The Long Term Investor

For those that like to know the short term reasoning and thinking as it applies to the market today....here you go.

Stock market news live updates: Stocks fall as tech rout deepens, Nasdaq extends losses

https://finance.yahoo.com/news/stock-market-news-live-updates-may-11-2021-221907344.html

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

"Stocks fell Tuesday morning, with the Nasdaq adding to Monday's losses as technology stocks came under increasing selling pressure as inflation concerns rose.

The S&P 500 and Dow also dropped. A day earlier, the Dow briefly topped 35,000 for the first time ever before erasing gains to end in the red. The Nasdaq dropped 2.6% to post its worst day since March. The S&P 500 also dropped more than 1%, with technology stocks sliding as traders rotated away from high growth stocks that could be impacted by rising inflation during the recovery out of the pandemic.

With a strong quarterly earnings season winding down – aside from a couple notable names including Disney (DIS) reporting later this week – investors are taking stock of the next catalysts for markets, with rising prices a key focal point.

According to data from Bank of America, mentions of inflation have increased nearly 800% year-over-year in quarterly earnings calls and reports. Bank of America equity strategist Savita Subramanian said that strong earnings, rising inflation and improving corporate sentiment "all point to a continued rotation into Value."

“We have an accelerating growth environment with the prospects for some inflation. And for investors, when they think about inflation, they tend to move away from tech stocks, because they think of tech stocks as longer-duration assets in which you're not going to be paid well into the future, and they'd instead rather own parts of the market that are more highly correlated with nominal GDP, " Brian Levitt, global market strategist for Invesco, told Yahoo Finance. "What we're going through right now is a reversion back to where we likely otherwise would have been had it not been for the coronavirus outbreak. In that reversion, you'll see more economic sensitive names outperform."

"But it doesn't change the long-term structural story," he added. "The long-term structural stories, all the shifts that are taking place in society, they don't change. And those tech stocks are on the cutting edge of it, so they were bound for some type of volatility or some type of correction, particularly if inflation concerns increased.”

This week, investors are set to also receive the latest monthly consumer price index and producer price index from the Bureau of Labor Statistics, which are each expected to reflect a strong jump in prices over last year's pandemic-depressed levels. The sustainability of these inflationary trends will ultimately guide the Federal Reserve's monetary policy decisions, determining whether they will maintain their current accommodative policies that have boosted both the economy and underpinned asset prices, or pull back some of their support.

“One of the big questions of course is, how does the Fed respond to all this inflationary pressure out there, and how long can they hold onto this concept of being transient before they have to start saying, we’re going to either pull back on quantitative easing asset purchases, or we’re going to have to start raising the Fed funds rate," Robert Dye, Comerica Bank chief economist, told Yahoo Finance. "They’re going to telegraph that well in advance, but I don’t know if they’re going to be able to hold out until the end of this year like some in the Fed have implied.”"

MY COMMENT

Today is ALL ABOUT the anticipation......or advance knowledge......of the CPI data this week. As usual......the media and BIG BOY investors.....or I should say traders......are all focused on whether the FED actually means what they have said about 500 times over the past few months.

You know when I read the above....with all the statements that....investors are taking into account this or that......or investors are shifting to stocks that blah, blah, blah.....I dont REALLY buy any of it. The average....ACTUAL investor....the retail investor that is the GUTS of the long term economy....dont think about any of that STUFF. That is short term TRADER baloney.

The average....REAL...investor...wakes up, looks at the markets, goes to work, eats dinner, watches some TV, plays with the kids, etc, etc.

OVER my ENTIRE lifetime I have yet to hear anyone having this conversation with their wife or their friend:

"Well Honey.....We have an accelerating growth environment with the prospects for some inflation. So I am thinking about inflation. Seems like we should tend to move away from tech stocks, because they are stocks as longer-duration assets in which we are not going to be paid well into the future, and we should instead rather own parts of the market that are more highly correlated with nominal GDP" (Of course....honey's reply.....huh?....what are we eating for dinner.....lets watch Netflix)

I CALL BS.....on this sort of short term reasoning. It is SIMPLY TRADER TALK.......and....not relevant to actual investors that are investing for a lifetime of accumulation of personal assets and net worth.

