The Long Term Investor

Have you used that new John Deere yet....Zukodany?

 

Oldmanram......prepare for a correction? NO. I believe we are in a very UNIQUE market situation right now for the next year or two. Obviously not straight up.....and there will be corrections....but lately the corrections we have had have not lasted long.

I mean...even if we have one.....I never try to anticipate them or prepare in any way. I just consider it a normal part of the market process. AND......being long term......I just wait it out and come back out the other side and continue on as usual. My view is....if you start trying to anticipate corrections you are just going to end up being a FAILED market timer....and....you will miss the end of the correction and the early BIG market gains that come out of nowhere when they end.

Personally....I never pay much attention to the VIX......I dont believe in Technical Analysis.....and I dont care much for indicators like the VIX. I prefer to focus on the very specific businesses that I own.....or....broad baskets of businesses like the SP500. Just a few days ago people were writing articles fear mongering that the VIX was higher......now it is down. I really dont care at all what some measure of investor sentiment is saying.

 

If I was going to look at some indicator right now...it would be the GSI......Government Stupidity Indicator. This......made up....indicator measures the current STUPIDITY of the government from day to day. It went UP today and tanked the markets based on this STUPIDITY:

Stock market news live updates: Stocks sink after report says Biden will propose higher capital gains tax on the wealthy

https://finance.yahoo.com/news/stock-market-news-live-updates-april-22-2021-221304988.html

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

"Stocks erased earlier gains to trade sharply lower after Bloomberg reported Thursday afternoon that President Joe Biden would propose increasing the capital gains tax rate on wealthy individuals.

The Dow dropped more than 250 points, or 0.7%, immediately following the report, after trading just slightly lower earlier. The S&P 500 and Nasdaq erased gains to trade at session lows.

Biden's plan would involve increasing the capital gains tax rate on the wealthy to 39.6%, according to the report from Bloomberg citing people familiar with the matter. This would apply to those earning at least $1 million. The current base capital gains tax rate is 20%.

Earlier, in the session, stocks were little changed and struggled for direction. Stocks have churned in recent sessions as investors digested a bevy of corporate earnings results and awaited additional reports, more economic data and more commentary from Federal Reserve officials in the coming weeks.

Corporate earnings have so far exceeded Wall Street's even lofty expectations, as companies benefited from both a pick-up in revenue as demand recovered, and as cost-cutting measures implemented during the pandemic boosted their bottom lines. Chipotle (CMG) shares edged higher in early trading after the restaurant company posted first-quarter earnings that blew away expectations late Wednesday, with digital sales more than doubling.

With stocks hovering near all-time highs and the early stages of the post-pandemic recovery already under way, any additional moves higher will likely come with some difficulty, some analysts said.

"What we have is the absence of a catalyst. Everything that we’ve done over the last twelve months has been to build up to this point, to get this recovery, to get a very, very strong second-quarter GDP, which we think could be upwards of 10%," Jim Caron, Morgan Stanley investment management fixed income portfolio manager, told Yahoo Finance. "But after that, things start to slow down. It doesn’t mean that the data gets bad, it just means on a relative basis that the third quarter will be weaker will the second quarter and the fourth quarter may be weaker than the third quarter."

Looking forward, the contours of additional government spending and monetary policy support will likely serve as key drivers, Caron added.

"We have an infrastructure spending plan that’s also coming out ... And once we have that, we’ve already spent $5.8 trillion, we’re going to spend some more, we’re going to have a very large deficit, so then what comes next? The next 12 months of fiscal spending is probably going to be less than the last 12 months," Caron added. "So that seems like a net tightening. And then we have Fed tapering to throw into the whole thing as well. So the market’s realizing that it has some hard work to do."

Others offered a similar view.

"I do think that returns for equities are certainly going to be more subdued. I mean, we did have a very strong recovery from the bottom that we’ve seen. But now we are bumping up against price targets. We’re probably about 5% away from our year-end price target," Anastasia Amoroso, JPMorgan Private Bank head of cross asset thematic strategist, told Yahoo Finance. "It’s possible that as long as the earnings revisions come through and they’re higher, we’ll revise that. But I think there’s going to be not as big of a beta rally going forward. There’s going to be more discerning investments needed in the markets.""

MY COMMENT

The GSI......Government Stupidity Indicator....should not be confused with the ISI....Investor Stupidity Indicator.....or the MSI......Media Stupidity Indicator. Although they often move in tandom.

