The Long Term Investor

I have been stuck with no phone, no internet, and no TV for the past 20 hours or so. An outage.....the TV just came on a few minutes ago so I am getting in a few quick posts while I can. It is amazing how DEPENDENT we all are now on being able to connect. I wrote out a check for deposit to one of my bank accounts and could not do the deposit using my phone. So I got out an old deposit slip and was prepared to actually go to the bank. It was a mini-wake-up-call for me having to live for a day without being able to connect or use any devices.

It made me realize that I dont even have a clue how to connect my TV to an actual antenna. Of course I dont have an antenna.....I do have some wire. It also made me realize that if I lived in earthquake country.....or.....some other area that is subject to disasters.....or.....if I was a prepper.....it would be a good idea to have a TV antenna as part of my emergency materials.

 

I was just able to check my account for the first time today.....red of course. I have 2 positions that are in the green.....MICROSOFT and HOME DEPOT. Looks like there is some nice buying interest in HD after the IRRATIONAL drop yesterday.

HEY....oldmanram.....dont buy any more of my stocks.....I cant afford it.

Pmw55.....yes Amazon....this year is a real DOG....so far. A number of reasons......the stock is too high, they need to split the shares by about ten to one. Second....the government is constantly after them.....not that anything will come of it. Third......the forward looking statements they gave at earnings hurt them. Forth......their earnings although GREAT were not up to what the "experts".....the analysts......wanted to see in EVERY little category. Fifth.....perhaps the change over in CEO is also having a bit of an impact by creating uncertainty about the future. Sixth.....they have had an EPIC run over the past 10-20 years.......at some point it will end and they will settle into being a mature company......whether that time is now or not....who knows.

In any event.....there comes a time when you just have to sell a company that has been a long term favorite......I am NOT saying that time is NOW for Amazon. I held Microsoft from about 1990 till 2002. It was an EPIC run and a huge amount of money was made on that stock. After that....the company became a disaster. I never owned the company again till after the current management took over and PROVED that they had the skills to take the company to new levels.

I intend to hang in there with Amazon for the rest of this year and see how they do next year. EVERY big company goes through times when they under-perform. I dont mind holding through those time periods......but I will watch how they are doing. They represent a bit over 8% of my total portfolio....without taking into account how much is in my SP500 Index Fund and my Fidelity Contra Fund. I have NO emotional attachment to the company.....if this becomes a long term trend.....I WILL sell and move on till they prove that they are back up to speed. I do like their continued investment in company infrastructure and capital assets. Also the money they are investing in employees and technology.....also....their continued GREAT earnings. I also like the fact that they are a MODERN CONGLOMERATE and the strength of their web services business. So lots of good stuff going on.

At the moment they are showing a gain of +1.06% for the year to date. I had to double check that...it seems so pitiful. At the moment they are at $3220....they started the year at $3186. A WHOPPING increase of $34 over the past 8 months on a stock that is over $3000 per share.

 

It does not help the markets today that we have the CONSTANT release of information by the FED happening this afternoon. It is just RIDICULOUS how often they meet, talk, and release "stuff".

 

HERE is a little article that has relevance to the discussion of AMAZON above as well as investing in general.

There’s No Such Thing as Buy and Hold

https://intrinsicinvesting.com/2021/08/16/theres-no-such-thing-as-buy-and-hold/

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

"We recently repaired my grandmother’s mantle clock. It’s a nice piece and looks good in our living room, but it only has sentimental value. The repair cost outweighs its market value.

When we brought it to the repair shop, we learned that almost all the internal mechanisms were rusted and had to be replaced. Fortunately, the external features were in great shape. It still looks like the clock I walked past in her foyer as a child.

At some point in the repair process, especially if we’d needed external replacements, it would no longer have been my grandmother’s clock. It would instead be a whole new clock that happened to resemble my grandmother’s clock.

Over a long enough timeline, the same thing happens to companies. Everything internal – from the copiers to the offices to the management teams – gets replaced. This point often gets overlooked because, like my grandmother’s clock, the exterior looks the same.

As companies get larger, the decisions made by present-day management have an outsized impact on the company’s subsequent fundamentals. What came before matters less with each passing year. As Warren Buffett quipped, “After ten years in a job, a CEO whose company annually retains earnings equal to 10% of net worth will have been responsible for the deployment of more than 60% of all the capital at work in the business.”

To illustrate, Wal-Mart today is not the same Wal-Mart led by founder Sam Walton. When Walton stepped down from the CEO role in 1988, Wal-Mart’s shareholder equity amounted to $2.26 billion; in fiscal 2021, it was $87.5 billion. In other words, 97% of Wal-Mart’s current shareholder equity was generated after Walton stepped down.

Business strategies also get replaced. Starbucks founder Howard Schultz’s early vision for the coffee house was rooted in its “third place” allure – a place other than work and home where customers could sit on comfy couches and enjoy a book or have a conversation with a friend. That strategy, by any account, was a massive success.

