The Long Term Investor

This little article pretty much sums up ALL the issues and the short term markets today.

Stock market news live updates: Stocks plunge amid continued interest rate worries; Dow sheds 500 points

https://finance.yahoo.com/news/stock-market-news-live-updates-january-18-2022-122506186.html

(BOLD is my opinion OR what I consider important content)
"U.S. stocks fell sharply Tuesday morning as investors geared up for a holiday-shortened week rife with quarterly earnings reports from companies across all three major indexes.

The Dow Jones Industrial Average plunged more than 500 points and the tech-heavy Nasdaq shed 1.7% as Wall Street continued to weigh the likelihood of sooner-than-expected interest rate hikes. The S&P 500 also edged lower, declining more than 1%. Meanwhile, the yield on the benchmark 10-year Treasury rose to its highest level in two years — up to 1.84%

Wall Street was closed on Monday in observance of Martin Luther King Jr. Day but resumed trading Tuesday amid a flurry of corporate results unveiled ahead of the session: Goldman Sachs (GS), PNC Bank (PNC) and Bank of New York Mellon (BK) released earnings reports for the last three months of 2021 before market open.

Goldman Sachs (GS) reported fourth-quarter earnings that fell below analyst expectations — reflecting a decline in profit for the last three months of the year due to weakness in its trading arm, adding to a lackluster lineup of recent bank results.

With earnings season in high gear, investors will set their focus on company profits and other corporate metrics, shifting away — at least temporarily — from worries around the Federal Reserve’s tightening of monetary policy and economic uncertainty that have rattled stocks in recent weeks.

“I think a lot of rationality tends to come back around earnings season,” OANDA market analyst Craig Erlam told Yahoo Finance Live. “That’s when people will start to get a better grasp, or at least start to maybe look at markets through a more rational lens, and we could start to see a bit of normality return for the markets.”

Worries over sooner-than-expected interest rate increases have weighed on equity markets in 2022 so far. The S&P 500 is down 2.79% year-to-date, while the Dow has lost 1.84%. The Nasdaq has shed a whopping 5.93% since the start of this year, with more than one-third of companies in the index at least 50% from their 52-week highs, according to Bloomberg data.

Still, the outlook for 2022 remains positive among strategists who anticipate that although the year is unlikely to match the blockbuster returns of 2021, stocks are in good shape for solid returns ahead.

“From an economic perspective 2022 will look like a moderated version of last year, but investors should be cognizant that the prevailing tailwinds are beginning to calm," Charlie Ripley, senior investment strategist for Allianz Investment Management, said in a note. “Lingering effects from the pandemic are likely to bleed into 2022, but the outright threat from COVID-19 to the economy will continue to fade.”

“Risk assets will likely have positive returns in the post-COVID economy, but headwinds are picking up and performance will be choppier than in past years,” he added.

On the economic front, investors will also tune in to fresh data out of Washington due out Tuesday, including fresh reads on the New York Federal Reserve’s Empire Manufacturing Index and the National Homebuilders Association’s Housing Market Index.

The Department of Treasury is also set to report its latest print on Net Long-Term TIC Flows, which tracks the flow of Treasury and agency securities, corporate bonds and equities, into and out of the United States.

10:30 a.m. ET: Airline stocks drop amid broader market sell-off

U.S. airline stocks fell in morning trading to mark the second straight session of losses, putting the sector on pace for its biggest two-day drop in more than a month, according to Bloomberg data.

The S&P Supercomposite Airlines Industry Index (S15AIRL) lost as much as 1.9% at open after the index closed down 2% on Friday, per Bloomberg. The index is now down as much as 3.8% across two sessions, the biggest two-day drop since December 14.

All nine companies in the index were in the red: United Airlines (UAL) ticked 0.32% lower to $46.59 per share, Delta Air Lines (DAL) was down 0.30% to trade at $40.19 a piece, and Hawaiian Holdings (HA) dipped 0.15% to $20.15 per share.

