The Long Term Investor

YEP......here we go. NVIDIA.....down after amazing earnings report yesterday......at the moment DOWN by 1.76%....about $10.19. At the same time....GameStop....is up by nearly 50%.....as a failing company with dismal earnings.

You have to love the short term markets. At least it is consistent....I have been watching stocks go down the day after great earnings for years now. It is just......a badge of honor.....and totally expected.

No doubt it reflects the markets anticipation of earnings and run up of a stock heading to earnings......the old saying "buy the rumor and sell the news".

A typical......squishy......open today. If we follow the recent trend of the past few months......there should be a pretty good chance for the markets to turn positive as the day progresses.

 

WELL.....I just got back from spending the day with the plumbers working on a broken pipe at my sisters house. Luckily it was an outside faucet pipe and did not flood the house. Not too bad once we found the split in the pipe. BUT...we did have to cut into the sheet rock in a couple of places and remove/destroy a section of the brick cladding on the back of the house about 8 inches by 2 feet. The split in the pipe was about a foot and a half up in the area between the brick and the sheeting of the house. At least the outside hole is in the back of the house. SO....it is all fixed and she can move back in. The mason will come out in a few weeks and replace the bricks.....again luckily.....she has a good pile of the bricks that match the house to use for the repair.

NOT.....that I missed anything today in the markets. As to today......no problem.....simply another day of short term overreaction and mania. In fact days like this.....or corrections....or even bear markets.....I have little focus on the markets since they are going to do whatever they do and it has NO impact on what I am......and......will continue to do.

In fact days like this just seem funny....more than anything.....watching the circus.

 

So today.......YES.....in the red.....big surprise there. And got beat by the SP500 by 1.31%.....no surprise there either with my very concentrated portfolio.

ACTUALLY.....the surprize today was the fact that I was NOT down as much as I expected. So...I am now down by about 6% from my ALL TIME HIGH. So the old market time machine has taken me back......I dont know.....perhaps 2-4 months.

As to the drama over interest rates.......NO......I have no concern....in fact I think it would be a healthy and good thing for rates to RISE. I would prefer to see the ten year in the 2-3% range....which I believe is a more healthy range....although still EXTREMELY low by historical standards. The ten year yield is STILL at about a 140 YEAR LOW.

Other general stuff today.....MASSIVELY POSITIVE. Employment numbers, GDP, durable goods, pending home sales......ALL very strong and along with earnings and EVERYTHING else.......indicating a GREAT economy over the next year to two years. THE....big issue.....will be keeping the hand of government out of everyones pocket......and.....letting the free economy and capitalism do its thing.

I heard the media early this morning trying to spin the pending home sales as a BIG NEGATIVE.......of course....buried in the drop in pending sales data is positive reason for the drop......there are very few homes for sale because of the crazy HOT market for houses. Hard to have high pending sales if there is nothing for sale. Shame on them.

 

LOL....I see an article on one of my FINANCIAL sites that.........."Mr Potatoe Head Tries To Be More Gender Neutral".

I did not read it....but the way things are now with all the newby wanna-be millionare investors......we will probably see a CRASH in the markets tomorrow.....and.....some expert will be blaming....... Mr Potatoe Head.

 

It seems like there is a lot of CRAZY out there right now. I was driving back to my sisters from Home Depot......yes, I patronize the companies I invest in.....and I heard someone on the BUSINESS RADIO saying that with the rates now at about 1.5%....that people like Microsoft shareholders might be tempted to move into ten year treasuries.....since the Microsoft dividend is below that.

I just turned off the radio. That has got to be one of the most IDIOTIC comments I have heard by an "expert" on a business show in a long, long, time. The odds of.....ANYONE...bailing on Microsoft to invest in ten year treasuries to get a 1.5% yield is CRAZY TALK. They NEVER mentioned the appreciation of the stock over the past years as part of the........yield.

At that point I knew we had just gone......way beyond.......DUMB with what people were saying and speculating about this short term stuff.

My view was confirmed when I saw that GameStop closed UP by about 18.5% today.

So....for any that might care.....NO....I have no concerns or worry about any of this short term stuff in the media or the markets. My ENTIRE focus is on the reopening of the economy and the massive business BOOM we are going to see over the next year or two.

 

SO.....we are in a classic....DUMB & DUMBER....short term market. I saw so much funny stuff today...I just can not stop. Headlines are classic......."NASDAQ Has Worst Day Since October". WOW......4 months ago......WOW. "DOW 560 Poing Drop Worst Fall In Three Weeks".....ok.....three whole weeks.....OMG.

Here is what we all expected.

Nvidia Becomes Latest Company To Beat Earnings Estimates But Get Punished

https://finance.yahoo.com/news/nvidia-becomes-latest-company-beat-145957890.html

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

"Nothing can go up forever without stopping. It just seems that way right now in the Treasury market.

The benchmark 10-year yield hit another milestone this morning when it reached 1.45%, a one-year high and about 55 basis points above where it started the year. This relentless surge upward could mean more pressure today on Tech stocks, but might be a boost for Financials. Fed Chairman Jerome Powell told us yesterday the economy has a long way to go, but the yield surge suggests some investors might think differently. More on this below.

