The Long Term Investor

Speaking of collecting Zukodany....I have been in a LULL lately. Earlier in the year we purchased six American Impressionistic oil paintings at various auctions.....but.....over the past 3-4 months we have not purchased anything. The auctions that have come up over that time just did not have anything of interest or quality.

I just got the catalog for an auction in JULY but the material was very mediocre. After that the next auction that I will be paying attention to is in late October. We continue to pick up an antique or collectable item....once in a while...but....we are extremely selective since we dont have a lot of display room left in our house. We try to ONLY buy the finest quality versus quantity.

 

SO....I often post the YEAR TO DATE for the SP500. For example....as of today.....the year to date return for the SP500 is 15.01%.

HOWEVER.....this is NOT......TOTAL RETURN.....which would include the impact of and reinvesting of dividends. The SP500....TOTAL RETURN....as of the close today is 15.86%. That would be an ABOVE average year for the average if we were at year end. In fact....at that rate you would be doubling your money every 4.53 years. An OUTSTANDING result.

Of course....we are not at year end and there is no guarantee that these gains will hold till year end. On the other hand....we might see these gains increase by 5%.....or 10%.....or even 15%....by year end.

For the past two PRIOR years we have seen the SP500 do 31.44% in 2019......and.....18.39% in 2020. If we can hold on and add to the current half year return.....we would be in for one of the best three year returns for the SP500 in a long time.....perhaps 20 years or more.

 

Another typical open today........seems good to me. I like this sort of lingering but UP summer market. HERE is yet another bit of economic data that everyone will ignore after the next 10-12 hours. Seems like we get some sort of economic data EVERY DAY now. The information is so UBIQUITOUS and reported so often....it is virtually USELESS. BUT.....that is ok....I dont invest on MACRO or MICRO economic data anyway. ALL I care about is the business results and prospects of the companies that I own. this economic STUFF might help to explain the daily movements of the general markets.....but....over the longer term......meaningless to whatever individual businesses that I might own.

June jobs report: Economy adds back 850,000 payrolls, unemployment rate ticks up to 5.9%

https://finance.yahoo.com/news/june...s-unemployment-labor-184624849-183926242.html

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

"The U.S. economy added back jobs for a sixth straight month in June, with job growth picking up speed alongside the reopening economy.

The U.S. Labor Department released its June jobs report Friday morning at 8:30 a.m. ET. Here were the main metrics from the report, compared to consensus estimates compiled by Bloomberg:

• Change in non-farm payrolls: 850,000 vs. 720,000 expected and an upwardly revised 583,000 in May
• Unemployment rate: 5.9%vs. 5.6% expected and 5.8% in May
• Average hourly earnings, month-over-month: 0.3%vs. 0.3% expected and a downwardly revised 0.4% in May
• Average hourly earnings, year-over-year: 3.6% vs. 3.6% expected and a downwardly revised 1.9% in May

Friday's jobs report also came with revisions to the past two months' payrolls figures. In April, non-farm payroll additions were revised down by 9,000 to 269,000, while May's were revised up by 24,000 to 583,000.

The biggest payroll gains in June were again in the leisure and hospitality industries, which were the hardest hit in the earlier stages of the pandemic. These added back 343,000 jobs in June after a rise of 306,000 in May. However, the labor deficit across these industries — with leisure and hospitality still down by 2.4 million jobs compared to February 2020 levels — comprises the plurality of the nearly 6.8 million total jobs the economy still has left to recover from before the pandemic.

Other industries also saw strong job gains in June. In the services sector, retail trade added back 67,100 jobs, or more than double the May gain, and professional and business services job gains also doubled month-on-month to 72,000. In the goods-producing sector, manufacturing job growth slowed more than expected, with payrolls rising by 15,000 after a gain of 39,000 in May. Public-sector jobs soared in June, with government payrolls up by 188,000.

"In both public and private education, staffing fluctuations due to the pandemic, in part reflecting the return to in-person learning and other school-related activities, have distorted the normal seasonal buildup and layoff patterns, likely contributing to the job gains in June," the Labor Department noted in its release on Friday.

Non-farm payroll gains have been choppy over the past several months as worker supply shortages capped the pace of the recovery across numerous industries. Other economic data have underscored these challenges, with the Institute for Supply Management's June manufacturing employment index dipping into contractionary territory for the first time since November, mentions of "shortages" more than doubling in the Federal Reserve's June Beige Book compared to January, and companies from FedEx (FDX) to Paychex (PAYX) citing difficulties in hiring.

These supply constraints have also pushed up wages. Average hourly earnings increased to a 3.6% year-over-year rate, up from the 1.9% registered in May, to reach the fastest pace since March. But wage gains also decelerated on a month-over-month basis, slowing to 0.3% in June from 0.4% in May. That said, in leisure and hospitality, average hourly earnings jumped by an outsized 2.3% month-on-month, underscoring employers' efforts to bring back workers to meet rising demand.

