The Long Term Investor

I HOPE SO Zukodany. I want to....see and feel.....the pain. We need to.......feel the burn......in order to start to recover. Until than we are likely to simply see the markets linger in an extended downturn.

 

Everyone I know is saying the same thing around here TireSmoke. There is a HUGE number of people with money out there. I have never in my life seen so many younger people with as much money. I think it is simply the fact that both the husband and wife are working in good high paying jobs. I am amazed at the number of younger people in my area buying million dollar houses.

 

Well another day.....another dollar. Markets are still up but not by much. We are due for a green day.......but what we might be due for and what we might get.....are two different things. We will have to wait till the close to find out.

 

I like this little article.

Powerful, Unseen Positives Signal a Classic Correction, Not a Bear

https://www.realclearmarkets.com/ar...l_a_classic_correction_not_a_bear_831422.html

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

"Fall in to the gap! The gap between expectations and reality, that is—always stocks’ chief driver. Today it’s a big, yawning chasm. The tragic, grinding Ukraine war, hot inflation, rising interest rates, a negative GDP quarter, central bank “tightening,” China’s lockdowns—all this and more torpedoed sentiment during 2022’s first third. Beneath this sour surface stir powerful positives—doubly strong because they are unseen. Their stealthy presence amid widespread gloom is more evidence this downturn is a classic correction, not a new bear market.

You needn’t look far to see rampant negativity and recession fears. Nearly 60% of respondents were bearish in April’s final American Association of Individual Investors’ survey, the highest since March 5, 2009—four days before the financial crisis’s low. Fund managers have slashed equity allocations and raised cash, according to Bank of America’s latest survey. Global growth pessimism levels, part of that poll since 2007, soared to record highs. Last spring’s budding euphoria feels ancient now.

Backward-looking metrics like inflation and Q1 GDP’s small, inventory-and-import skewed dip provide more fear fodder. But forward-looking indicators tell a nuanced tale. The Conference Board’s US Leading Economic Index rose 0.3% in March after a 0.6% February jump.

One big reason: the yield curve. Yes, you read that right. 2022’s wrongheaded headlines harped on parts of the US curve inverting, ones that don’t really matter, like the 10-year minus 2-year Treasury yield spread. Those spreads aren’t useful. The segment that matters—the meaningful part and that which is officially a leading economic indicator and has been for many decades—is the 10-year minus 3-month spread. Even after the Fed’s early-May 50 basis point hike, it is nearly a half percentage point wider than a year ago.

And why does it matter when the 10-year minus 2-year doesn’t? Because banks borrow short term money from depositors to fund long-term loans. They borrow from depositors heavily in very short 0-90 day periods, much with no duration at all, and fund lending almost not at all off of 1-3 year or longer deposits (there aren’t that many relatively….and far less than in decades back). So the 10 year minus 90-day spread serves as a pretty good proxy for banks’ profits on future loans. The wider, the more banks become willing to lend—bullish! The Conference Board’s Leading Credit Index, which features other forward-looking factors like credit swap spreads and senior loan officer surveys, boosted LEI, too.

Other components showed demand staying strong despite hot inflation. After slipping -0.3% m/m in February, nondefense durable goods orders excluding aircraft—a proxy for business investment—surged 1.0% in March. Manufacturing new orders pointed to growth, according to the Institute for Supply Management’s purchasing manager index. Service sector new orders—not an LEI component, but a gauge covering America’s dominant economic sector—were also strong. Typically, today’s new orders are tomorrow’s production. Supply chain snarls muddy that maxim some but the overall signals are positive.

Outside America and locked-down China, stealthy positives percolate—even in Europe—where broadly loosening COVID restrictions are an underappreciated tailwind unleashing restaurant, travel and entertainment activity—juicing service sectors region-wide. Services-heavy countries lead the way.

