The Long Term Investor

I would simply spread it around what I already own. The stocks and funds. The next time I will have cash....perhaps about $25,000. next December.......I will simply put it ALL in and spread it between the stocks and funds.

I was being kind of factitious with that post about......buying right now. I did not mean that TODAY is some sort of special day to buy. I was saying.....if I have cash at any time for any reason......I will invest it......immediately.....regardless of what the markets are doing on that day.

 

WELL.....today was a definately......RED.....day. ALL positions down except for Honeywell. Got slapped by the SP500 by 1.08%.

Not surprised.....my portfolio is an above average risk portfolio......so totally expected with what the markets were doing today.

 

MORE.....good news for business and investors moving forward.

The Earnings Slump Seems Over
Better-than-feared quarterly results indicate rational optimism—and highlight the 2020 contraction’s peculiarities.

https://www.fisherinvestments.com/en-us/marketminder/the-earnings-slump-seems-over

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

"So much for contraction. With 410 S&P 500 companies reporting Q4 results as of today, profits grew for the first time since 2019. That is a huge turnabout from the continued decline analysts expected. That earnings beat expectations, in and of itself, isn’t anything earth shattering. It happens much more often than not. But in this environment, it is more noteworthy. Sentiment has improved markedly in recent months, and as it did, analysts revised their Q4 earnings expectations higher. That reality still beat those higher benchmarks is, in our view, a good sign sentiment isn’t yet irrationally high.

The S&P 500’s Q4 blended earnings—combining reported results with remaining consensus expectations—are now up 3.0% y/y. If this holds through the rest of reporting, it will snap a three-quarter string of year-over-year contractions and blow away analysts’ -9.3% y/y consensus estimate at last year’s end. About 80% of companies reporting beat analysts’ earnings and revenue growth estimates—both well above average historically.[ii] That is even more remarkable considering analysts ratcheted up their expectations as sentiment improved last autumn. In September, they anticipated a -13% y/y drop in Q4 earnings.[iii] With vaccinations rolling out in the new year and sentiment riding high, analyst consensus had cut this in half. By mid-January, with only 26 companies reporting, the consensus saw a much milder -7% y/y earnings contraction. Instead, profits are up, illustrating the unexpected speed with which Corporate America has climbed out of its deep lockdown-induced hole.

In a typical expansion, it isn’t unusual for earnings to return to growth less than a year after a bear market ends. But a big chunk of that early growth usually comes from cost cuts. Firms get lean and mean during a recession and keep trimming the fat early in a recovery, hoping to drive growth through productivity gains. Favorable year-over-year comparisons also help if the recession drags on for a while. For example, after the global financial crisis, S&P 500 earnings returned to growth in Q4 2009. Their growth rate, thanks to a depressed comparison, topped 100%.[iv] But revenues grew just 5.8% y/y off their own depressed comparison.[v]

This time, neither of those explanations apply. Earnings growth didn’t come from an easy comparison—they grew above Q4 2019’s pre-pandemic level. Cost cuts alone don’t deserve the credit, either. Blended Q4 revenue for the S&P 500 also grew 3.0% y/y, matching earnings growth.[vi] This is one more way in which last year’s lockdown-driven downturn doesn’t look like a typical recession. Nor did year-over-year gains come solely from COVID winners. 248 of 410 companies (60%) reported positive earnings growth, while 243 companies’ sales (59%) rose. Overall, 9 of 11 sectors’ profits are higher, with revenues up in 8.

One of those sectors that didn’t grow: Energy, which deserves a closer look. Although it had the worst Q4 results by far, its stocks are the best performing this year. With just over half of the sector reporting, Energy’s Q4 earnings are down -110% y/y.[vii] That might not seem mathematically possible. But in Q4 2019, the sector’s net income was $11.5 billion. In Q4 2020, with 13 of 25 companies reporting, it was -$1.2 billion—the only sector to report a loss. Yet the S&P 500’s Energy sector is up 22.8% this year.[viii]

In our view, the apparent divergence between the results rolling in and Energy’s performance shows how markets work: They look forward. Energy earnings are sensitive to oil prices, which are up 26.5% year to date after declining -20.9% last year.[ix] We don’t think it is a coincidence analysts have revised Energy’s full-year 2021 earnings estimate up 27.3% from Q4’s end.[x] Markets have seen this and incorporated it into Energy stock prices rather than dwelling on the past. They already dealt with last year’s problems, when the sector fell -33.7%.[xi]

