The Long Term Investor

Here is what the markets are....."supposedly"....doing today.

Stocks slip with Fed, earnings, jobs data on deck

https://finance.yahoo.com/news/stock-market-news-live-updates-october-31-2022-112227074.html

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

"U.S. stocks lagged Monday morning to start a busy week marked by Fed policy, earnings, and jobs data.

The S&P 500 (^GSPC) declined 0.7%, while the Dow Jones Industrial Average (^DJI) erased 200 points, or 0.6%. The technology-heavy Nasdaq Composite (^IXIC) fell by roughly the same margin. Treasuries ascended again, holding above 4%.

Equity markets are still poised to round out the month higher after a brutal September slump. The Dow Jones Industrial Average was up 14.4% month-to-date as of Friday’s close – making October its 10th best month on record since 1915, according to data from Bespoke Investment Group. If the Dow closes just 2 basis points higher on Monday, this October will beat January 1976 as the best month since the 1930s.

The Federal Reserve’s next policy announcement Wednesday and October’s monthly employment report set for release Friday will determine whether the tailwind will continue pushing stocks forward through the rest of 2022.

U.S. central bank officials are poised to raise the Fed’s benchmark policy rate by another 0.75%, but some strategists believe it could be the last outsized hike before officials scale back on tightening plans.

Pantheon Economics Chief Economist Ian Shepherdson said with still-high core CPI and payroll gains averaging 372,000 across the third quarter, investor expectations that policymakers will keep raising rates into next year are justified.

“But we see enough straws in the wind now to think that the economy is at a real inflexion point, while investors are putting too much emphasis on data, which right now appear to suggest that growth is holding up well,” he said.

“We doubt Chair Powell’s tone will change significantly this week, but he won’t be able to hold back the tide if the numbers turn,” Shepherdson added.

The Labor Department’s jobs report is expected to show monthly payrolls fell below 200,000, a big drop-off from an average of 400,000 across much of the pandemic recovery but still near the pre-pandemic monthly average. Economists expect 190,000 jobs were added or created last month, according to consensus estimates from Bloomberg.

And on the earnings front, companies are still rolling out third-quarter results. Of companies in the S&P 500 index that have reported so far, the net profit margin for the index is 12%, which is below the previous quarter’s net profit margin and below the year-ago net profit margin, but higher than the five-year average net profit margin of 11.3%.

Bank of America analysts said in a note that earnings overall so far have continued to “defy recessionary calls,” with many corporate metrics still above expectations."

MY COMMENT

NOTHING new above in terms of the FED and the labor markets. Same old, same old. We have been living with this "stuff" for many months now.

What I see above that I consider the KEY data is the last little.....begrudging......bit of the article. The part dealing with earnings. Here is what I see as the BIG POSITIVE:

"the net profit margin for the index is 12%, which is below the previous quarter’s net profit margin and below the year-ago net profit margin, but........HIGHER THAN THE FIVE-YEAR AVERAGE NET PROFIT MARGIN OF 11.3%." (ALL CAPS IS MINE OF COURSE)

In other words.....EARNINGS are STRONG. You will NOT see this much in the media because it is not the narrative they have been pushing in the financial media lately. It is totally contrary to what we have been told by the "EXPERTS". I remember very clearly how we have been assured for the past......EIGHT to NONE QUARTERS......how earnings were going to be bad. EVERY TIME......the experts were WRONG. Their dismal record simply....DEFIES all rules of PROBABILITY.

 

I also believe that we are nearing the end of the FED rate increases.

We will see 0.75% this week. We will see 0.75% or 0.50% in December. We will......"perhaps".....see a couple of increases at the 0.5% level at the start of 2023. After that we will see diminishing rate increases by the FED.

So.....in my view we are within about 4 months of the end of the big rate increases. This does not mean that the FED will start to reduce rates. They WILL hold rates high for a long time....perhaps another year or more.....as they attempt to CRASH the economy to kill inflation.

 

Lets get past FED WEDNESDAY.....and move on. It is all about......the ELECTION and EARNINGS after that.