Composite manufacturing and services PMIs for Germany, Spain and Italy also showed output rising. France’s hit a four-year high. New business volumes across the bloc accelerated amid improving demand. All this more than compensates for new manufacturing orders slowing (even contracting in Germany). If Europe—far more affected by rising energy prices and the Russian fiasco—isn’t evolving to marked economic contraction, global recession’s likelihood becomes very low.

Despite months-old fears of galloping prices stunting demand or squashing profit margins, myriad S&P 500 executives said on Q1 calls that they aren’t seeing it. Procter & Gamble’s CFO said customers haven’t switched to cheaper brands as prices rise—many even trading up to pricier offerings!

Bank of America’s CEO said March credit card spending jumped 13% y/y—despite stimulus checks arriving a year earlier. One reason: Travel, entertainment and restaurant spending rebounded, a trend high-frequency data bear out.

Restaurant reservation service OpenTable’s April US reservations were within 1.3% of April 2019’s pre-pandemic levels. Globally they were up 5.5%. April US Transportation Security Administration checkpoint traffic was 52.5% higher than April 2021—and just 9.5% off April 2019 levels. Hotel occupancy is up, too, despite higher prices. Reopening is shifting demand and buoying activity.

Crucially, companies haven’t had to slash margins to stoke demand. S&P 500 firms’ gross profit margins are 33.8% presently, up slightly from 33.5% in Q4 2021—even higher than the 32.0% registered at 2019’s end.

These data aren’t predictive. But they show all that is feared isn’t tanking commerce—quite the opposite. They depict a moderately growing economy defying widespread scare stories.

Always remember: Stocks don’t care whether news is inherently “good,” “bad” or “meh.” They care how it evolves against expectations. So-so news is just fine if everyone expects ugly. Today, dour sentiment and sneaky positives present a beautifully bullish gap you should leap into like a trampoline—to catch the bounce."

MY COMMENT

I can see the above and do believe it is up in the air what will happen over the rest of the year. In addition......I dont care about labels....Bear Market, Recession, Correction......who cares. My actions or lack of action will be the same regardless. These...."economic".....labels are meaningless. Just.....BRING IT ON......and lets move forward.

 

Here is what we are doing today......short term of course.

Stock market news live updates: Stocks bounce back after S&P 500 closes at lowest level since March 2021

https://finance.yahoo.com/news/stock-market-news-live-updates-may-10-2022-223722536.html

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

"U.S. stocks climbed Tuesday morning following a sharp sell-off that sent all three major indexes to their lowest level year-to-date in the previous trading session.

The S&P 500 rose 1.6% after the benchmark closed below 4,000 for the first time since March 2021 on Monday, deepening losses from its longest streak of weekly declines since 2011. The Dow Jones Industrial Average was up 1.3% after the index erased over 650 points in Monday's session, and the Nasdaq Composite surged 2.5%, clawing back from a 4.3% drop in earlier trading.

Meanwhile, the benchmark 10-year Treasury note retreated after topping 3%.

The moves expand a period of recent turbulence for equity markets as worries around inflation, rising interest rates, and the possibility of an economic slowdown continue to weigh on investor sentiment.

“The market is void of major positive catalysts right now, so it is not surprising that we’re starting the week off under pressure,” Brian Price, head of investment management at Commonwealth Financial Network said in an emailed note.

Adding to headwinds is a lackluster earnings season that has raised concerns over how corporate profits will fare amid persistent macroeconomic disruptions. As of Friday, the percentage of S&P 500 companies beating EPS estimates was above the five-year average, but the magnitude of the upside surprises was below the five-year average, according to data from FactSet.

“Another catalyst that could be causing some risk aversion as of late is a fairly underwhelming earnings season,” Price added. “It certainly wasn’t as strong as the past few quarters and there is even more ambiguity surrounding future EPS outlooks given the tremendous amount of macro uncertainty.”

For this earnings season so far, 87% of the companies in the S&P 500 have reported actual results for the first quarter year-to-date as of Friday, per FactSet’s latest available data. Investors look ahead to more major reports underway this week from major names including Disney (DIS), Peloton (PTON) and Rivian Automotive (RIVN).

