The Long Term Investor

Back from running around today. Not that I missed anything.....it was a red day for me. with the SP500 beating me today by 1%.

My winners today were....NKE, NVDA, and TSLA. That is it......but better than nothing. I actually had a moderate loss day today. I still have a good portion of my cushion till I am back down to my low of the year......for the FORTH TIME. I seem to be stuck in a trading range....just like the general averages.

 

Tomorrow is FED DAY.....it will be nice to get it out of the way early this month.

 

Here is where we are headed tomorrow.......as if it is a big secret.

Fed expected to again raise rates by 75 basis points then 'lay the ground for a step down'

https://finance.yahoo.com/news/fed-expected-to-again-raise-rates-223821317.html

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

"The Federal Reserve is widely expected to raise its benchmark interest rate by three-quarters of a percentage point for the fourth meeting in a row on Wednesday after two days of Federal Open Market Committee meetings.

And after that, markets expect the central bank to come off its hawkish stance to lower inflation and slow down the pace of rate hikes unless data continues to show stubbornly hot inflation.

“We do expect Chair Jerome Powell to… use the post-FOMC press conference to lay the ground for a step down in the pace of rate hikes,” Michael Pearce, senior US economist Capital Economics, wrote in a note to clients. “He could do so by acknowledging the slowdown in the real economy already underway and emphasizing the lags between slowing economic activity and weakening price pressures.”

Some officials felt at the September meeting that central bank could slow the pace of rate hikes at some point and assess impact of previous rates hikes on inflation, according to minutes from the meeting.

Pearce says as interest rates rise above a level of neutral — a level that neither spurs nor slows economic growth — he expects Fed officials to talk about balancing raising rates to cool inflation with the risk of raising rates too high and precipitating a recession.

San Francisco Fed President Mary Daly recently laid the table for the Fed to slow down the pace of rate hikes, saying that the Fed should be talking about "stepping down" at some point when inflation data show signs of abating.

"We might find ourselves, and the markets have certainly priced this in, with another 75-basis-point increase," Daly said at a meeting of the University of California, Berkeley's Fisher Center for Real Estate & Urban Economics' Policy Advisory Board last week. "But I would really recommend people don't take that away and think, well it's 75 forever."

Data appear to point to signs that domestic demand is being pushed down by higher interest rates. Final sales to private domestic purchasers — a measure of consumer and business spending used to assess underlying demand in the economy — inched up at a 0.1% annual rate in the third quarter after rising 0.5% in the second quarter and 2.1% in the first quarter.

Imports meanwhile, fell in the third quarter by nearly 7%, pointing to sluggish consumer spending.

The job market is also cooling, with job openings falling sharply in August and the job quits rate trending lower while fewer new jobs being minted on a monthly basis. Economists project that Friday's job report will show that 200,000 nonfarm payrolls were created in October, a result that would be down from the 263,000 jobs created in September and down from the monthly average of 420,000 in 2022.

There are also signs below the surface that inflationary pressures are easing. The employment cost index showed private wages and salaries rising by 1.2% in the third quarter, down from 1.6% in the second, pushing the annual growth rate down from 5.7% to 5.2%.

The Fed is also aware of lags in the accounting of rents in the consumer price index. While rents and owners’ equivalent rents continue to accelerate in official CPI data, Apartment List, a private provider of rent data, showed rents declining in growth to 6% in October from a peak of 18%.

“That is still too rapid for comfort," Pearce noted, "but the direction of travel is clear, and strongly suggests that a significant slowdown in CPI shelter inflation is eventually coming."

Official measures of inflation aren’t easing as quickly as officials hope. The Fed’s preferred measure of inflation — the price consumption expenditures index (PCE) excluding volatile food and energy prices — rose by 5.1% in September and 6.2% on a headline basis. That’s down from 7% but still far from the Fed’s 2% inflation target. And the consumer price index — excluding volatile food and energy prices a stickier measure of inflation — rose by 6.6% in September, accelerating from 6.3% in August and 5.9% in July.

“The November FOMC meeting is not about the November policy rate decision,” Bank of America analyst, Michael Gapen, wrote in a research note to clients. “Instead, the meeting is about future policy rate guidance and what to expect in December and beyond.”


The Fed is projecting interest rates will need to rise to between 4.5% and 5% next year to bring inflation down toward the central bank's 2% goal. Once the policy rate reaches what the Fed feels is a sufficiently restrictive level, they would maintain that level for “some time” until there was “compelling” evidence that inflation was on course to return to 2%.

“PCE, the GDP data all point towards the direction of the slowdown down to 50 basis points for the December meeting,” Wilmington Trust Chief Economist Luke Tilley told Yahoo Finance. “There’s even the possibility of slowing down more to 25 basis points depending on the data. I expect language from Chair Powell that guides markets towards a slowdown.”"

MY COMMENT

I have no speculation on rate increases after December. It is clear that December is going to be either 0.75% or 0.50%. I would...."guess"....that January will probably also be 0.50%. Beyond that.....who knows and who cares.

 

HERE....is the real news for many investors.

Amazon sell-off pushes market cap below $1 trillion for first time since April 2020

https://www.cnbc.com/2022/11/01/ama...n-below-1-trillion-first-time-since-2020.html

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

"Key Points

• Amazon’s stock closed down Tuesday for a fifth straight day, falling to the lowest since April 2020.
• Last week the company projected sales in the holiday quarter would be far below expectations.
• The stock dropped 5.9% to $96.79.