 

HERE is another aspect of current REALITY.....the Housing BOOM....or in some areas...BUBBLE. Since ALL housing is LOCAL...LOCAL...LOCAL.....in some areas these price increases WILL stick for the long term...in others they will NOT.

U.S. Home Prices Surge the Most on Record in Buying Frenzy

https://finance.yahoo.com/news/u-home-prices-surge-most-141744748.html

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

"The median price for a single-family home in the U.S. rose the most on record in the first quarter, as buyers fought over a dearth of inventory, according to the National Association of Realtors.

Prices jumped 16.2% from a year earlier to a record high of $319,200. The growth eclipsed the 14.8% rate in the fourth quarter, which was the highest in data going back to 1989, the group said in a report Tuesday.

Americans are taking advantage of low mortgage rates to buy homes in the suburbs and in less-costly cities across the country, where supplies are tight and bidding wars are common.

“The record-high home prices are happening across nearly all markets, big and small, even in those metros that have long been considered off-the-radar in prior years for many home-seekers,” said Lawrence Yun, the group’s chief economist.

The metropolitan area with the largest increase from a year earlier was Kingston, New York, a picturesque Hudson Valley town about 90 miles (145 kilometers) north of Manhattan. Prices there soared 35.5%. Fairfield County, Connecticut -- home to Greenwich -- followed, with 34.3%.

Of the 183 metro areas measured by the group, 163 had double-digit price gains, up from 161 in the fourth quarter. Springfield, Illinois, was the only area where prices fell."

MY COMMENT

MUCH of these increases are happening in the suburbs, the NICE towns and up-scale areas. There is more and more of a DISCONNECT from.......the nice, safe, up-scale, great school, suburban areas and small to medium size town and cities.....and....the rest of the country....ESPECIALLY....the OLD SCHOOL cities....at least the parts of the OLD cities where the REAL people live.

I dont see MUCH danger of this BOOM.....or.....BUBBLE...leading to some sort of collapse. The mortgage industry seem to be doing a good job in the current market of screening buyers for qualification and ability to pay. AND.....many many buyers in the HOT markets are ALL CASH. This market is TOTALLY DIFFERENT than the ....LIAR LOAN.......boom in the 2007/2008 time span.

 

Well Emmett.....there is more to the above economic discussion about supply side than the current administration.

It applies across many administrations for the past 40+ years. Political party is not the common thread.....both sides have been......for the most part.......economic failures for various reasons.

Actually there have ONLY been TWO TIMES in the last 40+ years that the supply side economic theory was used. The first was with REGAN with the assistance of the Democrats under speaker Tip O'Neill. At that time the tax and other policies were put in place on a bipartisan vote. As I said.....they kicked off the greatest bull market and economic advance ever in terms of length in history.....deep into the Clinton era. The second time was recently from 2016 to 2020.....with the same historic DRAMATIC POSITIVE results.

I dont care about politicians.....or politics....but....I can see what has actually worked over my lifetime to kick start and maintain the economy. Unfortunately the POLITICS and political bickering gets in the way of most people seeing the reality of what works for the economic good of the country.

 

Yeah it is sad to see Zukodany.......but....many people just can not bring themselves to make a change. So they make SMALL changes....very incremental. You made the BIG change....and..it will pay off in quality of life as well as financially. You now have the best of both worlds.

We have always been able to make changes. After all, we have owned 10 houses.....all over the place. Some in the city...some in the country.....some in various towns and cities in Washington.....some in cities and towns in Texas. I know we are NOT normal.....we just are not tied down to any particular place. I guess it comes from the fact that BOTH myself and my wife grew up in career military families that moved around. SO.....now.....every 3-6 years we start to get the old urge to move.......we are aware of this and usually resist...but once in a while we give in and move.