In addition to taking a hit on broader declines spurred by interest rate worries, airlines have also been battered by several other factors, including winter weather, virus disruptions, and the impending rollout of 5G, which could cause major issues for the aviation industry.

10:15 a.m. ET: U.S. home builder sentiment slips in January

The National Association of Home Builders/Wells Fargo Housing Market index showed that confidence among U.S. single-family homebuilders declined in January after four months of consecutive increases on the print.

According to the trade association, higher material costs and shortages added weeks to typical single-family construction times as the U.S. economy struggled with rising inflation and backed-up supply chains.

The index dipped one point to 83 this month. A reading above 50 indicates that more builders view conditions as good than poor.

9:45 a.m. ET: Activision Blizzard stock surges on Microsoft deal announcement

Shares of entertainment company Activision Blizzard (ATVI) jumped after Microsoft (MSFT) said it will acquire the company in a deal valued at $68.7 billion, marking the software giant's largest takeover yet. Microsoft is expected to buy the video game publisher for $95 per share.

ATVI shares were up more than 30% in morning trading to about $85 a piece. Microsoft ticked lower at open, down 1.27% to $306.27 per share.

Upon closure of the deal, Microsoft is poised to become the world's third-largest gaming company by revenue, behind Tencent (TCEHY) and Sony (SONY), the tech giant said. The deal marks another consolidation move within the gaming industry — and massive bet on the future of the metaverse.

7:40 a.m. ET: Goldman Sachs profit misses analyst estimates

Goldman Sachs (GS) reported fourth-quarter earnings that fell below analyst expectations — reflecting a decline in profit for the last three months of the year due to weakness in its trading arm. Still, the investment bank's robust deal activity helped it post record full-year profits.

Shares of Goldman Sachs were down more than 2.5% ahead of open to about $381 a piece.

The company's results showed net earnings applicable to common shareholders fell to $3.81 billion in the period ending December 31, from $4.36 billion the quarter a year earlier. Earnings per share fell to $10.81 from $12.08 the prior year.

Consensus analyst estimates expected the bank to report adjusted earnings of $11.65 per share on revenue of $12.010 billion, according to Bloomberg data."

MY COMMENT

A distinctly negative day for the markets. What I think is more important.....a negative day for the general economy. The economy is FLOUNDERING right now. AND....I dont see much that is going to change any time soon. The HOT economy that people were thinking they were seeing in the recent past does NOT exist. The economy is in trouble right now. How long that will last is anyone's guess.

This is partly a reflection of the fact that GOVERNMENT is in trouble and has been for months now. Incompetence is RAMPANT and not much improvement is going to happen.

I am raising my prediction of a RECESSION to 60/40 odds....with the "60" being that we will see a recession this year. The new make-up of the FED is going to be a real problem going forward. I have very little confidence that the FED will be able to pull off their interest rate increases without putting the economy into a recession. Even without interest rate increases the general economy is much more FRAGILE than people think.

 

As usual....the issues that we are going to face in the coming months in the economy are NOT going to be related to business or companies. They are going to be issues of total lack of confidence in government. They are going to be the FED and what and how they do anything. A primary issue is the general WEAKNESS in the economy. At this point we should be seeing a much hotter economy.........IF...... all that has happened over the past year or two was going to ACTUALLY work as expected. BUT.....FAKE stimulus......is not going to help to get the economy to re-open.

Unfortunately we have TOTALLY screwed up the economy with the closure and the total disruption of the labor and employment markets. We did all of this "stuff" on top of a world wide economy that has been caught up in a deflationary event for over ten years now.

I have seen a lot of commentary lately about the first 6 months of this year being very weak. I believe that WILL be the case and depending on the actions of the FED and other events the entire year may be weak. As a long term investor there is nothing for me to do but watch and wait. What it is....it is.

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

 

I do believe that there appears to be a good chance for a correction over the coming weeks. We are not there yet in spite of the SEEMINGLY dramatic market moves. The real numbers tell a very different story. The SP500 is down so far......year to date.....by ONLY........3.73%. The NASDAQ is down by......6.54%.