Just before the pandemic struck, however, over 80% of Starbucks’ U.S. orders were “to go,” and in the most recent quarter, nearly half of U.S. orders were made through drive-throughs. Starbucks is currently restructuring its U.S. store footprint and focusing on rapid fulfillment. Though the “third place” is still a key strategy in China, the U.S. strategy has been dramatically reimagined.

If you happened to own Wal-Mart or Starbucks for the last 20-plus years, you implicitly approved of all the major changes at the company along the way. But if you didn’t give those changes any thought, your outcome was mostly luck. It wasn’t predestined that either company would have a positive outcome.

So how might we as investors, with some level of confidence and reason, explicitly approve of such changes with a forward-looking approach?

We suggest focusing on culture. Founders like Walton and Schultz set the algorithms for how their companies proactively and reactively respond to change. As investing legend Philip Fisher put it: “More successful firms usually have some unique personality traits – some special ways of doing things that are particularly effective for their management team. This is a positive not a negative sign.”

While subsequent leadership teams might tweak the founders’ mission statements, the core cultural algorithm is hard to break. So much so that when an outsider CEO goes against the grain and redefines an algorithm that works, trouble emerges.

This was the case at Home Depot in 2000 after co-founder Bernie Marcus stepped down and handed the reins to former General Electric executive, Bob Nardelli. Nardelli had no retail experience and pushed the centralized Six Sigma lean management style he learned at GE onto the Home Depot system, which had previously been decentralized and entrepreneurial in nature. Momentum at Home Depot stalled. It took nearly seven years for Nardelli and Home Depot to part ways, but once Home Depot was put back on track, it emerged stronger than ever.

Being outside shareholders, we’re not privy to the daily decisions companies make that over time determine their success or failure. But we aim to learn and understand the cultures – the algorithms – behind the businesses we own so we can better filter through daily and quarterly news flows.

A recent example is Netflix. Netflix announced it was moving into the video game space to provide subscribers with additional ways to engage with Netflix content. At first glance, you would be wise to be skeptical, as the video game industry is quite different from the TV series and movie business that’s been Netflix’s core focus for over 20 years. You might conclude that Netflix’s management is taking its eye off the ball.

Having studied Netflix for years, however, we’ve come to understand that the culture founder Reed Hastings set in motion is one that emphasizes experimentation and fast learning to create consumer surplus. Games will be available to Netflix subscribers at no additional cost. The point is to make your Netflix subscription even more of a no-brainer expense than it already is.

Without this understanding of Netflix’s culture, we may have reached a different conclusion.

A company that you’ve owned for a decade or longer is, in many ways, a different company from the one you originally bought. There’s no such thing as buy and hold with equities because corporations are organisms operating in ecosystems and, as such, are changing internally and responding to external stimuli. You can buy and hold something static like a painting or gold, but not equities.

As equity owners, then, we need to regularly evaluate our investments and reaffirm or change our conviction ratings. By getting closer to the company’s culture and the algorithms that drive its decisions, we can better sort through noise and identify important signals."

MY COMMENT

How true........CULTURE......defines a country, a state, a society,...... and .....A BUSINESS. People and investors take it for granted. BUT....it is very TENUOUS....and....quickly lost. Once lost it is very difficult to ever get back the MAGIC that allowed it to function and thrive. You see it all the time in sports, business, and government. A new coach takes over, or a new CEO, or a new government......and.....WHAMO.....it goes into the toilet......or BLAM....it goes from in the toilet to success.

This is why I do not talk much about being a buy and hold investor. I prefer to use the term.....fully invested all the time long term investor. Of course my GOAL is to buy and hold great companies for a very long time. It makes my investing life much easier if I dont have to make any changes or do anything other than ride the wave. I guess I am a buy and hold investor....with each company that I own....till I am not.

 

To continue the above theme.......here is another article linked to the above. UNFORTUNATELY ....there is little to no appreciation of the importance of SHARED CULTURE at the moment. This is a BIG REASON why.....working remotely....WILL be a total DISASTER for many businesses moving forward.

How Corporate Culture Can be a Moat

https://intrinsicinvesting.com/2018/05/04/corporate-culture-moat/

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

"The phrase “corporate culture” can be eye-roll inducing. It sounds like something right out of an M.B.A. textbook or the movie Office Space.

Culture nevertheless matters. In fact, Costco founder Jim Sinegal even went so far to say, “Culture is not the most important thing in the world. It’s the only thing…It is the thing that drives the business.”

Put another way, culture is the operating system from which all decisions – large and small – are made on a daily basis.

Or as Warren Buffett put it in his 2005 letter to Berkshire Hathaway shareholders:

Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous.

When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as “widening the moat.”

It’s precisely the imperceptible daily actions on which culture plays such an important role. Public companies are loaded with smart and talented managers capable of forming business strategy. But it’s those daily actions – good or bad – that add up and have a massive impact on the company’s economic moat.

Defining culture

What specifically makes for a virtuous culture varies by industry. For example, a virtuous culture in an industrial company may be one that’s obsessed with process. At a luxury apparel maker, perhaps creativity and design.