 

Oh yes.....the markets.....I just about forgot about them. I was in the RED today like many. BUT...I had a good beat of the SP500 today by .42%. The positive drivers of my account today were Amazon, Nike, and Nvidia.

 

SO.....TESLA. I guess they are having a CHINA problem.

On one hand:

Tesla puts brake on Shanghai land buy as U.S.-China tensions weigh: sources

https://www.cnbc.com/2021/05/11/tes...d-buy-as-us-china-tensions-weigh-sources.html

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

"Key Points

• U.S. electric car maker Tesla has halted plans to buy land to expand its Shanghai plant and make it a global export hub due to uncertainty created by U.S.-China tensions.
• With 25% tariffs on imported Chinese electric vehicles imposed on top of existing levies under former President Donald Trump still in place, Tesla now intends to limit the proportion of China output in its global production.
• Tesla had earlier considered expanding exports of its China-made entry-level Model 3 to more markets, including the United States, sources told Reuters, a plan that had not previously been reported.

U.S. electric car maker Tesla has halted plans to buy land to expand its Shanghai plant and make it a global export hub, people familiar with the matter said, due to uncertainty created by U.S.-China tensions.

With 25% tariffs on imported Chinese electric vehicles imposed on top of existing levies under former President Donald Trump still in place, Tesla now intends to limit the proportion of China output in its global production, two of the four people said.

Tesla had earlier considered expanding exports of its China-made entry-level Model 3 to more markets, including the United States, sources told Reuters, a plan that had not previously been reported.

Tesla currently ships China-made Model 3s to Europe, where it is building a factory in Germany.

Tesla’s Shanghai factory is designed to make up to 500,000 cars per year, and is currently producing Model 3 and Model Y vehicles at a rate of 450,000 units per year.

In March, Tesla refrained from bidding on a plot of land across the road from the plant as it no longer aimed to boost China production capacity significantly, at least for now, three of the people said, declining to be named as the discussions were private.

In a statement to Reuters, Tesla said its Shanghai factory was “developing as planned”.

The Shanghai city government, a key supporter in Tesla’s establishment of a wholly-owned factory in China - the first and only foreign passenger car plant not required to form a joint venture - did not respond to a request for comment.

Tesla had never declared an intention to acquire the land, which is about half the size of the 200-acre (80 hectare) plot housing Tesla’s current facility and would enable the company to lift capacity by another 200,000 to 300,000 cars, said two of the people.

Tesla’s China sales are surging despite mounting regulatory pressure in the country after consumer disputes over product safety and scrutiny over how it handles data.

It generated $3 billion in revenue in China in the first three months of this year, more than tripling year-earlier sales and accounting for 30% of total revenue.

Land plans
Led by mercurial CEO Elon Musk, Tesla is known for shifting gears on strategy, including in China.

Construction documents posted on a government website in March show Tesla is revamping its plant in Shanghai to add capacity.

Tesla still has land, designed for production but now used for parking, at its Shanghai site. One of the people said Tesla could expand its capacity beyond 500,000 on its existing site. Another said Tesla may acquire more land for more car production lines in the future.

Separately, Tesla is building facilities to repair and reproduce key components such as electric motors and battery cells and build EV chargers at its Shanghai plant.

The Shanghai government has been talking to several companies to sell the land for new-energy commercial vehicle production, said a person with direct knowledge of the matter.

Tesla faces intensifying competition in China with domestic players such as Nio, which is considering making mass market products under another marque.

Even before the trade war tariffs, relatively few China-made cars were shipped to the United States.

General Motors sells its China-made Buick Envision in the United States, paying the additional 25% tariff, although the SUV is not a high volume model."

ON THE OTHER HAND:

Tesla's weak sales in China worry investors

https://www.cnn.com/2021/05/11/business/tesla-china-problems/index.html

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

"Tesla's recent run of bad publicity in China is apparently hurting its sales there, raising investor concerns.

