The Long Term Investor

You are so right Zukodany.

AND.....the open today.......as well as the last nearly five months is a message to investors. The message is.....the short term.....the next 6-12 or longer months.........is likely to be very challenging.

Over the years on here I have mentioned a number of times that sooner or later we are going to see one of those SOUL SUCKING markets that goes on and on and on.....sometimes for years. We seem to have everything all lined up at this moment for the....."possibility"......for such a market.

Will it happen.....I dont know.....there is no way to know as it is happening.

I saw the markets open today with the same headline on the TV that we have been seeing for a long time now........."Stocks Fall On Inflation Fears".

Bitcoin.....although I do not follow it......just as dismal at the moment.

AGAIN......I mention......I say the above from a very clinical mind set. I personally feel NO negativity right now.....but......on here I am going to call things as I see them regardless of whether it is positive or negative.

 

Amazingly I dont see this little bit of economic data on some of the BIG financial sites.

Wholesale inflation climbs 11% in April, remaining near 40-year high
Economists expected the producer price index to show prices climbed by 10.7% in April

https://www.foxbusiness.com/economy/wholesale-prices-producer-inflation-april-2022

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

"Wholesale prices accelerated more than expected in April as inflation continued to hover near a 40-year high as a result of strong consumer demand, pandemic-related supply chain snarls and the Russian war in Ukraine.

The Labor Department said Thursday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, climbed 11% in April from the previous year. On a monthly basis, prices grew by 0.5%. Although that marks a slight moderation from March's reading of 11.2%, the gauge still came in higher than the 10.7% forecast from Refinitiv economists, suggesting inflationary pressures remain strong.

Core inflation at the wholesale level, which excludes the more volatile measurements of food and energy, increased 0.6% for the month, following a 0.9% increase in March. Over the past 12 months, core prices were up 6.9%.

Overall, prices for goods jumped 1.3% last month, the fourth consecutive rise and the biggest contributor to the headline inflation figure. That included gains for items like motor vehiclkes, diesel fuel and eggs. Prices for construction also soared by 4.0% in April, while prices for services held steady last month.

Energy moderated in April, rising by 1.7% after surging 6.4% the previous month following the Russian invasion of Ukraine.

The surge in wholesale prices comes on the heels of a separate Labor Department report released on Wednesday that showed the consumer price index climbed 8.3% in April from the previous year, far more than economists expected. Consumers are paying more for everyday necessities, including groceries, gasoline and cars.

Sky-high inflation has created a political headache for President Biden – who has blamed rising prices on the war in Ukraine, as well as pandemic-related disruptions in the supply chain – and has forced the Federal Reserve to chart an even more aggressive course to cool demand and bring inflation down.

The Fed now faces the tricky task of cooling demand and prices without inadvertently dragging the economy into a recession. Policymakers raised the benchmark interest rate by 50 basis points last week for the first time in two decades and have signaled that more, similarly sized rate hikes are on the table at coming meetings as they rush to catch up with inflation.

The back-to-back inflation reports "will not dissuade the Fed from making another half percentage point rate hike when they next meet in mid-June," said Bill Adams, chief economist for Comerica Bank. He noted that inflation will almost certainly finish the year well above the Fed's preferred target range of 2%.

"The Fed will want to see clearer evidence that inflation is cooling and higher interest rates are slowing demand before they start thinking about the endpoint of the current rate hike cycle," he said."

MY COMMENT

LOL Zukodany......anyone that thinks the NASDAQ is DOOMED is an extremely short term thinker.

BUT....talking about today or tomorrow. The news this week is very negative for the markets in conjunction with the general economic themes that are going on right now.

Those of us that sit and watch and wait......it does not matter. Actually the best thing most people can do is get on with life and ignore the markets. Go to work, go out, do something with your kids, turn off the TV.

I do feel sorry for anyone that is in early retirement or is within 10 years of retirement......at least those that are not government workers and dont have a pension. Over the past decade of so people have forgotten.........assuming that they knew this to begin with......that stocks and funds are a RISK ASSET. They can be very volatile over the short term. Unfortunately many people's definition of short term is now very compressed.

SO......lets talk basics. Short term in stock investing is.....in my mind.....LESS THAN THREE YEARS.....at the MINIMUM. Long term is.......FIVE YEARS......at the minimum. AND....better yet.....short term is a time period of less than five years and long term is seven years or more.

Many people have gotten FOOLED into shortening up these traditional time periods over the past ten years.

 

Looks like we are seeing some buyers coming into the markets and supporting the averages a little bit......at this moment. We are green in the SP50 and the NASDAQ.....an......close in the DOW.

The markets continue to be the back alley knife fight we have been seeing lately.......waves of selling and waves of buying.