There are some common attributes, however, and Daniel Coyle provides a nice summary in his new book, The Culture Code: The Secrets of Highly Successful Groups:

• Build Safety: A sense of belonging and identity.
• Share Vulnerability: Ability to ask for help and admit mistakes.
• Establish Purpose: Narratives create shared goals and values.

As an outside investor, it can be difficult to evaluate these attributes, but there are a few things that get our attention.

Coyle’s first point, about building a sense of belonging and identity, can often be found in the way management refers to its employees. Wal-Mart’s 1982 annual report, for example, referenced the “approximately 41,000 associates who are partners in the business.” (My emphasis.) Starbucks has also long referred to its employees as “partners.” Google employees are internally called “Googlers.”

From the outside, these phrases may seem silly or even empty, but having been part of the Vanguard “Crew” and The Motley Fool “Fools” earlier in my career, I can attest that they helped foster a unique sense of identity and teamwork. If they didn’t, they wouldn’t have stuck around.

It can also be encouraging to see management teams that openly admit mistakes. If management is admitting mistakes, that humility and ownership mentality likely exist in other parts of the business. A classic example is the Domino’s Pizza television advertisements from about ten years ago, where company president Patrick Doyle shared customer feedback saying Domino’s Pizza was terrible. These admitted weaknesses allowed Domino’s to revamp its menu rather than try to market its way around an inferior product.

Another way companies can hit on Coyle’s second attribute is by making all employees part owners of the business. This way, everyone has some skin in the game when making decisions. U.K.-based insurer Admiral Group, for example, immediately makes new employees shareholders. They are then eligible to receive up to £3,600 ($5,000) of shares every year with three-year vesting.

Finally, as Coyle points out, corporate narratives can help establish shared goals and values. In the mid-1980s, Danaher developed a lean manufacturing process called the “Danaher Business System,” which, as the company states, “drives every aspect of our culture and performance.” Over the last 30 years, Danaher used the DBS process to both evaluate and integrate a portfolio of acquired companies. A binding corporate narrative like DBS is the only way a conglomerate can keep so many business units working in harmony.

Bottom line

Culture can be a moat itself if it is virtuous, impacts return on invested capital, and is not easily replicable within its industry. "

MY COMMENT

I have left out part of the end of the article that is not relevant to this discussion. ANY business that goes to remote workers is committing business suicide. EVERY worker will be an island....there will be NO corporate culture. No one will give a SH*T about the company or anything but themselves. Management will not care about the workers and the workers will not care about the business. In addition there will be NO KNOWLEDGE of the history of the business and what works and what does not. There will be NO mentoring. EVERY generation of management and workers will simply make the same mistakes and there will be NO cohesion to hold the team together. As a.....former....business owner.....it is so obvious to me. BUT.....whatever.

 

Considering the day we had yesterday.....today....seems pretty good in comparison. Minimal shallow losses......with the emotional overhang of Afghanistan......on the general public. Here is where we are today.

Stock market news live updates: Stocks drift after S&P 500's worst day in a month

https://finance.yahoo.com/news/stock-market-news-live-updates-august-18-2021-221513238.html

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

"Stocks traded sideways on Wednesday, with investors contemplating a batch of weaker-than-expected economic data and mixed retail earnings results.

The S&P 500 hugged the flat line. The index dropped 0.7% during the regular trading day on Tuesday to end a five-session winning streak and post its biggest decline in a month. Cyclical and reopening stocks including cruise lines and airlines steadied after diving a day earlier.

"We wouldn't read too much into one day's movement in the markets. Instead, we would look at the causes for these," Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute, told Yahoo Finance. "Of course, consumer sentiment out last week was negative, and then [Tuesday's] retail sales were off, the COVID resurgence – all these things are playing on the investor psyche. And investors are probably taking some gains here given there are some uncertainties that appear to be building."

A disappointing U.S. retail sales report from the Commerce Department served as a key source of concern for equity traders, with sales dropping 1.1% in July versus the 0.3% dip expected. Housing starts also fell more than expected last month, posting the biggest monthly decline since April. Sales slowdowns at retailers from Home Depot (HD) to Target (TGT) compared to last year also appeared to vindicate traders' concerns that economic activity and profit growth may slow from here.

Investors are bracing for another set of potentially market-moving data on Wednesday. Later in the afternoon, the Federal Open Market Committee (FOMC) will release its latest meeting minutes, offering market participants more hints on when the central bank might announce and implement tapering of its crisis-era asset purchase program. The timing and scope of the eventual roll-back of the Fed's highly accommodative monetary policies have been key questions going forward for the markets.

But despite some of the lingering uncertainties in markets on the Delta variant and policy fronts, many strategists remain constructive overall on the path forward for equities.

"You're seeing a lot of economists and strategists on Wall Street now looking for some sort of catalyst here to get a sell-off, because we are going into what you would call the weaker part of the year for the market historically," Ryan Payne, Payne Capital Management president, told Yahoo Finance. "But if you look at the overall economic data, if you look at profits this quarter, it's kind of hard not to be bullish here."

8:46 a.m. ET: Housing starts slid by the most since April last month
New homebuilding fell much more than expected in July as materials shortages and labor scarcities restricted overall housing market activity.

