The Long Term Investor

You think Russia is bad? Investing in Chinese companies is much worse.

SEC Chair: Roughly 250 Chinese companies could be delisted 'as early as 2024'

https://finance.yahoo.com/news/sec-...d-be-delisted-as-early-as-2024-122037497.html

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

"In early 2020, an accounting scandal at Luckin Coffee blindsided its American stockholders as the coffeehouse chain's stock price fell to the floor.

Luckin Coffee highlighted a problem: American investors knew little of Chinese company financials while the stocks trade freely on U.S. exchanges. The incident sparked questions regarding whether other crises involving U.S.-listed Chinese companies lurked around the corner.

Congress acted to stop the next Luckin by passing the Holding Foreign Companies Accountable Act that year. The law gave Chinese companies an ultimatum: Either be delisted or follow the accounting transparency provisions that other U.S.-listed foreign companies already comply with.

Now, the issue is in the hands of regulators and Securities and Exchange Commission Chair Gary Gensler, who in a new interview for Influencers with Andy Serwer this week, offered an update.

“We've had some good discussions with our counterparts from China,” Gensler said of the Public Company Accounting Oversight Board (PCAOB), the nonprofit corporation established by Congress that he oversees. “But it's really up to the officials in China.”

If China changes tack, he says, “then there's a path forward.” But otherwise "Congress has spoken: about 250 Chinese companies," would have to suspend trading here "potentially as early as 2024."

‘Audit the auditors’
In addition to accounting requirements, the 2020 law also requires companies to disclose whether a foreign government owns or controls them.

A group known as the U.S.-China Economic and Security Review Commission has compiled a list of 248 Chinese companies now listed on the biggest three U.S. stock exchanges — including massive companies like Alibaba (BABA), Baidu (BIDU) and JD.com (JD).

What needs to happen, Gensler and other officials say, is for China to allow the PCAOB to look inside the Chinese auditors. Gensler described this “a kind of simple idea — audit the auditors."

“There's some basic understandings that if you want to list in the U.S., you need to comply with our investor protection rules,” Gensler says.

The law essentially treats U.S.-listed foreign companies the same way it treats American companies. “We just want Chinese companies to play by the same rules as everybody else,” is how Sen. Chris Van Hollen (D-MD), one of the bill's lead sponsors, put it to Yahoo Finance after the bill passed the Senate.

The most recent law updated the landmark Sarbanes-Oxley Act of 2002, which created the PCAOB and established the set of rules that China has largely avoided.

The 2020 law detailed how long Chinese companies could avoid the rules before delisting is on the table.'

MY COMMENT

Investing has enough opaque issues without being invested in Chinese companies that are subject to total control from the worlds most brutal communist dictatorship. When you "invest" in these companies you own nothing....other than shares in offshore shell companies. Under Chinese law foreigners are not allowed to own stock in Chinese companies. You have ZERO rights.

Fraud is rampant and condoned by the Chinese government. You can not trust anything about these companies. Just look at the recent crack-down by China on some of the largest companies.

I dont care to have my money at risk in such companies. What is happening in Russia is a huge wake up call for people investing in China.

 

I often do some real estate posting on the weekends. Since property is all....local, local, local.......I tend to focus on the Central Texas. This market is a VERY HOT market.

Here is a SHOCKING example. In October of 2019......we downsized and sold our larger home. That house was five beds, five and a half bath, just under 5000 sqft. We sold for $890,000. NOW......2.5 years later.....I saw a house about 8 houses down from our old house come on the market for sale. That house is about 100sqft less than our old home and does not have a pool (ours did). The interior finishes of the two houses are comparable. The price on that new listing......$2MILLION.......and it will sell quickly.

That is how CRAZY it is around here. You have a house like our old house that was selling for $890,000........2.3 years ago......now selling for $2Million. I know this house will sell quickly.

Our particular neighborhood of about 4200 homes is EXPLODING. We now have 5 houses for sale.......one priced at $650,000.......the rest priced from $1.2MILLION to $2.4MILLION. This market continues to be HORRIBLE for buyers....especially first time buyers.

Our area used to have many homes that were affordable for first time buyers. You could find houses in the low end of the market here for $280,000 to $450,000 all day long. Now....never. This was about 8-9 years ago. The bottom of our market now is about $650,000 to $800,000.

This time of year.....about 3-4 years ago....you would see anywhere from 50-90 listings for sale. Now we are lucky to have 3-5 active listings.........and.....the market stays HOT all year round.

 

Here is how to deal with this market from a buyers perspective......especially a first time buyer. Sorry.....no magic answers.

