The Long Term Investor

HERE is the flip side to all the interest rate and yield stuff you are seeing in the media lately. BONDS are going to be BIG NET LOSS LOSER as an investment. YES....they can be used as trading vehicles AND for corporate financing. Any company that has NOT already taken advantage of the HISTORIC low rates already is just RIDICULOUS.

Bond sell-off is a foretaste of things to come

https://www.ft.com/content/c1e55398...traffic/partner/feed_headline/us_yahoo/auddev

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

"For many in bond markets, the sell-off across fixed-income assets since the start of year might appear a bracing foretaste of things to come.

Markets are undergoing a pivotal shift. Where extraordinary support from central banks was a key driver for markets over the past nine months, economic fundamentals will take the lead this year. And bond market repricing sits at the nexus of this transition.

The repricing has already begun. Long-term US government bonds have lost more than 12 per cent this year amid rising volatility in fixed-income markets. Stronger fiscal stimulus in the US is weighing heavily on the bond market.

While the sharp rise in yields hints at disorderly repricing, we should remember that most of the rise has come from a repricing of higher growth expectations. This is a good thing.

And it is hard to call current financial conditions tight. After taking into account inflation, real 10-year yields remain deeply negative. Assets more sensitive to swings in risk appetite seem, by and large, to be taking the bond volatility in their stride. So-called value stocks with low valuations have fared well while small-cap stocks are at or near their highs.

Even the Vix, the ultimate fear barometer, which measures investor expectations of equity market volatility, remains remarkably subdued. We can also expect verbal intervention from central banks to assuage markets should financial conditions start to tighten, which should smooth out volatility during this transition.

But this is not just about a few bad weeks for bondholders. The recent price action is a timely reminder of the challenges ahead for core fixed-income investors. As the global economy enters a new cycle, new risks are building. The prospect of sustained fiscal stimulus, rising inflation risks and diminished central bank support, collectively challenges the safe harbour that government bonds once provided.

Investors are moving towards this realisation. In a recent survey of more than 1,500 of our clients, more than 60 per cent of respondents were either reducing allocations to developed-market government bonds or employing more active tools to deal with volatility. Several factors are at play here.

First, starting yields on government bonds in developed markets are low. As a result, the extent to which they can move lower and provide protection in times of stress is limited.

Further, the policy mix is changing. Fiscal policy is being used more actively to stimulate growth and monetary policy is prioritising higher average inflation expectations. This implicitly imposes a floor for bond yields.

In short, stronger economic growth sparked by unprecedented stimulus or the return of inflation, will eventually lead to a pullback in liquidity support from central banks. Investors today, perhaps, are preoccupied with the risk that the economic recovery is too sharp, rather than not sharp enough. That is a fear that is not well hedged by a large allocation to sovereign bonds. There currently seems a low likelihood of a sharp hawkish pivot by central banks. But, today, with markets still pricing in significant policy accommodation, even a small recalibration can lead to volatility in bond markets. The doubling of the gap between two-year and 10-year Treasury yields in just a few weeks is a timely reminder of such sensitivity.

So how should investors approach these new risks? Ensuring equity exposure is geared towards a strong cyclical recovery makes sense. Investors could also, for example, increase allocations to assets that are linked to inflation and benefit from stronger growth. For investors able to bear the illiquidity costs, real assets such as infrastructure or property that provide inflation-adjusted income streams are attractive.

Recommended US Treasury bonds Investors fear new Treasury auctions will set off repeat bout of selling Market volatility last March posed the first real test of these assets during times of stress. The resilience of those exposed to green-energy investment and technology-related logistics was notable.

Looking ahead, forecasts in our annual study on long-term returns across markets suggest US core real estate will offer an average return of 5.9 per cent for more than a 10- to 15-year period with more than 80 per cent of that sourced from high-quality, stable income streams. We expect that with leverage in real estate assets a mere fraction of the levels seen in the financial crisis, investors will increasingly be drawn to their income potential. As markets shift their focus from policy support to economic fundamentals, government bonds simply cannot provide the kind of safety they once did. Given the risks on the horizon, investors have no choice but to diversify sources of safety in portfolios."