Housing starts fell 7.0% in July, the Commerce Department said on Wednesday, which marked the biggest monthly drop since April. Consensus economists were looking for a 2.6% decline, according to Bloomberg data. In June, housing starts had risen at a 3.5% rate. Starts for single-family homes fell 4.5%, contributing heavily to the decline.

Building permits, however, came in faster than expected, signaling a pick-up in homebuilding down the line. These rose at a 2.6% monthly rate, or more than double the pace anticipated. That followed a 5.3% drop during the prior month."

MY COMMENT

I have left out some content at the end of this article that I consider irrelevant.

As to the FED today....NO...I dont think there is a snowball in hell....chance that they will actually do anything. The economy is bouncing back and forth between positive and negative data....EVERY DAY. The PATH of the re-opening is far from clear. What is clear is that over the LONG TERM the economy will NORMALIZE and re-open. BUT....the shorter term path is totally opaque and will be a series of......good and bad....events. FORTUNATELY....for investors....business is NOT government statistics and economic data.

 

ANECDOTAL.....but this is the perfect example of the amount of PENT UP DEMAND and longing for normalcy that is out there in the economy right now. A very HEALTHY sign for the retail companies.

Home Depot's early release of Halloween products sold out 'almost immediately'
Home Depot's overall net sales during the second quarter rose to $41.12B

https://www.foxbusiness.com/lifesty...alloween-products-sold-out-almost-immediately

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

"The home improvement retailer said in an earnings call on Tuesday that it had offered a "sneak peek" of its Halloween products online ahead of the upcoming season. "Almost immediately," everything was sold out, Chief Operating Officer Ted Decker said during the call.

Decker said this was a "very strong indication that people are still going to engage in decorating."

Just last year the retailer turned heads after it debuted its 12-foot skeleton figurine for Halloween in late September.

Despite the pandemic altering traditional holiday plans, the decoration, which cost roughly $300, proved to be a hit. At one point, the product was listed as out of stock online.

Overall net sales during the second quarter climbed 8.1% from the year-ago period to $41.12 billion.

"I would like to extend my sincere appreciation to our team, as well as our supplier and supply chain partners, as they continue to operate in this dynamic and challenging environment," CEO Craig Menear said."

MY COMMENT

We had one of those GIANT SKELETONS in our neighborhood last year. BUSINESS.....needs to quit walking around on eggshells and strongly and confidently......start to push product and go after customers.....in person and online. The demand is there.

 

Too bad my internet, TV and phone outage got fixed....otherwise I could have avoided looking at the markets today. Guess what.....I was in the RED today.......by a bit over 1%. I got beat by the SP500 by 0.20%. That plus the loss yesterday should put me about EVEN with the SP500 for the year.

The rest of the year......starts FRESH tomorrow.

 

Apparently the market had a mini TAPER TANTRUM today. The ACTUAL impact of tapering will be ZERO to the economy. Tapering DOES NOT equate to raising interest rates. Of course......there was actually......NO....decision on tapering...just comments about talking about doing tapering.

Stock market news live updates: Stock futures drift lower after Fed minutes highlight taper talk

https://finance.yahoo.com/news/stock-market-news-live-updates-august-19-2021-221601020.html

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

"Stock futures opened slightly lower Wednesday evening after a selloff during the regular trading day, driven by jitters over a potential shift in monetary policy that might remove some of the stimulus underpinning equity markets.

Contracts on the S&P 500 ticked lower. Earlier, both the S&P 500 and Dow dropped more than 1% to post a back-to-back session of gains.

Shares of Robinhood (HOOD) dropped more than 8% after the trading platform delivered its first earnings report since going public, with the print pointing to a revenue slowdown in the current period due to seasonal weakness in third-quarter trading. Cisco Systems (CSCO), a Dow component, also saw shares drop after its sales and profit guidance disappointed against some lofty Wall Street expectations.

Equity markets as a whole came under pressure on Wednesday on the back of the Federal Reserve's July meeting minutes. These suggested central bankers were moving forward with their debate over the timing and scope of the tapering of their crisis-era asset purchase program, with most participants expecting the U.S. economy to make enough of a recovery to meet the "substantial further progress" necessary to trigger a slowdown in purchases by later this year.

"With a growing number of officials now openly discussing the possibility of tapering beginning soon on the back of July’s strong employment report, it looks more likely than not that the wind-down will begin later this year, rather than early next year as we had previously thought," Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note on Wednesday.

"Regardless, the minutes also made clear that an earlier taper does not necessarily mean that the Fed will bring forward plans to start raising interest rates, with many officials believing that the FOMC should 'clearly reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in … the federal funds rate," he added.

Some pundits suggested the Federal Reserve's escalating talk around tapering is at least partially by design.

"The Fed is doing a masterful job of leading us down the taper exhaustion path, so when they actually do taper, we'll be so exhausted talking about it, it won't cause the volatility in the market," Andrew Slimmon, managing director at Morgan Stanley investment management told Yahoo Finance. "That's what I really think they're doing: They're going back and forth and back and forth. And at the end of the day, tapering just means they're buying fewer bonds than they used to, but they're still buying bonds."