"There’s no doubt that some employers are having to do more to attract workers. And retention will also be a challenge for business in the coming months," Mark Hamrick, senior economist analyst for Bankrate, wrote in an email Friday morning. "The longer-term key question is whether inflation will run hotter and remain more persistent beyond the current supply and labor squeezes. This part of the story will be closely watched, including by the Federal Reserve, here in the second half of the year."

Some economists and public officials have pointed to the federal enhanced unemployment benefits as one factor weighing on the pace of labor force reentry. While just one of a number of contributing factors, some are expecting a pick-up in filled positions once these benefits sunset across about half of U.S. states over the summer, and across the remainder by early September.

"Those stronger payroll gains could be a sign that some of the factors holding back employment have started to ease, particularly the enhanced unemployment benefits which are expiring early in more than half of states," Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note Friday morning. "But that is hard to square with the continued weakness of participation, with the labor force rising by only 151,000 in June and remaining more than three million below its February 2020 level."

And given that the survey week for the monthly jobs reports take place over the period including the 12th, Friday's print did not include any major impact from states having withdrawn federal enhanced unemployment benefits early. That phase-out period started as early as June 12 for four states. However, by the July jobs report, more than two dozen states will have partially or fully removed these benefits, potentially impacting the jobs data going forward. "

MY COMMENT

Certainly a mixed report. To me the key data is the continued reluctance of people to come back to work and the rise in the unemployment rate to about 6%. As we have seen for 8 of the past 12 years......it is very possible to have investors doing well and at the same time the unemployment rate stuck in the 6% range. It will ALL be a function of the business environment that management is FORCED to operate in.

Interestingly in the approximately 25 states that have DITCHED the extra unemployment money of $300 per week.....the economy and employment numbers are BOOMING........compared to the rest of the country. EXACTLY what you would think if you apply any sort of common sense. The LINGERING.....CAUTIOUS....re-opening in about half the country is going to stretch out the economic recovery. So....we are going to simply live through a 12-24 month time period of a slow but steady recovery. Perhaps....in the end.....that will be better than just throwing the entire country open all at once. Of course....the states....half the country.....that are fully open and actually ENCOURAGING (forcing) people to go back to work.....WILL....be the economic leaders of the country. Too bad for those states that are going to DRAG things out.......but......that is just the way it is.

 

Generally the markets are looking good today.....so far. We need to cap off the week with a good day going into the three day weekend. The markets will be closed on Monday. SO.....that means that after today we will have 10 days till the NVIDIA split. The FINAL COUNTDOWN.....10, 9, 8, 7, 6,.....

The stock it UP so far today but is BOUNCING AROUND like a jumping bean. At least so far....the up and down action today has been in the green.

 

HERE is the....short term....explanation for the markets today.

Stocks Climb as Jobs Report Dims Hawkish Wagers: Markets Wrap

https://finance.yahoo.com/news/asia-stocks-set-steady-start-220027118.html

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

"(Bloomberg) -- Stocks rose on speculation the economy is recovering at a pace that won’t make the Federal Reserve imminently take away the liquidity punch bowl that has helped push the market to a record.

The S&P 500 climbed for a seventh straight day -- the longest winning streak since August -- after data showed U.S. job growth surged the most in 10 months, while the unemployment rate edged up to 5.9%. The report bolstered views the central bank won’t rush to raise rates any time soon. Tech shares consolidated this week’s leadership position in the equity market, while economically sensitive companies underperformed on Friday. The dollar fell, while Treasuries fluctuated.

“Today’s jobs report was overall stronger, but not strong enough to raise inflation and tightening concerns,” wrote Fawad Razaqzada, an analyst at ThinkMarkets. “It keeps the ‘goldilocks’ scenario intact for stocks, and encourages dollar longs to ease off the gas ahead of the long weekend break.”

Here’s what other analysts are saying:

Mike Loewengart, managing director of investment strategy at E*Trade Financial:

“Though there’s a combination of good and mediocre in the read today, it’s doubtful that this will move the needle on the Fed’s stance or timing for moving to tighten policy.”

Seema Shah, chief strategist at Principal Global Investors:

“While the stronger-than-expected payroll number signals a continued buoyant recovery, the rise in unemployment rate suggests some slack in the market and, therefore, hopefully some respite for the Fed hawks.”

Jason Pride, chief investment officer of private wealth at Glenmede:

“Today’s report likely does not significantly change the Fed’s calculus here, as the U.S. labor market is far from its ‘full employment’ mandate.”

Among the corporate highlights, Tesla Inc. rose after announcing record car deliveries in the second quarter. Virgin Galactic Holdings Inc. surged on news that founder Richard Branson will be aboard the next rocket-powered test flight of its SpaceShipTwo Unity. Didi Global Inc.’s U.S.-traded shares slumped after China said it is starting a cybersecurity review of the ride-hailing company.

