The Long Term Investor

ZUKODANY......I agree. This stuff is all fun and games.....basically entertainment. BUT....I do believe there is some small potential for this to get out of hand and cause a disconnect of the markets from historical norms and reality. If this becomes the.....NORM.....all past research and data as to investor behavior will be out the window. ALL fundamentals will become irrelevant. There is also some small potential for this stuff to impact public confidence in the markets and investing.

 

We are in the middle of a big HAIL storm right now. Hail that looks like ice cubes from your refrigerator ice maker.

 

HERE are a couple of stories that are relevant to the SUPPLY/DEMAND disruptions that are quickly pushing through our economy and the world economy.

Facing labor shortages, companies are draining their inventories

https://finance.yahoo.com/m/3d9a7a0c-dfd4-3746-93e4-c06a611df6b3/facing-labor-shortages-.html

AND

Chinese Factories Delay New Orders as Costs Rise, Risking Global Supply Shortages
Higher raw-material prices and a lack of workers are forcing more manufacturers to slow production, stoking fears of inflation

https://www.wsj.com/articles/chines...e-risking-global-supply-shortages-11622543400

MY COMMENT

Yes we are going to have a hell of a time getting the manufacturing economy back up and in balance again. With all the.....on demand manufacturing.....and....on demand ordering....that business got used to....... pre-pandemic......this is going to be very difficult. There is NO SLACK in inventory for customers to order.....and there is NO LEEWAY......in the ability of manufacturers to produce their products without the materials they need.

 

BLAH open today......but totally rational. We have a rational open....based on the irrational. We are NOW fully in the era of Tabloid sensationalist financial journalism. Nothing wrong with that......it just becomes another factor that is short term....to be IGNORED by longer term investors. AND.......as a result and in line with society in general......we are now going to see SHORT TERM investing become DRAMA based. HERD behavior on STEROIDS.

It is interesting to see how the media and investors have worked themselves into a........BIG TIZZY......over the jobs numbers that will be released tomorrow. As a result.....we have a relatively MINOR.....one month....jobs number......that will be the PRIMARY market mover for a day or two. Not a big deal......but the amount of emotion, energy, and drama being spent on this is actually pretty funny.

What all this means........for the future and investors is......the short term will be even more of a CRAP SHOOT than ever before. This will be the new norm from here on......and....will no doubt escalate as time goes by as usual. I have no doubt that it will be a GOLD MINE for the brokers and others in the business.......short term investing will basically become TOTALLY GAMBLING. We have not seen anything yet......it is going to escalate way beyond what we see now.

Is this a bad thing......NO. People are free to do what they want with their money. Why would I care. Long term investing will be even MORE important as a concept......for people that want to invest based on FACT and not DRAMA. AND.....there will be a jump in the GAP between the haves and the have nots......as people gamble their money on the short term drama and excitement......trying to hit that one big score they see in the news each day.

 

HERE is a little preview of the jobs information that we will see tomorrow.

Jobless claims fall below 400,000 for the first time since the early days of the pandemic

https://www.cnbc.com/2021/06/03/weekly-jobless-claims.html

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

"Key Points

• Initial jobless claims fell to 385,000 last week, the first time below 400,000 since March 2020.
• Wall Street had been looking for 393,000 after the previous week’s 405,000.

Initial jobless claims fell below 400,000 for the first time since the early days of the Covid-19 pandemic, the Labor Department reported Thursday.

First-time filings for unemployment benefits totaled 385,000 for the week ended May 29, a decline from the previous week’s 405,000 and below the Dow Jones estimate of 393,000.



The last time claims were lower was the week of March 14, 2020, with 256,000. The number spiked to nearly 3 million the following week and peaked at more than 6.1 million in early April as governments across the U.S. shut down businesses in an effort to slow the coronavirus spread.

As vaccinations have spread and businesses have been allowed to reopen, the labor market picture has improved considerably. A report earlier Thursday from ADP showed private payroll growth surged by 978,000 in May.