8 tips for home buying in a seller’s market

https://www.mortgageloan.com/8-tips-for-home-buying-in-a-sellers-market#6-Offer-non-price-factors

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

"A home seller’s market is simply a matter of economics. Inventory is low and demand is high, leading to some homes being on the market for only hours with competitive bidding.

Home prices have been going up for 50 consecutive months across the country, according to data from the National Association of Realtors. The median existing-home price in April was $232,500, up 6.3 percent from April 2015.

Housing inventory is 3.6 percent lower than it was a year ago, when it was at 2.22 million homes

Mortgage rates remain low, giving consumers incentive to shop around for mortgage lenders and homes.

It’s still possible to buy a home in a seller’s market, though it’s obviously more difficult than it is in a buyer’s market or otherwise. Here are eight tips for buying a home in a seller’s market:


1 - Determine you’re in a seller’s market

This first step can help you know for sure if you’re in a seller’s market so you can adapt your home buying strategy to it. A real estate agent can help with a few easy calculations.

One is to use a market absorption rate calculator, which tells you how many months it would take to sell all the remaining homes, or inventory, for sale in a given area. A low number means you’re in a seller’s market.

The calculator first asks for how many homes were sold in the last 12 months. It divides that number by 12 months, and then divides the rate into the number of current listings.

Unsold inventory in the United States was at a 4.7-month supply at the end of April, up from 4.4 months in March, according to the National Association of Realtors. Most of the shortages of homes for sale are in the West, with the Midwest having the most inventory. A six-month supply is considered a balanced market.

Another measurement is the sales price to list price ratio, says Bruce Ailion, a real estate agent at RE/MAX Town and Country in Atlanta. A 103 percent ratio tells you it’s a hot market with multiple offers, a 98 percent ratio is a seller’s market, and 84-88 percent is a distressed buyer’s market, Ailion says.

“Like the temperature outside determines your clothes, so the temperature of the market determines your strategy,” he says.


2 - Make your best offer first

In strong seller’s markets Ailion recommends making a list price offer quickly to prevent competitive interest.

“Many agents are happy to get the seller their price and do not want to do the extra work of multiple offers to get $10,000 more when their compensation is only $300,” he says. “A buyer can take advantage of the lazy seller’s agent.”


3 - Be ready to bid

If a quick offer of the listing price doesn’t work, the next step is to still make your best offer, but be prepared for it not to be your final offer.

Ailion says he often adds an escalation clause of 2-3 percent more than the highest bid received. “This expresses a strong desire for the property and a willingness to pay the most,” he says. “Sometimes this works and sometimes it doesn’t.”

He says he’s also used this method in a slow market where a buyer wanted the property but not at the seller’s price. The buyer’s lower offer includes a 2 percent escalation if another buyer comes in.

Bob Gordon, a real estate agent at Berkshire Hathaway HomeServices in Boulder, Colo., recommends preparing for bidding wars on their favorite properties by only looking at houses up to 89 percent of their maximum budget. This will give them extra funds in a bidding war, Gordon says.


4 - Don’t counter

There are no counter offers in a seller’s market, Gordon says.

“Buyers really need to put their best offer on the table,” he says. “Owners are going to see three, five, 12 offers all at once. They don’t need to write a counter, they can pick and choose the very best offer. So buyers better be amazing on the first go.”

5 - Show cash

Show a seller how serious you are by offering more cash than normal in earnest money — a deposit made to the seller to show a buyer’s good faith in a transaction. If a high earnest money deposit in your area is $20,000, then increase it by $10,000.


6 - Offer non-price factors

Some sellers will accept your price if you provide some non-price considerations that can speed up the transaction, also called contingencies.

“In a strong market a buyer needs to consider waiving the financing contingency, limiting inspection to three to five days, and placing larger earnest money deposits to provide non-price consideration,” Ailion says.

In some very hot markets, the property might not appraise for the highest offer, and the loan won’t be approved. A lower offer with strong non-price factors may win out, says Ailion, who had a recent buyer compete with 13 offers and be successful with non-price considerations even though they were several bids below the top. The more contingencies a buyer has in their offer, the greater risk for a seller and the more likely a seller is to reject them in a seller’s market.

One of these is a home inspection contingency. A home inspection is important for a buyer, but some buyers will waive it to help improve their offer.

Buyers can also help themselves by being flexible with dates and deadlines in a contract. Giving a seller extra time to move out, for example, can make a seller’s offer more appealing.


7 - Have money for a low appraisal

High home prices can lead to home appraisals that don’t climb as fast, leaving lenders to not fund the loan. Gordon, the Colorado real estate agent, recommends that home buyers have money set aside the pay the difference between a contracted purchase price and the appraisal.

