The Long Term Investor

Another.......NORMAL DAY....considering the short term drama. Yes....more of the usual "stuff". So, no need to comment on it....we all know what is driving the short term markets.

POOR BANKS.......they lost their SLR relief.

Fed to restore bank capital requirements relaxed during COVID as markets stabilize

https://finance.yahoo.com/news/fed-...quirements-as-treasury-markets-130935328.html

NOT going to discuss the article...but...there it is if you are interested in banking drama and even though it is not mentioned....this stuff is all tied in with the treasury yields.

I dont see ANYTHING relevant or important for long term investors going on in the news or markets today. So.....I will post this and continue to look around my various mourning sources.

 

I was very surprised when I looked at my primary account just a minute ago. Eight of eleven holdings were UP. Account value....dead flat. UP holdings were.....AMZN, MSFT, COST, HD, GOOGL, PG, SNOW, and NVDA. So I guess there......is a chance........"So your telling me there is a chance"....to actually make some money today.

The way I see it.....we will continue in this SAME environment till the Ten Year yield is driven up to the 2% range by the traders that want the rate at that level. Personally I would like to see it in the 2-3% range. It is not a good thing to have it at these historic low levels. The FED has ABSOLUTELY no ammunition with rates that low in the event of a severe recession or continuation of the deflationary depression of the 2008 to 2016 years.

Short term....the markets are going to be very volatile and the daily jumps up and down that we have been seeing.....driven by market externals.....is going to be the norm. This might be the story for the entire year 2021. At some point sanity will once again emerge....as it always does for longer term investors.....and fundamentals will take hold. BUT....till than.....FRINGE media topics.......interest rates, inflation and jobs...... are going to drive the.......DUMB AND DUMBER markets.

CONSIDERING....that since 2002.....the SP500 has only had TWO DOWN YEARS........2008 (-37.02%) and 2018 (-4.52%).......I am VERY much willing to accept a down year or flat year or small positive year in 2021. BUT....at this point....we are FAR from year end and the markets will have a lot of surprises for us over the next 9 months.......so where we end up by year end is TOTALLY UNKNOWN.

As a LONG TERM INVESTOR......I am ABSOLUTELY willing to accept the erratic short term markets and a down year or two once in a while. This is a NECESSARY price that long term investors pay for the privilege of DOUBLING their money every 6-7 years. I am CONTENT to take whatever is necessary to get those long term returns and compounding. AIMING for anything more is simply GREED and FOOLISHNESS.

 

I will take any money that any sort of investment wants to give me......even if it is STUPID money. That....of course....brings me once again to our CRAZY housing market. We currently have 5 homes for sale out of about 4200 homes in the area. The average time on market before going pending is 1-2 DAYS.......with extreme bidding wars.

We downsized about 1.7 years ago into a different neighborhood. At that time the house we bought had a market value of $730,000. We paid over market........$800,000......... in order to buy it while it was "coming soon" because we wanted that floor plan and location of the lot. I CRUNCHED all the data on sales in the area going back a year.....so I know we overpaid by about $60,000 to $70,000. BUT....we got the house we wanted and it was worth it to us to KNOWINGLY overpay.

So.....fast forward to now........1.7 years later. A house down the block from us.....with the same square footage and same builder and same finishes.....same number of bedrooms and bathrooms......and....actually a little less desirable floor plan.......JUST went pending at $1,300,000.......in one day on the market. So....OUR house that we paid $800,000 for less than two years ago....in the CRAZY MARKET we are seeing here.....would probably sell in the $1.1MIL to $1.2MIL......OR HIGHER...... range....being conservative. A $300,000 to $400,000 gain in LESS THAN 2 years.

Of course....we have ZERO plans to sell and any gain at this point in this crazy market.....is just on paper and could easily disappear if the market collapses. BUT....the odds of a market collapse in our city is extremely slight with ALL the big tech companies here and more companies and high income people POURING into the area.

JUST an example of how......ONE market (property)..... will GIVE you something.......while at the same time another market (stocks) struggles short term. Some times it is stocks booming....some times it is housing prices.....some times it is something else. THE benefit of being well rounded as an investor in different assets. It ALL adds up to........LONG TERM......NET WORTH.

 

A perfect example of why the above is happening:

Portland real estate investment startup CrowdStreet says its headquarters are now in Austin

https://www.oregonlive.com/silicon-...-says-its-headquarters-are-now-in-austin.html

"CrowdStreet, a Portland startup that runs an online marketplace for real estate investments, said Friday that its CEO is moving to Austin, Texas, and that the company now considers that city its headquarters.