 

That is for sure Smokie......since it was all the "free money" and way overboard government spending/stimulus of the economy that is a big issue with the current inflation. Put this on top of the massive supply/demand issues that we currently have.....bingo....you have the current economic mess. Of course nothing the FED can do will have any impact on any of the above.

ALL anyone can do is.....FOCUS ON THE LONG TERM.....that is where the money is, anyway. That is where the PROBABILITIES favor investors.

AND.....today.....at the moment.....we have a slightly mixed market. The RUSSELL is green. All the other averages are red.....but they have pulled back from their lows of the day. there might even be some slight hope for further improvement as the day goes on. I could see the DOW ending the day in the green today.

However we end up it will be a surprise......as usual. My question to anyone and their money......are you an investor or a trader? AND......however you answered......does your behavior with your money fit your answer?

 

I still see a...."chance"....of the DOW closing in the green today. I also see a "slight chance" for the SP500 also.

personally, at the moment, I have 9 red stocks and 1 green. That one green is TSLA.

 

I like this little article.....and.....as a long term investor I agree completely.

Jeremy Siegel: Long-term investors should ‘absolutely buy now' — why the world-renowned Wharton professor remains optimistic about today’s stock market

https://finance.yahoo.com/news/long-term-investors-absolutely-buy-191000969.html

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

"With the Dow, the S&P 500, and the Nasdaq all deep in the red year to date, it might be tempting to hit the sell button and get out of this ugly market completely.

But a prominent economist suggests otherwise.

“If you're a long term investor, I would absolutely buy now,” Jeremy Siegel, professor of finance at the Wharton School of Business, told CNBC. “I think these are absolutely great long-term values.”

Here’s a look at why the professor is so optimistic.

Fed should be forward looking

One of the reasons behind this year’s stock market slump is inflation. Consumer prices were rising at their fastest pace in 40 years. While the headline CPI number has cooled off a bit recently — September’s inflation rate was 8.2% year-over-year — it’s still worryingly high.

To tame inflation, the Fed is raising interest rates aggressively. The central bank increased its benchmark interest rates by 75 basis points last month, marking the third such hike in a row.

If rampant inflation continues, more rate hikes could be on the way. And that does not bode well for stocks.

Siegel points to one segment of inflation that is cooling down: housing. But that isn’t properly reflected in the index numbers.

“We pointed out that the way these indices are constructed, that housing costs are very lagged, and they're going to continue to go up, even though as we saw the Case-Shiller Housing Index, and the National Housing Index, housing prices are going down,” he says.

Siegel suggests that instead of making decisions based on lagging indicators, the Fed “has to be forward looking.”

“They have to look at what's going on in the market, in the housing market, in the rental market, in the commodity market.”

‘Excellent value’

The pullback in stocks has been painful, but that’s exactly why this could be an opportunity.

The reason, Siegel explains, is that the fall in stocks has brought their valuations down.

“When you're talking about 16 times earnings, and even if they're clipped by a recession, and you shouldn't just base it on recession earnings, you should base it on longer term earnings, which I think are very favorable … I think these are just absolutely excellent values,” he said.


Of course, having attractive valuations does not mean stocks won’t drop further.

“Could it go down more? Of course, in the short run. In bear markets, it’s gone down more,” Siegel admitted, adding that “anything can happen on the short term.”

No lost decade

The outlook can be bleak, even for those who already made billions from the markets.

Billionaire investor Stanley Druckenmiller recently said that stock market returns could be flat for the next decade.

Ray Dalio’s Bridgewater Associates warned earlier this year that we could be facing a “lost decade” for stock market investors.

Siegel remains optimistic.

“I disagree with that completely that the Dow or S&P 500 would be flat [over the next decade],” he says.

“We added 40% to the money supply since the pandemic began in March of 2020. Earnings have historically moved up just with inflation and the money supply. So stocks should be 40% higher than they were.”