Now as to the above and the market today.....how any investor can be shocked or surprised that the government is going to do exactly what they said they would do is beyond me. PLUS......floating a media trial balloon is far different than the final law.

It ALWAYS amazes me to see all the ......."experts".....come out of the woodwork when things are obvious....like the recovery....and try to claim that they predicted it or it is meeting all their expectations. Half these people were......probably....telling us how horrible earnings and the economy were going to be.

BOTTOM LINE.....right or wrong....these people are MORONS. Masters of hindsight and present-sight.....prediction. They wait till something is in the middle of happening and than they put out their comments....as though they anticipated the whole event....all along.

This is what makes investing FUN. Watching and reading all the daily BALONEY that is floated. The language and terminology and ego mania and stroking of ego's. The perfect example is the story I posted earlier about Credit Suisse........funny how NONE of their....EXPERTS......predicted or anticipated the massive loss they just sustained by their own STUPIDITY.

 

Today.....in the red as is probably typical today. Got beat by the SP500 by .27%. A waste of a perfectly good market day and many GREATLY good earnings. OH WELL.....nothing you can do about this sort of day....other than see it as future money.......when the attention comes back to business and away from politics and taxes.

At least....I am equal opportunity when it comes to politics......that is why I use the generic term......"government". It does not matter which party is in power.....they.....ALL......have a unique ability to SCREW THINGS UP. Unfortunately.....none of them really care.....they ONLY care about THEMSELVES. As was said long ago:

"No man's life, liberty or property are safe while the Legislature is in session."

 

Now what really matters......that is a gorgeous sunset....Oldmanram. It is amazing the sunsets that you get on the Puget Sound and on the Washington Coast.

 

In my own.....perverse way.....it does not bother me at all to see those making millions per year or the billionaires get hit with massive tax increases. I cant count the number of times I have seen people in this category come on the media and talk about how they think taxes should be higher......and.....they would gladly pay more. It would be nice to see them get their wish.

The problem is......tax increases......have a NASTY habit of boomeranging back onto the middle and upper middle classes.

Myself.....I really dont have a lot of fear of taxes. First....any increases will NOT impact "me" at all with my current very low taxable income. Second.....there are STILL some people like myself alive that were working and paying taxes when the top rate was 60-70%. In 1978.....when I started to make some real money as a business partner....the top bracket for federal income tax was........70%. Third....business will simply pass any tax increases on to the poor consumers.

Somehow.....it all works out....people get used to it and just adapt and live with it. Back in those.....old days.....at least we had what was called.....income averaging.....where you could do a calculation on your tax form to average your income over ten years in the event of an abnormally high income year.

 

It will be interesting to see the markets and the well-to-do.....SQUAWK and SPUTTER.....when the estate tax exemption is proposed to be reduced to $3Millino to $5Million The bill will be called......"The CPA And Estate Planing Attorney Relief Act". Suddenly generation skipping trusts will be the RAGE again for people that dont need them now with the current $11.7Million per person estate tax exemption.

The coming proposal to ELIMINATE the......STEP UP IN BASIS on death.....will also be interesting to watch.

Of course.....in the end....who knows what we will ACTUALLY get.....at this time it is all about floating trial balloons.

 

I post this......not for the politics.....PLEASE NO Political arguments.....but for any that are not aware of the tax proposals that MIGHT be coming. AGAIN.....as I said.....what is proposed and what actually passes are two very different things

Biden Eyeing Tax Rate as High as 43.4% in Next Economic Package

https://finance.yahoo.com/news/biden-eyeing-capital-gains-tax-171528499.html

(BOLD is important content)

"President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.

For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%. The new marginal 39.6% rate would be an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public.

A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than rates on some wage and salary income, they said.

Stocks slid the most in more than a month on the news, with the S&P 500 Index down 0.9% at the close. Ten-year Treasury yields fell to 1.54% from an intraday high of 1.59% before Bloomberg’s report.

The proposal could reverse a long-standing provision of the tax code that taxes returns on investment lower than on labor. Biden campaigned on equalizing the capital gains and income tax rates for wealthy individuals, saying it’s unfair that many of them pay lower rates than middle-class workers.