The electric car leader sold fewer than 26,000 cars in China in April, down 27% from March, according to figures released by the China Passenger Car Association. The drop came as Chinese EV manufacturers such as Nio (NIO), Xpeng, and Li Auto, all reported improved domestic EV sales.

Tesla was the target of a protest at China's largest auto show in Shanghai last month by Tesla owners who complained about problems with their cars. The company also has five Chinese regulatory agencies questioning the quality of its Shanghai-made Model 3 cars. And there were reports that China's military had banned Tesla vehicles from entering its complexes, expressing concerns that cameras equipped onboard could be used for spying, a charge Tesla CEO Elon Musk denied.

"It was expected that its April sales would be down sequentially, but not to this extent," said Dan Ives, a tech analysts at Wedbush Securities. "China is a lynchpin to the Telsa bull story. The sales numbers show that all the issues in April had an impact."

Also hurting share prices Tuesday is a story from Reuters that Tesla has halted plans to buy land to expand its Shanghai plant into a global export hub due to uncertainty over U.S.-China trade tensions. The report cited unnamed sources familiar with the company's thinking.

Tesla did not respond to a request for comment on either its April sales in China or its Shanghai plant plans. The company reports its global sales quarterly, not in particular markets or for particular months. Reuters reported that Tesla told it that the Shanghai factory is "developing as planned."

The news of Chinese sales and the Reuters report helped send Tesla shares down 3% in early trading, after being down even more in pre-market trading.

A spectacular 743% share price gain in 2020 lifted Tesla to one of the most valuable US companies of any kind and by far the world's most valuable automaker, worth as much as the six largest automakers combined.

But after continuing that run in the first few weeks of 2021, shares topped out in late January after the company reported slightly disappointing fourth quarter earnings. The slide has taken Tesla shares down 29% from their peak, even before Tuesday's slide, sending the stock into bear market territory."

MY COMMENT

I am STILL very much on the fence with holding my remaining Tesla shares. I STILL have a NICE GAIN...just below 150%. BUT....I continue to be tempted to sell and lock in that gain. I would prefer to NOT sell into the current market weakness.....if I sell. At this moment I have not made any decision. I will have to look at where my gains is at the moment and consider what the prospects are......I HATE to ride a nice gain down.

With Germany and Austin plants to come online in the near future.....and with continued interest in INDIA.....there is really no need for Tesla to expand in China. my view....the smart move is to take advantage of the soon to be completed capacity in Austin and Berlin.....and...make a STRONG move into INDIA. Let INDIA be the core of your Asia strategy. BUT....MUSK is a smart guy and does not need my view......I am sure he is well aware of all the various factors and will.....as usual....make the right strategic move.

 

Well thank you Emmett. That is the final piece of data and advice that I needed. SO......I have put in an order to SELL.....ALL SHARES....of Tesla at the open tomorrow.

Just joking that you had anything to do with it.

Yes...the rest is REAL. I will have between 125% and 130% GAIN in 10-11 months having purchased in June and July 2020. That is ENOUGH for me.....a LARGE ENOUGH gain in a span of LESS that one year. I can live with it.

Unfortunately the gain will be short term capital gain.....fortunately....in my NEW tax situation with my tax rate having plummeted.....as a result of how my retirement income is now structured.....it is not a big issue.

SOME of proceeds will be added to NVIDIA...to continue to bring that position up to the level of the others that I hold. The rest will be added to my SP500 Index Fund to increase my BROAD market exposure.

Of course....I will STILL own TESLA in the SP500 Index......and....of course like any stock I will have the ability to buy it if need be in the future.

GOSH....the end of an era for me......well...if an era is defined as 10-11 months.