The economist explained to CNBC last month that at one point, stocks were 50% to 55% higher than pre-pandemic levels. But with the recent pullback, they were just 20% higher. And that means investors have something to look forward to for the next decade.

“To say that 10 years from now, we're going to have the same Dow when the earnings yields that I see there on the market, show that your returns are going to be probably in the neighborhood of 6% per year after inflation.”"

MY COMMENT

I agree completely in general terms. Of course achieving great returns depends on the specifics of what you invest in. I dont see any chance of a lost decade.....that is simply fear mongering.

As in any market time.....you can look at the positive or you can look at the negative. I prefer to simply look at the positive PROBABILITIES....which are strongly positive as usual for any ten year time period. I also KNOW that anyone buying at these levels.....especially in something like the SP500.....will, in all probability, achieve a HUGE compound return as the bear market resolves and we move back into a bull market.

Just like those that failed to take advantage of the historic low mortgage rates in the 2% to 4% range....are all bummed out. Those that do not take advantage of the stocks and funds that are ON SALE right now......will be totally bummed out. WELL......actually they probably will not be bummed out because they dont understand the simple mechanics of long term investing.....and as usual they will have some rationalization for why they are not achieving market beating returns.

 

Simply a LOST DAY today in the markets. Stocks tried to come back a few times through the day....but....in the end closed nicely down.

I had a clean sweep in the red today, all 10 stocks. I also got beat by the SP500 today by 0.65%.

Pretty hard for the markets to buck all the FED stuff and anticipation of Wednesday. Not a great environment for a positive short term market....at least for the next couple of days.

 

Since I have ZERO DEBT.....I am not really concerned directly about any of this stuff. Although as a home owner and participant in the American economy....I do have an indirect stake in some of this stuff.

Another interest rate hike from the Federal Reserve is on the way: Here’s how it may affect you

https://www.cnbc.com/2022/10/31/ano...on-the-way-heres-how-it-could-impact-you.html

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

"Key Points

• To fight inflation, the Federal Reserve is expected to announce its sixth interest rate increase of the year this week.
• Here’s a breakdown of how that may impact mortgages, credit cards, car loans, student debt and savings.

This week, the Federal Reserve will likely raise rates for the sixth consecutive time to combat inflation, which is still running at its fastest pace in nearly 40 years.

The U.S. central bank has already hiked its benchmark short-term rate 3 percentage points since March, including three straight 0.75 percentage point increases ahead of its upcoming policy meeting.

“The impact of what’s been done isn’t fully reflected yet,” said Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business and former chief economist of the Securities and Exchange Commission. “Inflation hasn’t come down much so far, in part because these policies take a while to kick in,” he said.

In the meantime, “the impacts on the consumer have created potentially difficult economic circumstances and are likely to get considerably worse as we get more of these rate hikes kicking in,” he added.

The next rate hike, which is widely expected to be the fourth straight 0.75 percentage point increase, will correspond with another rise in the prime rate and immediately send financing costs higher for many types of consumer loans.

“The cumulative effect of rate hikes is what is really going to have an impact on the economy and household budgets,” said Greg McBride, Bankrate.com’s chief financial analyst.

In fact, borrowing is already substantially costlier for consumers across the board.

What a rate hike means to you

The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates consumers see every day.

From your credit card and car loan to mortgage rate, student debt and savings, here’s a breakdown of some of the major ways rate increases impact you:

1. Mortgages

Although 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

Along with the Fed’s vow to stay tough on inflation, the average interest rate on the 30-year fixed-rate mortgage is now near 7%, according to the latest data from the Mortgage Bankers Association.

“Rates resumed their record-setting climb,” said Sam Khater, Freddie Mac’s chief economist, “with the 30-year fixed-rate mortgage reaching its highest level since April of 2002.”

As a result, “demand has completely fallen off the table,” McBride added. “Affordability was strained already from the surge in home prices, when you layer on top of that this never-before-seen pace in mortgage rates it compounds the problem.”