“Austin has a number of benefits such as pro-growth economic policies that help job-creating businesses thrive,” CEO Tore Steen said in a statement announcing the move. He said that Texas is among its top markets for investors participating in its marketplace."

MY COMMENT

The company will split its 110 employees between Austin and Portland. I am TOLD by personal sources.....that live in Portland..... that downtown Portland is STILL closed down and is STILL a daily WAR ZONE. Homeless tents are everywhere, high rises are boarded up, and crime, shootings, and murders, have skyrocketed. HERE is what is happening:

"Portland police have responded to close to 200 shootings in 2021.
Pashley said the man who died in Tuesday’s shooting was Portland's 20th homicide victim of the year, and the 15th person to die from gun violence. At the same point in time last year, the number of homicides in Portland stood at one.

“We see it has reached crisis proportions,” said Portland Mayor Ted Wheeler, speaking about the violence. “We are collectively unified in our desire to bring an end to it."

SO SAD. WE are on the same track but perhaps about ten years behind Portland in my city. THIS is why I see the MILLENIALS fleeing the city....IN DROVES....... to areas like our close in suburban area......an ISLAND that is surrounded by the city....but NOT in the city limit. Since we are NOT in the city limit....our schools are better....actually superb, our taxes are lower, our utilities are lower, our crime is lower, etc, etc.

 

I see.....THE WORM HAS TURNED....at least for the moment.

I know there is a good quote that I could use from....."DUNE"....but I can not remember the one I want....oh well. THIS one is very relevant to the markets and long term investing......but.....I can not remember the one I was wanting to post......."the sleeper will awaken".

As you can see.....I am TIRED OF the media investing PORN....so I am ignoring it today....so far.

 

EXACTLY....oldmanram. You have to be able to TOLERATE the short term movement up and down to RACK UP the long term gains. We are on track.....at the moment...for a nice day today. AND....I have not looked today....a nice close today will probably mean at worst a flat week....and...at best a gain for the week. It is amazing how human brain behavior works.....we get a NASTY day like yesterday....and that......obscures the fact that we are heading to a......worst case situation....a flat week.

You take that......4 steps forward and 3 steps back.......and EXTEND that over ten years.....and you end up with a market gain that represents many hundreds......or even thousands...... of "NET" steps forward after you take out the back steps. THAT is the power of long term investing.....as reflected in the long term historical returns.

I probably jinxed us by anticipating the close today.

 

HERE are the NIKE earnings for those that own the stock...as I do. They are....of course.....down today and a drag on my portfolio for the day.

Nike posts mixed results as sales fall short of estimates, hurt by U.S. port congestion

https://www.cnbc.com/2021/03/18/nike-nke-q3-2021-earnings.html

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

"Key Points

• Congested ports in the United States and ongoing store closures in Europe weighed on Nike’s sales during its fiscal third quarter, the company said Thursday.
• In North America, revenue dropped 10% year over year, as Nike said shipments have been delayed by more than three weeks.
• But Nike continued to see momentum online. Its e-commerce sales surged 59% during the period.

Nike on Thursday reported higher third-quarter profits even though sales growth was hurt by widespread port congestion in the United States and ongoing store closures in Europe.

Although the global health crisis still leaves an overhang of uncertainty, Nike said it anticipates lockdowns will start to ease in Europe in April, and delivery windows will slowly improve in North America through the remainder of the year.

Its shares dropped nearly 4% in after-hours trading.

Here’s how Nike did during the quarter ended Feb. 28, compared with what analysts were expecting, based on a survey by Refinitiv:

• Earnings per share: 90 cents vs. 76 cents expected
• Revenue: $10.36 billion vs. $11.02 billion expected

Nike reported net income of $1.45 billion, or 90 cents per share, compared with $847 million, or 53 cents per share, a year earlier. That was better than the 76 cents per share that analysts were expecting, based on Refinitiv data.

Total sales rose to $10.36 billion from $10.1 billion a year earlier. That was lower than the $11.02 billion forecast by analysts.

In North America, revenue dropped 10% year over year, hurt by shipment delays that Nike said have been dragging on for more than three weeks. That also meant sales at its wholesale partners were affected, as businesses such as department stores and sporting goods outlets didn’t receive goods on time. They’ll likely now need to discount some of that merchandise to make space on the shelf for more in-season styles.

Backlogged West Coast ports, a global container shortage, and a truck driver shortage in the U.S. continue to be headaches for businesses from Nordstrom to Urban Outfitters to Peloton. Many have said they expect these issues to drag on until the second half of the year.