MY COMMENT

In REALITY I doubt that anything that the FED is doing....other than keeping interest rates low......is having any impact on the economy. Just like the various stimulus bills that come from congress......I doubt that they have any real impact on the economy.....especially the private economy. It is just taking money away from business and people and giving it to government to spend. The ways that this spending and little game they play DISTORTS and DISRUPTS the economy is probably worse then simply doing nothing.

I personally dont care if they start to TAPER tomorrow. It is not going to have any real impact at all.....other than perhaps SCARE the markets into a self-imposed correction.

 

HERE are the Nvidia earnings.

Nvidia beats earnings expectations, but cryptocurrency chip sales falter

https://www.cnbc.com/2021/08/18/nvidia-nvda-earnings-q2-2022.html

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

"Key Points

• Nvidia reported earnings on Wednesday for its second fiscal quarter, which ended Aug. 1, beating Wall Street estimates on the back of strong graphics card sales.
• However, the company’s cryptocurrency chip product, CMP, had lower sales than the company predicted in May.

Nvidia reported earnings on Wednesday for its second fiscal quarter, which ended Aug. 1, beating Wall Street estimates because of strong graphics card sales.

However, Nvidia’s cryptocurrency chip product, CMP, had lower sales, at $266 million, than the $400 million the company predicted in May. Shares of Nvidia were up more than 2% in after-hours trading.

Here’s how the chipmaker did versus Refinitiv consensus estimates:

• Earnings: $1.04, adjusted,vs. $1.01 expected
• Revenue: $6.51 billion, vs. $6.33 billion expected

Nvidia forecast $6.8 billion in revenue in the current quarter, beating Refinitiv expectations of $6.5 billion.

Nvidia is in a period of sustained, massive growth in its business as semiconductors are in short supply worldwide and as demand for the kind of processors that the company specializes in skyrockets. Nvidia’s revenue rose 68% annually during the quarter. In the previous quarter, sales grew 84%.

Graphics chips like Nvidia makes are increasingly important for a variety of technologies including gaming, artificial intelligence and types of cryptocurrency mining.

Nvidia’s graphics segment, which is primarily made up of graphics cards, grew 87% to $3.91 billion, growing faster than the compute and network segment, which includes chips for data centers. Compute and network grew 46% to $2.6 billion.

Broken down by market instead of reportable segment, one highlight was gaming, which was up 85% to $3.06 billion. Nvidia has had supply issues since late last year as its latest line of graphics cards has remained mostly sold out in stores, and the company said in May that it expected supply issues through the second half of the year. The company said Wednesday that it was seeing longer lead times throughout its supply chain.

Nvidia said the increase in gaming sales was due to both GeForce graphics card sales as well as the chips it sells to game console makers, such as the processor at the heart of the Nintendo Switch.

Nvidia’s data center business also hit an all-time high, growing 35% annually to $2.37 billion, which the company attributed to graphics cards for data centers, both in industrial uses and among cloud providers.

Investors are closely watching how correlated Nvidia’s business is to cryptocurrency prices.

Cryptocurrency revenue fell short of expectations, reporting $266 million in cryptocurrency card sales, more than 33% lower than expectations. Nvidia forecast in May that the dedicated chips it makes for mining cryptocurrency, called CMP, would have sales of around $400 million in the August quarter.

Nvidia says its cryptocurrency cards are an effort to ensure there is enough chip supply for gamers and it applied software to its GPUs to prevent them from mining cryptocurrencies. Nvidia CFO Colette Kress said that it expects a “minimal contribution” from its CMP sales going forward.

Nvidia’s professional visualization segment, mostly graphics cards for high-end professional workstations, were up 156% annually to $519 million. Its automotive business remains a small portion of the company’s sales, with $152 million in sales, down sequentially from the most recent quarter and up 37% from the same quarter last year, which was in the middle of the global Covid-19 pandemic that snarled auto production.

Last year, Nvidia said it planned to buy Arm, which makes important intellectual property for mobile chips, for $40 billion. The deal is opposed by some of Nvidia’s competitors, which worry that they may lose access to important Arm technology.

“Although some Arm licensees have expressed concerns or objected to the transaction, and discussions with regulators are taking longer than initially thought, we are confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees, and the industry,” Nvidia said in a statement.

Nvidia split its stock 4-for-1 in June. Shares are up over 57% in the last year."

MY COMMENT

All around....GREAT EARNINGS. A clear cut BEAT of the estimates in BOTH earnings and revenue.

As a side note:

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

 

To CAP OFF the Amazon discussion today....the stock closed at $3201......taking the year to date gain well below 1%. Year to date is now 0.46%. Basically.....ZERO.

HERE is a link to a chart of their annual gain in price. Since 1998 they have had 7 years in the RED. The last one before this year was a loss of 22.18% in 2014. There are a lot of BIG GAIN years in that chart including last year to balance out the red years. Before about 2015 nearly every other or every third year was a negative return. So I am not too worried about the current situation....UNLESS....it continues for a number of years.

https://www.1stock1.com/1stock1_146.htm

 

I will IGNORE the open for now. HERE is the latest economic data....jobs.....that no one will care about since we are in the middle of a TAPER TANTRUM by the wall street professionals.....of course the little retail investors......they dont care about tapering at all....other than the irrational short term impact on the markets.