 

The news item of the day that I dont see mentioned anywhere.......the TEN YEAR YIELD.....has fallen to 2.87%.

If there is going to be a short term little rally today or tomorrow....this might be the factor that is responsible.

 

Nothing to see in the markets at the moment.....so I guess I will go and work on some charts.

 

LOL.....I could not stay away. I made it through one chart about three times.

Here is a simple little article with a good......basic..... lesson for investors.

How Bear Markets Can Be a Blessing for Long-Term Investors

https://buffalonews.com/business/in...cle_d7893509-e01d-5bd7-b69e-49f79af4688f.html

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

"Watching the value of your portfolio drop can be tough. It's even tougher to watch when the market (and/or your portfolio) falls into a bear market territory, defined as a prolonged period of stock prices dropping by at least 20% from recent highs.

But bear markets shouldn't be the time to panic and begin selling off assets. For investors with a long-term attitude about the market and their individual stock holdings, bear markets can actually present an opportunity. Let me explain.

You can lower your cost basis

When markets get volatile and investors are talking about what to do, a phrase that often pops up is "buy the dips." It's an investing strategy that can boost your overall return if done properly. If you're a long-term investor and you have a company you are confident has a lot of potential for stock growth, buying the dip gives you the chance to lower the cost basis of your investment. Your cost basis is effectively the average price of the shares you've purchased, accounting for the fact you likely purchased multiple shares at different prices at different times.

If you bought 10 shares of a company at $200 each, your cost basis would be $200. If the stock's price decreased to $150 and you bought 10 more shares, your new cost basis would be $175. Here's how the math works:

• 10 shares x $200 = $2,000
• 10 shares x $150 = $1,500
• $3,500 / 20 shares = $175 per share

Your cost basis is important because it determines how much profit you receive when you eventually sell the shares. You and someone else could sell the same number of shares at the same time for the same price, but the person with a lower cost basis would collect a higher profit. If the above stock increased to $300 and you sold your 20 shares, you'd profit $125 per share. If someone's cost basis were $200, they'd profit $100 per share.

So, in a bear market, a short-term drop in the price of a stock you planned to invest in any way can be viewed as a discount. If you would have invested in a company at $200 per share, if it drops to $150, you should still feel comfortable making that investment.

To take advantage of the dips, you need to keep some cash set aside

You can't benefit from a bear market if you don't have the cash to purchase the discounted stocks. There's no single answer for how much cash you should have available, but cash does play an important role in a savvy investor's action plans.

Imagine you're an investor and a strong believer in Microsoft (NASDAQ: MSFT). At the beginning of the pandemic in March 2020, Microsoft's stock price dropped to around $137. At that price, you could have bought 10 shares for $1,370. As of May 9, 2022, those 10 shares would be worth over $2,650. However, you couldn't have taken advantage of the price drop if you didn't have cash readily available to use.

You could sell one investment to purchase another investment, but it's not a good option and is best avoided. Having dedicated cash set aside for these opportunities (that isn't your emergency fund) is important.

Focus on the goal

Good long-term investors don't focus on the daily fluctuations of stock prices. Volatility is, and will continue to be, part of investing; that's just how it works. If you're focused on the long term, what's happening with a stock's price in the day-to-day shouldn't be of much concern.

History has shown us that fundamentally sound companies make for good investments over the long term, even if they're experiencing short-term market downturns. Markets go up and down short-term but they generally go up over the long term. An investing strategy that takes advantage of that notion is a winning one."

MY COMMENT

KISS.....keep it simple stupid. That is your basic investing advice. Follow the established probabilities that the academic research shows over and over are true. Invest in the BEST of the BEST. Hold for the long term. Consider long term as five years....minimum. Avoid jumping in and out of the markets. Avoid short term trading and market timing. Be RATIONAL and REASONABLE in what long term return you are trying to achieve.....like about 10% average total return per year long term. Be patient. Do not invest based on short term news or the EMOTIONS that short term news drives. Avoid the latest FAD. Etc, etc, etc.

 

When I was in the business world I knew a very successful architect. He was brilliant in rehabbing old historic structures that had been abandoned and turning them into amazing businesses (bars and restaurants) and condos. He had a habit of signing every document that I ever saw with the phrase......."In Struggle".....and than his name.

He was very successful and very positive.....but....he recognized that the short term.....day to day.....was the same for everyone. We ALL struggle with something and we are all together.....even though we seem very isolated and individual. Same with investing.

 

NICE.....I just looked at my portfolio for the first time today and I am moderately in the green. What an erratic open and past couple of hours in the markets today. Just shows you can never really anticipate what is going to happen or why in the markets.....especially short term.

One thing about investing.....if you can stay detached.....it is a very interesting experiment in human behavior.