 

This sale will NOW take my little stock portion of my total account down to 10 positions. I like to stay between 10-15 positions. At the moment I intend to simply stick with the 10. By ditching SNOW and now TSLA.....I will increase the percentage of my stock portfolio that is NOT tech. I will have my five BIG TECH positions....AMAZON, MICROSOFT, GOOGLE, NVIDIA AND APPLE.......and....my five non-tech positions.....HOME DEPOT, HONEYWELL, NIKE, COSTCO, AND PROCTOR & GAMBLE.

In the current market environment this......MIGHT....help to make my daily returns a little more stable and less erratic.......not that I really care about daily returns.

 

Zukodany....balancing my portfolio a little bit away from the tech does not have anything to do with this sale. It is just a side benefit.....incidental.

My primary reason for the sale...I am not confident in TESLA going forward. I am not confident that they will retain any sort of premium to all the other EV companies that are going to flood the markets in the near future or the battery technology that is going to flood the market.

When I bought I did so based on three medium term factors......that I thought they could achieve........that supported the buy....... making the next production numbers....making the number of quarters of profit necessary for the SP500......and...actual inclusion in the SP500. All were achieved. The stock split was an added bonus.

As a result the stock price skyrocketed in the medium term. Now the stock has been in a flat to down trend for the past five months. I dont see fundamental factors that are going to change that any time soon......and....I suspect that for now and perhaps for some time......the explosive growth in the stock is over. The fact remains that the majority of their profit is generated by selling emissions credits.......and now Bitcoin. Now that.....making money from selling credits and investing in crypto....might be a smart business model.....it has been so far....but over the long term....I dont know.

So....having achieved what I set out to do....I will sell NOW and take my gains on top of the prior gains that I took. At the moment....I do not care to gamble the profit that I can take now versus the future of the company. I DO think MUSK is a different leader....in a positive way....and a visionary. BUT...he has a lot of different irons in the fire at the moment.

ALSO....add in as a slight factor....I do not ever buy auto companies. I made an exception for Tesla since they are far more than an auto company. I dont like the boom and bust cycles that auto companies go through.

I have been letting this little SELL stew around in my brain for over a month now. I decided to wait till the recent earnings to see how the stock did and how the markets did. In the end...I have to follow my instinct. I will have no regret from taking this profit even if the company does well going forward.....I would have regret with not taking this profit if it lingers or does poorly.

On the positive side there is the coming opening of the plants in Austin and Berlin and perhaps a move strongly into India. Their battery tech and self driving tech is state of the art. This is an EXTREMELY young industry....there will be plenty of time to see how it all shakes out.

I will revisit the stock later if I think it is justified.

I am just not sure this sort of information and fundamentals justifies holding versus what I can take right now.

Credits and Bitcoin Than Cars
Tesla’s bitcoin bet paid off, while Model S and Model X production came to a halt in the first quarter of 2021.

https://www.autoweek.com/news/green...-money-selling-credits-and-bitcoin-than-cars/

"Tesla recorded another profitable quarter in the first three months of 2021 even with two of its models on the sidelines, posting a net income of $438 million while recording $10.4 billion in revenue. This profit didn't materialize thanks to car sales, however, which is ostensibly the main business of an automaker.

Rather, Tesla has two main items to thank for posting a profitable quarter: Sales of emissions credits to other automakers, and sales of its bitcoin holdings.

Emissions credits accounted for $518 million in revenue in a quarter that saw a pretax income of $533 million and a net income of $438 million on a GAAP basis. Needless to say, the credits account for almost the entirety of Tesla's profit for this quarter—in fact, sales of emissions credits have been a major source of revenue for Tesla for quite some time, contributing to hundreds of millions in income for the past few quarters. The automaker accumulates regulatory credits because it produces only EVs and sells them for a profit to other automakers that are short of these credits.