In its Europe, Middle East and Africa region, Nike said, sales at its brick-and-mortar retail stores dropped due to pandemic-related closures and restrictions while digital sales in those markets grew 60% in the latest period. It said about 60% of its stores in the region are open today, with some operating on reduced hours.

In Greater China, a region that is further along in recovering from the pandemic, sales climbed 51%.

Nike offered an outlook for the current quarter and fiscal year that anticipates inventory transit times will improve slowly across North America from here and lockdowns will ease across Europe come April.

It’s forecasting fiscal 2021 revenue to rise by a low-to-mid-teens percentage from the prior year. Analysts had been calling for full-year revenue growth of 15.9%, according to Refinitiv.

Fourth-quarter sales are expected by the company to be up 75% year over year, as the company laps a period when 90% of its owned stores were shut due to the pandemic. Analysts had been looking for growth of 64.3%.

Online sales get a boost from livestreaming
Nike’s direct-to-consumer business grew 20% year over year, to $4 billion. And online sales for the Nike brand surged 59%, as consumers looked to add new sneakers and athletic gear to their wardrobes, even if they were stuck at home. The company said it booked $1 billion in sales online in North America for the first time.

“We continue to see the value of a more direct, digitally-enabled strategy, fueling even greater potential for Nike over the long term,” Chief Financial Officer Matt Friend said.

Nike’s e-commerce business is still on track to account for at least 50% of sales in the coming years, the company said. Nike has been investing more in digital, including its popular SNKRS app, to reach younger consumers online and reduce its reliance on third-party partners.

It also said it has recently had success testing new livestreaming formats, which remain more popular in Asia than in the U.S. But other companies, including Nordstrom and Walmart, are experimenting in America, too. During the third quarter, Nike said it started livestreaming in Japan, Germany and Italy.

“We’re seeing phenomenal engagement for this live interaction, with average viewing doubling,” Chief Executive Officer John Donahoe said.

Nike shares are up more than 110% over the past 12 months, as of Thursday’s market close. It has a market cap of more than $225 billion.

MY COMMENT

A GREAT company and one of my longest holdings. I actually think these are REALLY strong earnings....especially for the longer term. Earnings per share really kicked ass....even with the shipping delays that are NOT their fault. As the world reopens we are really going to see BOOMING NUMBERS from this company as well as many if not most of the BIG CAP tech companies over the next year or two.

 

A minimal day....but....green is green. AND....a beat of the SP500 by .07%. Nothing to write home about....but I will take it and move on to next week.

DOW year to date +6.60%
DOW for the week (-0.46%)

SP500 year to date +4.18%
SP500 for the week (-0.77%)

NASDAQ 100 year to date (-0.17%)
NASDAQ 100 for the week (-0.54%)

NASDAQ year to date +2.54%
NASDAQ for the week (-0.79%)

RUSSELL 2000 year to date +15.83%
RUSSELL 2000 for the week (-2.77%)

ALL in ALL.....once again......a NOTHING BURGER week for the averages....especially the SP500, DOW, and NASDAQ 100. It seemed a lot worse as it was happening....in the end no big deal....mostly a FLAT week.

 

THIS little article is a good one to end the week.....and....move on forward.

The 'three pillars' of this bull market are still in place

https://finance.yahoo.com/news/three-pillars-of-bull-market-in-place-morning-brief-095329123.html

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

"'Worriers are going to worry,' Bank of America says
Stocks hit record highs on Wednesday after the Fed's latest policy statement.

Stocks got crushed on Thursday as investors thought more about the Fed's latest policy statement.

In this kind of environment, it's hard to know what to believe.

But strategists at Bank of America led by Ajay Singh Kapur argue in a note published earlier this week that three factors are supporting the market now that should trump any worry du jour that spooks investors: liquidity, earnings growth, and breadth. Said another way, money is available, corporate fundamentals are improving, and more companies are doing better.

"We are in a bull market for equities, a view we have reiterated since March 2020," the firm writes.

"Yet, it seems easier to find skeptics, pessimists and worriers. There is always some reason or the other since the start of this bull market to complain/worry about. That's why bull markets climb a wall of worry. Bear markets crush confidence and trigger primordial survival modes in humans... The latest worry is rising bond yields and inflation. Interestingly, we have gone from all that skepticism about no V-shaped recovery straight to the opposite end — inflation! All within a few months. Worriers are going to worry." (Emphasis ours.)

Kapur and team include this great chart which shows the rise of global stocks over the last year alongside the concerning headlines that at each turn appeared to threaten the rally which began one year ago.