 

Yep Zukodany. With a year of tightening and raising rates ahead of us. It is VERY LIKELY that mortgage rates will settle in between 6% and 7% some time in the next 6-12 months. People will look back on 5% as the good old days. Not that 6-7% is abnormally high.....I would say it is about the historical average.

 

AND......if the market and economic environment that we are seeing right now continues for another 12-36 months.....all the young people and Millennials will........REALLY......get to experience what those of us that are old enough......ACTUALLY.....went through back in the late 1970's early 1980's. It will give them something to talk about when they are old.

 

This little article....SO,SO......reminds me of the Jimmy Carter era.......perhaps we can bring back the "WIN" (Whip Inflation Now) buttons for people to wear.

How we can all beat inflation

https://finance.yahoo.com/news/how-we-can-all-beat-inflation-183905327.html

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

"Is 8.3% inflation too much for you? Want to do something about it? Well, you can: Simply stop buying stuff.

The current spate of inflation has several causes, but inflation, by definition, is a rise in prices when demand exceeds supply. There’s a lot of arguing these days about why supply is tight: Maybe it’s because President Biden wants to rein in fossil fuel production. Russia’s invasion of Ukraine certainly hasn’t helped. COVID lockdowns in China are still snarling supply chains. The microchip shortage persists.

That’s the supply side. But if demand were lower and supply stayed the same, prices would fall and inflation would be less of a problem, or no problem at all. There are obviously some things we can’t stop buying: food, baby formula, gas to get to work, energy to heat our homes and other necessities. But a lot of what Americans buy doesn’t qualify as a necessity, and those splurges have intensified during the last two years as COVID has forced millions to spend way more time at home.

Inflation is an obvious hardship for people living on tight budgets. But there are at least 40 million Americans living large, with plenty of money to spend, as The New York Times pointed out in a recent article. They include homeowners whose biggest asset has soared in value during the last two years and investors whose stock portfolios have swollen, even with the recent market declines.

A boom in personal consumption

Those spenders have fueled a boom in personal consumption that’s a big contributor to elevated inflation. From 2010 to the beginning of 2020, the average monthly increase in personal consumption from the year before was 3.9%. For the last 12 months, the monthly increase has averaged 14.2%. That number is somewhat exaggerated, because some of the year-ago baseline numbers were depressed on account of the COVID downturn. Even so, personal consumption grew 9.1% year-over-year in March, after rising 12.3% in March 2021. That tells us turbocharged spending is much more than a numerical phenomenon and extends well beyond the federal stimulus payments that goosed spending in 2020 and 2021.

There’s plenty of anecdotal evidence that a lot of consumer spending is discretionary, rather than essential. Home remodeling sales at Home Depot (HD) and Lowe’s (LOWE) have been very strong, and Bank of America forecasts “better than expected industry trends” this year. Those are mostly nice-to-do projects, not staples. Some categories with high inflation are essentials, such as household gasoline (up 44% year-over-year), household energy (up 16%) and food (up 11%). But other categories represent purchases many people could put off if they had to, such as furniture (up 15%), new cars (up 13%) and appliances (up 8%).

Travel is also a new source of inflation, with airfares up 33% year-over-year, hotel rooms up 20% and rental cars up 10%. Some travel is essential, but much isn’t. It’s actually good news that demand for travel is driving prices up. That will help one of the hardest-hit industries recover, and also shift some consumer spending away from goods, which could bring down elevated prices. It also tells us Americans are optimistic enough to pay higher prices for travel, after two years of COVID frustration.

Time for 'demand destruction'

If there were a concerted national effort to postpone nonessential purchases, it would have a prompt a perhaps dramatic effect on inflation. This is a wistful thought exercise, however, since there’s no chance that will happen. Americans are not in the habit of sacrificing for the common good, and if President Biden were to even suggest it, the mockery would be deafening. One benefit of Biden’s advanced age is that he was actually in government in 1979 when President Jimmy Carter asked Americans to consume less, the last time a U.S. president has been naïve enough to make that mistake.

The ultimate solution to inflation, however, is a recession—because people suddenly worried about money stop buying stuff. “Demand destruction,” as economists call it, isn’t a binary thing that happens only during a recession. It’s an incremental thing that happens all the time, and is undoubtedly happening now, as consumers make mostly rational decisions to buy less or substitute cheaper stuff as prices rise. You can’t do that with everything, but even if demand falls back at the margin it can make enough of an impact to bring inflation down.

This has happened during every recession in past-war history, as the chart below shows, with the recessionary periods shaded in gray. In July 2008, for instance, inflation hit an unusually high 5.5%, driven largely by surging oil prices. But a recession was already underway and a year later, inflation had turned negative, with prices falling by 2%. During the “stagflation” of the 1970s, double-digit inflation helped trigger recessions, yet price hikes decelerated sharply in the aftermath.