“Savvy home sellers are looking for purchasers that can make up the difference between the negotiated sales price and the appraisal,” he says.


8 - Use videos and letters

Not everything in a home sale is about money. A seller’s nostalgia for their home can be strong, and a short, personal letter from a buyer that shares how they’d enjoy living there might sway them.


Promising to maintain the architectural heritage of a historic home, for example, or showing how much you look forward to taking care of the rose garden on the property can show that you’ll also have a sentimental attachment to the home."

MY COMMENT

There is no magic answer. Most of the above is common knowledge. In addition in many HOT markets the cash buyer is ubiquitous and king. As I said.....a horrible market.....especially for first home buyers.

 

Here is what we are looking at this week.

CPI inflation, Rivian earnings: What to watch this week

https://finance.yahoo.com/news/cpi-inflation-rivian-earnings-what-to-watch-this-week-194035775.html

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

"Another likely red-hot inflation reading and a handful of key corporate earnings results are on tap for investors this week, offering further catalysts after the past several weeks' volatility across risk assets.

On the economic data front, Thursday's Consumer Price Index (CPI) from the Bureau of Labor Statistics (BLS) is set to be the most closely watched print. Investors have been anxiously awaiting signs of a peak in inflation — and to that end, the incoming data is unlikely to offer this payoff.

Consensus economists are looking for the headline CPI to accelerate to show a 7.9% year-over-year increase, rising further from January's 7.5% rise, according to Bloomberg consensus data. Such a result would set a fresh 40-year high rate of inflation. And even excluding volatile food and energy prices, the CPI is likely to rise 6.4%, compared to January's 6.0% increase.

The month-over-month data are also expected to keep climbing. Economists are looking for a 0.8% monthly rise in the broadest measure of February CPI, marking 21 consecutive months of advances following January's 0.6% rise.

The latest CPI report will begin to capture the only very early impacts to prices from Russia's war in Ukraine, with a full-scale invasion taking place in late February. Concerns that this geopolitical conflict would disrupt the energy complex in Ukraine or Russia — the world's third-largest oil producer — have sent U.S. crude oil prices soaring above $110 per barrel to a more than decade high.

And other recent economic data have also suggested prices continued to climb across the U.S. economy. The Institute for Supply Management's February services index from late last week showed prices climbed compared to January, and that surveyed businesses "continue to be impacted by supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages." And in last week's jobs report from the Labor Department, average hourly wage gains came in well-above pre-pandemic trends with an annual rise of 5.1%, albeit while coming down slightly compared to January's 5.5% jump.

Even ahead of the upcoming CPI inflation data and latest jobs report, key Federal Reserve officials have already signaled the central bank was set to move on raising interest rates following its mid-March meeting. Federal Reserve Chair Jerome Powell said last week he would back a 25 basis point interest rate hike this month. While lower than the turbo-charged 50 basis point hike some market participants had been anticipating beforehand, such a move would set off the process of raising borrowing costs across markets and help bring down demand to in turn push down prices.

"As prices rise, you're on the demand curve, and people demand less. I think what the Fed is hoping is that there are some other channels in the global economy that will manifest themselves and help bring inflation down," Nathan Sheets, Citi global chief economist, told Yahoo Finance. "And some of the factors the Fed has pointed to in its minutes — one is some further progress on supply-chain disruptions. Another one is further progress on a reduction in commodity prices. And I have to say given what I'm seeing at the moment, both of those seem quite remote."

"Now a third one that is maybe a little more hopeful is, as we make progress in better managing the pandemic ... it will allow a rebalancing from this red-hot, commodity-intensive goods sector more into the services sector and allow some of these goods prices that have been so elevated and rising quickly [to] come off the boil a bit," he added. "The Fed has its fingers crossed that these things are going to come through and be supportive of lower inflation in addition to that demand destruction channel."

Rivian earnings, Q4 reporting season comes to end

While the vast majority of S&P 500 companies have now reported fourth-quarter earnings results, a handful of closely watched newly public companies are still set to offer results this week.

One will be Rivian (RIVN), the Amazon- and Ford-backed electric vehicle firm that went public in November in the sixth-largest IPO in U.S. history and the largest of last year. Shares have since fallen by more than 50% for the year-to-date, however, amid a broad rotation out of growth and technology stocks.

Rivian has had its fair share of company-specific challenges as well, however. The California-based EV maker missed its 2021 vehicle production target, coming up short compared to the 1,200 vehicles it had targeted for last year. And the stock took another leg lower this week after Rivian took back price increases for its electric trucks and SUVs for some pre-orders due to customer backlash.