Despite the decline in weekly claims, continuing claims rose by 169,000 to 3.77 million. That data runs a week behind the headline claims numbers.


The jobless claims data comes a day ahead of the closely watched nonfarm payrolls report from the Labor Department. The estimate is for 671,000 new jobs after April’s disappointing 266,000 at a time when expectations were for 1 million.

Though the employment data continues to improve, large gaps remain in the labor market, particularly among those at the lower end of the economic spectrum.

More than 15.4 million Americans are still receiving benefits under the various programs including two put in place specifically to address pandemic-related displacements. That total, which runs two weeks behind, is about half where it was a year ago.

The claims numbers are expected to continue their decline as more workers return to their jobs and as states curtail benefits. The federal government’s extended jobless programs are set to expire in September, and they’ve been blamed by some for the reluctance of some workers to accept new positions.

A periodic survey the Federal Reserve conducts across its districts, released Wednesday, indicated that businesses across the country are having a difficult time finding workers to fill positions.

“The lack of job candidates prevented some firms from increasing output and, less commonly, led some businesses to reduce their hours of operation,” the Beige Book report stated. The report also noted that businesses are offering signing bonuses and higher wages to attract workers but expectations are that labor supply will remain “constrained.”

In the Boston area, business owners listed “generous unemployment benefits, childcare responsibilities and safety concerns” as issues keeping them from finding workers."

MY COMMENT

As expected with the re-opening. I would expect that we will see better and better numbers month by month. Seems like basic common sense. I think the number that matters is the continuing claims number:

"continuing claims rose by 169,000 to 3.77 million."

That number is STILL rising. The economy will be showing good improvement when that number is going down rather than up.

 

HERE is the other economic data today....that no one cares about.

U.S. first-quarter worker productivity unrevised at 5.4%

https://finance.yahoo.com/news/u-first-quarter-worker-productivity-131723686.html

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

"U.S. worker productivity rebounded solidly in the first quarter, the government confirmed on Thursday, also noting that labor costs grew instead of contracting as previously reported.

Nonfarm productivity, which measures hourly output per worker, increased at an unrevised 5.4% annualized rate last quarter, the Labor Department said. Productivity fell at a 3.8% rate in the fourth quarter. Economists polled by Reuters had expected productivity would be raised to a 5.5% rate.

Productivity shot up early in the pandemic before slumping in the final three months of 2020. Economists attributed the jump to the hollowing out of lower-wage industries, like leisure and hospitality, which they said tended to be less productive.

Compared to the first quarter of 2020, productivity rose at an unrevised 4.1% rate.

Hours worked increased at a 3.0% rate last quarter, revised slightly up from the 2.9% pace estimated last month.

Unit labor costs - the price of labor per single unit of output - increased at a 1.7% rate. They were previously reported to have dropped at a 0.3% pace. Unit labor costs surged at a 14.0% rate in the fourth quarter. They rose at a 4.1% pace from a year ago, instead of at a 1.6% rate as previously reported.

They have also been distorted by the pandemic's disproportionate impact on lower-wage industries.

Hourly compensation increased at a 7.2% rate last quarter, rather than the previously reported 5.1% pace. That followed a 9.7% growth pace in the fourth quarter. Compensation increased at an 8.3% rate compared to the first quarter of 2020, revised up from the previously estimated 5.8% pace."

MY COMMENT

The KEY data here is the wage increases. this sort of data is what I would keep an eye on if I was the FED since it is wage/price spiral that will be an indicator of BAD inflation.

Not that I care much about inflation......business will do just fine with or without inflation. The extra costs will just be passed on to the ultimate consumer and along with a bit of price gouging......big business will do just fine and make more money than ever.

 

Well....talking about inflation and the impact on business and stock investors.....I like this little article.