The increase in mortgage rates since the start of 2022 has the same impact on affordability as a 35% increase in home prices, according to McBride’s analysis. “If you had been approved for a $300,000 mortgage in the beginning of the year, that’s the equivalent of less than $200,000 today.”

Adjustable-rate mortgages and home equity lines of credit are pegged to the prime rate. Most ARMs adjust once a year, but a HELOC adjusts right away. Already, the average rate for a HELOC is up to 7.3% from 4.24% earlier in the year.

2. Credit cards

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. As the federal funds rate rises, the prime rate does, as well, and credit card rates follow suit.

Annual percentage rates are “closing in on 19%,” on average, up from 16.3% at the beginning of the year, according to Bankrate.

Further, households are increasingly leaning on credit cards to afford basic necessities since incomes have not kept pace with inflation, McBride said, making it even harder for borrowers to get by.

If the Fed announces a 75 basis point hike as expected, consumers with credit card debt will spend an additional $5.1 billion on interest this year alone, according to a new analysis by WalletHub.

3. Auto loans

Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans, so if you are planning to buy a car, you’ll shell out more in the months ahead.

“Car loan rates are the highest in 11 years,” McBride said. The average interest rate on a five-year new car loan is currently 5.63%, up from 3.86% at the beginning of the year and could surpass 6% with the Fed’s next move, although consumers with higher credit scores may be able to secure better loan terms.

Still, it’s not the interest rate but the sticker price of the vehicle that’s causing an affordability crunch, McBride said. “It’s the $45,000 or $50,000 people are borrowing that’s the problem.”

Paying an annual percentage rate of 6% instead of 5% would cost consumers $1,348 more in interest over the course of a $40,000, 72-month car loan, according to data from Edmunds.

4. Student loans

The interest rate on federal student loans taken out for the 2022-2023 academic year already rose to 4.99%, up from 3.73% last year and 2.75% in 2020-2021. It won’t budge until next summer: Congress sets the rate for federal student loans each May for the upcoming academic year based on the 10-year Treasury rate. That new rate goes into effect in July.

Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that, as the Fed raises rates, those borrowers are also paying more in interest. How much more, however, will vary with the benchmark.

Of course, anyone with existing education debt should see where they stand with federal student loan forgiveness.

5. Savings accounts

On the upside, the interest rates on some savings accounts are also higher after consecutive rate hikes.

While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which have been near rock bottom during most of the Covid pandemic, are currently up to 0.21%, on average.

Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are as high as 3.5%, much higher than the average rate from a traditional, brick-and-mortar bank, according to Bankrate.

As the central bank continues its rate-hiking cycle, these yields will continue to rise, as well. “We’ll see 4% before the beginning of the year,” McBride said.

Still, any money earning less than the rate of inflation loses purchasing power over time."

MY COMMENT

This stuff compounds and multiplies across societya nd the economy. for msot people the impact of what the FED is doing will be very negative and a real drag on their personal finances.

 

WELL....it is time to ditch the financial stuff for the day and focus on tonight......HALLOWEEN.

So......I will get the folding table out of the garage and the chairs and get them set up on the driveway. We set up a table outside to do the candy since our house is gated and we have dogs.....so it is difficult for kids to come to the door.

The little kids will start around here in daylight.....about 6:30 or so. It will all be over about 8:30. As usual we will be doing full size candy bars and movie theater boxes of candy like, DOTS, MALTED MILK BALLS, SOUR PATCH, BUTTERFINGERS, SNICKERS, STARBURST, etc, etc, etc. This year we have about 8-10 different choices....all in big sizes.

We also have our usual....back up bag....of about 100 small bar candies just in case we run out. We usually get about 80 kids in a normal night and rarely run out......since we have our usual 115 of the big items.

Any candy that is left over will go to the local police. Once that candy hits the local police substation....it disappears in one day. It usually gets put out for the late night shifts.

Our neighborhood gets into Halloween....pretty well. Out of our 80 homes more than half have decorations. There is also one neighborhood house that does an annual Halloween kids party and pot-luck with games, a haunted house, candy, etc, etc.

