The Long Term Investor

Actually...Emmett.....No I did not. The bill was actually less than I expected with all the thanksgiving stuff added to our cart. but than.....we dont buy any of the overpriced "organic" or "natural" stuff. We eat the old fashioned way.

 

Well I went against the grain today.....I was green for the day. I ALSO beat the SP500 by 0.60% today. So I gained back about the same percentage against the SP500 that I lost yesterday.

Not a pretty day for Tesla. It is a good thing that I had a nice cushion on my initial share purchase a few weeks ago. Another day like this and my cushion will be history. BUT......who cares.......it is a long term holding....and....I am in the old generation where long term means at the minimum 5 years.

 

With the CPI being released tomorrow I expect another RED day in the markets and MUCH fear mongering about inflation. But....who knows day to day.

 

Here is the next shoe to drop for the markets....for better or worse......the release of the FED appointment.

A Brainard Fed May Mean Lower for Longer: Wall Street Reacts

https://finance.yahoo.com/news/brainard-fed-may-mean-lower-173517121.html

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

"(Bloomberg) -- The biggest signal yet that Federal Reserve Governor Lael Brainard is a major contender to replace Jerome Powell as Fed chair has triggered a wave of speculation over how financial markets would react if President Joe Biden announced her as his nominee.

Bloomberg News reported on Monday that Brainard was interviewed for the top job at the U.S. central bank when she visited the White House last week. The longest wait for the announcement in the modern era had already spurred uncertainty that Powell -- long thought to be heading for reappointment -- will win another four years when his current term ends in February.

Treasury yields sank following the report as investors debated whether Brainard -- generally seen as more dovish on monetary policy than Powell -- would follow through on the Fed’s latest asset-purchase tapering timeline or hold off on raising interest rates for a longer period than currently anticipated.

The following are some thoughts from market participants of potential market reactions in the case of a Biden nomination of Brainard for Fed chair.

Lower for Longer

A Brainard appointment would be more bullish for the bond market, said BMO strategist Ian Lyngen. That’s because she would likely keep rates lower for longer and be less aggressive when eventually hiking, he said.

“She was always considered the ‘go-to’ replacement in the event Biden doesn’t renominate Powell,” he wrote in a note. “That said, it’s safe to assume that any candidate the administration would favor over Powell would be more dovish; hence the belly-led rally seen during the overnight session,” he said, referring to medium-term Treasury securities such as five-year notes.

Inflation Expectations

Brainard, if anything “seems more dovish, less inclined to raise interest rates quickly,” said Brian Nick, chief investment strategist at Nuveen. “If there’s any risk that she’s going to be the choice over Powell, what we’re seeing in the bond market -- lower rates, higher inflation expectations, lower real interest rates -- that squares with my understanding of what she’d be bringing to the table.”

Quick Test

“We don’t think that that event will cause significant volatility,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. At the same time, with several Fed board appointments now set to be filled, and with the pandemic economy’s evolution, the central bank could soon face a testing period, she said.

“We’ve seen with Powell that sometimes it takes a little bit of runway to get that communication just right,” she said in a Bloomberg Television interview with Alix Steel. “And that could be a challenge as we have a more junior group of Federal Reserve officials into next year at a time that the economy is slowing and inflationary pressures potentially need to be snuffed out more quickly.”

Hawkish Surprise

Sebastien Galy, senior macro strategist at Nordea Investment Funds, anticipates two phases of reaction. First, he sees equities reacting positively -- especially growth stocks, which tend to be more interest-rate sensitive. The shorter end of the Treasuries yield curve could flatten, he also said -- that is, the yield gap between shorter term notes such as two-year securities and slightly longer-dated ones such as five-year notes could shrink as the scale of expected Fed tightening in coming years diminishes.

“However, I expect the market to then become quite surprised by her turning more hawkish to anchor inflation expectations among households and corporates -- though that should take a few weeks,” Galy said.

2022 Election

Peter Boockvar, chief investment officer at Bleakley Advisory Group, predicted that Brainard -- a Democrat -- would hold the Fed back from raising interest rates until after the November 2022 midterm congressional elections, when Democratic control of both chambers will be up for grabs. The quantitative easing program may still run off as currently scheduled by June, however, he said.