These are some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 10:15 a.m. New York timeThe Nasdaq 100 rose 0.7%The Dow Jones Industrial Average was little changedThe Stoxx Europe 600 rose 0.1%The MSCI World index was little changed

Currencies

The Bloomberg Dollar Spot Index fell 0.1%The euro fell 0.1% to $1.1833The British pound was little changed at $1.3774The Japanese yen rose 0.2% to 111.35 per dollar

Bonds

The yield on 10-year Treasuries declined one basis point to 1.44%Germany’s 10-year yield declined three basis points to -0.23%Britain’s 10-year yield declined two basis points to 0.71%

Commodities

West Texas Intermediate crude fell 0.9% to $74.59 a barrel. Gold futures rose 0.2% to $1,780.70 an ounce"

MY COMMENT

AMAZING that ten year yields in GERMANY and I suspect many of the EU countries is STILL negative....can you say DEFLATION? The EU and much of the world is ONE BIG MESS. They have been in a deflationary depression for 12 years now....and like we saw with Japan....that situation can last for decades......if not FOREVER. Those countries have distorted the NORMAL capitalistic economic factors to such a degree with Socialism, cultural, and INSANE government policies and mandates that.....baring some HUGE change.....they are SCREWED for the log term. It will not be dramatic....just a long term and slow, continuous, lingering financial decline.

THIS is exactly WHY I ONLY invest in AMERICAN companies and businesses.....besides the fact that there is NOTHING in the way of business that I would be interested in any of those countries anyway.

The exception to the above decline is the few Eastern European countries that were former captives of Russia that have embraced capitalism.

 

FOR all the TESLA fans and stockholders.

Tesla sales rise despite problems with chips and China

https://www.cnn.com/2021/07/02/investing/tesla-sales/index.html

"New York CNN Business —
Tesla managed to sell more than 200,000 vehicles last quarter, even as the company faced rising prices, a PR disaster in China and a shortage of computer chips.

The company also managed to build more than 200,000 cars over the past three months despite those enormous headwinds. The increase in the number of vehicles produced and sold more than doubled the number from a year ago, when the pandemic caused Tesla to shut its factories. But orders and deliveries were also up modestly from the first quarter of this year, similar what was reported Thursday by other automakers. Deliveries came in at 201,250, compared to about 91,000 a year ago and 184,800 in the first quarter.

The entire auto industry has been struggling with the chip shortage. In April Tesla CEO Elon Musk called the shortage a “huge problem” for Tesla.

“Our teams have done an outstanding job navigating through global supply chain and logistics challenges,” said Tesla’s statement about second-quarter sales.

Tesla also has raised car prices to deal with rising raw material costs, which is also a problem across the industry.

But Tesla has been uniquely dogged by bad publicity in China, the world’s largest market for car and EV sales, over safety and quality concerns. A group of Tesla owners protested at the Shanghai auto show in April. And nearly 300,000 Teslas built at its relatively new Shanghai plant were recalled a week ago. There have been concerns among investors that Tesla could be facing long-term problems in China.

Friday’s sales report did not break down Tesla sales by market, but the headline number should quiet some of the concerns about China, said Dan Ives a tech analyst with Wedbush Securities who has a buy recommendation on Tesla shares.

“Overall, this quarter was an impressive performance from Musk & Co. and now with a strong second half performance should be able to hit about 900,000 vehicles for the year, which was a major stretch goal to kick off this year,” said Ives in a note to clients. “China and Europe had strong months of May/June we believe, which were key this quarter.”

Tesla is also facing growing competition from electric vehicles from established automakers such as Volkswagen, General Motors and Ford.

GM (GM) reported US sales of the only EV it sells here, the Bolt and Bolt EUV, jumped 350% in the quarter after it introduced updated versions. GM (GM) has yet to report second-quarter sales in China but through the first quarter it said its Wuling Hong Guang Mini EV, introduced last year, is the best-selling electric vehicle in China.

Volkswagen (VLKAF) has passed Tesla in EV sales in numerous European markets, and Ford’s new Mustang Mach-E has been taking share from Tesla, according to analysis by Morgan Stanley. Ford sold 13,000 of the model in the US since deliveries started earlier this year.

But those EV sales by established automakers, coupled with the continued rise in Tesla sales, also demonstrates the growing appetite for electric vehicles by car buyers.

“Tesla’s second-quarter sales illustrate how effectively the automaker is riding the global EV wave,” said Karl Brauer, executive analyst at iseecars.com. “But increased competition from more established automakers is inevitable and could impact Tesla’s growth curve.”

The company restarted production of its more expensive Model S and Model X in the quarter, and delivered just less than 2,000 of those vehicles, which Ives said was less than forecasts of sales of more than 5,000. But the Model 3 and Model Y, which account for more than 90% of sales, topped sales forecasts

Shares of Tesla (TSLA) were slightly lower on the report as the total deliveries was a bit less than analysts’ forecasts. Tesla (TSLA) was the best performer among US stocks in 2020, rising 743%, but it has struggled this year, falling into bear market territory, with a 25% decline from its record high in late January"

MY COMMENT

This is WELCOME good news for TESLA....even though the stock is flat today. This should give them some needed momentum and a break from the slightly negative stories lately. I will not be a buyer of the stock....but....having been out to the Austin plant area yesterday......they WILL have a number of significant manufacturing plants coming online soon over the next year or two......that should be a BIG BOOST for the company.