On the economic data front, Wednesday's Consumer Price Index (CPI) will also be closely-watched by traders for the latest snapshot on the state of inflation in the U.S. The figure is expected to offer clues on how much more aggressively the Federal Reserve will need to act in order to mitigate rising prices.

“The equity market continues to struggle when factoring in the implications of inflation and rising market interest rates on share prices,” Comerica Wealth Management Chief Investment Officer John Lynch said in a note on Monday.

"This is a tightrope walk by the Fed. If it moves too slowly, it risks not tamping down inflation and having higher inflation expectations become embedded – making it more difficult to eliminate," Lynch noted. "Conversely, if the Fed raises rates too quickly, it risks tilting the economy into recession, with the associated job losses and other costs. The Fed indeed has a difficult task in front of it.""

MY COMMENT

What I see that is important in the above is the lack of anything new.....at all. Nothing is going on. It is the same old issues we have been talking about for 6-12 months now. There is NOTHING NEW.......going on with stocks or the markets.

The above severely downplays earnings. Earnings have been generally good. The big change that I see as impacting EVERYTHING.....is the total absence of LEADERSHIP from those that are not in the business world......in other words government.

 

The primary reason I believe stocks are trying to be green today is the fact that the Ten Year Treasury is now back below 3%. I dont buy any of the garbage that a 3% ten year Treasury should impact the markets significantly. At 3% the Treasury is STILL in the LOW end of the range over the past 100 years. BUT......we are in IRRATIONAL times where Social Media, rumor, gossip, drama, and other factors impact the markets regardless of truth or accuracy.

The Ten Year is now at 2.95%.

 

WHOOPS.....our little neighborhood of 4200 homes has now seen a drop in available homes for sale down to.....15. A sudden drop in inventory from a week or two ago.

In addition we do have 4 homes in the ONLY remaining area being built in this general neighborhood. They will be done with construction and available for move in this FALL. This small area of new construction will be done by the end of the year and probably has only 5-10 homes that are still under construction. Once that area is done there will be no more construction of new homes in this general area.

The market continues to be very strong.

 

DOUBLE.....WHOOPS. The markets have now turned red. The dreaded mid morning drop. The typical pattern we often have been seeing for the past 6 months.

 

I agree with Cathy Wood on many things. The current world wide deflationary environment, the fact that the world is in a recession, the FED is going to screw up the economy, etc, etc, etc. I feel sorry for her being "LABELED" by the media. You have to have more than.......one good year.....to be a "STAR STOCK PICKER".

ARK's Wood sees global recession, blames market selloff on Fed hike plan

https://finance.yahoo.com/news/arks-wood-sees-global-recession-182530464.html

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

"NEW YORK (Reuters) - The global economy is in recession and recent stock market volatility is a sign investors believe that the Federal Reserve's plan to continue hiking interest rates is too aggressive, star stock picker Cathie Wood said in a webinar on Tuesday.

Wood, whose ARK Innovation ETF outperformed all other U.S. equity funds during the pandemic rally in 2020, said slowing economic growth will likely benefit the type of innovative companies that the fund invests in.

"There are a lot of indicators to us that we are in a bit of a bear market” because of the Fed's expected plan to increase rates by 50 basis points at its June and July meetings, Wood said. "The markets are speaking pretty loudly right now and seem to be calling into question the Fed’s strategy."

The benchmark S&P 500 is down approximately 16% for the year to date, near the 20% decline that typically signifies a bear market.

At the same time, "innovative" companies are being subject to "incredible" shorting activity, Wood suggested, pushing stock prices lower.

"If we are right, then shorts will be forced to cover and we are certainly looking forward to that time," Wood said.

The $7.9 billion ARK Innovation Fund, which gained 2% in Tuesday trading, is down 57.6% for the year to date. Overall, the fund is now down nearly 75% from its record high in February 2021, and close to the low of $34.69 it touched in March 2020 at the start of the coronavirus pandemic.