“I’ll make a call that if she is Fed chair, maybe they’ll finish QE in June but they won’t raise rates until after the midterm elections,” Boockvar said in a note. “This all said, both Powell and Brainard are doves, so the eventual approach won’t be that much different with respect to monetary policy.”

Turbulent Time

Whether it’s Brainard or Powell, the next eight months or so -- when the Fed will be zeroing out its bond purchase program -- are going to be really uncomfortable for investors, said Lauren Goodwin, economist and portfolio strategist at New York Life Investments.

“The markets are not convinced by the Fed’s messaging that it will complete its taper before considering rate liftoff,” she said. “If we have a few more months of strong inflation prints, which I think most investors expect, then the narrative around the Fed’s patient approach will prompt rate volatility.”

Bigger, Later?

It would take time to understand what the implications are of Brainard at the helm of a reshaped Fed board, according to Phil Orlando, chief equity market strategist and head of client portfolio management at Federated Hermes. First question: would the new team follow through with tapering asset purchases and raising rates over the next two years, he said.

“If the answer to that is no -- and we believe the Fed is already behind the curve in terms of this inflation issue -- does that raise the raise the prospect of a potential need for a more Volcker-esque policy response somewhere down the road?,” he said in an interview with Bloomberg Television, referring to the rapid monetary tightening overseen by former Fed Chair Paul Volcker in the early 1980s to whip inflation. “We don’t know the answer to that, but I think the market is going to have to come to grips with that question once we know who the players are.”

Continuity Factor

There are many institutional forces that bear on Fed decision making and provide continuity, including the role of regional district banks and the influence of the central bank’s staff, said Michael Feroli, JPMorgan Chase & Co. chief U.S. economist.

“Since Brainard is considered a dove, at the margin one might expect to see inflation breakevens move higher,” Feroli said, referring to the yield premium of regular Treasuries over those linked to consumer prices. “With the important caveat that you never want to make too much of one day’s price action, the fact that the curve is flatter after yesterday’s Brainard news suggests the market also appreciates the continuity in Fed policy making.”"

MY COMMENT

Who knows what will happen. At the least any change will INJECT UNCERTAINTY into the markets and the economy for at least 6 months while everyone tries to figure the new FED chairman out.

This may just be a window dressing story to placate women supporters. Or, it may just be a trial balloon. Or, it may be a story that is out there to give a signal. Who knows.

My suspicion.....if there is a FED change along with the other appoints for existing openings....in a short period of time......it will turn out to be a very NASTY NEGATIVE for the economy and the markets. I hope I am wrong.

 

OBVIOUSLY.....here is the big anchor that will hold the markets back today.

US consumer prices soared 6.2% in past year, most since 1990

https://finance.yahoo.com/news/us-consumer-prices-soared-6-133914207.html

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

"WASHINGTON (AP) — Prices for U.S. consumers jumped 6.2% in October compared with a year earlier as surging costs for food, gas and housing left Americans grappling with the highest inflation rate since 1990.

The year-over-year increase in the consumer price index exceeded the 5.4% rise in September, the Labor Department reported Wednesday. From September to October, prices jumped 0.9%, the highest month-over-month increase since June.

Inflation is eroding the strong gains in wages and salaries that have flowed to America's workers in recent months, creating political headaches for the Biden administration and congressional Democrats and intensifying pressure on the Federal Reserve as it considers how fast to withdraw its efforts to boost the economy.

Job gains and pay raises have been much healthier during the pandemic recovery than they were after the Great Recession roughly a decade ago. But in contrast to the years that followed that downturn, inflation is now accelerating and diminishing Americans' confidence in the economy, surveys have found.

Excluding the volatile food and energy categories, so-called core prices rose 0.6% in from September to October. Core prices are now up 4.6% compared with a year ago.

Energy costs soared 4.8% just from September to October, with gasoline, natural gas and heating oil surging for the same reason that many other commodities have grown more expensive: Demand has risen sharply as Americans are driving and flying more, but supplies haven’t kept up.

Economists still expect inflation to slow once supply bottlenecks are cleared and Americans shift more of their consumption back to pre-pandemic norms. As COVID-19 fades, consumers should spend more on travel, entertainment and other services and less on goods such as cars, furniture, and appliances, which would reduce pressure on supply chains.