 

Let me be the first to say....to ALL that post and read on this site......HAPPY FOURTH OF JULY. Have a great 3 day weekend. Be safe and sane. CELEBRATE the country that allows us to invest and make money as we do. For any that might live in Canada.....Happy Canada Day....yesterday.

 

MAN that was a BARN-BURNER of a day today. BIG green for my account and a very nice beat of the SP500 by 0.81%. My BIG winners of the day were 70% of my 10 stock portfolio....AAPL, +1.96%.....AMZN, +2.27%....NVDA, +1.36%....NKE, +1.1%.....MSFT, +2.23%...COST, +1.12%.....and...GOOGL, +2.3%. OBVIOUSLY....yet another personal all time high today in the old brokerage account.

 

What a NICE way to end a good week. The SUMMER RALLY is booming the markets at the moment. I really like this short term action. It helps to pile up the gains so when we have the inevitable pull back or correction....I have plenty of cushion to take a hit and still have a great gain for the year.

Here is how the week was:

DOW year to date +13.66%
DOW for the week +1.02%

SP500 year to date +15.87%
SP500 for the week +1.67%

NASDAQ 100 year to date +14.27%
NASDAQ 100 for the week +2.67%

NASDAQ year to date +13.59%
NASDAQ for the week +1.94%

RUSSELL year to date +16.76%
RUSSELL for the week (-1.23%)

I guess this year WAS NOT the year to sell in May and go away. I NEVER follow that sort of stuff anyway. Staying fully invested all the time is the......ONLY......way to capture all the gains ESPECIALLY the BIG RALLY gains that always seem to come out of nowhere.

I continue to be fully invested for the long term as usual.

 

WELL......I finally got ahead of the SP500 year to date. As of today I am at +15.89% year to date in my account. The SP500 is at 15.87% year to date. I am SMOKING the SP500 by 0.02%.

Earlier in the year I was beating the SP500 handily. Than the BIG CAP GROWTH collapse occurred and I fell way behind. I have now pulled back even. We will see who can win the final six month sprint to year end. Of course...neither I nor the SP......will be doing anything other than siting and doing nothing till year end. it will be a very PASSIVE race.

 

This is a nice little market summary for the Second Quarter.

Q2 2021 Market Performance in 7 Charts
Bond markets recover and stocks post broad gains.

https://www.morningstar.com/articles/1045559/second-quarter-2021-markets-summary

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

"As the global economy moved in fits and starts toward a recovery, global stock and bond markets posted broad gains in the second quarter.

• The Morningstar U.S. Market Index ended the second quarter up 8.4%, adding to a 6% return posted in the first quarter. The index hit a new record high on the last day of the quarter and has gained 43% from a year ago.
• Volatility across equity markets fell to pre-pandemic levels.
• International stocks continue to lag the U.S. market, with China a drag on returns.
• After the Federal Reserve signaled it was on watch for inflation pressures, bonds mostly recovered from a rough first quarter. The Treasury 10-year yield fell 29 basis points from its high in March to 1.45%.
• High-yield bonds continue to outpace government and corporate bonds, with the Morningstar High Yield Bond Index rising 2.7% in the second quarter and 15.4% over the past year.
• Renewed demand for oil pushed prices higher and energy stocks topped the sector list, followed by technology stocks. Utilities and industrial sectors dragged.
• The contrast between growth and value stocks faded as growth stocks bested value for the quarter across large and mid-cap Morningstar Categories. Small value continues to beat small growth.

In U.S. equity markets, one of the most dominant trends from late 2020 and the first quarter began to fade: the outperformance of value stocks over growth stocks. This shift came as the Federal Reserve indicated in June that it may raise rates somewhat sooner than expected amid signs inflation was beginning to take hold.



In the bond market, the headlines out of the Fed sent the yield of the 10-year note down 29 basis points to 1.45% from a recent high of 1.74% in the first quarter.



As the Fed signaled that it recognized the building inflation pressures by bringing forward rate increase expectations, longer-term yields fell, in turn causing the yield curve to flatten from the first quarter. The 10-year yield fell 29 basis points to 1.45% after reaching a recent high in March.


With the Fed keeping the current level of interest rates in place into 2023, markets weren’t spooked. In fact, stock market volatility fell to levels unseen since before the pandemic. In the U.S. market, volatility fell to its lowest level since 2019.



A wide divergence in sector performance during the first quarter narrowed in the second, with all but the utilities sector posting gains. Energy stocks still led, gaining 12%, but technology stocks rose 11.3% after trailing all other sectors in the first quarter. Stronger-than-expected earnings and expectations for a slower economic recovery may have revived tech shares in in the second quarter as investors sought out the category’s growth potential.