The fund added a position in General Motors Co, largely due to signs it is "serious" about its move into electric vehicles, the company said during the webinar Tuesday. Tesla Inc remains its largest overall position.

Despite its losses, ARK Innovation continues to draw the interest of investors. The fund has received positive inflows on net over the last 4 weeks, including $455.7 million in net inflows the week that ended May 4, according to Lipper data."

MY COMMENT

I agree with much of what she says.....but....I would never touch any of her funds. She has a long way to go to prove that she is not a one trick pony that simply got lucky during the pandemic year of 2020.

 

I have not looked at my account yet.....but we ended the day in the green in the averages that count....the SP500 and the NASDAQ.

Today was very typical of what we have seen over the last six months. We start the day in the green but the gains fade away till we are just mildly in the green. Than about mid morning......10:30 Central time.....the markets go red. Than over the rest of the day they recover to end the day in the green.

Of course the other typical days over the last six months are.......the markets rocket up and end in the green.....or more likely......the markets tank for the entire day and plummet to end in the red.

Never a dull moment anymore in the markets.

 

This is pretty much how it is right now.

Good news is bad news in the economy right now
Economic strength is forcing the Fed to get more aggressive

https://www.tker.co/p/federal-reserve-monetary-policy-inflation-down?s=r

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

"On Tuesday, we learned U.S. employers had a record 11.5 million job openings as of March. That’s arguably the clearest sign that the economy is booming, as hiring workers isn’t cheap and most employers would only do it if they didn’t already have the staff to keep up with demand.

Currently, there are just 5.9 million people who are unemployed. In other words, there are nearly two job openings per unemployed person. The mismatch means that workers have a lot of options, which means they have a lot of leverage to ask for more pay. Indeed, employers are paying up at a historic rate.

But booming demand, record job openings, and higher wages… are bad?

The Federal Reserve and many in the economics profession are not putting it so bluntly. But that’s effectively their message.

The state of play: Demand for goods and services has been significantly outpacing supply,1 which has been sending inflation to decades-high rates. This is partly due to the fact that higher wages mean higher costs for businesses, many of which have been raising prices to preserve profitability. Ironically, these higher wages have helped bolster the already-strong finances of consumers, who are willingly paying up and thereby essentially enabling businesses to keep raising prices.

It’s important to add that this booming demand has been bolstered by job creation (i.e., a phenomenon where someone goes from earning nothing to earning something). In fact, the U.S. has created a whopping 2.1 million jobs in 2022 so far.

The Bureau of Labor Statistics has a metric called the index of aggregate weekly payrolls, which is the product of jobs, wages, and hours worked. It’s a rough proxy for the total nominal spending capacity of the workforce. This metric was up 10% year-over-year in April and has been above 9.5% since April 2021. Before the pandemic, it was trending at around 5%.


This combination of job growth and wage growth has only been exacerbating the inflation problem.

And so the best solution, at this point, seems to be to tighten monetary policy so that financial conditions become a little more challenging, which should cause demand to cool, which in turn should alleviate some of these persistent inflationary pressures.

In other words, the Fed is working to take the legs out of some of the good news coming from the economy because that good news is actually bad.2

The Fed moves to trim ‘excess demand’
In a widely-anticipated move, the Fed raised short-term interest rates on Wednesday by 50 basis points to a range of 0.75% to 1.00%. It was the largest increase the central bank made in a single announcement since May 2000.

Furthermore, Fed Chair Jerome Powell signaled the Federal Open Market Committee’s (i.e., the Fed’s committee that sets monetary policy) intention to keep hiking rates at an aggressive pace.

“Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the Committee that additional 50 basis point increases should be on the table at the next couple of meetings,” Powell said. “Our overarching focus is using our tools to bring inflation back down to our 2% goal.“

To be clear, the Fed isn’t trying to force the economy into a recession. Rather, it’s trying to get the excess demand — as reflected by there being more job openings than unemployed — more in line with supply.