MY COMMENT

ALL the recent talk about bond yields hurting the stock markets and drawing money out of stocks is just absolute BALONEY. It is not going to happen. ANYONE....that is not a bond day trader....is NOT going to take the hit of LOSING large amounts of capital with the SURE NET LOSS they will experience with bonds as yields rise. This STUFF is simply ignorant media DOOM&GLOOM. Simply day to day SENSATIONALISM.

 

AND.....a GREAT open today. The DOW is over 32,000. The other Indexes are BOOMING .........so far. It is nice to earn some of the losses back......for a few hours today. Will it last to the close.....who knows. Is it the end of the correction.....who knows. Predicting or anticipating this sort of....short term stuff......is just not possible in either direction....up or down.

In any event.....it is nice to get a little reprieve from the recent negativity. Although I dont see a lot of longer term stock investors showing any concern. Most are realistic about corrections and normal market behavior. Most know this type of short term volatility is just part of the process and comes with the territory of being invested in stocks and funds. Most know that this little correction will pass as they always do and the markets will move forward.

 

HERE is some good news for TESLA owners....in addition to.....the nice rise in the markets today. The company needed some PR since there has not been a lot of news coming out lately. The BITCOIN investment is now PROBABLY well over $1BILLION in profit.....but.....still a very dangerous investment of corporate funds.

Tesla, Nio stocks bounce after upbeat China car sales data

https://finance.yahoo.com/m/b1782755-999b-3493-8d0c-0a48f7ff51dc/tesla-nio-stocks-bounce.html

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

"Shares of Tesla Inc. bounced 5.6% in premarket trading Tuesday, after tumbling 21.6% amid a five-day losing streak through Monday, after upbeat car sales data out of China. The China Passenger Car Association said electric vehicle sales in February rose more than sevenfold from a year ago while falling 38% from January, to 97,000 EVs. Tesla sold 18,318 EVs in February, which Wedbush analyst Dan Ives said is up 18% form January and puts Tesla's China-based sales "on a strong trajectory" into March.

"Considering the Lunar New Year in China, which took up a portion of February, we would characterize these February results as quite impressive and ahead of Street expectations," Ives wrote. He kept his stock price target at $950 and rating at neutral. Separately, shares of China-based EV maker Nio Inc. rallied 5.9% ahead of the open, after plunging 29.2% amid a five-day losing streak through Monday, which followed a 19.7% drop in February. Among other China-based EV makers, shares of XPeng Inc. jumped 6.3% and Li Auto Inc. climbed 5.6%. The stocks' rallies comes as futures for the S&P 500 gained 1.1% ahead of the open."

 

We have been hearing for 3-4 weeks now about the ROTATION away from GROWTH into other types of stocks. WELL.....today I heard one of the talking heads describing the market today as a ROTATION back to GROWTH.

ABSOLUTE INSANITY........a few hour market rally......is NOW a rotation.

Just shows the incredible flightiness of the media and the general investing environment lately. The MORE you see this sort of irrational STUFF.....the more it is confirmation that the ONLY way to invest for many........NOT ALL....people is long term investing.

AND....actually we ALL know......on some level......that long term investing is what the VAST majority of people do......that are investing in stocks and funds. WHY....because the average person is invested through their IRA or their 401K.....and.....very few people.....even speculative traders.....are trading those sorts of accounts.....due to the RISK to their future.

 

I LIKE Zukodanys post above. YES....if you have cash right now.....and are a long term investor......it is a great time to put it to work.

Personally I follow the academic research that tells me that investing cash when I have it.....without waiting for a drop in the markets.....WILL over the long term BEAT those that wait for some market entry point to invest. BUT.....MOST people probably would have a hard time following this course. It is just NOT intuitive........even though the research bears it out.

BUT....these sorts of investor differences.......are simply personal preference. WHAT is really IMPORTANT........is that people that are interested in securing their long term future......INVEST. We ALL have little differences in how we do it. We ALL have our quirks and habits. BUT......the bottom line.....if you want to secure your financial future for yourself and your family.....you need to be invested in stocks or funds or both.

THAT is the point of this thread. It is NOT that everyone has to invest the same way. It is NOT that everyone here has to CONFORM.....or....invest exactly like I do or someone else does. It is ALL ABOUT long term planing and thinking and investing in a way that WILL achieve your goals and lead to CRITICAL MASS. (there used to be a radio investing host BOB BRINKER that always talked about achieving CRITICAL MASS....the point where you had financial freedom)

THAT is the KEY MESSAGE of this thread. Invest for the long term. Invest over a lifetime. Whatever you need to do and however you personally do it........no problem.....JUST DO IT.