All told, Rivian is expected to post revenue of nearly $64 million when it reports results Thursday after market close. Net losses are expected to come in at $1.8 billion, compared to the $1.2 billion posted in the third quarter.

Results from Rivian as well as other reports this week including Bumble (BMBL), StitchFix (SFIX) and Oracle (ORCL) will come at the end of a fourth-quarter earnings season that has so far been solid across the board for most S&P 500 companies. While these results capture the period before the geopolitical conflict between Russia and Ukraine and the uncertainty over the global economic landscape that has ensued, the earnings have signaled solid momentum in corporate profitability heading into the new year.

"Q4 earnings season, while clearly prior to all of what we're seeing right now, came in well ahead of expectations, and we saw really strong positive revisions, and positive guidance for 2022. Q1 is definitely going to be a wild card," Amanda Agati, PNC Asset Management Group chief investment officer, told Yahoo Finance Live. "We're going to have to watch very, very carefully for what happens with rising input costs, wage pressures, now we have the energy story coming into the equation. So I do think there is an element of risk to it, but I also think that the underlying fundamental story is pretty strong."

Economic calendar

• Monday: Consumer credit, January ($24.000 billion expected, $18.898 billion in December)
  
  
• Tuesday: NFIB Small Business Optimism, February (97.4 expected, 97.1 in January); Trade balance, January (-$87.1 billion expected, -$80.7 billion in December); Wholesale inventories month-over-month, January final (0.8% expected, 0.8% in prior print)
  
  
• Wednesday: MBA Mortgage Applications, week ended March 4 (-0.7% during prior week); JOLTS job openings, January (10.968 million expected, 10.925 million during prior week)
  
  
• Thursday: Consumer Price Index month-over-month, February (0.8% expected, 0.6% in January); CPI excluding food and energy month-over-month, February (0.5% expected, 0.6%. in January); CPI year-over-year, February (7.9% expected, 7.5% in January); CPI excluding food and energy year-over-year, February (6.4% expected, 6.0% in January); Initial jobless claims, week ended March 5 (220,000 expected, 215,000 during prior week); Continuing claims, week ended February 26 (1.476 million during prior week); Household change in net worth, 4Q ($2.4 trillion in 3Q); Monthly budget statement, February ($118.7 billion in January)
  
  
• Friday: University of Michigan sentiment, March preliminary (62.5 expected, 62.8 in February)

Earnings calendar
Monday

No notable reports schedule for release

Tuesday

Before market open: Dick's Sporting Goods (DKS), Olaplex (OLPX)

After market close: Bumble (BMBL), StitchFix (SFIX), MongoDB (MDB), Figs (FIGS)

Wednesday

Before market open: No notable reports schedule for release

After market close: Sonder Holdings (SOND), CrowdStrike (CRWD), Asana (ASAN)

Thursday

Before market open: No notable reports schedule for release

After market close: DocuSign (DOCU), Rivian (RIVN), Oracle (ORCL), Ulta Beauty (ULTA)

Friday

Before market open: WeWork (WE)

After market close: No notable reports schedule for release"

MY COMMENT

I think the FED is dreaming. I dont believe that a little 0.25% interest rate increase is going to do anything to the supply and demand issues. In fact I dont think that four 0.25% increases in a row is going to squelch demand at all. They are going to find out that the sort of supply/demand inflation we are seeing now is very much immune to interest rate increases. From what I am seeing in the real estate markets and all the cash buyers and people lined up to buy very expensive houses.......the demand for goods is going to remain very tight for at least this year and probably beyond.

As to RIVIAN.......a joke. The company produces ONLY 1200 vehicles.......it is concept company......sounds good in theory.....but...... their ability to produce product in quantity is a long way off. I put the odds of this company being successful at very slim.

 

Yep.......to all you posted Tiresmoke.

The markets are being driven by outside events....the FED and the WAR......and it will continue for some months. It is just one of those times when there is nothing you can do as an investor.

As to buying a house......yes a horrible market for buyers in many areas. At least you seem to have the resources to be a competitive buyer. For the average first time buyer......keep in mind that what you buy is unlikely to be your lifetime house. It will be a starter home for most people. It does not have to have all the bells and whistles. It just needs to be a good SOLID well built house in the best area and the best school district you can afford.......thinking forward to MAXIMUM resale value. I think most first time buyers will live in that first house for 3-10 years and than will move up as kids are born or get older.

It is very difficult to get that first house right now....but.....once you have it you will be in the real estate system and your ability to keep up with the escalating market and move up will be helped by the increasing value of your home along with the rest of the general market.

If you or anyone else on here is willing to tell us about your adventures trying to buy a house in this market.....please do so.