“There's a lot of excess demand,” Powell said.
Currently, there are massive economic tailwinds, including excess consumer savings and booming capex orders, that should propel economic growth for months, if not years. And so there’s room for the economy to let off some pent-up pressure from demand without going into recession.

Here’s more from Powell’s press conference on Wednesday (with relevant links added):

…I would say I think we have a good chance to have a soft or softish landing or outcome, if you will. I'll give you a couple of reasons for that. One is households and businesses are in very strong financial shape. You're looking at, you know, excess savings on balance sheets, excess in the sense that they're substantially larger than the prior trend. Businesses are in good financial shape. The labor market is, as I mentioned, very, very strong. And so it doesn't seem to be anywhere close to a downturn. Therefore the economy is strong, and is well positioned to handle tighter monetary policy.

It’d be a far more risky situation if consumer and business finances were stretched in addition to there being no excess demand. But that’s not the case right now.

And so, while some economists are saying that the risk of recession is rising, most don’t have it as their base-case scenario for the near future.

Is it bad news for stocks? Not necessarily.
When the Fed decides it’s time to cool the economy, it does so by trying to tighten financial conditions, which means the cost of financing stuff is going up. Generally speaking, this means some combination of higher interest rates, lower stock market valuations, a stronger dollar, and tighter lending standards.

Does this mean stocks are doomed to fall?

Well, a hawkish Fed is certainly a risk to stocks. But nothing is ever certain when it comes to predicting the outlook for stock prices.

First of all, history says stocks usually rise when the Fed is tightening monetary policy. It makes sense when you remember that the Fed tightens monetary policy when it believes the economy has some momentum.

Nevertheless, the prospect for higher interest rates is definitely a concern. Most stock market experts, like billionaire Warren Buffett, generally agree that higher interest rates are bearish for valuations, like the next 12-month (NTM) P/E ratio.

But the key word is “valuations,” not stocks. Stock prices do not need to fall to bring valuations down as long as expectations for earnings are going up. And expectations for earnings have been going up. And indeed, valuations have been falling for months.

The chart below from Credit Suisse’s Jonathan Golub captures this dynamic. As you can see, the NTM P/E has been trending lower since late 2020. However, stock prices have mostly been on the rise during this period. Even with the recent market correction, the S&P 500 today is higher than it was when valuations started to fall. Why? Because, the next 12 month’s worth of earnings have essentially only been going up.


To be clear, there’s no guarantee that stocks won’t keep falling from their January highs. And it’s certainly a possibility that future earnings growth could turn negative if the business environment deteriorates.

But for now, the outlook for earnings continues to be remarkably resilient, and that could provide some support for stock prices, which are currently experience a pretty typical sell-off.3"

MY COMMENT

YEP....lately the good news simply does not matter.....earnings, job creation, wages, consumer spending booming, etc, etc, etc. It is all bad, bad, bad.

 

A nice....medium level.....day for me today. In the green.....plus......a good beat on the SP500 by 0.60%. My only two stocks that were down today were Nike and home Depot. BUT......not anywhere close to erasing the recent big down day losses. We need to string together a good number of positive weeks to do that. At some point it WILL happen....but....I have no idea when it will be. That is why I remain fully invested.....waiting....as usual.

 

OK.....this is definately a positive indicator. Now if we could only get that percentage up another 10-15%.

43% of investors say they’re too nervous to get into markets right now. Here’s why they should invest anyway

https://www.cnbc.com/2022/05/10/43p...oo-nervous-to-get-into-markets-right-now.html

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

"The stock market has been off to a rough start this year. The S&P 500 Index is currently down more than 16% year to date through Monday’s close.

That’s sparked worry for some investors. Some 43% said they’re too nervous to invest in the market right now, according to Allianz Life’s Quarterly Market Perceptions study, an online survey of more than 1,000 adults conducted in March.

That’s a nearly 10 percentage-point increase from the previous quarter, the survey found. In addition, more than half of respondents worry about a market crash, and 81% expect volatility to continue in the market this year.