 

oldmanram posted:

"but I'm old and from time to time I forget , in IRA's you don't have to pay cap gains when you buy or sell , only when you distribute , in 30 years or so. So if you want to get rid of something that isn't performing RIGHT NOW , you can switch it up for something that is , I can hear WXYZ in my ears right now, they are burning. But seriously it's something to think about."

IN FACT.....I agree completely. I NEVER hesitate to make any change that I want to make. Being a long term investor.....ABSOLUTELY....does NOT mean that you just blindly hold onto every investment. I NEVER hesitate to make any changes I wish in my account......my taxable account.

ANY time I make a change....as part of the process......I immediately have another holding that the funds will go into. SO....when I sell something....I reinvest it in something else that same day. EVERY time I sell something....it is simply a LATERAL MOVE into some other sort of stock market asset.....another stock or a fund or an ETF.

IF I sell a stock and do not have another one in mind to move that money to......I simply put the proceeds in my SP500 Index fund.....so the money is STILL stock market money earning stock market returns.......until I have something I want to buy or add to. Again simply a........LATERAL MOVE.

Personally.....it gives me confidence to sell some holding....knowing that it will simply be a lateral move.....and the money will STILL be stock market money going forward. AND....hopefully the new investment will BEAT what the old one would have done.....if my analysis is correct.

 

NICE....a little one day rally that will give investors a BOOST in valuation and some confidence to hang in there. I am interested to see if we get follow through tomorrow and the rest of the week. OR.....if we get people selling to take some profits from the prices that are being established today. OR.....if we get lower prices tomorrow from people that want to cut back on exposure and this little BUMP UP will give them a bit of a incentive to sell off some of their holdings and recover a bit of their losses.

For now.....who cares.....time to ENJOY an epic market day.

 

YOU know one reason for the rising bond yields right now is the COLLAPSE in demand for bonds. It is a snowball, circular firing squad. Rates are at 50-100 year lows. They are OBVIOUSLY going to go up as we get into more of a normal economy. The economy is obviously going to reopen. AND any investor other than en extreme short term trader or speculator is simply going to lose money as the value of bonds plummets. There is going to be MINIMAL interest in any bonds that are being offered right now. AND...that means the yield has to rise to attract buyers.....but....any buyers that are not going to hold to maturity.........and are not traders..........will STILL lose their shirts.

 

This is pretty good news....going forward....if you trust an ECONOMIST:

Stimulus checks could power U.S. economy to nearly 10% GDP growth: economist

https://finance.yahoo.com/news/stim...nearly-10-gdp-growth-economist-195130418.html

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

"The bullish Wall Street calls on the U.S. economy in light of the new $1.9 trillion stimulus plan are starting to pick up.

"I think we are on track for pretty strong growth. I am expecting 9.5% GDP growth in the first quarter, and growth averaging almost 7% this year," Jefferies chief financial economist Aneta Markowska told Yahoo Finance Live. "I think the economy is in great shape. We are going to see the data continue to surprise on the upside probably for the next three or four months. What retail sales for January really showed us is there is tremendous propensity to spend stimulus checks."

Markowska tracks economic activity through the lens of various real-time indicators such as online shopping and restaurant bookings. Those measures — and others Markowska tracks such as employment gains/losses — have begun to pick up in recent weeks as captured in the Jefferies U.S. Economic Activity Index.

The index rose by 2.3 points last week from the prior week. It's up a solid 5.6 points since bottoming on Jan. 15, suggesting momentum in the economy that stands to only accelerate into the spring amid the latest round of stimulus checks and increasing vaccinations.

In fact, economic data is already beginning to surprise to the upside.

Non-farm payrolls rose by 379,000 in February, above the 200,000 expected. The unemployment rate fell to 6.2%, unexpectedly improving from January's 6.3%. And private payrolls improved 456,000 versus estimates for a 200,000 increase.

January retail sales (reported in mid-February) surged 5.3%, smashing estimates for a 1.2% gain. U.S. retail sales spiked 4.6% in February, according to recent data from MasterCard SpendingPulse. Online sales rose 54.7%.

To be sure, others on the Street are in Markowska's camp.