There’s good news on the data front this morning as new jobless claims fell to 730,000, almost 100,000 below analysts’ estimates and down from 841,000 the prior week. It’s just one number, so maybe don’t get too excited yet. We need to see this go down further and stay down to indicate any serious improvement in the labor market.

Key earnings news broke after yesterday’s close when chipmaker NVIDIA Corporation (NASDAQ: NVDA) easily exceeded analysts’ bottom- and top-line estimates for Q4 and also delivered April quarter guidance that looked pretty impressive. Gaming and data center revenue both came in strong, but shares stepped back in pre-market trading.

The company referred to the industry-wide chip shortage, saying, “Throughout our supply chain, stronger demand globally has limited the availability of capacity and components, particularly in Gaming.”

The sausage making continues in Washington, with the media reporting that the House could vote on a $1.9 trillion stimulus package tomorrow. The Democrats’ goal is for President Biden to sign it before March 14. It’s unclear how much of a life this might give the market, considering that a lot of investor enthusiasm for more federal spending could already be built-in. It’s almost certainly one factor behind the yield rally.

Another thing to keep an eye on is commodity inflation. Crude oil is on a four-day winning streak and continues to quietly build momentum. Agricultural commodities have been on a tear. Copper and lumber have also been rolling up gains. It’s interesting to hear Powell say inflation isn’t a threat, but people may be looking at commodities and wondering if there’s something there. Personal consumption expenditure (PCE) prices come out tomorrow morning and could give investors another read on where inflation stands.

Also, GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc (NYSE: AMC) are back in the news with huge gains over the last 24 hours or so. The same thing applies as last time: If you consider trading these, remember that as fast as they went up, they could go down just as quickly. So know the risk and have a plan of where you want to get in and where you want to get out.

Enthusiasm Seems Hard To Sap

Call it what you want: Momentum, resilience, “buying the dip.” Whatever it is, investor sentiment still seems to think of stocks as the best game in town, and we saw more of that play out yesterday.

The momentum from Tuesday’s rally faded at Wednesday’s open, but an early test by the S&P 500 Index (SPX) of territory below its 20-day moving average (now around 3870) failed to find much selling interest, and then it was back to the races. The day ended with the index just 25 points below its all-time high.

The Nasdaq (COMP) and the SPX both fell to their 50-day moving averages earlier this week and roared back, so that could provide a nice bit of technical support moving forward. The consolidation many analysts had been talking about now appears to have happened, and there wasn’t much of a push to take things below existing support levels.

That might be inspiring some analysts to expect better things. Research firm CFRA, for instance, on Wednesday raised its 12-month target for the SPX to 4265, implying 10% gains from current levels. They based the move on what they said was “cap-weighted target price growth expectations” adjusted as a result of Q4 2020 earnings reports and forward guidance.

Fed Chairman Jerome Powell did what most expected him to on Wednesday, sticking closely to script and pretty much dismissing inflation fears. There’s no change in Powell’s plans to keep up the $120 billion in monthly bond buying and rates at zero. He thinks rising yields reflect an improving economy.

As we said last week, it seems unlikely he’d want to kill the goose that laid the golden egg by even “thinking about thinking about” any tightening at this point, to use an old Powell quote. We’re a few weeks out from the next Federal Open Market Committee (FOMC) meeting, but it would probably take some sort of dramatic change of events to hear something different then. Especially considering what Powell said yesterday about it maybe taking another three years for inflation to reach the Fed’s goal.

Fed funds futures now estimate chances of a rate hike by June at around 6%, down from 8% before Powell’s two days of testimony to Congress. That’s hardly different than the chance of a change by the end of the year, which stands at 8%, down from above 10% earlier in the week.

Are We There Yet? Yep!

The Fed may have control over one aspect of borrowing costs, but investors also drive bond yields, and they’re making themselves heard.

Going into 2021, Bloomberg surveyed analysts to see where they thought the 10-year Treasury yield would be by the end of the year. The average estimate was around 1.4%. Well, they were right that it would reach that level, just not on the timing. Less than two months into the year, the 10-year yield hit 1.45% early Thursday.

What’s a little worrisome isn’t the 1.45%, which is still historically low. It’s how rapidly the 10-year rode the elevator up there. It’s risen about 55 basis points since the start of the year, and a swift move like that sometimes gets investors worried about overheating and inflation. On the other hand, the Treasury market might simply be reacting to positive economic news, as Powell explained things yesterday. Analysts say it’s pretty typical to see the long-end of the yield curve lead the way higher during an economic recovery.

Cyclical sectors like Energy and Financials continued to form the vanguard on Wall Street yesterday, with Tech taking more of a backseat. This may be disappointing for people who piled into Tech over the last two years, but it’s arguably a sign of health in the economy (see more below). Word that the Food and Drug Administration (FDA) found Johnson & Johnson’s (NYSE: JNJ) vaccine to be safe and may be close to approving it added to Wall Street’s enthusiasm yesterday.