The Complicated Reality of Those Inflation-and-Stock-Return Analyses
We crunched a lot—and we mean a lot—of numbers on inflation and stocks.

https://www.fisherinvestments.com/e...-of-those-inflation-and-stock-return-analyses

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

"Throughout 2021’s great inflation scare, we have seen a few pieces arguing stocks will disappoint investors hoping their returns will outpace accelerating consumer prices. Some use rhetoric, arguing rising input costs will zap corporate earnings (and, in our view, ignoring that companies can raise prices of whatever goods and services they sell, preserving margins). Others purport to support their case with data showing a strong link between “rising inflation,” whatever that even means, and weak stock returns. But we have yet to see any show their math or data in transparent detail. There are embedded assumptions in every single one we have seen, and absent that transparency, you can’t really judge the accuracy. So to help you out, we ran a bunch of numbers. As we will show you, they suggest stocks do well in inflationary environments more often than not.

The most recent article that caught our eye on this front was in The Wall Street Journal last week. Citing a study from a UK asset management firm, it stated that “from early 1973 through last December, stocks have delivered positive inflation-adjusted returns in 90% of rolling 12-month periods that occurred when inflation—as measured by the consumer-price index—was below 3% and rising … But that fell to only 48% of the periods when inflation was above 3% and rising.”

Upon reading this, we had a host of questions. Why start in 1973, considering the inflation everyone associates with the 1970s started in the late 1960s? What constitutes “rising inflation”—if CPI jumps one month, slows the next, then inches higher, is that in the dataset? Why exclude periods of decelerating double-digit inflation—don’t people still worry about fast-rising prices eroding their purchasing power in that environment, too? Alas, we nosed around, looked up reports, watched videos and found little that provided an answer.

The main problem with this and other outlets’ attempts to illuminate inflation’s stock market impact is that, depending on the criteria you use, the results can differ wildly. This is partly because inflation rates aren’t fixed. They fluctuate wildly, and periods of high inflation can last a long while. Therefore, if you take the forward stock returns from every month where the CPI inflation rate breached 3% y/y, 4%, 5% or what have you, you will inevitably have a lot of double-counting. But if you just go from the beginning of an inflationary stretch, taking the first year or so of returns, you will inevitably miss problems that materialize later.

Nowhere is this more clear than in the late 1960s and 1970s. Back then, the CPI inflation rate crossed above 5% y/y in August 1966, and it stayed above that threshold for 234 months. It spent a chunk of that time over 10%. That stretch included three bear markets (1968 – 1970, 1973 – 1974 and 1980 – 1982). But using only the beginning of that period, for the sake of avoiding double counting, would show big forward 6- and 12-month returns. That is an interesting data point, but it doesn’t tell the full story.

So when we crunched the numbers, we shunned convention and decided to double count the heck out of everything. We found every month where CPI inflation rate was above 3% y/y, 4% or 5% since good stock market data begin in 1925, and we grabbed the S&P 500’s corresponding returns over the next 6, 12 and 18 months. We didn’t add filters and arbitrary definitions for fuzzy concepts like “rising inflation.” We didn’t lump anything into a subjective category like “inflationary period.” We learned to stop worrying and love the overlapping results. And then we averaged them out, as you will see in Exhibit 1.

Exhibit 1: A Long History of Inflation and Forward Stock Returns


Source: Global Financial Data, Inc. and US Bureau of Labor Statistics, as of 5/27/2021. S&P 500 total return index, 12/31/1925 – 4/30/2021. HT: Fisher Investments Research Associate Chloe Butler.

All of the average return figures above are positive, which indicates higher-than-usual inflation isn’t inherently negative. Yet in some cases, the frequency of positive returns is below stocks’ long-term average frequency of positivity (around 75% over all rolling 12-month periods), making it an error to outright dismiss inflation as a market risk.[ii] Even in those six-month forward return windows, where the frequency of positivity is lowest, there could be overlap with a bear market. So, we think it is beneficial to go deeper, assess where those negative returns cluster, and see what we can learn.