This also illustrates why jumping on the Energy bandwagon now likely isn’t the most beneficial move. Oil’s rebound and its potentially positive impact on earnings are widely known. Looking forward over the next couple years, investors should ask: Is there much more unpriced upside in oil? Beyond the recent cold-snap induced hiccup taking more than a quarter of daily US oil production offline temporarily, global production seems set to rise sharply this year and into next.[xii] With supply responding to higher prices, Energy’s run may prove shorter than the current enthusiasm suggests.[xiii]

As for the broader market, the latest 2021 estimates put S&P 500 earnings 6.6% above 2019’s peak, which doesn’t seem unreasonable to us.[xiv] It could even prove low, depending on the pace of vaccination and reopening. Rising revenues show how firm demand is. The more the country and world reopens, the more of an outlet that demand will have."

MY COMMENT

AS USUAL........the majority of indicators and data moving forward over the next 6-12 months is strongly positive.

 

YES......more on inflation. HERE is some actual data. Most people have NO IDEA about anything to do with inflation since they have really never experienced it first hand. They may have heard their grandparents talk about the high inflation of the late 1970's. If you look at the latest minutes and notes and discussion by the FED you will see that inflation in the 2-3% range is relatively normal.....and.....desirable. HERE is a lot of good data in various forms. The bottom line.....the amount of inflation we have now is far from concerning and is well below where the FED would like it to be. AND....we have seen little to no....BAD......inflation over the past 30-40 years.

Average Annual Inflation Rates by Decade

https://inflationdata.com/Inflation/Inflation/DecadeInflation.asp

"This Chart shows the Average Annual Inflation Rate for each decade. Each bar represents the geometric mean for the decade (not the total cumulative inflation for that 10 year period ).

For two of the decades below you would think the numbers were large enough to be for the entire decade rather than the average annual rate for a single year. Both the teens and the 1970's had huge annual inflation rates. The teens (beginning in 1913 when the U.S. government formed the Federal Reserve and began tracking inflation) averaged almost 10% a year and the 1970's averaged just over 7% a year. This resulted in a cumulative total inflation for the years 1913 until the end of 1919 of 92.86% (in only 7 years) while the inflationary 1970's saw 103.45% over the entire decade (i.e. prices more than doubled in 10 years).



(click to see larger image)

Note: There was so much inflation in January 1920 that if you calculate the average from the end of January 1920 - December 1929 the average for the decade is -0.09% but if you calculate it correctly from the end of December 1919- December 1929 that single month increases the average to 0.38% for the decade.

Note: The reason to calculate from December through December is that the index is set for the end of the month so in order to get a full year you need to use the index from December 31st through December 31st rather than from January 31st through December 31st.

Cumulative Inflation by Decade
Looking at the average inflation rates often gives us the impression that "low" inflation rates like 2% aren't so bad. For instance: You may think that 7% inflation in the 1970's is terrible but 2% or 3% per year isn't so bad right? The average annual inflation from 1990 through the end of 2018 was 2.46%. Well, the total cumulative inflation for the 28 years from January 1990 through November 2020 is 102.40%. In other words, something that cost $100 in January of 1990 would cost $202.40 in December of 2020 in other words prices more than doubled (i.e. purchasing power fell by half) and that is what happens at "low" inflation rates.

The following chart shows how much inflation was "racked up" during each decade rather than simply the average for each year during the decade. See: Cumulative inflation per decade Article for more information about this chart. So we can see that at during the 1990's things cost about 1/3rd more at the end of the decade as they did at the beginning.



As we passed the 100th anniversary of the creation of the FED what have they done to our currency? The following chart shows the trajectory since 1913.



See: total cumulative inflation since 1913 for the full commentary.

Note: We have recently updated the method of calculating the averages so they will be slightly different than you may have seen previously. That means that instead of taking the annual inflation rates for each of the ten years of the decade and then averaging them all together we have used the geometric mean. The geometric mean is also called the compound annual growth rate (CAGR) and is typically used to calculate things like average investment return.

This generally produces a slightly lower number but it is the accepted method of calculating average percentage rates. According to the University of Toronto Mathematics network "The geometric mean is relevant any time several quantities multiply together to produce a product. The geometric mean answers the question, "if all the quantities had the same value, what would that value have to be in order to achieve the same product?" For more information on arithmetic vs. geometric means see: Applications of the Geometric Mean.