But no one knows how long that might take. Higher inflation has persisted much longer than most economists had expected. And inflation is spreading well beyond items like appliances and new and used vehicles that are directly affected by the pandemic.

“The inflation overshoot will likely get worse before it gets better,” said Goldman Sachs economists in a research note Sunday.

For months, Federal Reserve Chair Jerome Powell had described inflation as “transitory,” a short-term phenomenon linked to labor and supply shortages resulting from the speed with which the economy rebounded from the pandemic recession. But last week, Powell acknowledged that higher prices could last well into next summer.

The Fed chair announced that the central bank will start reducing the monthly bond purchases it began last year as an emergency measure to boost the economy. Investors now expect the Fed to raise its benchmark interest rate twice next year from its record-low level near zero — much earlier than they had predicted a few months ago.

Many large companies are passing on the cost of higher pay to their customers, and in some cases, consumers are paying up rather than cutting back.

To attract workers, for example, McDonald’s boosted hourly pay 10% to 15% over the past year. To help cover those higher labor costs as well as more expensive food and paper, the company said last month that it raised prices 6% in the July-September quarter from a year earlier. Yet even so, company sales leapt 14% as virus restrictions eased.

Other companies have been more cautious. One of them, Wayfair, an online furniture retailer, said last week that its costs are rising as factories in Asia have shut down amid COVID outbreaks, ports are jammed, and labor costs have surged. But the company isn’t necessarily passing along all those higher costs.

“We are in a mass-oriented business where the average customer does not have an unlimited discretionary budget,” said Michael Fleisher, Wayfair’s chief financial officer. “Inflation is rampant across the economy, and there are competing demands for their time and wallet share.”"

MY COMMENT

WHATEVER. The markets will just live with this however it turns out. It is not going to be much of an issue for investors....unless.....the FED freaks out and starts to focus on killing inflation and ends up killing the economy as a result.

 

On the other hand.....own a home? Own art, collectables, or other hard assets? Great........inflation "might" just be your friend. The market takes from one asset....short term....and gives to another....short term. Fine with me.

In addition anyone on Social Security......well we have a year to go....but a another nice increase in benefits next October would be nice.

Everything is a double edged sword. AND.....sorry, as a long term investor....I really dont care about the short term DRAMA.

 

Good......the markets are being very reasonable and rational today. I have a small loss. I actually have four stocks that are UP. There was really nothing unexpected in the CPI data this morning.....at least in terms of the markets.

 

Well actually.....I did take SS at full retirement age. I guess the consideration is whether or not you think you can earn more by taking the money at full retirement......versus.....the 8% per year that waiting results in being added to your benefit.

So lets say your benefit is $25,000. If you wait a year you will gain 8% on that so....$2000......your benefit will be $27,000. You would need to compare that to taking the money at regular retirement age and than investing the money for some return. Of course the $2000 extra from SS is guaranteed for life....where your investment return and compounding of that return is not.

I see that you specified....no immediate plans for retirement....in that case I might be tempted by the guaranteed 8% by waiting. A big factor would be how DISCIPLINED the person was and whether they would ACTUALLY invest ALL the SS money each year. Another factor is you are talking short term....about 3 years. Assuming a full retirement age of 67......you would have 3 years to age 70 to make whatever investment return you could on that money versus the 24% you would gain for life by waiting. Life expectancy is also a factor.

All in all it is a very complex calculation.

How to Calculate Your Social Security Break-Even Age

https://smartasset.com/retirement/social-security-break-even-age

HERE is one such calculator:

https://www.socialsecurityintelligence.com/calculators/social-security-break-even-calculator/

Of course this calculator does not take into account saving and investing the money.

HERE are 10 more social security calculators of various types.

https://money.usnews.com/money/reti...lators-that-can-help-you-decide-when-to-claim

For example I started SS in 2015......investing the money over the next 4 years to age 70 the returns of the SP500 would have been:

2015 1.25%
2016 12.34%
2017 21.67%
2018 (-4.52%)

So I could get that return versus my benefit increasing by the following.....GUARANTEED AMOUNT.... each year if I waited till age 70:

2015 8%
2016 8%
2017 8%
2018 8%

Bring TAX ISSUES into the above and you have an even more complex comparison.