One big cluster was 1937, when the Fed truncated the recovery from the early-1930s bear market by jacking up reserve requirements, which wrecked lending and economic growth and, in our view, triggered a new bear market. A smaller cluster followed in 1941, as markets reckoned with the likelihood of the US entering World War II. Next up is 1968 – 1969, when the Fed inverted the yield curve in hopes of containing price increases. Then, 1973 – 1974, when the Nixon administration monkeyed with price controls to disastrous effect. Another small, non-bear market cluster arrived in parts of 1976 and 1977, when high inflation wasn’t new but the Carter administration was, spooking investors with a unified Democratic government and the potential for big legislation. The next big negative swath, 1980 – 1982, accompanied former Fed head Paul Volcker’s ultimately successful attempt to finally tame the inflation beast with sky-high interest rates. That, too, inverted the yield curve deeply and brought a long recession. Lastly, there are the negative returns accompanying higher inflation in late 2007 and 2008, when fast-rising oil prices were merely part of the backdrop as FAS 157 (the mark-to-market accounting rule) did its worst to bank balance sheets.

We think this all illustrates a key point: Inflation, on its own, isn’t inherently problematic for stocks. Rather, the trouble manifests when the Fed or government does something counterproductive in the name of fighting inflation. Or, when another, unrelated negative wallops an expansion before that happens, like WWII’s onset and the application of mark-to-market accounting to illiquid, hard-to-value assets that banks never intended to sell. Until a wallop or monetary policy error arrives, stocks can and have delivered very nice returns during periods of higher inflation, helping investors who stay disciplined maintain their purchasing power.

Therefore, if it turns out that we are wrong in thinking the current bout of higher inflation is only temporary, and the CPI inflation rate creeps higher and stays there, we don’t think that is likely to be reason enough to sour on stocks. Rather, we think it is a call to critically assess whether there are simmering fundamental negatives that the rest of the world overlooks. If the masses are happy and arguing in unison that high returns can offset high inflation—and they don’t notice when the Fed implements contractionary policy—that could very well be cause for action. But if everyone sees and fears high inflation, then it could very well be priced in, setting the stage for those positive returns that follow higher inflation the majority of the time. So wait, watch and see. "

MY COMMENT

Inflation has been beat to death by now. EVERYONE sees and fears it and as a result it is totally BAKED IN. The real danger as shown above will be the FED and government. It is just about impossible.....for either one....to keep their hands off when the media and the country is SQUAWKING for.....something to be done. DO SOMETHING.....ANYTHING.

Well.....we usually do.....and it turns out that what we do puts us into a BEAR MARKET.....when doing nothing would have been the better course. Bureaucrats and politicians love to play the hero....unfortunately.....it never works out the way they thought.

SAME for investors....the best course in dealing with any sort of economic situation is......DO NOTHING.

 

I find it interesting that investors and traders in the current era are just a bunch of.....WEENIES. People today have NO IDEA what investors went through in the past.....or....how bad things were at times in the past. the little bumps we are dealing with would be considered GOLDEN in many time periods in the past. Consider the era mentioned in the article above:

".......the late 1960s and 1970s. Back then, the CPI inflation rate crossed above 5% y/y in August 1966, and it stayed above that threshold for 234 months. It spent a chunk of that time over 10%. That stretch included three bear markets (1968 – 1970, 1973 – 1974 and 1980 – 1982)."

We had inflation above 5% for over........NINETEEN YEARS.......PLUS.....three very nasty bear markets in the span of 14 years. We also had inflation over 10% for a number of years. YET.....somehow.....investors and society managed to MUDDLE through it all and come out the other side just fine.

SO......in the VERY MINOR events we are seeing at the moment....any panic or frenzy is simply........the modern new normal at work. The culmination of the current....... narcissistic investor trend.