The second item that helped Tesla were sales of bitcoin, the "positive impact" of which amounted to $101 million. The automaker purchased some $1.5 billion worth of the cryptocurrency at the end of 2020, and has begun accepting the cryptocurrency for sales of its cars just a few weeks ago. It has now sold about a tenth of its bitcoin holdings, which helped its position in the first quarter of 2021, proving to be a bet that has paid off amid a sharp rise in the cryptocurrency's value. It also came at a time when CEO Elon Musk has repeatedly mentioned bitcoin and other cryptocurrencies on social media.

Both of these sources of income and investment should prompt some deeper examination of what the automaker is doing to generate it.

For one thing, if the government emissions credits did not exist and were not given to automakers under a cap-and-trade system, Tesla would simply not have any to sell—the government is essentially giving credits to Tesla to sell to other automakers for cash. For another, the automaker that trades on offering vehicles that produce zero emissions in the use phase (if not the build phase) has invested $1.5 billion in an electronic currency that requires tremendous amounts of energy to "mine," drawing power from what are often not the cleanest sources of energy all over the world, in amounts greater than those produced by some individual countries by some estimates, for the sake of producing electronic currency.

One other unusual aspect of this quarter's results is that Tesla also produced close to zero Model S and Model X vehicles in the first quarter, with both reportedly affected by a parts shortage ahead of crucial updates, including a redesigned interior for the Model S and the option of a yoke-style steering wheel. Tesla still posted record deliveries in the first quarter of 2021, delivering 184,800 vehicles and producing 180,338, with Tesla's plant in Shanghai now playing a big role in the company's global output.

"Model Y ramp in Shanghai is progressing well. We expect that our Shanghai factory will continue to increase quarterly production output through the year," the company noted in its Q1 financial report. "We recently improved our domestic supply sourcing ratio to over 90%. Vehicle exports to Europe and APAC continue to progress as planned."

This means that the Model 3 and the Model Y accounted for 182,780 of its deliveries in the first quarter, also reflecting the consumer market's turn to more affordable EVs amid booming battery-electric vehicle sales in Europe and China. Both updated Model S and Model X vehicles are expected to reenter production shortly, with the Model S due to begin shipping in June.

"First deliveries of the new Model S should start very shortly, Model Y production rate in Shanghai continues to improve quickly and two new factories Berlin and Texas are making progress," the automaker said. "There is a lot to be excited about in 2021."

Perhaps the greatest challenge to Tesla's car-building operations will arrive later this year, as a number of automakers roll out their first mass-market battery-electric models in several crucial regions. Whether this will dent Tesla's profits in the short term remains to be seen."

MY COMMENT

In the end...I dont get emotionally connected to stocks or companies. I try to be as decisive with selling as with buying. There is NO absolute answer in most cases of buying or selling a stock. BUT.....one thing that I know....I have never regretted selling when I can turn $1 into about $2.30 in less than one year. AND.....there are no limits to buying a stock again in the future.

 

OK....doing some clean up work on my Tesla SELL that happened a little bit ago. I just put half the proceeds into Nvidia in each account and the other half into the SP500 Index. The SP500 Index trade will happen after the close today at the closing NAV.

Considering the shares that I sold earlier to recover my initial investment in Tesla and the profit that I took at that time.......and....considering that the entire proceeds today was profit.......I ended up with a "total" profit for the entire position of Tesla that was purchased in June and July of 2020.......11 months ago....of approximately 150%. Not bad for a ten month holding period.

By random chance I happened to get a good price on the Nvidia with the markets being down today.

 

With earnings being over....or at least over in terms of any attention from anyone......we are now back to the day to day media and short term trader driven market environment. Of course here is the story of the day.....emphasis on......"day".

Inflation speeds up in April as consumer prices leap 4.2%, fastest since 2008

https://www.cnbc.com/2021/05/12/consumer-price-index-april-2021.html

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

"Key Points

• The Consumer Price Index rise for April from a year earlier was the sharpest since September 2008.
• Economists surveyed by Dow Jones had been looking for an increase of 3.6%.
• One big reason for the acceleration was base effects – at this time a year ago, the economy was hit with the worst of the Covid pandemic and inflation was unusually low.
• Federal Reserve officials see the current rise as temporary and not likely to influence policy.