Anyway......the way I think....I took my money when I hit full retirement age. Your question is making my head hurt....Emmett.

 

Well....I missed everything yesterday with company here and when I looked at my account this morning all the reesults from yesterday were gone since it is a new day. I was DEFINITELY in the RED with my ONLY up position being TSLA. I know I got beat by the SP500 by somewhere between 1-1.5%. Just another day in the markets......short term

 

Yeah....the SS discussion. I never considered waiting to age 70. I much preferred to take the money when I got to full retirement age and have it to invest or use as needed. Our plan was to use the annuities and SS money for our annual living money and that is what we have done. We do get enough from those two sources that we are usually able to put into Schwab about $20,000 per year.

We all get old and have some issue. I have moderate chronic kidney disease and had a hip replacement at age 65. See....young guys.....this is what old people talk about.....all their health issues and surgeries. Some day you will be there too. I believe that in the end it is simply GENETICS that controls about 95% of how long you will live.

 

I have seen this many times over the years in a bad economy. The polls and data do NOT reflect the actual state fo consumer confidence and behavior. When polled MOST people will speak in generalities and will support the negative media line because they are talking in terms of......other....people. BUT....if you dig into their specific personal behavior....they are buying and spending and feel positive.
Inflation: 'There is a bit of dichotomy' among consumer spending right now, Deutsche Bank economist says

https://finance.yahoo.com/news/infl...ending-deutsche-bank-economist-125652241.html

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

With inflation in America reaching a 30-year high in October, one economist highlighted a major difference between what consumers are thinking and what they're actually doing.

"At this point, I would say that there is a bit of a dichotomy between [consumer] sentiment, which looks depressed and which is indicating a very low propensity to buy household durables, housing, and autos," Matthew Luzzetti, chief U.S. economist at Deutsche Bank, told Yahoo Finance Live (video above), and "a household that looks to be pretty confident on spending into the future."

The consumer price index increased by 6.2% in October as compared to the previous year, which was the largest 12-month increase since November 1990, the Bureau of Labor Statistics announced on Wednesday.

Leaving out food and energy prices — both considered to be more volatile — the index rose by 4.6% over the same duration and saw the biggest jump since 1991.

Meanwhile, consumers are expecting higher costs, according to a separate survey by the New York Fed. Households expect inflation in the next 12 months to rise from 5.3% in September to 5.7% in October. That's the highest rate since the survey began in 2013.

"When you look at the surveys, there's pretty clear evidence that price pressures are denting expectations, they're denting sentiment, and really, consumers are telling you it's a bad time to buy homes, it's a bad time to buy autos, it's a bad time to buy durables," Luzzetti said.

Yet, "when we look at the actual consumption patterns, it's less clear," he added, because "consumer spending expectations actually look to be pretty strong."

Consumer spending to hold strong despite higher prices: Economist
Even as supply-side constraints such as congestion at ports and a general shortage of goods leads companies to hike prices, spending has been "pretty decent," Luzzetti said.

Some of the main factors pushing prices up are the many containers stranded at sea and the trucking routes that continue to be clogged as consumer demand increases.

"You've got the proverbial softball through the snake right now," Generac CEO Aaron Jagdfeld said previously on Yahoo Finance Live. "Christmas season demand, in particular, is exacerbating the problem. ... all signs kind of point to maybe by the second half of next year that some of these tougher supply chain challenges abate."

An Oxford Economics survey of 148 businesses found that only one in five businesses affected by the supply chain disruptions believe that the worst of the crisis is over.

About 56% of businesses affected by the supply chain crisis expect disruptions to continue, and 64% said they expect this crisis to end after mid-2022.

However, none of this is going to dampen consumer spending, Luzzetti stressed.

"We do think from a growth perspective, as you get into 2022, you [will] continue to see strong consumer spending growth even though sentiment has been dented," he said."

MY COMMENT

This is TYPICAL over the past 45+ years that I have been following this stuff. The consumer reporting is just about ALWAYS more negative than the reality. In responding to polls and surveys people just about always talk in terms of the current media generalities when talking about consumer behavior. If you want the TRUTH you have to look at their ACTUAL BEHAVIOR.

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Well the markets have now been open for while today and they seem stable.....or at least normal. A good thing.