 

YES.....the markets are open. It is a typical open for the current times......general market weakness........with no connection to actual business or fundamentals. Welcome to 2022 and world events.

If my memory is right we have ONLY had one down year in the SP500 since 2009. We have a long time left this year so there is no way to predict year end numbers......but.....if we end the year negative.....NO BIG DEAL. If we do end negative......it will ONLY be the second negative year in the past 14 years. That would be a STELLAR RECORD for stocks and funds.

 

Lets talk about the FED....since they are going to dominate the news in a few weeks when they raise rates by 0.25%.

The Fed’s ‘Average’ Is More ‘Flexible’ Than ‘Target’
When is an inflation target not a target?

https://www.fisherinvestments.com/en-us/marketminder/the-feds-average-is-more-flexible-than-target

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

"Here is an assignment that, in theory, should be simple: Compute the average of an economic data series over the medium term. Just pick one—retail sales, industrial production, inflation, whatever! The data are pretty easy to find—and freely available—at the St. Louis Fed’s data tool, FRED. But here is the thing: You can’t do it. Why? We didn’t give you enough information. “Medium term” is a fuzzy, unspecified period. Which brings us to the Fed and inflation. The Fed has come under fire for the inflation rate far exceeding its 2% (ish) target. Some suggest it should chuck that target outright, lest it lead the central bank to overreact to spiking oil prices and risk hiking rates aggressively as the economy slows. What they miss: The Fed did that in August 2020. We argued this at the time, and it bears repeating, as knowledge is power for investors.

When Congress established the Fed’s dual mandate with 1978’s Humphrey-Hawkins Full Employment Act, there were no numerical targets—just marching orders to pursue maximum employment while promoting price stability. No one interpreted “price stability” as zero inflation, as most everyone accepts that some inflation is a healthy side effect of a growing economy, which usually means more money in circulation. Conventional wisdom globally eventually zeroed in on a 2% annual inflation rate as reasonable, and many central banks have long had that rate as their target. The Fed followed suit officially in 2012, establishing a target of 2% y/y for the headline Personal Consumption Expenditures Price Index (PCE).

Between then and August 2020, the Fed managed to hit that target all of three times. For most of that span, inflation undershot 2% y/y, despite all the alleged “stimulus” sloshing around courtesy of quantitative easing (QE). Thus, there developed a view that the target itself was the problem—that the Fed was still acting as if 2% were a hard ceiling and thus keeping policy tighter than it otherwise could be. One school of thought argued central banks should target a certain level of nominal GDP growth instead. Another claimed that if central banks merely targeted an “average” inflation rate, it would give them more latitude as periods of higher inflation would cancel out periods of below-target price increases, thus enabling the Fed to step on the gas.

The Fed adopted this approach in August 2020, saying it would target “inflation that averages 2 percent over time,” a policy framework dubbed, “Flexible Average Inflation Targeting.” But it never defined over what time period, leaving “average” open to interpretation, bringing us back to our introductory conundrum. As the St. Louis Fed explains, the Fed would “seek inflation that averages 2% over a time frame that is not formally defined.”[ii] This is the problem. How can you be accountable for an average inflation rate if you don’t commit to an iteration? We don’t know if the Fed wants the inflation rate to average 2% over 12 months, 24, 36 or more. It isn’t even clear the Fed knows. This matters, because rolling averages aren’t etched in stone. Data points are regularly coming in and dropping out.

Using an undefined average quickly goes to a strange place. Technically, as one economist we follow pointed out last month, the Fed could argue today’s fast inflation has met the Fed’s target. December’s 5.8% y/y rise in the PCE price index brought it to the same level it would have arrived at if the inflation rate were a steady 2% y/y since January 2005, a totally arbitrary starting point.[iii] This would be the first time it was back at that mark since 2014. Does anyone really think the Fed should be doing a victory lap, patting itself on the back because a hot inflation rate at the end of 2020 hit a made-up target? Of course not! We will concede that thinking in these terms helps put more recent price increases in perspective, but we are quite certain no one thinks the Fed should hope for hot inflation to balance out below-target price increases over the preceding eight years. That is extremely cold comfort for those trying to manage sharp cost increases today. Steady and predictable is the goal, after all.

Second, how is the Fed calculating this average? Are we talking a simple arithmetic mean (add all the iterations and divide by the number of iterations), or are we using a geometric mean to account for the effects of compounding?

Newsflash: If you try to target an “average” inflation rate but refuse to commit to strict parameters, then you don’t have a target. Society has nothing specific to hold you accountable for. In the UK, the Bank of England Governor has to write a letter to the Chancellor of the Exchequer whenever the monthly year-over-year inflation rate exceeds 3%. That is a clear boundary. The Fed has no such boundary. Forget the old adage about trying to hit a moving target—the Fed is shooting at something that doesn’t exist.