For a correction we would need to see the averages down by 10% or more. SO....we are NOT in a correction at the moment....or....even close.

Much of what happens over the next weeks and months will be based on PSYCHOLOGY. Very little of what we will see will be based on actual business or company results. We are going to be in a dangerous PSYCHOLOGICAL time period for the markets and for the economy in general.

One potential POSITIVE is the fact that starting in about a week or two we should see a very SHARP drop off in Covid as the OMI variant quickly backs off leaving much of the population with very strong antibodies.

ALL in all....it is going to be another......VERY STRANGE TRIP.....for investors and society this year.

 

I dont mean to sound NEGATIVE with the above. I will simply stay invested as usual. BUT.....it appears that the odds are shifting very quickly in favor of a short term market downturn and perhaps a negative year for the averages. We are ONLY a couple of weeks into the year.....so who knows.

MUCH of what happens will depend on......REALITY. In other words how well those in power and society in general is connected to....REALITY. We are a very SPLINTERED, SCHIZOPHRENIC, society at the moment.

 

I seem to be following the short term path of the NASDAQ.

I just looked at my account for the first time today and I am DOWN by 6.4% year to date. Not too bad considering how screwed up things are in the general economy right now. We have ONLY had 11 market days so far this year.....so this little market drop to start the year is a very short term event.....so far. I TOTALLY TRUST the stocks that I own......so I sit and watch the human behavior. It has been a long time since we have had a recession and a long time since a sustained market drop. It will be very interesting to watch if.......either or both.....of these events happens this year.

At this moment....EVERY.....position is in the red today.

I continue to be very glad that I made the decision to totally disconnect my retirement from the stock markets. NONE of my income sources are dependent on the markets.

 

A great day to add to those stocks Zukodany. Definitely money in the bank at some time in the near future.

 

I ended the day as expected. Every position was in the red today. Plus....I got beat by the SP500 by 0.36% for the day.

Another day over with as we move forward to a more positive market environment. When will that be? It is some time in the future......could be tomorrow....could be much longer.

 

Duckleberry.......I feel good.....I knew that I would.....so good, so good, I got you. Sorry James Brown....I am talking about Microsoft acquiring Activision.

Microsoft to buy Activision in $68.7 billion all-cash deal

https://www.cnbc.com/2022/01/18/microsoft-to-buy-activision.html

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

"Key Points

• Microsoft will buy video game giant Activision Blizzard in a $68.7 billion all-cash deal.
• Activision makes popular game franchises such as Call of Duty.
• Activision has been mired in controversy in recent months due to allegations of sexual harassment and misconduct among company executives.

Microsoft announced Tuesday it will buy video game giant Activision Blizzard in a $68.7 billion all-cash deal.

The price means Microsoft will pay $95 per share for Activision. Activision’s stock ended the day up more than 25%, closing at $82.31 per share on Tuesday. Microsoft’s shares closed down more than 2%. This would be Microsoft’s largest acquisition to date, followed by its purchase of LinkedIn in 2016 for $26.2 billion.

Activision, which is known for popular games such as Call of Duty and Tony Hawk’s Pro Skater, has been mired in controversy for the last several months after reports of sexual misconduct and harassment among the company’s executives. On Monday, Activision said it fired dozens of executives following an investigation.

Under the deal, Activision CEO Bobby Kotick, who has faced calls to resign over the cultural problems within his company, will remain CEO during the transition. Microsoft said Activision as a company will report to Microsoft’s Xbox boss Phil Spencer after the deal closes, implying Kotick could depart after the transition. The Wall Street Journal reported Tuesday afternoon Kotick is expected to step down after the deal closes.

Microsoft said it expects to close the deal in its fiscal 2023. However, U.S. regulators have signaled they will be far more aggressive in evaluating large acquisitions, especially in the tech industry, so there’s a chance the deal dies under government review.