Real estate stocks performed better as housing prices rose across the country. The basic materials and industrials sectors cooled from the first quarter but finished the second quarter up still up on the year.


The clear divide in performance between growth and value stocks that dominated the market since October 2020 faded in the second quarter. Value stocks outperformed growth stocks in May, but April and June were strong months for growth stocks as energy returns fell back into step with other sectors and tech shares surged.

For the quarter, large- and mid-cap growth stocks beat their value counterparts but small-cap value still led small-cap growth.

counterparts but small-cap value still led small-cap growth.



"

MY COMMENT

the above pretty much sums up the quarter. Next up....EARNINGS. The next round of earnings that starts in a couple of weeks will be very CRITICAL to the short term direction of the markets. I am anticipating that they will be GREAT. BUT...you know what they say about.......counting your chickens.

 

THIS is why I HATE the current trend of corporate stock buy-back plans.

Amazon giving new CEO Andy Jassy $215M in stock
Jassy will officially replace Amazon founder Jeff Bezos as CEO on July 5

https://www.foxbusiness.com/business-leaders/new-amazon-ceo-andy-jassy-given-215m-stock

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

"The man replacing founder Jeff Bezos as CEO of Amazon is set to receive a huge stock package when he takes the helm on Monday.

Andy Jassy will receive roughly $215 million worth of the e-tail giant's stock.

In a filing to the Securities and Exchange Commission earlier this week, Amazon reported that Jassy will receive 61,000 shares of the firm's common stock vested over 10 years upon becoming president and chief executive on July 5. At Friday's closing price of $3,510.98, that's $214,169,780.00 – not a shabby payday.

Jassy started at Amazon in 1997 in the firm's marketing department, and worked his way through the ranks to his current role as head of Amazon Web Services. Bezos announced in February to the company's 1.3 million employees that Jassy would succeed him in leading the online retail behemoth.

Bezos founded Amazon in 1994, and is reportedly the richest man in the world with an estimated net worth of $190 billion."

MY COMMENT

YES....it is a big job.....and a big company....and they make lots of money....and the vesting is spread over 10 years.......BUT...as a shareholder...it just rubs me the wrong way to see a new.....unproven..... CEO given.......a quarter of a BILLION dollars......in company stock that comes out of the buy-back pool. That is MY MONEY.

I would much rather see it given out as dividends or used to grow the company or the company operations or capital items.

Are Stock Buybacks a Good Thing, or Not?

https://www.investopedia.com/articles/financial-advisors/121415/stock-buybacks-good-thing-or-not.asp

"For corporations with extra cash, there are essentially four choices as to what to do:

1. The firm can make capital expenditures or invest in other ways into their existing business.
2. They can pay cash dividends to the shareholders.
3. They can acquire another company or business unit.
4. They can use the money to repurchase their shares—a stock buyback."

"Before 1980, buybacks weren't all that common. More recently, they have become far more frequent. Between 2003 and 2012, the 449 publicly listed companies on the S&P 500 allocated $2.4 trillion—some 54% of their earnings—to buybacks, according to a Harvard Business Reviewreport.3 And it's not just giants like Apple and Amazon.com Inc. (AMZN), with smaller companies also getting into the buyback game.
In 2019, stock buybacks by U.S. companies totaled nearly $730 billion.4 Companies have been steadily increasing the amount of cash they put into buying back their stock over the last decade."

"According to recent Harvard Business Review research, more than half of corporate profits in the U.S. go toward share buybacks.3 Some economists and investors argue that using excess cash to buy up their stock in the open market is the opposite of what companies should be doing, which is reinvesting to facilitate growth (as well as job creation and capacity).

The biggest social concern about this has to do with opportunity costs—money that goes to shareholders in a stock buyback program could have been used for maintenance and upkeep. On average, fixed assets and consumer durable goods in the U.S. are now older than they’ve been at any point since the Eisenhower era (the 1950s). There is a lot of attention paid to the nation's crumbling roads and bridges, with private infrastructure also suffering neglect—although it's less talked about.

The scale and frequency of buybacks have become so significant that even shareholders, who presumably benefit from such corporate actions, are not without worry.

“It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies,” wrote Laurence Fink, Chair, and CEO of BlackRock Inc. “Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.”

According to a Harvard Business Review report, in 2012, the 500 highest-paid executives named in proxy statements of U.S. public companies received, on average, $30.3 million each, with 42% of their compensation coming from stock options and 41% from stock awards.3 So C-suite executives have little incentive to scale back on buybacks, given the large positions in company stock they typically hold and therefore amount they have to gain.

By increasing the demand for a company’s shares, open-market buybacks automatically lift its stock price, even if only temporarily, and can enable the company to hit quarterly earnings per share (EPS) targets. All that said, buybacks can be done for perfectly legitimate and constructive reasons.

