The Long Term Investor

Did you play in college or the minors......Ragin Cajun?

 

OK.......who forgot to take care of the markets. I....FINALLY....get out of the house for a few hours and the markets tank....compared to this morning.

 

YEAH they have.....at least my stocks.....not near as positive as the general averages. Even though the close is still a half hour away.....I have mentally given up on today......and.....am moving on to next week in my thinking.

 

As I mentioned on the prior page in a post. The environment for stock investors is EXTREMELY positive. For the unemployed and the employment picture.......not so much.

Why Corporate America is jumping for joy while millions of workers remain jobless

https://www.cnn.com/2021/02/18/economy/ceo-business-confidence/index.html

(BOLD is my opinion OR what I consider important content)

"America's CEOs are the most confident they have been in 17 years, as company leaders expect fewer layoffs and further improvements in the business environment,according to a recent survey from the Conference Board, a non-profit think tank.

But this sentiment doesn't align with the experience of millions of Americans who are still unemployed and need government aidto make ends meet as a result of the pandemic.

The disconnect is yet more proof of the k-shaped recovery, in which some Americans are experiencing major improvements while others are still suffering.

For example, arecent consumer sentiment survey from the University of Michigan showed that households making less than $75,000 per year felt especially pessimistic about their financial futures as of February.

Meanwhile, CEO confidence stood at 73 points in the first quarter of the year, marking its highest level since the same period in 2004, according to the Conference Board.

What makes business leaders so optimistic while many workers feel otherwise? CEOs think the outlook for wages has improved and the potential for layoffs is lower. Only 12% of surveyed CEOs said they expect a workforce reduction over the next 12 months, down from a hefty 34% in the fourth quarter survey.

Also, 82% of CEOs expect the economy to improve over the next six months, a jump from 63%.
"With the vaccine rollout underway in major economies, CEOs entered 2021 historically upbeat," said Dana Peterson, chief economist at the Conference Board.

On top of that, the stock market is near record highs, with the Dow (INDU) notching a new all-time high Wednesday and company valuations soaring. The strength in the market is due to hope for more government stimulus to bring the economy back to life, as well as the rollout of vaccines across the country.

Goldman Sachs (GS) predicts US gross domestic product — the broadest measure of economic activity — will growthis year at the fastest pace since 1989. Meanwhile, the Federal Reserve's interest rates remain near zero, soit's cheaper for companies to borrow or refinance their debts.

The CEOs may be onto something with their optimism. But for millions of Americas the stock market's highs make little difference in their lives.

More than 18 million people received benefits under the government's various programs in the last week of January, the Labor Department reported Thursday.

Economists fear the effects of long-term unemployment on the economy; the longer workers are out of a job, the less likely they are to return to work at all.

Meanwhile, many of those who have returned to work have seen their hours or wages cut, or perhaps both, as the pandemic economy exacerbates America's inequities."

MY COMMENT

A BOOMING....business environment....does not mean increased wages or employee hours. In fact.....I assume many employers have learned how to get by with less employees over the past year. In addition technology and the decreases in employees that we have been seeing over the past 10-15 years will continue to escalate going forward. Many small businesses have probably learned how to operate with a skeleton staff.

As to the.....GRATUITOUS comment on "equity".......that of course had to be thrown into the article......NO COMMENT.

 

YEAH my......1/60....of ONE bitcoin....or whatever it is at the moment....continues to do well also. I MIGHT have some.......real money......in Bitcoin if it gets up to about somewhere in the range of $50MILLION or above.

 

I want to get this post up so I can tell the markets to SHOVE IT.....and move on to next week. This was a real SUCKY week....in general. I was....moderate...red today.....still one of the worst days in a while for my specific stocks. I ALSO got beat by the SP500 by .79%. SO....now I am about a little over 1.6% from my all time high.

This STUFF....where the markets linger and refuse to do much.....while....everything is positive.....and sentiment is glowing.....and earnings are GREAT....is exactly why you can NEVER trust the short term. BUT....I am patient...and will wait for it to happen. It ALWAYS does.....and....I will be thankful for where we are right now considering everything we have gone through over the past year.

We are APPROACHING the one year anniversary of the economic shut down....in about a month or so. AMAZING how much.....and....what.......investors and everyone else.....have gone through over the past year. ALL in all....we have done amazingly well over that time. ESPECIALLY....when you consider what might have been.

 

YEAH....it is.....and...it is ALSO a hefty part of the SP500. That is why I do the two funds. They provide coverage for me with a lot of stocks that I would not....personally....EVER buy as individual stocks. AND.....they balance out my individual BIAS. I dont try to second guess the holdings in those funds......EVER.

 

Since it is officially the weekend......I will BORE everyone with an article about Treasury yields. Rustic1 raised the issue of Treasury yields a few days ago.

Wall Street Week Ahead - Rising U.S. bond yields pose new threat to sky-high stocks

https://finance.yahoo.com/news/wall-street-week-ahead-rising-233441368.html

(BOLD is my opinion OR what I consider important content)

"NEW YORK (Reuters) - The U.S. stock market has so far digested a surge in Treasury yields, but some investors are worried that a continued ascent could prove more problematic.