“People don’t like uncertainty when it comes to finances and that is exactly what we have experienced in the markets thus far in 2022,” said Kelly LaVigne, vice president of consumer insights at Allianz Life, in a statement.

Even amid market volatility and uncertainty going forward, financial experts advise that people, especially investors with long time horizons, continue to put money into the stock market.

“Consistency in life and in investing is a real critical element to building wealth,” said certified financial planner Diahann Lassus, managing principal at Peapack Private Wealth Management in New Providence, New Jersey.

Dollar-cost averaging

If you’re investing for retirement in a 401(k) plan, you should continue to put the same amount into markets, or dollar-cost average your investment.

“You have to be able to do that on the up and the down, that’s literally how you compound,” said Douglas Boneparth, CFP, president of Bone Fide Wealth in New York. “That’s how you win the game.”

Continuing to buy when markets fall is also where investors can find opportunities for stocks poised to increase, he said.

“You’re effectively buying things at a discount,” said Lee Baker, CFP, founder of Apex Financial Services in Atlanta, adding that having discipline in today’s market is like having a parent tell you to eat your vegetables when you were a kid.

“Broccoli doesn’t taste so good when we’re younger, or carrots, but its good for you and in the long-term it pays off in the form of strong bones,” he said. With investing, the payoff is a strong retirement account when you’re ready to stop working, he said.

Rebalance if needed

If the market’s downturn is keeping you up at night, it may be a good time to rebalance the assets in your portfolio.

“If you ended up with 80% in equities and that’s really giving you an ulcer, then maybe it’s time to review that exposure,” said Lassus, adding that markets may have already done the work for you.

She also suggested rotating money from winners – stocks that have performed well – to ones that have lost value. Even though it can be difficult to sell your high performers, the discipline of selling high and buying low will serve you well over time.

Baker agreed, adding that for some investors, the typical 60% equities and 40% bonds portfolio may no longer make sense.

“Maybe they really need to be at 50-50, or 40-60,” Baker said.

Have cash reserves ready

Of course, a falling stock market can be especially nerve-wracking for those who are in or near retirement.

To avoid selling assets at a loss to cover expenses, financial experts recommend having a solid emergency fund on hand in cash. This acts as a buffer so that you can keep assets in the market to rebound instead of selling when prices are down.

“Even if you’re 60 or 70 years old, with life expectancies today, you’re still investing for the long-term to keep pace with inflation,” said Lassus, adding that if you hope to leave money for your family down the road, long-term investing is even more important.

Refocus on your plan

One thing that may help investors disconnect from the daily cycle of volatile markets is to check back in with their long-term financial plan and track where they are with their goals, said Lassus.

Remember that volatility is something to be expected for long-term investors, and today’s choppiness comes after roughly two years of solid market returns.

“It’s a lot easier to do well investing money, and be disciplined when markets are on the rise,” said Boneparth. “It’s increasingly difficult to keep up that discipline when things get wild.”

In those moments, it’s critically important to have a plan and be able to execute on your strategy, he said.

“If you find yourself lost here, it’s likely due to lack of a plan,” he said."

MY COMMENT

YEP.....have a plan....a long term plan. Change your allocation or investment mix if you find that you risk tolerance is not what you thought. BUT.....you have to stay in the game for the long term if you want to get that great COMPOUNDING that everyone talks about. Remember.......market timing does NOT work.

 

Inflation is obviously the story of the day. I like this take on the latest data.

US inflation slowed last month for the first time since August

https://www.cnn.com/2022/05/11/business/consumer-price-inflation-april/index.html

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

"New York (CNN Business) US inflation took a breather last month for the first time since August. Prices still increased, but at a slower pace than in previous months.

The Consumer Price Index was up 8.3% in the 12 months ended in April, the Bureau of Labor Statistics reported Wednesday, slightly higher than economists had predicted. It was a decrease from the 8.5% recorded in March, which had been the highest level in more than 40 years.