Benefits of Share Buybacks
The theory behind share buybacks is that they reduce the number of shares available in the market and—all things being equal—increase EPS on the remaining shares, benefiting shareholders. For companies flush with cash, the prospect of bumping up EPS can be tempting, especially in an environment where the average yield on corporate cash investments is barely more than 1%.

In addition, companies that buy back their shares often believe:

• The stock is undervalued and a good buy at the current market price. Billionaire investor Warren Buffett utilizes stock buybacks when he feels that shares of his own company, Berkshire Hathaway Inc. (BRK.A), are trading at too low a level. However, the annual report emphasizes that "Berkshire's directors will only authorize repurchases at a price they believe to be well below intrinsic value."5
• A buyback will create a level of support for the stock, especially during a recessionary period or during a market correction.
• A buyback will increase share prices. Stocks trade in part based upon supply and demand and a reduction in the number of outstanding shares often precipitates a price increase. Therefore, a company can bring about an increase in its stock value by creating a supply shock via a share repurchase.

Buybacks can also be a way for a company to protect itself from a hostile takeover, or signal that the company plans on going private.

Some Buyback Cons
For years, it was thought that stock buybacks were an entirely positive thing for shareholders. However, there are some downsides to buybacks as well. One of the most important metrics for judging a company's financial position is its EPS. EPS divides a company's total earnings by the number of outstanding shares; a higher number indicates a stronger financial position.

By repurchasing its stock, a company decreases the number of outstanding shares. A stock buyback thus enables a company to increase this metric without actually increasing its earnings or doing anything to support the idea that it is becoming financially stronger.

As an illustration, consider a company with yearly earnings of $10 million and 500,000 outstanding shares. This company's EPS, then, is $20. If it repurchases 100,000 of its outstanding shares, its EPS immediately increases to $25, even though its earnings have not budged. Investors who use EPS to gauge financial position may view this company as stronger than a similar firm with an EPS of $20 when in reality the use of the buyback tactic accounts for the $5 difference.

The key reasons buybacks are controversial:

• The impact on earnings per share can give an artificial lift to the stock and mask financial problems that would be revealed by a closer look at the company’s ratios.
• Companies will use buybacks as a way to allow executives to take advantage of stock option programs while not diluting EPS.
• Buybacks can create a short-term bump in the stock price that some say allows insiders to profit while suckering other investors. This price increase may look good at first, but the positive effect is usually ephemeral, with equilibrium regaining when the market realizes that the company has done nothing to increase its actual value. Those who buy in after the bump can then lose money.

Criticism of Buybacks
Some companies buy back shares to raise capital for reinvestment. This is all good and well until the money isn't injected back into the company. In July 2017, the Institute for New Economic Thinking published a paper titled "US Pharma’s Financialized Business Model" on pharmaceutical companies and their share buyback and dividend strategy.6

The study found that share buybacks weren't being used in ways to grow the company, and in many cases, total share buybacks outnumbered funds spent on research and development (R&D). The report stated:

In the name of 'maximizing shareholder value' (MSV), pharmaceutical companies allocate the profits generated from high drug prices to massive repurchases, or buybacks, of their corporate stock for the sole purpose of giving manipulative boosts to their stock prices. Incentivizing these buybacks is stock-based compensation that rewards senior executives for stock-price performance.
And, as mentioned above, any boost to share price from the buyback seems to be short-lived. Along with Apple, Exxon Mobil, and IBM have made significant share repurchases. A CNBC article in May 2017 said since the turn of the century, total outstanding shares of Exxon Mobil have fallen 40%, and IBM's has decreased by a whopping 60% from its peak in 1995. The article notes that not only does this fit "financial engineering," but it also affects overall stock indexes that are valued on the weightings in these companies.7

Buybacks vs. Dividends
As mentioned earlier, buybacks and dividends can be ways to distribute excess cash and compensate shareholders. Given a choice, most investors will choose a dividend over higher-value stock; many rely on the regular payouts that dividends provide.

For that very reason, companies can be wary of establishing a dividend program. Once shareholders get used to the payouts, it is difficult to discontinue or reduce them—even when that's probably the best thing to do. That said, the majority of profitable companies do pay dividends.

Buybacks do benefit all shareholders to the extent that, when stock is repurchased, shareholders get market value, plus a premium from the company. And if the stock price then rises, those that sell their shares in the open market will see a tangible benefit. Other shareholders who do not sell their shares now may see the price drop and not realize the benefit when they ultimately sell their shares at some point in the future.

The Bottom Line
Share repurchase programs have always had their advantages and disadvantages for company management and shareholders alike. But as their frequency has increased in recent years, the actual value of stock buybacks has come into question. Some corporate finance analysts feel that companies use them as a disingenuous method to inflate certain financial ratios, such as EPS under the auspices of providing a benefit to shareholders. Stock buybacks also enable companies to put upward pressure on share prices by affecting a sudden decrease in their supply.