The yield on the benchmark 10-year Treasury note, which rises when bond prices fall, climbed to a one year high of 1.36% this week, fueled by expectations that progress in the countrywide vaccination program and further fiscal stimulus would further spur economic growth.

So far, stocks have responded with little more than a wobble. But some investors worry that a continued rise in yields on Treasuries -- which are backed by the U.S. government -- could dim the allure of comparatively riskier investments such as equities and weigh on the S&P 500 that has risen about 75% since last March.

"When ... government bond yields rise, all asset prices should reprice lower -- that’s the theory," said Eric Freedman, chief investment officer at U.S. Bank Wealth Management, adding that he does not believe yields have yet risen far enough to provide an competitive alternative to stocks.

The rise in yields comes as the S&P 500 hovers near all-time highs at the end of a fourth-quarter earnings season that has seen companies overall report earnings 17.2% above expectations, according to Refinitiv data. Earnings will continue to be in focus next week along with data tracking the economic recovery and developments with President Joe Biden's proposed $1.9 trillion coronavirus relief package.

Despite solid corporate results, worried investors can point to any number of signs -- including blistering rallies in Bitcoin and Tesla shares and the proliferation of special purpose acquisition companies (SPACs) -- that ultra-easy monetary policy and fiscal stimulus have fueled an excessive appetite for risk that could be curbed if yields start to rise.

The latest fund manager survey by BofA Global Research showed a record in the net percentage of investors taking higher-than-normal risk, cash allocations at their lowest level since March 2013 and allocations to stocks and commodities at their highest point in around a decade.

Citi strategists said in a report this week that a 10% pullback "seems very plausible," noting that "if rising bond yields drag down some mega-cap IT growth names... that will impact the broad index as a result of the over-representation of such stocks."

Analysts at Nomura, meanwhile, said earlier this week that a move above 1.5% on the 10-year could spark an 8% drop in stocks.

Low yields and interest rates support equities in several ways, such as reducing debt and borrowing costs, making stocks look relatively attractive to bonds and helping increase the value of companies' future cash flows.

At 22.2 times its forward price-to-earnings ratio, the S&P 500's valuation is well above its long-term average of 15.3, according to Refinitiv Datastream, though several investors said stocks still look relatively inexpensive compared to bonds.

Plenty of investors are sanguine about the move, noting that yields appear to be rising due to expectations of an improving economy.

J. Bryant Evans, a portfolio manager at Cozad Asset Management, recently added bank and mortgage company stocks to a high dividend portfolio this week to take advantage of the improving economic outlook and rising rate environment.

More broadly, he was targeting a 3% yield on the 10-year for when bonds might start competing more aggressively with stocks.

"For my clients, I would urge some balance and wait a little bit before moving to fixed income because I think interest rates are still extremely low historically speaking," Evans said.

Paul Nolte, portfolio manager at Kingsview Investment Management, is watching whether rising yields eventually come with a "change in tone at the Fed" that suggest the central bank will start tapering its bond purchases as it reins in its stimulus, which could shake the market.

Still, he isn't pulling back on his equity exposure for now because of the recent rise in yields, convinced a strengthening economy will continue buoying stocks, particularly those that should shine in a recovery such as financials and other value shares.

The steeper yield curve, Nolte said, is "the bond market’s way of telling everybody that the economy is recovering and getting healthy.""

MY COMMENT

LOTS of mixed messages in this little article. MY opinion....we are a LONG WAY from a ten year yield of 3% that is mentioned in this article. The ONLY times we have seen a 3% yield in recent past is:

June of 2018
September of 2013
March 2011

NOT exactly a common occurrence. ALL the rest of the time the yield was lower and often MUCH lower.

I dont see many stock investors jumping into Treasuries....especially ten year Treasuries....based on a 2% or 3% or even a 4% yield. Based on past experience I just dont see it. Now...in the past.....when Treasury yields were higher than now and rising....stocks might be impacted by rising yields and by the FED raising rates....for a few days or perhaps a week.

I ALSO....do not see even a 4% Treasury yield on a 10 year.....being attractive to the MODERN stock investor that can average 10-11% or more in unmanaged Indexes. Stock investors are SPOILED......and are NOT going to abandon the potential for gains to sit back and take 3% or even 4%....for ONLY ten years.

My opinion......like inflation......this Treasury STUFF is simply MEDIA......BALONEY.

As a long term investor...do I really care about Treasury yields.....especially the ten year......NO. Have I......ever.....cared about 10 year Treasury yields over the past 45 years of investing.....NO.

 

WOW....after siting around for the past five days waiting for my pipes to explode and flood the house....or......the water and power to go off.....we are finally going to get back to normal tomorrow.

I have a rehearsal at noon tomorrow. Than on Sunday.......will be going to San Antonio....to play an afternoon show......outside. It will almost seem like a normal weekend. Oh wait....I forgot about the virus......the immediacy of the ice and snow took everyone's mind off the virus for a whole week.