Microsoft has gotten more aggressive with gaming over the past several years. It bought Minecraft maker Mojang for $2.5 billion in 2014. And last year, Microsoft completed a $7.5 billion acquisition of game maker Bethesda.

The deal also plays into a long-term vision for Microsoft as it competes with Meta (formerly Facebook) to build technologies to create a virtual world called the metaverse. In fact, Microsoft CEO Satya Nadella was the first Big Tech CEO to publicly acknowledge the value of the metaverse, months before Meta CEO Mark Zuckerberg. Today, virtual worlds are dominated by gaming, but the hope is they expand to cater to other demographics and replace a lot of traditional social networking activity online.

“When we think about our vision for what a metaverse can be, we believe there won’t be a single, centralized metaverse,” Nadella said on a call Tuesday morning where he discussed the deal. That means Nadella sees an opportunity for many software makers to create many different virtual worlds in the future, instead of one dominant company controlling most of the activity.

Still, Microsoft does not yet have an affordable, consumer-grade virtual reality headset that would be necessary to fulfill the vision for the metaverse. Microsoft does sell an augmented reality headset called HoloLens, but that device paints digital items on top of the real world. It’s not a fully immersive experience and is mostly used for business applications.

In an interview with CNBC’s Becky Quick on “Squawk on the Street,” Kotick said the deal came through after he realized Microsoft had the technology to push Activision forward in the burgeoning competition between tech companies to build the metaverse. In the same interview, Spencer said talks about an acquisition began between the two companies late last year.

That said, both companies focused on the present in announcing the deal, with a highlight on Activision’s strength in mobile gaming. For example, Activision owns Candy Crush, one of the most popular and lucrative mobile games around. (Activision bought Candy Crush’s publisher King for $5.9 billion in 2016.) They also highlighted the opportunity to cross-promote popular gaming franchises from both companies, like Microsoft’s Halo and Activision’s World of Warcraft.

“The last two years in particular have shown how critical games are to helping people maintain a sense of community and belonging, even when they are apart,” Nadella said on a conference call Tuesday morning following the announcement of the deal. He added that 3 billion people around the world play video games, a hint at the total market he sees Microsoft moving into."

MY COMMENT

I like this deal. It will give MSFT some big potential income and markets to tap while waiting for the future pay-off in using this technology in the Metaverse.

I TRUST Microsoft to know what is the right thing to do with this sort of acquisition. They have great management. I also LOVE to see my tech companies add more and more businesses and income sources as they become tech conglomerates.

AND....that is what corporate cash is for. Not share buybacks or other goodies for the executives. This is how you create REAL future shareholder value.

 

We are starting to see mortgage rates move toward 4%. It is not going to happen immediately......but....I expect it will happen this year. It might happen as soon as about March. People that did not take advantage of the historic low rates are going to be BUMMED.

Mortgage rates jump again, causing headaches for homebuyers

https://www.cnbc.com/2022/01/18/mortgage-rates-jump-again-causing-headaches-for-homebuyers.html

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

"Key Points

• The 30-year fixed mortgage rate is now at the highest level since April 2020.
• Rates are closing in on a full percentage point gain from a year ago.
• “Some [lenders] will be at 3.625%, but many are already up to 3.75%,” said Matthew Graham, COO of Mortgage News Daily.

The average rate on the popular 30-year fixed mortgage hit 3.7% Tuesday morning, according to Mortgage News Daily. That is the highest since early April 2020 and now 83 basis points higher than the same time one year ago.

Rates are reacting to surging bond yields, as financial markets react to swifter and more aggressive monetary policy tightening by the Federal Reserve. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury, but they are also affected by demand for mortgage-backed bonds. The Fed had been buying those bonds aggressively during the pandemic in order to keep rates low, but it is now pulling out of the MBS market faster than expected.

Mortgage rates, “would be higher, but lenders are compressing their margins to compete in a rising rate environment. Some will be at 3.625%, but many are already up to 3.75%,” said Matthew Graham, COO of Mortgage News Daily.