The Federal Reserve is trying to cool the economy by raising interest rates, without going as far as triggering a recession. Higher rates suppress consumption on their own, because debt-fueled business and consumer purchases become more expensive, so there’s less of it. The jury’s out on whether the Fed can engineer the “soft landing” that would bring inflation down while keeping the recovery going, but spending and prices will come down one way or the other. We could cut spending preemptively, but we’re more likely to do it because it suddenly feels uncomfortable parting with our money."

MY COMMENT

I cant tell if some of this little article is actually SARCASM. It should be. I mean.......come on man.....it is your patriotic duty to NOT BUY ANYTHING. AND......yes this is the sort of IDIOCY that was being pushed during the Jimmy Carter era.

Now the ultimate solution.....DEMAND DESTRUCTION......that will actually work. AND.....we are heading down that path right now, people are just not feeling it yet. At some point as we enter into a nasty recession people will start to fear for their jobs and the future and will pull back and quit spending. At that point we will see the emergence of the underlying DEFLATION that is still underlying what is going on right now.

There are a couple of charts that did not copy in the article above. One of them is a nice chart of the inflation rate for the past 70 years. That inflation chart very clearly shows that the 2% inflation target that the FED in using now is INSANELY LOW. The average.......and normal.....rate of inflation would be about 3% to 4%. This is the REAL rate that everyone.......used......to use as NECESSARY for an healthy economy.

 

One of my favorite.......TARGETS.......the IRS.

Tax professionals ‘horrified’ by IRS decision to destroy data on 30 million filers

https://www.cnbc.com/2022/05/12/tax...ion-to-destroy-data-on-30-million-filers.html

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

"Key Points

• The IRS destroyed data for an estimated 30 million filers in March 2021, according to the Treasury Inspector General for Tax Administration.
• The decision, prompted by a backlog of paper filings, has sparked anger in the tax community.
• “It just further damages the IRS’ reputation in the business community and in the public,” said Larry Harris, director of tax services at Parsec Financial.

An audit by the Treasury Inspector General for Tax Administration revealed the IRS has tossed data for millions of payers, sparking anger from the tax community.

The material, known as paper-filed information returns in accounting parlance, is sent yearly by employers and financial institutions, and covers taxable activity, such as W-2 forms, with copies sent to taxpayers and the IRS.

“The continued inability to process backlogs of paper-filed tax returns contributed to management’s decision to destroy an estimated 30 million paper-filed information return documents in March 2021,” according to the report.

The IRS backlog, created by years of budget cuts, understaffing, pandemic-related office closures and added duties, is expected to clear by December, according to Commissioner Charles Rettig.

While the report doesn’t specify which information returns the agency chucked, the news has triggered angry responses from tax professionals, particularly after another difficult filing season.

“I was horrified when I read the report describing the destruction of paper-filed information returns,” said Phyllis Jo Kubey, a New York-based enrolled agent and president of the New York State Society of Enrolled Agents.

CNBC has reached out to the IRS for comment.

Missing information returns can cause a “mismatch” at the IRS, delaying refunds because the agency can’t verify details on a taxpayer’s returns, she explained.

While the eventual consequences of the decision are unknown, tax professionals have long complained about the stream of automated IRS notices, with limited options to reach the agency.

“If they’re not putting those into the system, there’s going to be discrepancies, which means potential notices that are sent out,” said Dan Herron, a San Luis Obispo, California-based certified financial planner and CPA with Elemental Wealth Advisors.

Although the IRS halted more than a dozen types of automated notices in February, Herron says the constant correspondence is still creating headaches for taxpayers and advisors.

Brian Streig, a CPA with Calhoun, Thomson and Matza LLP in Austin, Texas, said the news was a “break of our trust,” pointing to the burden on the business community.

“Small businesses stress out every year in January trying to accurately prepare these informational returns and get them filed on time,” he said. “To see the IRS just destroy these is almost like the IRS admitting they don’t really care.”

Larry Harris, a CFP and director of tax services at Parsec Financial in Asheville, North Carolina, voiced similar concerns, questioning the agency’s ability to stay compliant.

“It just further damages the IRS’ reputation in the business community and in the public,” he added."

MY COMMENT

Your Federal Government at work. "It makes it seem like they dont really care"........well DUH.....of course they dont care.

AND....to make things worse we have put into place new regulations this year and last that will greatly increase the amount of paper data that business and others have to file:

Get ready for the new 1099-NEC and changes to 1099-MISC filing

https://www.w9manager.com/irs-proposes-big-changes-to-1099-forms/

The above article documents simple.....INSANITY. AND.....note that this information above is not some news release by the IRS......this destruction of materials was discovered by the Inspector General For Tax Administration in an AUDIT of the IRS. The agency itself has........"no comment".

 

I have to say the above story made my day.