 

The shareholders vote on it today. It happens July 20. It is kicking ass today. Since the announcement it is up over $85. I added 30 shares at the announcement.

 

Yes oldman. We actually did walk to school in the snow. But only uphill one way. We also walked home for lunch and back to school. As a kid in Germany

 

I will miss the closing today. You guys try to stem the losses. I will check in later and see how you did.

 

I SOLD my Tesla stock a while back. What the articles below describe is what I feared. I post this for those considering buying this stock. Those that already own it are aware of this info....or....purchased long enough ago.....they dont care. YESTERDAY:

Tesla Shares Drop Most in Three Weeks on Market-Share Loss

https://ca.finance.yahoo.com/news/tesla-heads-biggest-drop-3-160725168.html

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

"Tesla Inc. shares fell by the most in three weeks, sitting out of the broader market’s advance, after electric-vehicle sales figures showed a loss in global market share for April.

The drop adds to pressure on Tesla’s stock in recent months as investors eyed growing competitive threats, an ongoing chip shortage, multiple crashes, signs of a slowdown in China sales and a potential delay to a factory in Germany. The Wall Street Journal also reported that U.S. regulators warned Tesla last year that Chief Executive Officer Elon Musk’s tweets had twice violated a court order.

The shares fell as much as 4% in New York on Wednesday, before closing down 3%, restraining the advance in the S&P 500 Index. It was the stock’s biggest one-day decline since May 13. Tesla shares also missed out on a two-day rally that lifted other electric-car stocks.

Tesla’s global market share decreased to 11% in April from 29% in March, likely marking the lowest such reading since January 2019, according to Credit Suisse analyst Dan Levy. He said Tesla lost ground in China, Europe and the U.S., where its dominance has been eroded by new competition and recent price hikes.

While the data weighed on the stock, analysts warned against reading too much into volatile monthly moves in market-share numbers, given the small size of the electric-vehicle universe and the industry’s challenges from the pandemic and semiconductor shortages.

“Month to month is tricky to extrapolate,” Roth Capital Partners’ Craig Irwin said in an email. “Tesla can continue to do well, but it won’t be all of the market as so many are expecting.”

Tesla is now down 14% this year, while the S&P 500 has advanced 12%. That marks a shift from 2020, when the shares soared more than eightfold as investors plowed into growth stocks. Among 44 analysts surveyed by Bloomberg, more than a quarter rate the stock a sell.

“It has been a choppy year in China along with a bunch of black eyes, and that combination in an overall risk-off environment means any bad news that the market would have dismissed last year, is being taken on the chin right now,” Wedbush analyst Daniel Ives said by phone."

AND......TODAY:

Tesla shares drop on report of steep May sales decline in China

https://www.cnbc.com/2021/06/03/tes...ort-of-steep-may-sales-decline-in-china-.html

"Key Points

• The Information, citing a single source familiar with the data, wrote that Tesla’s “monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April.”
• CNBC has not corroborated that report.
• Elon Musk’s electric vehicle company has been grappling with recalls and safety investigations in China.

Tesla shares dropped more than 5% Thursday after a report said the company’s vehicle orders in China steeply declined last month.

The Information, citing a single source familiar with the data, wrote that Tesla’s “monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April.” CNBC has not corroborated that report.

Tesla’s Shanghai factory is supposed to have the capacity to make around 500,000 electric cars a year for deliveries in China and exports to other parts of Asia and Europe.

Elon Musk’s electric vehicle company has been grappling with recalls and safety investigations in China. It is also dealing with a public relations backlash there following some high-profile vehicle crashes, price changes and quality complaints from Chinese customers.

JL Warren Capital CEO Junheng Li said in an e-mail to CNBC that even though Tesla hasn’t spoken about potential impacts of its PR crisis in China, she expects they will be material.

“We see a definitive material impact on Tesla branding, orders and deliveries for future months, although it’s hard to quantify exactly to what extent the declining demand is driven by concerns on Tesla’s safety features, or rising competition especially from Chinese automakers,” she said.