Many of the individual homes here are gated....but people set things up to make it easy for the kids.

HAPPY HALLOWEEN....EVERYONE. Have a scary but safe night out there.

 

That is why we give all the left-over candy to the police officers. Otherwise we would be "getting in the leftover candy bag" for weeks.....till we ate it all. We had a good bunch of kids tonight.....all ages.

YEP......on to November......the FED in a couple of days and the election in 8 days.

 

Siting and watching the markets open strong today.....and....than lose the gains to self fulfilling prophesy fantasy stuff and short term data drama. Yes.....the FED is NOT going to pivot. AND...yes....the economic data today is just as distorted and screwed up as usual. And....yes....the Ten Year Treasury yield is up again.

The bad news.....this stuff is constantly fear mongered day to day by the financial media and traders.

The good news.....NONE.....of this stuff matters one bit over the long term.

 

Here is the economic stuff that is the excuse of the day for the short term markets:

Job openings surged in September despite Fed efforts to cool labor market

https://www.cnbc.com/2022/11/01/jolts-september-2022.html

MY COMMENT

SORRY FED......nothing you are doing is going to have any impact on this sort of data. If it was going to happen we would see some sign of it already.

 

HERE is where we are as a society. The lure of FREE MONEY has now taken over. I hope this NEVER happens. It will simply make inflation WORSE.

63% of Americans support federal govt sending inflation relief checks
18% indicated they do not support federal inflation relief checks

https://www.foxbusiness.com/economy...ederal-govt-sending-inflation-stimulus-checks

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

"A recent poll found that almost two-thirds of Americans are proponents of the federal government sending out inflation stimulus payments.

About 63% of eligible U.S. voters expressed some degree of support for federal inflation relief checks being distributed, the Newsweek poll conducted by Redfield & Wilton Strategies showed. Of those who agreed the federal government should do so, 42% indicated they "strongly agree" while 21% said "agree," according to the poll.

Inflation has been hovering at painfully high levels, FOX Business previously reported.

The consumer price index in September rose 0.4% from August and 8.2% from the prior year. In the same month, the personal consumption expenditures index – the preferred inflation gauge of the Federal Reserve – went up 0.3% month over month and 6.2% year over year.

According to Newsweek, 18% of Americans indicated they do not support the federal government providing stimulus checks for inflation.

Multiple states have either said they will send out inflation relief checks to eligible residents or have already done so.

In the past couple years, the federal government has sent out three rounds of stimulus payments aimed at providing eligible Americans relief from the COVID-19 pandemic. The first coronavirus relief payment was $1,200, while the following two were $600 and $1,400, respectively, according to USA.gov/.

The Newsweek poll took place online among 1,500 eligible U.S. voters for Oct. 23-24.

MY COMMENT

HELLO......these FREE CHECKS are called....."Stimulus checks" for a reason. They "stimulate" the economy. In other words they CAUSE inflation. It is simply IDIOTIC that we would pour more stimulus gasoline onto the inflation fire.

EVERYONE wants their FREE GOVERNMENT MONEY. So far we are NOT going down this road on the Federal level although many states and cities have done so. Once we go down this road too many times....we will never be able to stop. This is also part of the reason that the labor and jobs markets are TOTALLY SCREWED UP.

As a professional musician, I am basically a 1099 contractor. When the pandemic happened I could have signed up for that FREE MONEY.....$600 per week. I made the personal decision that I was NOT going to do it. I did not need the money and even though I could qualify.....I was NOT going to take that money. Perhaps I was stupid for not taking what I could.....but if I had to do it over today....I would NOT take that money.

 

HERE is the markets today.....so far.

Stocks turn lower with Fed policy, earnings in focus

https://finance.yahoo.com/news/stoc...-113431605-113431160-113431843-151822924.html

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

"Stocks lost ground Tuesday morning, with another batch of earnings on tap and investors awaiting the Federal Reserve policy meeting and jobs data later this week.