Goldman Sachs' chief economist Jan Hatzius reiterated his 7.7% U.S. GDP forecast for this year, the highest among Wall Street firms. Hatzius sees first quarter U.S. GDP growth of 5.5% and then accelerating to 11% in the second quarter. Economic growth will hit 8.5% in the third quarter and 6% in the fourth quarter as stimulus checks run out, according to Goldman's modeling.

Hatzius sees the unemployment rate reaching 4.1% by year end, the lowest among his peers on the Street.

"The main reason that we expect a hiring boom this year is that reopening, fiscal stimulus, and pent-up savings should fuel very strong demand growth," Hatzius said in a new report Monday titled "The Coming Jobs Boom.""

MY COMMENT

As to most of this article I say.......DUH. The only part I do not agree with is the unemployment. I suspect it will linger at much higher rates than expected. Tow primary reasons......small business owners are going to be cautious.....AND.....the government policies are going to be DRAMATICALLY anti business. BUT.....employment does not mean much to the markets. We are going to see some RECORD HOT economy going forward. AND.......NO....my view of inflation has not changed. I will change my opinion on this topic once I see some ACTUAL inflation happening. AND....even than it is NOT likely to impact investors other than short time periods when the FED starts to raise rates back up to......NORMAL.

 

AND....as a companion article to the one above.....we are ENJOYING a very nice day today. SO....lets put it out there....

Stock market news live updates: Tech stocks stage rebound after Nasdaq slides into correction

https://finance.yahoo.com/news/stock-market-news-live-updates-march-9-2021-122439436-231640543.html
"Stocks jumped on Tuesday and technology stocks resurged after another session of deep losses. The Dow extended Monday's gains, but trailed the S&P 500 and Nasdaq.

The Nasdaq gained 4% at session highs to pace toward its best day since April 2020. The move marked a stark reversal after the index sank into a correction by the close of Monday's session, plunging a total of more than 10% from a recent record closing high. Shares of Tesla (TSLA) jumped 18% after falling another nearly 6% on Monday and bringing its March-to-date loss to almost 17%. Apple (AAPL) shares also rebounded since hitting the lowest level since November earlier this week. The Dow, meanwhile, added to gains after rallying to an all-time intraday high on Monday.

The sharp contrast between the performance of the Dow and Nasdaq in recent sessions has underscored investors' increasing tilt away from technology stocks in favor of value and cyclical stocks with earnings closely tied to a strong economic recovery. The U.S. House of Representatives is set to take up the $1.9 trillion stimulus package the Senate advanced over the weekend, putting the legislation on track for potential passage this week and teeing up the economy for another massive infusion of stimulus. These prospects have also pushed bond yields higher, with the yield on the 10-year Treasury note topping 1.61% on Monday, for a jump of about 50 basis points from levels just a month ago.

These factors have all worked to make the growth and tech stocks less appealing to investors, especially following many of their breakneck run-ups last year. Shares of Zoom Video Communications (ZM) – a paragon of the "work from home" trade of 2020 – have fallen 8% for the year-to-date through Monday's close, pulling back after a nearly 400% surge last year. Shares of other technology companies and businesses conducive to social distancing have endured similar swoons, albeit while steadying at least temporarily during Tuesday's session.

"This is a trend that tends to happen as we get out of a recession: You tend to see stocks move towards cyclicals. So things like value companies or small caps, things like energy, tend to do really well when you’re coming out of a recession. And what happened last year is, those tech companies were really doing so well that their prices were getting extremely high,” Courtney Dominguez, Payne Capital Management senior wealth advisor, told Yahoo Finance on Monday.

“I don’t think these companies are going away. I think a lot of these are going to be things that we continue to have in our workplaces going forward," she added. "But the question is, are these companies so expensive, is all the optimism already priced in? And that’s different than these companies continuing to being a main forefront of how we work going forward."

1:11 p.m. ET: Nasdaq extends jump to 4%, pacing toward best day in nearly a year
Tech shares extended their gains further Tuesday afternoon, and the Nasdaq was on track for its best session since April 2020.