Stripping out more volatile product categories like food and energy, the CPI stood at 6.2% over the same period, less than the 6.5% reported in March.

For April alone, prices increased by 0.3%, adjusted for seasonal swings, less than the 1.2% jump recorded in March. Without food and energy prices, core inflation rose 0.6%, more than the 0.3% advance in the prior month.

Wednesday's data suggests that the inflation peak is behind us, just as economists, the Federal Reserve, the White House and the American people hoped. But there are still a lot of factors that will keep prices elevated over the summer.

The war in Ukraine has put pressure on energy and food prices. Meanwhile, renewed Covid-related lockdowns in China threaten to exacerbate the supply chain issues that the world has been struggling with over the past year. That means it's uncertain how much the pace of inflation can slow down until these things are resolved.

On top of that, inflation has shifted from goods to services as it spread through different parts of the economy and is no longer constrained to categories that have been explicitly affected by the pandemic or geopolitical events, such as used cars or gas. That could mean that the high prices will be harder to shake when both of those factors wane.

"The peak of inflation may be behind us, but today's CPI report points to a long, slow descent or maybe even a plateau around 8% until prices start to drop significantly," said Robert Frick, corporate economist at Navy Federal Credit Union, in emailed comments.

What got more expensive?

April price increases were particularly stark for housing, food, plane tickets and new cars: Food prices rose 0.9% last month and 9.4% year over year, the biggest jump since April 1981. Grocery store prices were up 10.8% for the year ended in April, the biggest increase since November 1980.

However,energy prices fell in April as gasoline prices came down from their March peak.Over the 12-month period, energy prices soared 30.3%. In May, however, gas prices ticked higher again, so this part of the CPI could look worse again in next month's data.

Housing costs, which are comprised of rents and owners' equivalent rent for people who own their homes, rose in April by 0.5% for the third month in a row. Year-over-year, housing costs are up 5.1%. Because rents change infrequently, the Labor Department collects rent data from each sampled apartment or house only every six months.

Economists have been concerned about the increase in housing costs, which will likely stick around after other price peaks pass."

MY COMMENT

I would say this is the reason for the markets being positive today. We are now probably going to see similar......slowly decreasing.....inflation going forward. As we go forward the comparisons to 12 months ago will get easier.

This is a VERY WELL WRITTEN article. None of the.....BREATHLESS EXAGGERATION......that is rampant today in articles about this same data. The DRAMA, FEAR, and PANIC inherent in most of these types of articles today is ridiculous.

 

TAXES are a BIG ISSUE with what happens in our PRIVATE economy and in business......and......thus to anyone that invests in businesses in the form of stock ownership. This little article has some good lessons and information.....especially for those that were not alive or are under age 40 and have no clue what happened in the late 1970's and early to mid 1980's.

Tax Debate Blasts Us Back to the Abjectly Stupid 1970s

https://www.realclearmarkets.com/ar...back_to_the_abjectly_stupid_1970s_831578.html

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

"It’s too easily forgotten that when Ronald Reagan sought the Republican nomination for president in 1980, the view even in his own Party was that the tax cuts he desired were inflationary. Yes, you read that right, Reagan was viewed as radical for not buying into the impressively obtuse theory that “putting money in people’s pockets” caused inflation.

In fairness to the Republicans in a broad sense, the Democrats of that era similarly believed tax cuts an instigator of inflation. That they did set Reagan up for a wondrous smackdown of Jimmy Carter during one of the 1980 presidential debates. Reagan asked the 39th president why it was inflationary to let the people spend their own money, but not so when government was spending our money.

Forty-two years later, it seems the Democrats have unlearned what Carter learned the hard way in front of a national audience. In a front page article in yesterday’s New York Times, economics reporter Alan Rappeport signaled a desire within the states to reduce a variety of taxes. The problem, according to Rappeport, is that “economists warn” cutting taxes “could exacerbate the very problem lawmakers are trying to address. By putting more money in people’s pockets, policymakers risk further stimulating already rampant consumer demand, pushing prices higher nationally.”