Li’s equity research firm focuses on Chinese and U.S. companies with significant exposure in China. Her firm estimated, in a note on June 1, that Tesla orders in China declined by around 30% in May compared to April. While that’s not as dire as the 50% drop reported by The Information, Warren noted that “both are disastrous.”

China represented last year the second-largest electric vehicle market in the world, according to IEA research. Tesla’s near-term growth hinges largely on its ability to make and sell cars successfully in China.

According to analysis of Tesla job listings by Snow Bull Capital, the company is stepping up hiring for “Legal & Government Affairs” positions in 2021 across the country. It’s also generally ramping up hiring at its Shanghai plant.

Chinese Tesla rival Nio saw deliveries slide in May as a global semiconductor shortage hit its business. But another competitor, Xpeng, said it delivered 5,686 cars in May representing a 483% year-on-year rise and a 10% increase from the previous month.

Tesla shares are down about 15% year-to-date, and down more than 35% from their intraday high on Jan. 29."

MY COMMENT

The BIG crunch for Tesla is happening right now. Every car manufacturer is quickly going electric. They are no longer going to be....the only game in town. This will also impact the value......and sale..... of their EV credits.....which is their MAIN source of income.

I dont have a crystal ball....so....I have no idea where this is going to lead for Tesla. At the moment they are in a very rough patch.....and....I doubt it is going to end any time soon.

 

For those that like to get down into the weeds.....Taxes.......here is how the proposed rates would apply for income tax. This is based on the ACTUAL proposal. If you want to see ALL the tax proposals.....there is a link below to the ACTUAL GOVERNMENT document.

https://www.cnbc.com/2021/06/01/bid...-rate-would-apply-at-these-income-levels.html

Under the plan the top rate of 39.6% would apply as follows:

"That top rate would apply to single individuals with taxable income of more than $452,700 and married couples filing a joint tax return with income over $509,300, according to a budget proposal issued Friday by the Treasury Department.

It would also apply to heads of household with income exceeding $481,000 and married individuals filing separate tax returns with income over $254,650.

Those income thresholds are lower than under current law, set by the 2017 Tax Cuts and Jobs Act.



(By comparison, the 37% top individual rate applies to income exceeding: $523,600 for single filers and heads of household, $628,300 for married joint filers, and $314,150 for married separate filers.)

The 39.6% top rate would kick in during the 2022 tax year, according to the proposal. (That means it would apply to tax returns filed in 2023.) Congress would still need to pass legislation enacting the policy, which isn’t assured."

HERE is the actual plan language:

https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf

MY COMMENT

I am curious why the new top rate would apply to a single tax payer at income of $452,700.....but a married couple at a joint income of $509,300. I am curious why it applies to a married tax payer filing separately at an income level of $254,650.

Looks like two higher income people are going to be better off NOT getting married. Talk about the old.......marriage penalty.

It will be fun to watch what actually passes.

 

I had a LONG DAY today doing some studio work. I got in a few afternoon posts on my cell phone.....but....just had the first chance to look at my account. I was of course.....down....today and got beat by the SP500 by 0.05%. The GOOD holdings for me today were NVDA......PG.....and....COST.

It should be a really interesting day tomorrow with the jobs numbers. I have NO CLUE.....how the markets will react to whatever the numbers are. If it is like MOST....highly anticipated events.....it will be a YAWNER. BUT....in this case....who knows.

 

Hey Xx....good to see you here and posting.

I hope some of the others on here can give you some opinion or info on those stocks. I just dont follow or know much of anything about TXN...DKNG....NRZ....or.....PLD. I am also ignorant about the others that you already hold. You are way more informed about any of these than I am....sorry.

All I can say in general is.......it is all about the FUNDAMENTALS....for long term investing. If you have researched the company fundamentals and have determined that these companies are solid businesses for the long term.....that is what it is all about.