Here's where markets were trading:

• S&P 500 (^GSPC): +79.18 (+2.07%) to 3,900.53
• Dow (^DJI): +286.36 (+0.9%) to 32,088.80
• Nasdaq (^IXIC): +507.82 (+4.03%) to 13,116.29
• Crude (CL=F): -$0.91 (-1.40%) to $64.14 a barrel
• Gold (GC=F): +$39.00 (+2.32%) to $1,717.00 per ounce
• 10-year Treasury (^TNX): -5 bps to yield 1.544%

10:16 a.m. ET: Rise in rates not yet reason for equity investors to fear: Canaccord Genuity
Investors have been eyeing the rapid rise in Treasury yields with increasing skittishness, with traders trying to gauge whether potential inflationary pressures during the post-pandemic economic recovery may spur the Federal Reserve to move faster than they have telegraphed on tightening monetary policy.

But even the recent jump in rates has not yet reached a point warranting major concern from equity investors, according to Canaccord Genuity analyst Tom Dwyer.

“The sharp rise in long-term U.S. Treasury rates has caused fear of a more dramatic economic and market impact, which begs the question of when the rising rate environment that has driven the recent rotation correction becomes problematic,” Dwyer wrote in a note Tuesday. “In our view, the time to worry about a more signifiant and sustainable correction due to economic impact from higher rates is when there is a meaningful tightening in financial conditions. Our favorite gauge here is the Chicago Fed National Financial Conditions Subindices (NFCI) that measures 105 credit stress indicators, and despite the rise in rates there has been no discernible deterioration in financial conditions.”

"Inflation expectations are higher, but not enough to scare the Fed,” Dwyer added. “They have made it clear that they need to see sustained inflation rather than a bump-up on easy pandemic comps.”

9:40 a.m. ET: Investors are buying the tech rout: Bank of America
Investors are still buying technology stocks despite the deep selloff in many of these names over the past couple weeks.

New client data from Bank of America showed that inflows into U.S. stocks last week totaled $3.7 billion, with that sum landing in the 98th percentile of the firm's weekly flows in data going back to 2008. Much of the buying was in turn taking place in tech names.

"Last week's big net buying was concentrated in tech, which saw another near-record weekly inflow ($2.6B, the highest in over seven years)," the Bank of America analysts noted. "As a result, four-week average tech flows have hit a record high."

Still, flows into value exchange-traded funds (ETFs) were at a five-week high last week while growth ETFs saw the largest outflow in a month, underscoring the rotation taking place across equities over the past week. By S&P 500 sector, the communication services, consumer staples and health-care sectors saw the biggest outflows last week, Bank of America added.

9:31 a.m. ET: Stocks open higher, tech shares outperform after Monday selloff
The three major indexes opened sharply higher Tuesday morning after dipping on Monday, as heavily weighted technology shares recovered some losses. The small-cap Russell 2000 index also gained strongly, adding more than 1%. Small-cap stocks have outperformed so far fo the year-to-date amid expectations for a robust economic recovery.

The Nasdaq gained 2.5%, adding more than 300 points, shortly after market open. The Dow gained nearly 200 points, or 0.6%, and the S&P 500 jumped 1.2%.

The rise in equities coincided with a pullback in Treasury yields across the curve. The 10-year yield retreated by more than 5 basis points to just over 1.5% after hitting a one-year high of 1.61% a day earlier.""

MY COMMENT


LOTS of strength reflected in the various STUFF above. I am posting this BECAUSE....I have NO fear of jinxing the markets. I spit in the face of the correction.......COME ON I dare you Mr correction....do your worst. YOU BIG WEENIE. BLAH, blah, blah.

No doubt in a few days I will be deleting the above and begging Mr Correction to have mercy on me.....I did not mean any of it......please.

 

LOL......I love it.

We are now seeing a BIG drop in the gains today heading to the market close. The POOR DOW has now lost nearly ALL gains for the day. AND....the SP500 and NASDAQ are well off their highs of the day. We are seeing the FEAR TRADE hit the markets. People are taking th gains today and doing some selling. They are seeing the day today as a time to get out of some holdings at a much higher level than we were at yesterday.

WELL as I type this the markets are CLOSED. What an EPIC day....regardless of what happens the rest of the week. I am interested to see where the numbers settle today as the closing data comes in. Looks like the DOW is going to barely hold onto a gain for the day.

OK.....today shows the POWER of the markets.....and.....the POWER of what is lined up for the next 6-24 months. Not that everything will be roses......or.....straight up......or......that the current correction is over.