Jobless claims hit new pandemic-era low in a sign of hope for the employment picture

https://www.cnbc.com/2021/08/19/us-weekly-jobless-claims.html

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

"Key Points

• Jobless claims totaled 348,000 for the week ended Aug. 14, below the estimate for 365,000 and down 29,000 from the week before.
• Continuing claims fell to 2.82 million, as both counts marked new pandemic-era lows.
• A separate report showed that manufacturing growth in the Philadelphia region was lower than expected.

First-time filings for unemployment insurance hit a new pandemic-era low last week, a sign that the jobs market is improving heading into the fall.

Jobless claims for the week ended Aug. 14 totaled 348,000, the Labor Department reported Thursday. That was below the Dow Jones estimate for 365,000 and a decline of 29,000 from the previous week.

The last time claims were this low was March 14, 2020, just as the Covid-19 pandemic declaration hit and sent the U.S. economy spiraling into its deepest but briefest recession on record.

In the weeks that followed, more than 22 million Americans would be sent to the unemployment line, sending the jobless rate skyrocketing to 14.8%. The jobs market has been on a steady recovery trajectory since then, but remains well off its pre-pandemic health.

Stock market futures were off their lows following the news, but contracts tied to the Dow Jones Industrial Average remained down nearly 300 points.

Continuing claims also fell, dropping to 2.82 million on a 79,000 decline from the week before. That data runs a week behind the headline claims number and also represented a new low since the pandemic struck.

The total of those collecting benefits under all programs fell to 11.74 million, a decline of 311,787 for the week ended July 31 and owing mostly to a big drop in those receiving enhanced benefits, which will come to a complete close in September. A year ago, the total under all programs stood at 28.7 million.

A sizeable chunk of the decline in claims came from Texas, which fell by 8,311, according to unadjusted data. Illinois also declined 3,577 and Michigan was lower by 2,188.

Overall, the decline in claims could be good news for a jobs market that has seen nonfarm payrolls increase by 2.5 million over the past three months and the unemployment rate fall to 5.4% from 6.3% at the beginning of the year. Thursday’s data reflects the period the Labor Department uses as its survey week for the monthly nonfarm payrolls count.

There remains, however, a large jobs gap, with some 6 million fewer Americans considered employed now than prior to the pandemic. There also were 8.7 million workers looking for jobs in July, though that was well below the 10 million or so job openings in the U.S.

Economists see a multitude of reasons for the inability to get back to full employment. Among them are ongoing fears about the pandemic, workers pressing for higher wages and the enhanced government benefits that have lowered the incentives for taking jobs.

Wages have been increasing in response to the current conditions, with average hourly earnings up 4% year over year in July. Prior to the pandemic, that would have been a record in data going back to March 2007.

A separate reports Thursday showed the pace of manufacturing growth in the Philadelphia region slowed in August. The Philadelphia Fed’s manufacturing index declined to 19.4 from 21.9 the month before. The reading represents the percent difference between firms seeing expansion vs. those seeing contraction. The level was below the Dow Jones estimate of 22."

MY COMMENT

Not bad....but we still have a HUGE way to go to get back to normal employment. We need to bite the bullet and let the expanded benefits expire.....people have had long enough and plenty of warnings that is was coming. In the scheme of the day to day markets this information will have NO impact at all.

 

Here is a little Schwab article that is a sort of primer on TAPERING.

Fed Tapering: Will it Be Different This Time?

https://www.schwab.com/resource-cen...ing-will-it-be-different-this-time?cmp=em-QYC

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

"As the Federal Reserve transitions from merely talking about tapering its bond holdings to actually tapering, investors may be left wondering what it might mean for the markets and their portfolios. Here’s a quick review of the Fed’s policies, what happened the last time the Fed tapered, and whether it will be different this time.

How we got here
In March 2020, the Federal Reserve was staring down the runway of an unprecedented pandemic with dire economic implications. As a result, the Fed quickly cut the federal funds rate to the range of zero to 0.25% from 1.5% to 1.75% and started purchasing large amounts of Treasuries and agency mortgage-backed securities (MBS) to provide additional stimulus to the economy above and beyond the rate cuts. These large-scale asset purchases are what is commonly referred to as quantitative easing (QE). The goals of quantitative easing are to:

• Support the smooth functioning of the financial markets
• Provide additional stimulus to the economy by lowering borrowing costs
• Put downward pressure on long-term yields to boost investment
• Support the MBS and commercial mortgage-backed securities (CMBS) markets through lowering interest rates for residential and commercial mortgages.

Fast forward through the shortest recession on record and the economy is rebounding strongly. The Fed’s economic forecasts for the end of 2021 show economic growth rising at a 7.0% pace, core inflation at 3.0%, and an unemployment rate of 4.5%.

Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents


Source: Federal Reserve Board, as of 06/16/2021.