Meanwhile, the so-called “bond proxy” sectors Utilities and Staples were the only ones in the red yesterday, which isn’t unexpected when you consider that suddenly, Treasury yields are back to levels that may compete with stock dividends. It’s not really something too many predicted would happen so fast, and it’s probably left people who bought the once sizzling Utilities sector last year for those dividends feeling a bit high and dry.

Airlines Continue Climb: If you haven’t noticed, airline stocks have left the rest of the transport sector on the tarmac over the last month (see chart above) and are approaching levels last seen before the pandemic. Obviously, the sector is rallying off a low base after getting battered by Covid last year, but the recent gains look pretty solid, not like the little ones we saw at times in 2020. As we noted the other day, U.S. passenger traffic recently popped above one million on several weekend dates, but the stock rally reflects longer-term expectations. One way to measure the health of the airline industry? Check fares farther away on the calendar. For instance, Barron’s reported that flights to Orlando from New York in early April cost as low as $89, but over Christmas the price rises to $349. That implies improved pricing power, an important factor for an industry that’s so dependent on variable costs (like fuel and employee salaries).

Airlines generally didn’t do too well in Q4 earnings season, but comparisons start getting easier as 2021 advances. If there’s any ice forming on the runway ahead, it might be fuel prices, which recently hit levels that historically begin to take a toll on margins. Some of that impact might be blunted for airlines that had the foresight to hedge their fuel costs last year when crude fell to all-time lows. If you’re thinking of jumping into an airline stock, consider checking their financial reports to see if they mentioned any hedging activity. The ones that did might have a leg up.

Fresh From the Factory: A week from Friday we’ll get a fresh monthly payrolls report from the Department of Labor. Before that comes a report that may not receive as much attention but definitely deserves a close look: Monday’s February ISM Manufacturing data. Lately, manufacturing has been a hot spot, with the ISM index rising above 60% in December and flirting with that round number again in January with a reading of 58.7%. Strength has been broad-based, with 16 of the 18 industries surveyed by ISM reporting economic growth in January. These included machinery, primary metals, fabricated metal products, transportation equipment, and miscellaneous manufacturing. Two industries reported contraction: printing and petroleum & coal products.

Any reading above 50% indicates expansion, and ISM has been above 50% for eight straight months. Manufacturing comprises only about 12% of the U.S. economy, but its performance often foretells future growth. In the February report, keep an eye on new orders and production, both of which dropped in January. Any continued slide there might raise eyebrows.

See-Saw Gets Some Balance: Last year, we spent a lot of time talking about how the so-called “mega-cap” Techs stocks and their sharp gains helped pump up stock indices even as the vast majority of stocks just treaded water. That sort of action—easy to understand when a handful of stocks compose 25% or more of the value of SPX—made some of the 2020 market gains a little suspect in some peoples’ eyes.

That’s why the current rally might be so significant, because it’s happening without much help from the big gorillas like Amazon.com, Inc. (NASDAQ: AMZN), Tesla Inc (NASDAQ: TSLA), Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT) and a few others whose names you can probably guess. Instead, this appears to be a broader-based rally that goes well beyond the same old Info Tech and Communication Services stocks. Consider Wednesday’s comeback rally, where we saw dominance from airlines (mentioned above), along with Energy, Industrials, and Financials. Where were the mega-caps during all this? TSLA jumped more than 6%, but it’s well off recent highs. AAPL and AMZN actually ended lower. Energy stocks like Occidental Petroleum Corporation (NYSE: OXY), Marathon Oil Corporation (NYSE: MRO), and ConocoPhillips (NYSE: COP) and transport companies like Southwest Airlines Co (NYSE: LUV) and American Airlines Group Inc (NASDAQ: AAL) led the way. Other travel-oriented stocks like TripAdvisor Inc (NASDAQ: TRIP) and Boeing Co (NYSE: BA) also surged. That’s the kind of scenario you often see in a rising rate environment where economic optimism lifts most boats, rather than fear lifting just a few."

MY COMMENT

This is from this morning and reflects the......good, bad and ugly.....that impacted today as the day progressed. You are so right ZUKODANY.......no one seems to remember the past year and the 30-40% drop as the economy was VOLUNTARILY SUCKER PUNCHED. No one seems to have any memory of the past 50 years of markets and investing.

ACTUALLY.....you are probably right ZUKODANY....since many of the speculators now.......had never traded on invested prior to the past 6-9 months.

I started to BOLD the stuff that mattered in the above article than I got sidetracked by the MORONIC language like the......"RELENTLESS SURGE UPWARD".....in the ten year yield.

SORRY.....I have trouble maintaining focus on actual legitimate.......market...... commentary.....when there is such CLASSIC comedy material being provided by the media and the markets lately. My inherent SARCASM gene just takes over.

SORRY........I WILL write on the blackboard 100 times........."I will not laugh at the markets and investors"....I will not laugh at the markets and investors"....."I will not.....