Inflation in April accelerated at its fastest pace in more than 12 years as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported Wednesday.

The Consumer Price Index, which measures a basket of goods as well as energy and housing costs, rose 4.2% from a year earlier. A Dow Jones survey had expected a 3.6% increase. The month-to-month gain was 0.8%, against the expected 0.2%.

Excluding volatile food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% on a monthly basis. The respective estimates were 2.3% and 0.3%.

The increase in the headline CPI rate was the fastest since September 2008.

Energy prices overall jumped 25% from a year earlier, including a 49.6% increase for gasoline and 37.3% for fuel oil. That came even though most energy categories saw a decline in April.

Prices at the pump, which fell 1.4% in April, have resumed their climb in May, with the national average eclipsing $3 a gallon for the first time since November 2014, according to AAA. Further rises are likely from Friday’s cyberattack that shut down Colonial Pipeline’s main transmission line from Houston to New Jersey.

Used car and truck prices, which are seen as a key inflation indicator, surged 21%, including a 10% increase in April alone. Shelter, another key CPI component, was up 2.1% year over year and 0.4% for the month.

In addition to rising prices, one of the main reasons for the big annual gain was because of base effects, meaning inflation was very low at this time in 2020 as the Covid pandemic caused a widespread shutdown of the U.S. economy. Year-over-year comparisons are going to be distorted for a few months because of the pandemic’s impact.

For that reason, Federal Reserve policymakers and many economists are dismissing the current round of numbers as transitory, with the expectation that inflation settles down later this year around the 2% range targeted by the central bank.

Fed officials repeatedly have said they will not raise interest rates or pull back on monthly bond purchases until inflation averages around 2% over an extended period.

“As the cyclically-sensitive components of CPI are still rising at a modest pace, we doubt this report will change the view of officials that inflationary pressures are ‘largely transitory,‘” wrote Michael Pearce, senior U.S. economist at Capital Economics. “It’s just that there’s a lot more ‘transitory’ than they were expecting.”

Stock market futures briefly reached session lows after the release of the CPI numbers and pointed to a negative open on Wall Street. Government bond yields were mostly higher.

Price surges also have come amid supply bottlenecks caused by a number of factors, from production issues with the ubiquitous semiconductors found in electronics products to the Suez Canal blockage in March to soaring demand for a variety of commodities.

Lumber prices alone have risen 124% in 2021 amid persistent demand for building materials. Copper, often seen as a proxy for economic activity, has jumped nearly 36%."

MY COMMENT

As expected by everyone. HERE is the understatement of the year:

"one of the main reasons for the big annual gain was because of base effects, meaning inflation was very low at this time in 2020 as the Covid pandemic caused a widespread shutdown of the U.S. economy."

My ONLY concern with inflation will come if we start to see a wage/price spiral situation that I outlined in my prior post about STAGFLATION. At this point in time we are simply seeing the impact of the re-opening of the economy and various supply issues due shortages that......in theory...should smooth out as the economy around the world re-opens.

For my money.....there is NO substitute for investing in stocks and funds. I will leave it to the management to the companies that I invest in to handle anything that the economy wants to do short term. Other than temporary share price fluctuations........which are normal over the short term....I expect the CREAM OF THE CROP companies that I own to BOOM in any environment we might see over the next year or two as the WORLD re-opens.

 

NOW.....this is a REALLY BIG PROBLEM.

Chick-fil-A is facing a sauce shortage

https://www.cnn.com/2021/05/12/business/chick-fil-a-sauce-shortage/index.html

OMG......now what are we going to do. OBVIOUSLY the reason for the market being down today.

 

Well said TomB16.......and so true. If I am lucky I might have somewhere around another 20+ years to be an investor. I DOUBT that I will remember today or that I will be able to distinguish today or any other short term event in a 20 year chart of the SP500.

Media DRAMA.