Lenders are losing vast amounts of refinance business, which had been booming just a year ago when rates were much lower. Applications to refinance a home loan were down 50% from a year ago, according to the most recent weekly survey from the Mortgage Bankers Association.

“While the rapid rate spike is motivating a certain portion of fence-sitters--especially those looking for cash-out refinances, rates are now becoming a bigger deterrent,” said Graham. “In other words, the refi share of the origination market should be taking a substantial hit in forthcoming updates.”

Mortgage rates set more than a dozen record lows in 2020, causing already strong homebuyer demand to surge even more. With the extra purchasing power afforded by low rates, buyers bid up prices on the low supply of homes for sale, and those prices are now still up double digits from a year ago.

Both new and existing home prices are at record highs, and there is still not enough supply to cool the market.

Rising rates are not what potential buyers want to see on the cusp of the usually busy spring housing market. Buyers of new construction are also concerned, as timelines from contract to closing are long now due to supply chain and labor issues. Those buyers can’t lock in rates until they have a firm closing date.

Buyers of the median-priced existing home (around $350,000) are now looking at monthly payments of about $125 more than they would have been just a few months ago. That may price some out of the market, especially first-time buyers on the lower end."

MY COMMENT

Not good news for soon to be home buyers. I suspect that even these higher rates will look really good in a year or two as mortgage rates normalize in the 5.00% to7.5% range.

 

Here is someone that is not happy with the Microsoft/Activision deal......SONY.

Sony slides on 'monumental challenge' from Microsoft gaming deal

https://finance.yahoo.com/news/sony-shares-untraded-glut-sell-001424913.html

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

"TOKYO (Reuters) - Shares in Japan's Sony Group fell 9% on Wednesday after gaming rival Microsoft said it will buy developer Activision Blizzard in a record $68.7 billion deal for the industry.

While Sony's PlayStation is widely seen as having a lead in the generational battle with Microsoft's Xbox, the purchase of the "Call of Duty" maker comes as Microsoft is aggressively expanding its Game Pass subscription service.

Sony has strengthened its network of in-house games studios in recent year and delivered a string of exclusive hits including in its "Spider-man" franchise, with Microsoft left playing catch-up.

"Sony will have a monumental challenge on its hand to stand its own in this war of attrition," wrote Amir Anvarzadeh, a market strategist at Asymmetric Advisors who recommends shorting the stock, in a note to clients.

Sony is a pioneer in virtual reality and announced a few teasing details this month of its next generation headset, but deep pocketed and non-traditional players such as Facebook owner Meta Platforms are investing in the metaverse, or virtual online worlds.

PlayStation is a major source of revenue for Activision, complicating any potential decision by Microsoft to remove titles from Sony systems and squeeze its rival.

Many industry observers believe operability across multiple platforms is essential for the success of a metaverse where users can game, shop and work freely as advances in cloud technology weaken ties to the bulky gaming hardware that made Sony and Microsoft industry gatekeepers.

"If Microsoft continues to provide these games to (the PlaySation) platform as well, that would indicate that it may be positioning itself for metaverse in the long-term," Jefferies analyst Atul Goyal wrote in a client note."

MY COMMENT

In my view this acquisition has GOT TO BE all about the metaverse. I believe that Microsoft......WILL.....continue to provide games to the PlayStation platform. It will be a major source of revenue for Microsoft........basically putting SONY in the position of helping to fund their primary competitor.

 

Those funds that you put to use on the CHEAP will really pay off over the long term Zukodany.

 

Oldmanram......where have you been?

You disappear for the past 2-3 weeks and the markets go into the toilet. Dont tell me that was coincidence. Obviously it was YOU that was driving the BULL MARKET. For example....you post last night....and....today the markets are all in the green. Random chance....I dont think so. The markets need you back.

 

Well.....we "were" in the green. Right now we are experiencing the TYPICAL mid morning weakness.