White House Press Secretary Jen Psaki, asked about the capital-gains plan at a press briefing Thursday, said, “we’re still finalizing what the pay-fors look like.” Biden is expected to release the proposal next week as part of the tax increases to fund social spending in the forthcoming “American Families Plan.”

Other measures that the administration has discussed in recent weeks include enhancing the estate tax for the wealthy. Biden has warned that those earning over $400,000 can expect to pay more in taxes. The White House has already rolled out plans for corporate tax hikes, which go to fund the $2.25 trillion infrastructure-focused “American Jobs Plan.”

Republicans have insisted on retaining the 2017 tax cuts implemented by former President Donald Trump, and argued that the current capital-gains framework encourages saving and promotes future economic growth.

“It’s going to cut down on investment and cause unemployment,” Chuck Grassley of Iowa, a top Republican on the Senate Finance Committee and former chair of that panel, said of the Biden capital-gains plan. He lauded the result of the 2017 tax cuts, and said, “If it ain’t broke, don’t fix it.”

GOP lawmakers on Thursday called for repurposing previously appropriated, unused pandemic-relief funds to help pay for their counteroffer infrastructure plan. The group underlined opposition to tax hikes, other than a potential revamp of the levies that go toward highway funding in a way that would cover electric vehicles.

Biden will detail the American Families Plan in a joint address to Congress on April 28. It is set to include a wave of new spending on children and education, including a temporary extension of an expanded child tax credit that would give parents up to $300 a month for young children or $250 for those six and older.

Biden’s proposal to equalize the tax rates for wage and capital gains income for high earners would greatly curb the favorable tax treatment on so-called carried interest, which is the cut of profits on investments taken by private equity and hedge fund managers.

The plan would effectively end carried interest benefits for fund managers making more than $1 million, because they wouldn’t be able to pay lower capital gains rates on their earnings. Those earning less than $1 million may be able to still claim the tax break, unless Biden repeals the tax provision entirely.

The capital gains increase would raise $370 billion over a decade, according to an estimate from the Urban-Brookings Tax Policy Center based on Biden’s campaign platform.

For $1 million earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.

Democrats have said current capital gains rates largely help top earners who get their income through investments rather than in the form of wages, resulting in lower tax rates for wealthy people than those they employ.

Capital gains taxes are paid when an asset is sold, and are applied to the amount of appreciation on the asset from when it was bought to when it is sold.Congressional Democrats have separately proposed a series of changes to capital-gains taxation, including imposing the levies annually instead of when they are sold.

“There ought to be equal treatment for wages and wealth,” Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat who’s the chamber’s top tax-writer, told reporters in a phone briefing Thursday. “On the Finance Committee we will be ready to raise whatever sums the Senate Democratic caucus thinks are necessary.”"

MY COMMENT

WHATEVER......by the time all the lobbyists and special interests get a-hold of whatever is proposed who knows what it will look like. AND....as an investor.....I will just deal with whatever I have to deal with......just like my entire investing life over the past 45+ years.

 

One of my holdings.....Honeywell....reports tomorrow before the open. Very few companies report tomorrow...I think this is the largest one. We need to get in a good day tomorrow to close out the week. It is a negative week so far......and we will need a positive day above 1% gain to end the week positive for the SP500. Kind of a strange week. Seems like everything has been pretty positive....but....the markets just went off on a tangent a couple of the days. The.....REALITY....of the short term.

 

I DO like the POSITIVITY of this little article.....and.....the sentiment that it reflects.

Global economy to stage vigorous recovery; jobs growth to lag: Reuters poll

https://finance.yahoo.com/news/global-economy-stage-vigorous-recovery-001108021.html

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

"The global economy will recover this year from its coronavirus slump at a pace not seen since the 1970s as strong momentum builds in most major economies, according to Reuters polls of over 500 economists.

That optimism was largely led by the widely expected vaccine-driven recovery, massive liquidity injections, unprecedented fiscal support - primarily by the United States, with more in the pipeline - and continued adaptation of economic activity to overcome subdued mobility.

With many countries still facing challenges from the pandemic, when asked on the likelihood of a renewed spike in coronavirus cases derailing the global economic recovery this year, economists were split in the Reuters polls taken over the past month. (Interactive graphic tracking global spread of coronavirus: open https://tmsnrt.rs/2FThSv7 in an external browser)

But 2021 growth views for 55% of 44 economies polled on were upgraded from three months ago, led by the U.S. economy - which was predicted to mark the fastest annual expansion since 1984 - and China, set to return to pre-crisis levels this year.