Over the last year, many developments related to the pandemic have appeared to put the market at risk. But so far, none of these has overcome the forces of liquidity, earnings growth, and broadening participation in the rally. (Source: Bank of America Global Research)
Of course, in hindsight it is always easier to say that some new development turned out to be nothing. And so Thursday's market's decline is absolutely worth noting: we will only know with hindsight whether this was the beginning of a rocky period for stocks or just another hiccup along a path up and to the right for stocks.

But we too often see investment commentary fall into one of two camps: everything matters or nothing matters.

There is, however, no absolute right answer. There can only be answers that are either more right or less right, depending on your investment goals, your time horizon, and your risk tolerance, among other factors.

But as far as Kapur and his team are concerned, these recent market jitters focused on a new market risk — in this case inflation — do not yet challenge any of the three core tenets of their bullish outlook.

"When free liquidity tightens, when the EPS growth cycle is enfeebled, and when the Tape breaks down, we will worry," the firm writes. "[Until] that time, stay bullish. Buy cyclicals, value, and start taking a fresh look at tech, already bruised by rising bond yield concerns."'

MY COMMENT

THE chart with the headlines superimposed above is GENIUS. If it was a larger chart you could superimpose hundreds of negative headlines along the path of the last year. What is amazing and HILARIOUS looking at that chart is that.....EVERY ONE OF THE HEADLINES......was flat out WRONG. They ALL reflect nothing more than BIAS of the writer or news source. In fact NONE of them have even the slightest correlation with what the markets ACTUALLY did.

That chart above....with the headlines....shows that the MSCIAC Index was up 77% from the March 2020 low to recently.....over the course of one year. All the while......the headlines were screaming....fear, fear fear, panic, panic panic. BUT....old Mr Stock Market....just kept on trucking ahead. I guess it is a good thing that the market averages can not read.

The BIG LESSON.......the experts, the writers, the media, the professionals.....dont know SH*T.......they are BIASED......they have an AGENDA. All you have to do to make them look like fools is remain a long term investor. It TRULY is that simple.

 

Yeah it is a good read.....and....I thought the movie adaptation was not bad for....what seems like....a difficult story to adapt for a movie.

As investors these days we have to learn how to walk like the FREMEN in the......investing......desert.....otherwise the giant sand worms......inflation, tax increases, and interest rates........will rise up and get us.

At least this week took us another week....forward...... into the rising yields and another week into this little market rough patch. Sooner or later we will come out the other side and make some good.......sustained...... gains. One thing about investing......a good thing right now......nothing lasts for long......conditions and results will always change, short term.

 

A couple of nice little articles below that illustrate one of my personal opinions:

First Negative-Yield Quote Causes Flutter in India’s Bond Market

https://finance.yahoo.com/news/first-negative-yield-quote-causes-060120173.html

TREASURIES-Yields retreat, bills flirt with negative rates

https://finance.yahoo.com/news/treasuries-yields-retreat-bills-flirt-201616668.html

European stocks climb as Bank of England leaves interest rates on hold

https://www.yahoo.com/lifestyle/eur...bank-of-england-decision-looms-084506188.html

MY COMMENT

Over here "we".....the royal "we"......are ALL concerned with a yield on a ten year Treasury of under 2%. In MOST of the rest of the world....Germany, England, most if not all of the EU, Japan, India, etc, etc......the issue is negative yields.

In fact in most if not ALL of the world the issue over the past 10-12 years and continuing today is......DEFLATION. We have been in a world wide deflationary depression for the past 13 or more years. In fact we saw the same thing here.....deflation from 2008 till 2016. With our new government....we are back on that same path.

All of the "central planing" socialistic government countries of the EU are stuck in what will be a long many decades of deflationary stagnation. Japan is stuck in long term deflationary depression.

For the first time in a long time....it is apparent over the past few years....that the FED is actually aware that this is the key issue facing this country on an economic front. This is WHY they are NOT concerned with inflation and would actually like to drive inflation higher. This is what will be the great job killer in this country. Of course it is a chicken or the egg situation with jobs. The CLEAR path going forward with jobs is going to be the ELIMINATION of tens of millions of good paying jobs in the corporate world. Companies WILL outsource jobs to work from home workers all over the world.....and.....will save billions in employee costs. As technology and AI improves they will need fewer and fewer workers.

It is all about PRODUCTIVITY and creating shareholder value. Revenue can drop and profits can still skyrocket if you drop enough employees. This is happening at Nike right now. This is happening in corporations all over the world right now.

I HOPE we do get some inflation......that will be a good thing. We might have a chance to avoid the deflation that has a BIG grip on the rest of the world. BUT....even if we do....it will only be a temporary condition. The future path here as in the rest of the world is for a continuation of the current deflationary depression.