Not surprisingly, one of the “economists” warning about the downside of tax cuts is often wrong, never in doubt Harvard professor Jason Furman. Furman told Rappeport that “all these tax cuts in states are adding to inflation.” In attempting to explain Furman’s analysis, Rappeport indicated that tax cuts apparently have a downside because the economy is “at full capacity,” and “additional spending power would drive up demand and prices.” We’re all Jimmy Carter now, or something like that.

Perhaps some Republicans reading this are chuckling, but they would be wise to withhold their laughter. More than they’d like to admit, their neo-inflationist economic arguments of the moment resemble those of their confused opponents. But for now, let’s focus on the Democrats and Furman.

For one, there’s no such thing as an economy at “full capacity.” All production stateside is a consequence of global cooperation and the division of work with humans and factories around the world. To insinuate that the U.S. economy is at “full capacity” is to operate under the assumption that the U.S. is an impregnable island of economic activity. Quite the opposite, really.

Furthermore, Furman’s analysis ignores that all demand is a consequence of supply. This is important, because implicit in his argument is that if states “allow” Americans to keep more of what they earn, the act of doing so will constitute “additional spending power.” No, not at all. Our work is our spending power.

It’s all a reminder that in any economy, demand mirrors supply. While at any time there’s an excess or deficit of disdained or much-desired goods, in a broad sense we can only demand insofar as we supply. It’s sad that something so basic rates stating, but it does. Which means government can’t enhance spending power in the economy by “putting money in our pockets” as much it can reduce the spending power it extracts from our pockets. Demand springs from supply, which means tax cuts merely shift spending power back from government to those who produced the spending power in the first place: us.

Of course, the above truth is a reminder of the impressively obtuse arguments presently being made by neo-inflationists on the Right. Though they claim to be “supply siders,” their argument that government spending is creating “excess demand” reveals their closet Keynesianism. Their arguments imply that demand created by our wasteful federal government is driving up prices. Except that such a view defies simple economic logic.

Indeed, while there’s no argument about the wastefulness of our federal government, the simple truth is that it cannot increase “demand.” Only production enhances demand, and government produces nothing. It just confiscates a portion of the production of the people and redistributes it. Get it? With government spending there’s no increase in demand as much as there’s a shift of demand from one set of pockets to another.

That all demand begins with supply speaks to the foolishness of both sides. The Left claims putting more money in our pockets causes inflation, while the Right claims putting more money of others in our pockets causes inflation. Both sides are confused.

Both sides also miss that there’s an ocean of difference between rising prices and inflation. This is important simply because the price of a good can increase for all manner of reasons, including demand outstripping supply, but none of this is inflation. That is so because as logic indicates, a rising price for a certain good logically implies a falling price for another.

Inflation is a decline in the value of the unit of measure used to facilitate exchange; in our case, the dollar. Notable here is that measured in gold, the dollar is the same price today as it was when Joe Biden entered office; while that same greenback is up against most foreign currencies. It’s something to think about. Inflation is about monetary decline, but there’s been no decline in the dollar in recent years.


The paradox of the present is that tax commentary has regressed to what prevailed in the 1970s, while inflation has been redefined altogether to something non-monetary. Stupid times."

MY COMMENT

The failure of the FED and economists to be able to predict and control the economy is EPIC. AND.....it should also be totally anticipated. These people........on all sides......have no clue what they are doing. There is absolutely.....ZERO......science in economics.

TWO simple events ALWAYS result in a booming economy.......lower taxes for the actual people that ARE the economy.....AND.....less government regulation and control of private business. UNFORTUNATELY......very few politicians.......on any side.....practice this in reality.

On a broad level......beyond the topic of this little article....I am NEVER amazed at all the stuff that people want the government to do and impose on people and the country.....that is TOTALLY CONTRARY to the success of our economy. This is one reason that the markets usually CHEER when there is split .........PARALYZED.....government.