"A synchronised global economic recovery is underway, notwithstanding the continuing battle against COVID-19. Every economy we cover is projected to register a meaningful rebound in annual average GDP growth this year," noted Janet Henry, global chief economist at HSBC.

"Much will depend on whether governments prefer a strategy of eliminating or suppressing the pandemic; access to effective vaccines; the structure of the economy; the willingness of households to spend their accumulated savings; and the scale and mix of policy stimulus."

Reuters poll graphic on the global economic growth and inflation rate outlook: - https://fingfx.thomsonreuters.com/g...conomic growth and inflation rate outlook.png

The devastating pandemic pushed the world economy into its deepest-ever recession last year, but the poll showed a sharp rebound with the global economy predicted to grow on average 5.9% this year, the fastest since the 1970s.

That compared to 5.3% expected in January and a sharp upgrade compared to expectations from a year ago, when the pandemic took hold.

While the latest consensus is just a touch below the International Monetary Fund's 6% projection, nearly 30% of 74 economists predicted world GDP growth in excess of the IMF's forecast.

Over 85% of economists, or 152 of 178, in response to an additional question said the recovery would be faster than previously expected or about the same pace versus the remaining 26 predicting a slower pace of rebound.

None foresaw a downturn.

Reuters poll graphic on the global economy outlook: https://fingfx.thomsonreuters.com/g...oll graphic on the global economy outlook.png

Despite those upgrades to economic growth, the job market recovery was expected to lag, with unemployment rates not forecast to return to pre-crisis levels this year or next for most advanced economies polled on.

While the latest jobs outlook has improved slightly compared to April last year on trillions of dollars worth of stimulus, it still suggests the COVID-19 pandemic would leave many million workers jobless, with several economic sectors disrupted by mobility restrictions not expected to recover anytime soon.

Also, projected quarterly growth forecasts showed uneven momentum for economies from developed to emerging in the latest polls, reflecting worries that public health gains against the coronavirus have stalled in some parts of Asia, Latin America, and Europe.

"Growth rates are still set to be fairly erratic on a quarterly basis and vary enormously between economies and within them. For some economies momentum is set to slow, so much of the strong rebound in the forecast annual average GDP growth rates in 2021 reflects the rebound from the pandemic lows already delivered," added HSBC's Henry.

Following massive stimulus and the pandemic-led supply constraints, the 2021 inflation outlook for over 70% of 44 economies polled on was upgraded from previous surveys, with over 80% of 207 economists answering a question saying risks to their already elevated forecasts skewed more to the upside.

Inflation has ticked up in some advanced nations on pent-up demand, spurred by the re-opening of economies and a global increase in commodity prices.

But base-case expectations were not for a sustained rise in prices, with inflation forecast to moderate next year for most economies.

Monetary policy has drawn renewed attention after the Bank of Canada on Wednesday cut the pace of its bond purchases, making it the first Group of Seven central banks to move towards withdrawing extraordinary stimulus.

The European Central Bank or the Federal Reserve were not expected to start winding down their asset purchases programme this year.

"The biggest risk now, we feel, is that U.S. inflation rises such that the Fed is forced into a hasty exit of COVID-19 era accommodation, and is far more aggressive than current market pricing - which is already more hawkish than the Fed's own timetable," noted analysts at Barclays.

"However, we think this is unlikely. We expect U.S. inflation to moderate by the end of 2021, after a mid-year spike."

MY COMMENT

Sounds good to me. I LIKE the predicted fastest expansion since 1984 comment. Having lived through that time period....and.....knowing that it was the beginning of the REGAN BOOM that lasted till the dot-com crash.....experiencing a similar impact would be AMAZING.

I ALSO see the anticipated weak job recovery as being......a POSITIVE. This will be a BIG help in keeping inflation under control.

The only word of warning......this IS a poll of economists.....and....they are often simply flat out wrong in what they project.

 

On the sites that I scan.....which usually involve at least 100 or more articles, opinions, and commentary......the vast majority tonight are on the issue of the tax hikes floated today. with the amount of commentary on this issue....I am thinking that the topic will be WORN OUT by the time the markets open tomorrow........and.....we can move on to a more RATIONAL day for investors.

At least for now the futures are POSITIVE.