More to the point, at January’s Fed post-meeting press conference, a reporter asked Fed head Jerome Powell if, with inflation running well above 2%, “Do you want to go below 2%, so that on average you get a 2% inflation rate?” Powell’s response: “So no, there’s nothing in our framework about having inflation run below 2%. That we would do that. That we would try to achieve that outcome. So the answer is no.”[iv] Hmmm. This … isn’t how averages work.[v]

In our view, this background knowledge can help you make sense of Fed chatter. Numerous Fed people made headlines over the past two weeks for their seemingly conflicting views on how many times—and by how much—the Fed should hike rates in the coming months. Is this because they disagree on the necessary prescription for today’s elevated inflation? Or because the “average” target means different things to every one of them/ Oh, for the days when competing views of data were the main problem—competing views of the target takes it next-level.

However, we don’t think this changes much for the predictability of Fed moves. Our view of future Fed policy has always been they will do what they do when they do it. If the target really meant much, they wouldn’t have started a tightening cycle in late 2015, when the headline inflation rate was flirting with zero. Moreover, the Fed generally follows market-set rates at a lag. They don’t so much set short-term rates as catch up to them. That was the case before they had a target, while they had a target, and we think it remains the case now that they have an imaginary target-in-name-only. Finally, as we have written, the Fed has a pretty limited ability to rein in supply-driven inflation like today’s, given it cannot drill for oil or mass-produce semiconductors."

MY COMMENT

The FED has no special knowledge or ability when it comes to directing anything in the economy. It is all HINDSIGHT and REACTIONARY. they do NOT lead the economy......or....direct the economy. They simply follow behind the economy. the best you can hope for with the FED is that they dont go crazy and cause too much damage.

 

There are some good nuggets of information for long term investors in this little interview.

How to Protect and Grow Your Wealth in the Face of War

https://americanconsequences.com/trish-regan-how-to-protect-and-grow-your-wealth-in-the-face-of-war/

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


"Trish: It’s so good to have your perspective, Scott. Historically, you’ve been very interested in growth. But now, as a defensive player, you’ve been doing extremely well. Your portfolio has consistently been beating the S&P 500 Index. Tell us how you’re thinking about this “brave new world.”

Scott: There are a lot of moving parts. I’ve learned that when you have uncertainty, people can invest. They’re apt to sell first and raise money so they can invest it later. When Vladimir Putin invaded Ukraine, that removed a layer of uncertainty for the market.

Trish: So, Putin is threatening the globe with nuclear weapons, right? Yet we’re saying that now is a good time to invest in stocks. How does that gel? Are people not taking the threat seriously? Will there be so much inflation that you’ll still need to invest in stocks?

Scott: There’s a lot of that going on. Our economy is growing way above the norm, almost double the norm right now. This will eat into some of that extra spending or discretionary spending by consumers, but it won’t kill it altogether. There will still be growth. Wages are rising… That’s driving inflation as well.

There’s a ton of pessimism priced in right now. And certainly what’s going on in Ukraine can get a whole lot worse. But the market is starting to price in a lot of the worst-case scenarios. The European Central Bank’s Chief Economist, Philip Lane, recently said that growth in Europe could wane by 3% to 4% this year because of Russia and Ukraine and the impact on energy prices. The ECB is not rushing to hike rates because that would hurt the economy. That means there will also be a slowdown here in the U.S.

So those things could back the Fed off, even though oil prices are going up. It could still back the Fed off into a situation where we get four rate increases instead of the expected seven. Remember that Wall Street and markets react like an auction market… It’s all about performance versus expectations. And when you expect seven rate hikes and you get four, that’s better than what you expected. That usually leads to upside in these situations.

Trish: Scott, you run the Defensive Portfolio at Stansberry Research. And it sounds like you believe in this market, despite what’s going on. I don’t want you to give it all away, but are there names or sectors we should be focused on right now? There might be some nice value plays in there…

Scott: People really need to focus on companies that generate income. If you want to invest in tech, you have to look at a company like Microsoft. It’s a great business and there’s tons of demand. We’re starting to transition when it comes to COVID-19. Since vaccination rates have gone way up, people have learned to adapt. But we’re going to start moving away from some tech companies. So you also want to look at old economy companies. Focusing on income and diversification in your portfolio is the way to go.

Also, if you want to buy something, don’t rush to use all the money you’re setting aside. You don’t have to do it all at once. You can use half of it now and see how it goes. It’s not that I don’t like growth. I would just be leery of companies that aren’t making money and have to borrow heavily.