Notes: For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections is even, the median is the average of the two middle projections. The central tendency excludes the three highest and three lowest projections for each variable in each year. The range for a variable in a given year includes all participants' projections, from lowest to highest, for that variable in that year. Longer-run projections for core PCE are not collected.

As the economic picture improves, it is not surprising that the Fed would start talking about scaling back its stimulus. Although it’s waiting for “substantial further progress” towards its dual mandate of an average inflation target of 2% and full employment, it looks like those benchmarks may be reached sooner rather than later, given its forecasts for 2021.

What is tapering?
Tapering is a term used to describe the process of gradually stopping asset purchases when there is no predefined end date or amount. Tapering does not involve the outright sale of Treasuries or agency MBS by the Fed—it only means reducing purchases to zero. The Fed likes to signal its intentions around tapering its QE program well in advance to minimize the impact on the markets. Although in the past, the prospect of tapering has unsettled markets, we expect it to be more orderly this time around, as the markets have been through the experience before. Nonetheless, it’s important for investors to understand the process.

Now and then: The Fed’s balance sheet
The Federal Reserve initially implemented what some coined as “unlimited QE” in March 2020 before subsequently capping its monthly purchases at $80 billion and $40 billion for Treasuries and agency MBS, respectively. Ringing in around $7.7 trillion, the Fed’s current holdings of securities quickly blew past the prior peak seen after the 2007-2009 Great Recession. But that’s not the full story.

The Fed’s balance sheet has grown and changed


Source: Bloomberg. Federal Reserve Balance Sheet Securities Held Outright: Treasuries, Mortgage-Backed Securities, and Federal Agency Debt (FARWUST Index, FARWMBS Index, FARWUSFA Index). Weekly data as of 7/28/2021.

The composition of assets has shifted slightly, with the Fed holding a higher proportion of Treasuries compared to MBS this time around. Treasuries now comprise about 69% of the Fed’s holdings compared to 59% last time, and MBS holdings stand at 31% versus 42%.

The Fed’s balance sheet composition in 2013 vs. 2021


Source: Bloomberg. Federal Reserve Balance Sheet Securities Held Outright: Treasuries, Mortgage-Backed Securities, and Federal Agency Debt (FARWUST Index, FARWMBS Index, and FARWUSFA Index). Data as of 12/18/2013 and 7/28/2021.

Another difference is that the bulk of the Fed’s holdings of Treasuries have shorter maturities, resulting in a weighted average maturity of 7.5 years versus 10.2 years previously.

The Fed’s balance sheet: Treasury maturity distribution


Source: Bloomberg. Maturity distribution of Federal Reserve SOMA Treasury Holdings. As of 7/28/2021.

How long will tapering take?
Tapering is likely to be very gradual—in 2014 when the Federal Reserve tapered for the first time, it did so by decreasing monthly purchases by $5 billion per month for Treasuries and MBS each. The full tapering process took 10 months to complete. This time there has been some indication from Federal Open Market Committee (FOMC) members that they would like to move more quickly, as the economy has bounced back so fast. As a result, we forecasted two scenarios—tapering sooner and tapering later.

Tapering earlier vs. later


Source: Bloomberg. Federal Reserve Balance Sheet Securities Held Outright: Treasuries & Mortgage-Backed Securities (FARWUST Index, FARWMBS Index). Monthly data as of 7/30/2021.

In both scenarios, the balance sheet will likely stand around $8.5 trillion once tapering is complete. If the Fed starts tapering in November at $10 billion per month for Treasuries and $5 billion per month for MBS, tapering would be completed in about seven months, or by May 2022. On the other hand, if the Fed holds off until 2022 to start tapering by the same amount, it would be completed by July 2022. Although unlikely, the Fed does have flexibility to speed up or slow down the tapering process. Once completed, income received from the holdings will continue to be reinvested, growing the balance sheet at a much slower rate.

Given the expressed preference by some FOMC members to complete tapering sooner rather than later and the Fed’s forecast for the economy, we expect the Fed to announce it will begin tapering this fall, by slowing the pace of Treasury purchases by $10 billion per month and MBS by $5 billion per month. At that pace, tapering should take roughly seven months.

What does tapering mean for the markets?
In theory, tapering should lead to higher interest rates. By tapering its bond purchases, the Fed is increasing the supply that needs to be absorbed by the market and signaling that policy is becoming less accommodative. In practice, that hasn’t always been the result. We only have one previous example of tapering to look at, but the results were counterintuitive.

1. Treasury yields

Tapering doesn’t necessarily mean yields will spike higher. In the previous period of tapering, yields rose prior to the onset of tapering in 2013 but then fell during the implementation period. The pattern was similar to earlier periods when the Fed started and stopped QE. Yields rose during periods of QE and fell when QE ended.

10-year Treasury yields historically fell after tapering was announced


Source: Bloomberg, using weekly data as of 7/30/2021. US Generic Govt 10 Yr (USGG10YR Index). Shaded areas represent the periods of quantitative easing.