Investors shouldn't judge a stock based solely on the company's buyback program, though it is worth looking at when you're considering investing. A company that repurchases its own shares too aggressively might well be reckless in other areas, while a company that repurchases shares only under the most stringent of circumstances (unreasonably low share price, stock not very closely held) is more likely to have its shareholders’ best interests at heart truly.

You should remember also to focus on the stalwarts of steady growth, price as a reasonable multiple of earnings, and adaptability. That way, you'll have a better chance of participating in value creation versus value extraction.

Some experts contend that buybacks at current high market levels cause the company to overpay for the stock and are carried out to placate large shareholders. For clients who invest in individual stocks, a knowledgeable financial advisor can help analyze the longer-term prospects of a given stock and can look beyond such short-term corporate actions to realize the actual value of the firm."

 

Looks to me like this little SUMMER RALLY has a good ways to run from here. The factors that WILL drive the continued rally:

1. The economy continues to re-open. It will take at least a year at the minimum to get the economy fully opened up. We are going to see continued POSITIVE impact from the very early re-opening over the summer.

2. Earnings will be starting in just a few weeks. Many companies are raising estimates.....and.....putting out very positive statements.Even though we have a history...lately....of the markets ignoring or even PUNISHING great earnings...the upcoming earnings....on top of.....the AMAZING earnings last quarter.....WILL drive the markets. The markets can only IGNORE booming earnings for a short time. Sooner or later the markets can NO LONGER RESIST.....and..... get pushed over the top.

3. The BIG CAP GROWTH portion of the market is......ON FIRE. None of these companies shut down for even one day during the pandemic. They are FULLY open and operating....and.....have no drag on their performance from having to go through the reopening process.

4. The BIG CAP GROWTH AMERICAN companies that are leaders around the world with their ICONIC products and world wide marketing WILL benefit as the world re-opens. The vast majority of the world is way behind the USA in re-opening. The future is going to be one constant business escalation for these companies for.....the YEARS....that it takes the world to get going again.

5. At the same time USA VALUE STOCKS will ALSO enjoy the same environment mentioned above and will THRIVE. It is going to be a MULTI-FACETED......business boom.

6. On an anecdotal level. As I scanned many, many, business sites today there is a......TOTAL LACK.....of the usual fear mongering and negativity. The financial media has simply WORN OUT the typical doom and gloom topics of the past 6 months. No one cares....no one is paying attention. The professionals are on vacation.....the markets are left in the hands of the "little people".....and....."we" are going to run with it.

7. The BOOM in housing prices is making people feel like they have MUCH MORE wealth. It is creating a very UPBEAT mood around the country. The current PSYCHOLOGY is.....all good....for the markets and investors.

8. Mortgage rates and the Ten Year Treasury continue to be STUCK at HISTORIC lows.

9. The collectable and art markets are BOOMING. This is an indicator of the amount of PENT UP MONEY that is out there. People have lots of money.....IN HAND....and are willing to spend it. As the markets BOOM......the resulting publicity......WILL drive more and more retail investment in stocks and funds. GREED and fear of missing out will continue to GROW.....and drive investors to participate.

 

Oldmanram....WELCOME BACK......to reality.....the real world awaits you.

 

Well....4th of July.....and nothing better to talk about on the 4th than American real estate. Local conditions.

Here out of 4200 homes we have NOW reached a new high in listings......20 homes actively for sale. The most in a long time. We follow the market very closely and often drop in on open houses. The market has DEFINITELY cooled a bit lately. Homes are staying on the market for 2-3 weeks. The CRAZY FRENZY seems to have backed off a bit.

The real estate show that I listen to on the radio on Saturdays when I am driving said the same thing. We are still seeing multiple offers....but not as many as a few weeks ago. It is STILL definitely a SELLERS market......and prices are STILL going up.

I am seeing a FEW....but a growing number......of homes come back on the market after going pending. Either they would not appraise or buyers could not qualify. I doubt that many of them have inspection contingencies in the current market....but...some could.

I think the worst is over for BUYERS....but it is still a very difficult market to find and successfully offer on a home. Here in Central Texas.....the market has been strong for a long time....years.

Nineteen months ago when we downsized and sold our BIG house......5 bed, 5.5 bath, over 5000 sq ft, pool, view, etc, etc.....we sold in about 45 days. That was the norm back than......about 30-60 days for the average larger home to go pending. Now with the market backed off a bit...houses like that one are selling in about 2-4 weeks......at the PEAK of the FRENZY......1-2 months ago....they were going pending in a week or less.

 

Yet another......perfect....example why I do not invest in companies that are TIED TO CHINA. As an investor there are certain risks that I am willing to take. China is NOT one of them.

China Blocks Didi From App Stores Days After Mega U.S. IPO

https://finance.yahoo.com/news/china-regulator-orders-didi-removed-120112782.html

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

"(Bloomberg) -- China’s cyberspace regulator ordered app stores to remove Didi Chuxing, dealing a major blow to a ride-hailing giant that just days ago pulled off one of the largest U.S. initial public offerings of the past decade.