Trish: That makes sense. What do you think the window is here? Should people be sharpening their pencils right now? Do you have to buy today?

Scott: I definitely think the Fed removes uncertainty. There are three really interesting things that I’ve been looking at. Again, put volume. The amount of premium bought last week exceeded $1 trillion. In the worst part of the pandemic, in March 2020, that number was $800 billion. So people are more worried about this current environment than they were about the pandemic environment. If you look through the history of all these geopolitical sell-offs, they actually wind up being very good buying opportunities.

Consider this: Germany invaded Poland in September 1939. A year later, you would have lost 1% of the S&P on a total return basis. Two years later, you would have made 3.5%. Five years after the event, you were up 100%. That’s just to give you a time horizon… These are good buying opportunities.

Trish: I’ve been covering the news for a long time, and I’ve seen some awful stuff. Now, Ukrainians’ homes are being blown to bits and a refugee crisis will ensue. The Russian people are lined up trying to get their money out of banks.

And you want to talk about preventing mass currency problems… They’ve hiked rates by 20% overnight in Russia. It’s probably time to invest because that doesn’t happen a lot. But you have to still keep a clear head, which is why the U.S. is still the best place to be.

Scott: Completely. The U.S. is the best defensive asset out there in my book. We have the toughest systems in terms of accountability. There’s a reason why a number of Chinese companies have been kicked off of our exchanges. And Europe is as strict as the U.S. So as an investor, your safest bet is typically going to be in the U.S. and then U.S. treasuries. I always call them “the best house on a bad block.” You’ve got to have a long-term vision and a gut check.

Trish: That’s good advice. I’m still obviously nervous in the face of what’s happening with Putin. But so far, you’ve turned out to be right. Time will tell. But to your point, six months later, a year later, five years later… It’s been shown that if you go in during really scary moments, it pays off.

Scott: Yes, that’s exactly it. Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.”

Trish: Scott, thank you again."

MY COMMENT

YES......in a good environment and ESPECIALLY in a bad environment like now......it is all about QUALITY. It is not hard to balance quality and the potential for growth in the markets. EVERYONE knows what the quality.....but also growing....companies are. It is not a secret. All you have to do is SUPPRESS the temptation to swing for the fences......trying to hit the next big thing. I am more than content.....to let the markets do the work and identify the BIG GROWTH companies for me......than I simply get on for the ride.

 

I like this little article.

Investors See Bullish Signals Under the Stock Market’s Surface
Despite recent volatility, a variety of individual stocks have broken out

https://www.wsj.com/articles/invest...stock-markets-surface-11646538735?mod=itp_wsj

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

"It’s been a rocky spell for stocks. Under the market’s surface, some investors see promising signs.

The S&P 500 has risen or fallen at least 1% in six of the past nine trading days as anxieties over the war in Ukraine, high inflation and the path of interest rates buffet the market. The benchmark U.S. stock index recently suffered its first correction, or decline of at least 10% from a recent high, since the beginning of the Covid-19 pandemic. It is now down 9.2% this year, including last week’s 1.3% fall.

Despite the volatility, a variety of individual stocks have broken out. Among those setting records last week were candy maker Hershey Co. HSY +0.91% , oil giant Chevron Corp. CVX +1.20% , railroad company Union Pacific Corp. UNP +1.66% , drug distributor AmerisourceBergen Corp. ABC +0.60% and conglomerate Berkshire Hathaway Inc. BRK.B -0.48%

Many investors see reason for optimism when stocks from different corners of the market rally simultaneously. Such moves hint at the underpinnings of a durable advance, even when that has yet to materialize at the level of major stock indexes. That contrasts with periods in recent years when big tech stocks lifted the market while other sectors languished.

“That can’t sustain itself forever, so I think that’s been a healthy development,” said Hank Smith, head of investment strategy at Haverford Trust. “Even with this being another down week, what you’re seeing is there is buying power out there.”

Tech shares have pulled back this year as the Federal Reserve’s plan to raise interest rates weighs on the high value that investors assigned to those companies’ future earnings. The losses in sectors ranging from industrials to financials to healthcare have been less severe, and the energy group has shot higher.

In one sign of the outsize influence of big tech companies, the S&P 500, which is weighted by market value, is lagging behind a version of the index in which each constituent is equally weighted. The S&P 500 Equal Weight Index is down 5.9% in 2022.

Investors this week will scrutinize new inflation data ahead of the central bank meeting, which begins March 15. They also will parse earnings reports from Campbell Soup Co. , Ulta Beauty Inc. and software company Oracle Corp. for insights on cost pressures and customer demand.