The S&P 500 (^GSPC) turned down by about 0.2%, while the Dow Jones Industrial Average (^DJI) ticked lower by 0.3%. The technology-heavy Nasdaq Composite (^IXIC) fell by 0.1%. All three indices rose to start the session.

Investors digested economic releases on Tuesday, including job data that showed openings unexpectedly rose in September to 10.7 million from 10.28 million last month. Economists had expected openings to decrease to about 10 million, which would have been in line with the kind of cooling the Federal Reserve wants to see in the labor market.

Meanwhile, the October ISM manufacturing PMI index fell to 50.2, while economists surveyed by Bloomberg estimated 50.0. The ISM manufacturing employment index rose to 50.0 from 48.7, as economists surveyed by Bloomberg surveyed estimated 53.0.

The stock moves came after the major indices lagged on Monday as investors prepared for the Federal Reserve’s interest rate decision this week. Still, the Dow had locked in its best monthly return since January 1976, when the index gained 14.2%, data from Bespoke Investment Group showed.

The Fed’s aggressive pace of interest rate increases has pressured markets for much of the year, leaving investors hoping for any sign that the central bank will come off its hawkish stance.

The Fed is widely expected to raise interest rates by 75 basis points on Wednesday at the conclusion of its two-day policy meeting, but some strategists see the bank slowing the rate of increases moving forward.

JPMorgan economist Michael Feroli he sees "a step down from 75bps to 50bps and then to 25bps before this tightening cycle ends. Any indication from the Fed that [the] terminal rate is lower or that the tightening cycle ends in 2022 is likely to [be] digested bullishly by stocks. The biggest risk to this view is CPI coming in hotter than expected next week or in December."

Whatever the size of December’s move, “the Fed is in a tough position because they're very data dependent. And it's just unclear how quickly inflation is going to come down,” Public Markets Group Head Lisa Erickson told Yahoo Finance Live on Monday.

Also on the earnings front Tuesday:

• Uber (UBER): The ride-hailing giant posted a third-quarter loss but beat analysts’ estimates for revenue and showed a surge in bookings. Shares were up more than 14% in early trading.
  
  
• Pfizer (PFE): The drugmaker posted a better-than-expected quarter and raised its revenue outlook for the year despite higher prices offset slowing COVID-19 vaccine demand outside the US.
  
  
• SoFi (SOFI): The digital bank reported a smaller-than-expected quarterly loss and revenue that topped analysts estimates. The fintech company raised its guidance as the company added 4.7 million more customers by the end of the third quarter.
  
  
• Eli Lilly and Company (LLY): The pharmaceutical company beat third-quarter expectations but cut its 2022 outlook, citing exchange rates and tax law.
  
  
• Abiomed (ABMD): The maker of small heart pumps agreed to a nearly $17 billion takeover by Johnson & Johnson (JNJ) as the deal gives J&J exposure to a high-growth segment of medical technology.
  

Advanced Micro Devices (AMD), Airbnb (ABNB), Mondelez (MDLZ) and Clorox (CLX) are also set to report Tuesday.

And the week will finish with the October jobs report. The Labor Department’s report is expected to show monthly payrolls fall below 200,000, while economists surveyed by Bloomberg estimated 190,000 jobs were added or created last month.

In energy markets, Brent crude, the international benchmark for oil prices, fell to $94.36 a barrel Tuesday morning. Yields on the 10-year Treasury note fell as much as 12 basis points to below 4% before climbing back above that level later in the morning.

U.S. listed shares of Chinese companies including Alibaba (BABA) surged Tuesday as unconfirmed social media reports swirled that the Chinese government may be moving toward shedding its strict COVID policy."

MY COMMENT

Simply more IRRELEVANT stuff going on today. It is very relevant to the traders. But to actual.....INVESTORS.....not so much. We......the investors.....sit and wait.

 

Getting ready to head out to get my second Shingrix shot. More fun than the markets today.

I have not bothered to look at my account today since I know it is down more than the averages due to the particular stocks that I own. I will look later in the afternoon when I get back.

EMMETT.....get on those phones.