The Cyberspace Administration of China announced the ban Sunday, citing serious violations on Didi Global Inc.’s collection and usage of personal information, without elaborating. That unusually swift decision came two days after the regulator said it was starting a cybersecurity review of the company.

That effectively requires the largest app stores in China, operated by the likes of Apple Inc. and smartphone makers Huawei Technologies Co. and Xiaomi Corp., to strike Didi from their offerings. But the current half-billion or so users can continue to order up rides and other services so long as they downloaded the app before Sunday’s order. Shares in SoftBank Group Corp., a major Didi shareholder, fell as much as 5.9% Monday, its biggest intraday fall since May 13.

The surprise probe and rapid decision by China’s powerful internet regulator piles on the scrutiny of Didi over issues ranging from antitrust to data security. The company has been grappling with a broad antitrust probe into Chinese internet firms with uncertain outcomes for Didi and peers like major backer Tencent Holdings Ltd. It lost as much as 11% of its market value at one point on Friday, after the watchdog revealed its investigation.

More broadly, Beijing has been curbing the growing influence of China’s largest internet corporations, widening an effort to tighten the ownership and handling of troves of information that online powerhouses from Alibaba Group Holding Ltd. to Tencent and Didi scoop up daily from hundreds of millions of users. The regulator on Sunday ordered Didi to rectify its problems following legal requirements and national standards, and take steps to protect the personal information of its users.

On Sunday, the company said on social media that it had already halted new user registrations as of July 3 and was now working to rectify its app in accordance with regulatory requirements.

In a follow-up statement, Didi said the regulatory move may have “an adverse impact” on its revenue in China.

Didi’s IPO was led by Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. In all, the ride-hailing firm appointed 20 advisers to manage the float.

The CAC didn’t specify on Friday what it will look into. But the timing of its announcements was significant, coming not just on the heels of Didi’s IPO but also the Communist Party’s 100th anniversary celebrations in Beijing.

Didi, one of the single largest investments in SoftBank’s portfolio, defeated Uber Technologies Inc. in China in 2016 before embarking on an ambitious international expansion. It started trading on Wednesday in New York after a $4.4 billion initial public offering, pulling off the largest debut by a Chinese firm in the U.S. after Alibaba.

But Didi had to settle on going public at a far lower market value than previously targeted. It debuted at about $67 billion, barely up from its last round of funding in 2019, and far short of the most bullish expectations for $100 billion -- a reflection of the regulatory scrutiny that’s hounded it ever since a pair of murders in 2018 that founder Cheng Wei has called its “darkest days.”

The Beijing-based firm responded to the subsequent crackdown with a fusillade of efforts to improve security across its network. It began to explore new businesses to offset slowing ride-hailing growth, from car repairs to grocery delivery. That served it well during the coronavirus pandemic, when whole cities came to a standstill. The company delivered an $837 million profit in the March quarter -- a rarity among recent high-profile IPOs like Kuaishou Technology.

The latest move against Didi underscores the uncertainty surrounding the Chinese government’s crackdown on the internet sector. Earlier this year, the State Administration for Market Regulation announced it was looking into alleged abuses -- including forced merchant exclusivity arrangements -- at Meituan, also days after China’s third-largest internet company raised $9.98 billion from a record share placement and convertible bonds sale.

“This is deeply unfair to investors,” Brock Silvers, chief investment officer at Hong Kong-based private equity firm Kaiyuan Capital, said on Friday. “And as a crucial matter of market integrity, China’s regulators should cease allowing companies to list while under investigation.”"

MY COMMENT

ANYONE investing is this garbage gets the CHINESE government as their partner. AND.....not a silent partner....a dictatorial partner.....with total control and veto power over your money and your investment.

Anyone investing in a Chinese company........in partnership with the...... WORLDS MOST BRUTAL DICTATORSHIP.....is putting their money at risk at the whim of the Chinese government which totally controls ANY company in China.

I assume that any investor in China knows this....although who knows. This is MUSCLE FLEXING.....sending a message....by the Chinese government. Chinese companies......WILL comply....they have no choice.

 

Jeff Bezos steps down as CEO of Amazon on Monday. I hope he stays very connected to what is going on at the company in his new role as Executive Chairman. What he has done as a business person is one of the greatest stories in business history. I say.....WELL DONE.

This will be a critical time for the company over the next years. Making the transition from FOUNDER management is a critical time for any company. I am hoping......as a shareholder....that his role as Executive Chairman will be....training wheels....for the new CEO and a role that allows JEFF to make sure things are going well as he slowly releases control.

I remember very well the ISSUES and PROBLEMS that Microsoft had making this transition. I was a shareholder from about 1990 to 2002. At that point I sold ALL shares. I have now been back as a shareholder once it became clear that the current management is BACK ON TRACK nicely. the management before the current management was a......DISASTER.....for many years. But, I think the company was DRIFTING...even before Gates left.