We believe this pattern reflects the power of the Fed’s signaling—it wasn’t necessarily the removal of the Fed as a buyer of Treasuries that caused yields to decline, but the signaling that did. Markets viewed ending QE and/or tapering as the start of tighter policy which would likely result in rate hikes down the road, slower growth, and less inflation. Consequently, yields fell, and the yield curve flattened.

It could always be different this time since yields for intermediate to long-term treasuries are already very low. However, it’s worth noting that the market reaction will depend more on the outlook for economic growth and inflation than on the level of treasury supply.

2. The TIPS market

The Fed has arguably had the most outsized impact on the Treasury Inflation Protected Securities (TIPS) market given the characteristically low level of supply in that market. The TIPS market is the only market where the Fed’s purchases decreased the overall supply of securities since initiating QE. Currently, the Fed holds 22% of the TIPS market.

The Federal Reserve holds 22% of the TIPS market


Source: Bloomberg. Federal Reserve's Percent of Ownership of the MBS Market (.FEDMBSIN G Index). Monthly as of 8/2/2021.

In 2014 when the Fed started tapering MBS purchases, MBS spreads narrowed, and yields declined. The decline in yields and narrowing of spreads in the MBS market resulted from the general improving of the housing market more so than the Fed tapering QE. Although MBS spreads could rise slightly this time around, it is likely that the tapering of MBS purchases will have a minor impact on the MBS market.

Is this time different?
Yes and no. If yields remain very low, the start of tapering may send them higher, reversing the pattern of the last round of tapering. It is also worth noting that we expect this round of tapering to be completed faster than the previous round of tapering in 2014.

However, since the markets and the Fed have experience with the process, we don’t necessarily expect a jump in Treasury yields or Treasury volatility. The key to the market’s reaction is based on how strong the economy looks at the time. Tapering is as much about signaling as it is about the implementation, and tapering signals that the Fed will have the flexibility to hike rates sooner rather than later.

What to consider now
If intermediate to long-term yields rise in anticipation of the Fed reducing its asset purchases, we suggest investors use that as an opportunity to increase the average duration in their portfolios. We have been suggesting keeping average duration low over the past year and would use a moderate rise in yields to add some longer maturity bonds to generate more income over time. A bond ladder strategy still makes sense to us in this environment, given the steepness of the yield curve.

Do not be surprised if there is an uptick in volatility for the riskier segments of the bond market. Over the past year, QE has provided an incentive for investors to take on more risk, and as asset purchases come to an end, it could spook the riskier segments of the market."

MY COMMENT

One thing you can be sure of.....whatever is predicted to be the impact of tapering......will likely NOT happen. What happens will be what was NOT expected by all the experts. In other words......yields will end up lower or at worst unchanged not higher when it is all said and done. We will end up right back in the same old DEFLATIONARY ENVIRONMENT that we were in before the pandemic......when this process is complete. The impact of any TAPERING....on the average investor.....over the longer term will be ZERO.

The media.....they will have a field day for a while with this issue....they will fear monger it to death. As a result....it will quickly become a non-issue as people are.....EXHAUSTED....by the constant NOISE.

 

While doing some reading with the business TV in the background....and....putting up a few posts....the markets have recovered MOST of the pre-market losses. Cooler and more rational thinking has come back for a while....at least.

I think we are NOW going to see more and more IRRATIONAL and ERRATIC short term market action. The addition of millions of new people to the markets....many of them with gambling instincts and NO experience as ACTUAL investors.....is going to create HUGE day to day disruption based on short term events and news.

I would hate to be a TECHNICAL ANALYSIS investor......this new influx of gamblers and novices is going to make any prior technical indicators worthless. ( Although I personally dont ascribe any predictive power to them anyway)

It is going to be like those MASSIVE schools of fish that you see on the nature channel......that move as one.....turning on a dime...... right, left, right, left, up, down, up, down,......as they move a s a huge group through the water. Throw in a few sharks or killer whales and the intensity of the moves of the school is even crazier. WELCOME....to the modern stock markets.

FORTUNATELY.....the impact on long term investors......will be nothing. Fundamentals will still matter and will still control the long term behavior of any stock that reflects the actual operations of a businesses.

 

LOL.....the markets are trying to go GREEN....but when they get there.....waves of selling knocks them back down a bit. We will see who wins the battle at the end of the day.

The people next door have started building a pool today. They somehow....squeezed the LARGE digger past my fence without crushing it. Now they are tearing the crap out of the yard and poor sprinkler system....what a mess. Lots of pools....about 10....going up right now in this little neighborhood of about 85 homes. Most are a big hole in the ground with ripped up sprinkler pvc sticking out of the ground and NOTHING happening. The pool builders are so backed up......with the masonry, gunite, and other subcontractors....... that the average pool is just siting month after month with nothing happening. They are quick to dig the hole....than it just sits. I think they operate on the theory that once you have a GIANT hole in your yard.....you are committed at that point........and there is nothing you can do about the delay after that. We built one pool in the past in a prior home. It was such a nightmare with issues a few years after completion....having to replace a skimmer and issues with needing restoration.....that I STILL have SWIMMING POOL PTSD. Never again.

It is kind of like owning a boat......some people are boat people....and....some people are not. You quickly find out once you actually have one.