While the recent stock-market declines might make investors cringe, some point to signs that shares are poised for a rebound. Profits among big U.S. companies are expected to grow more than 8% from 2021, and the stock market looks less expensive than it has since the early days of the pandemic in the wake of the recent selloff. The widespread selling on geopolitical news shows a rush from risk but not fundamental weakness that would weigh on stocks longer term, these investors said.

“It doesn’t feel good right now, but it points to the potential for that breadth to improve markedly,” said Shannon Saccocia, chief investment officer at SVB Private Bank.

On Wednesday, for example, more than 90% of the stocks in the S&P 500 advanced after Fed Chairman Jerome Powell said he would propose raising interest rates by one-quarter of a percentage point this month. Some investors had feared the Fed might raise rates by half a point. Higher rates tend to pressure stock valuations by reducing investors’ risk appetite and denting the value analysts assign to companies’ future earnings.

To be sure, other technical indicators have been bleak. The market’s drawdown has been so widespread that the percentage of S&P 500 stocks trading above their 200-day moving averages recently hit its lowest level since May 2020. And in late February, the 15-day moving average of the percentage of S&P 500 stocks declining in a trading session hit one of its highest levels since March 2020, according to brokerage Instinet.

It is too soon to know just how effects of the war in Ukraine and ensuing sanctions against Russia will ripple through the global economy. The prices of commodities from wheat to corn to aluminum have hit multiyear highs, and oil has surged above $100 a barrel for the first time since 2014. Gas prices have already topped $5 a gallon in some parts of the country.

Mr. Powell said Thursday that Russia’s invasion was likely to push up inflation. He indicated the Fed wouldn’t tolerate a significant period of higher inflation, even if that meant choking off economic growth.

So far, analysts haven’t brought down their forecasts for profit growth for the year, though first-quarter estimates have edged lower. Earnings from companies in the S&P 500 are projected to climb 8.6% this year, up from forecasts for 7.2% growth on Dec. 31 and for 8.4% growth two weeks ago, according to FactSet.

The pullback in stocks has the U.S. equity market looking its cheapest since the spring of 2020. The S&P 500 traded last week at roughly 19 times its projected earnings over the next 12 months, about where it was trading in February 2020 before stocks plummeted on concerns about how the Covid-19 pandemic would harm the economy.

“I’m looking at this year as a race between earnings growth and PE contraction,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office. “The question is: Who’s going to win the race?”"

MY COMMENT

I actually cont see much evidence of panic or fear out in the real world. The majority of investors.......the silent majority.....are long term investors. People have been investing in their 401K and retirement accounts now for a few decades or more. Most.....regular people.....have much more ability to just sit out the short term events than they are given credit for.

The current markets are very BORING......as investors sit and do nothing. That is just how it is. You sit and wait for the good markets to come back. Of course......it has ONLY been 2.5 months......which represents the extreme short term.

 

I have no plans to sell anything or do anything. As a long term....fully invested all the time investor......I will do nothing in response to the current short term events and environment.

AS USUAL.........HERE is my current PORTFOLIO MODEL.

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 59% of the total portfolio and the fund side at about 41% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio. At the same time the funds double and triple up on my individual stock holdings............that I consider the BEST individual businesses in the WORLD.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Microsoft
Nike
Nvidia
Tesla

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (72). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my ten stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis.

 

I do own one of those Emmett. Honeywell. It is one of my little group of non-tech stocks......along with Costco, Nike, and Home Depot.

Besides I dont believe in moving around in the markets in response to world and other events. it is just not worth it to try to do short term moves.....like going into defensive stocks. First it is simply market timing. Second......and more importantly.....it will generate tax liability for me in the form of capital gains.

 

Today......a lost cause at this late hour......and.....a very CRAPPY day for investors. (LOL) What can I say.....it is what it is. We seem to be reaching PEAK MARKET INSANITY about now......with the war, the rising gas prices, the talk of banning Russian oil, and the FED going to raise rates in the next two weeks.

One thing about all this stuff hitting the fan all at once.......the economic data is simply WORTHLESS now. No one will have the slightest clue what inflation is, how strong the economy is, or anything else. All these events are totally distorting the economic data.......which was already SCREWED UP by the lingering economic impacts of our Covid responses.

 

What a wild ride for ARK investors. The fund was up into the stratosphere......and.....over the last year has tanked. Of course.....anyone buying it MUST know that it is an extremely volatile and risky fund and subject to big moves UP and DOWN.

From what I see it is now DOWN year to date by (-36.3%)........and DOWN for the past year by nearly fifty percent (-48.60%). As least it is positive for the past three years by +10.30% annualized return.

It will be fun to watch when the good market returns........."could".....see some massive gains. Or....."could".....not.