The typical way of averaging is called the "arithmetic mean." So exactly how much difference does using the geometric mean make vs. the arithmetic mean make in our data? Interestingly, the answer is "that depends." In our data some decades were almost identical and others were several tenths of a percent apart. The most recent decade (2000-2009) changed from 2.57% to 2.54%. The biggest change came during the six years from 1913-1919. The arithmetic mean produced 8.7% while the geometric mean actually produced a significantly higher number of 9.8%.

It is interesting to note that the inflation for the "teens" decade was the highest at 9.80% and the 70's were close on their heels at 7.25% while the 20's have virtually Zero inflation on an annual basis and about 10% deflation (falling prices) over the entire decade if you don't count the first month of the decade (i.e. January 1920).

The decade of the 30's showed significant deflation where prices actually declined on an annual basis and even over the entire decade. It isn't hard to figure out that prices were falling during the depression (the 30's).

Note that the most prosperous decades were those of low inflation like the roaring twenties (although in that case, the prosperity was primarily for the rich and middle class while the poor farmers suffered due to falling crop prices), the fabulous fifties, and the nineties. Both the 20s and the 90s culminated in a stock market crash while the decade with deflation is known for the poverty they included. Interestingly, deflation doesn't always equal depression. A truly healthy economy with increasing productivity and no increase in money supply will result in lower consumer prices and even more wealth to go around. The same economic conditions combined with moderate inflation may appear healthy but the some of the wealth will be siphoned off to the government via inflation, so the the people will not prosper as much as they would have had there been no inflation at all."

MY COMMENT

You know....we heard all sorts of HORROR stories and predictions about the 2nd....3rd....and 4th quarter of 2020. About EVERY economic indicator for 2020....and....everything else having to do with investing and the economy. We even saw many on these boards.

GUESS WHAT.....NONE of them actually happened. The more things change the more they stay the same.....when it comes to DIRE and CATASTROPHIC predictions of the stock markets, investing and the economy. The MAJORITY of them......just WILL NOT HAPPEN.......and those that do.....will have no impact anything near what was predicted.

 

rg7803

Yes it is true for a VERY SMALL group of customers. They are the customers of a company called GRIDDY. A very small group in terms of the population. They are the extremely CHEAP people.....those always looking for some sharp angle.....the schemers...... that got suckered into a low budget utility provider by thinking they were beating the system and paying cheap prices.

THEY AGREED.......voluntarily switched to this provider.......in order to pay the "wholesale rate" for their power. They never complained when they paid less.....but.....in this little event their.....playing every angle and CHEAPNESS and thinking they were playing all the other suckers.......bit them in the ASS.

HERE is some info:

"The state’s unregulated market allows customers to pick their utility providers, with some offering plans that allow users to pay wholesale prices for power. Variable plans can be attractive to customers in better weather, when the bill may be lower than fixed-rate ones. Customers can shift their usage to the cheapest periods, such as nights. But when the wholesale price increases, the variable plan becomes the worst option.

“Everyone in Texas is about deregulation, and Griddy as a wholesale electricity provider is the most deregulated you can get,” said Nicholas Milazzo, who received a $3,000 bill. “And this just goes to show why regulation is important, because, sure, in the short term it’s great, but then situations like this arise where it just gets out of control.”

MY COMMENT

OF COURSE......none of these people ever complained when they thought they were playing the system to get cheap power. NOW.....suddenly...they want to be regulated and protected. Griddy has about 29,000 members. ALL of these people.....VOLUNTARILY...... signed up with this company and signed up for the for this "wholesale rate"......to game the system. As usual....they now realize.....they were the ones being gamed.

HERE is the pitch under Griddy.com:

"How does Griddy help me save money? First off, you save simply by going Griddy and only paying the wholesale price – which is 20% cheaper than the Texas Average. But for even more savings, you can automate your smart home devices with Griddy's IFTTT integration."

"No markups, no markups, and oh yeah...no markups. You pay exactly what we pay – the wholesale rate."

OF course.....during this mess the "wholesale rate" for power went up like.....10,000%.....for a few days....or something like that. So these....power gamblers lost big time.....and now want to be bailed out.

MOST people in Texas.....the VAST majority..... are not under this sort of company. Most are under various city and other government power plans that DO NOT have this sort of risk.

I dont see a lot of sympathy for these people now that the facts are becoming known. BUT....I have no doubt they will be bailed out by the government.....ie: the taxpayers. It makes for a sensational story......but that is about it. AS USUAL......GREED.

FOR REFERENCE.....the population of Texas is about 29,000,000. This 29,000 people represents about 1/10 of one percent of the population.

 

Hey oldmanram.....are you still in Seattle? What part of town? Are you a Cougar or a Husky or did you go elsewhere?