Amazon has exited the trillion-dollar club.

Shares of the e-retailer plunged 5.9% on Tuesday, falling for a fifth straight day and closing at their lowest since April 2020. The sell-off has erased almost all of the stock’s pandemic surge.

Investors continued to punish the company for last week’s disappointing fourth-quarter forecast. Amazon said revenue during the holiday quarter would grow 2% to 8% over the year-ago period, far below analysts’ estimates. The cloud division, Amazon Web Services, also reported weaker-than-expected sales.

It’s the first time Amazon’s market cap has been below $1 trillion since April 2020. The stock has plunged 42% in 2021 and is on pace for its worst year since 2008, when it dropped 45%. The only other year that was worse was during the dot-com crash of 2000, when the company lost 80% of its value.

Like the rest of Big Tech, Amazon has struggled this year due to a slumping economy, soaring inflation and rising interest rates. On top of that, Amazon has been forced to scale back after expanding dramatically during the pandemic, now that consumers have returned to stores.

Amazon has been the second-worst performer in the Big Tech group this year, behind Facebook parent Meta, which has plummeted 72%. Meta told investors last week that revenue in the fourth quarter would likely decline for a third straight period"

MY COMMENT

It is IMPOSSIBLE to know what is going on with this company due to the hang-over from the covid lock-down and the bear market.

As I have said in the past.....I have this company as a TWO YEAR WATCH. I am assuming that a couple of years will have us out of this bear market and out of the lock-down drag on companies. If that is true....I want to see a year or two of what this company is doing in a normal business environment in order to evaluate their business and ESPECIALLY the new managements ability to produce. I have STRONG doubts about Amazon at the moment.....much of it focused on the current management....but am not going to immediately sell.

If they can not put up good numbers and show good management once we are back to relative normal....I will sell the stock.

This company is in a very dangerous time period......the time when a FOUNDER leaves the company and turns over the running of the business to others. I have NOT seen anything so far to give me any confidence in the new management. The other issue is the fact that this is NOW a mature company. I need to see that they can continue to put up good earnings numbers as a mature business.

Up to now they have had the benefit of the doubt and there have been many excuses for their performance. That will end some time over the next couple of years.

 

YEP.....nothing matters today....it is simply the FED that will be the focus over the next couple of days. We might be green......we might be red....but either way it is all about the FED.

Kind of SILLY actually....but that is how the short term works.

 

Hi Independentcandy.

Things are all good here. Well nearly.....I got my Shingrix...second shot....yesterday and the side affects are kicking my ass. Fever, chills, etc, etc. So I have not done much reading today.

As to AMAZON........time will tell for them. I would not say that I am frustrated. BUT......I would like to get some clarity....which is impossible right now with the bear market and the post-covid distorted environment which continues to hammer the economy.

One thing about me.....I am an EXTREMELY CLINICAL person when it comes to money and investing. I have no problem selling a stock when the time comes. With Amazon......I dont want to sell now since there is no clarity. So I have it on a...."mental"....two year watch. If or when I sell that stock.....or anything else actually.....I will just put the proceeds into the SP500 Index. That would allow me to STILL have fair exposure to Amazon....and ALL my favorite BIG CAP socks......in case my opinion turns out to be wrong.

EVERY company eventually becomes a mature company. At that point the thing is....can they continue to operate at a high level and put up good numbers for the LONG TERM. A perfect example is COSTCO......that company went through a long time of extreme growth. But now.....for many decades they have been a relatively mature company.....but their management and their company operations......are exceptional year after year. They stick to what they do and have never seemed to lose track of what got them to this point in their business. They do what they do best....over, and over, and over, and over.

 

The good news for investors is that we are approaching the end of the big FED increases over the next few months. I would not be surprised to see the current bear market last for another 6-12 months minimum. On the other hand it could end with a bang and simply be gone before that. The economy is certainly strong in spite of everything. And....earnings continue to come in well...in spite of the past 2+ years of dismal predictions.

I do feel like I am seeing DEMAND DESTRUCTION at the various regular places that I patronize.

 

This little article sums up much of my view......since I am ALLWAYS BULLISH on the long term future.

Weekly Market Pulse: Rational Optimist

https://alhambrapartners.com/2022/10/31/weekly-market-pulse-rational-optimist/

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

"I have often been accused over the years of being too optimistic and I will plead guilty to having a little rose-colored tint in my glasses. I am an optimist by nature and I search constantly for good things to write about. There are more than enough people out there willing to tell you the world is coming to an end, in more interesting ways than I could ever imagine. I don’t feel like I can add much to the doom and gloom canon. Besides, the sunny side of the aisle is pretty roomy right now. Come on over. Be an early adopter!

Rose-colored my glasses may be but they don’t blind me to the potential problems investors face; I am a rational, realistic optimist. The Fed is going to meet this week and the course of the stock and bond markets, at least for a while, will be determined by what is decided at the FOMC meeting. That is not how this is supposed to work but it is the reality of the situation, at least for now. We should be concentrating on making long term investments that will benefit us, and the economy, instead of worrying about what some central banker might say. But in the age of the loquacious central banker, we will instead focus our attention on Jerome Powell. Sigh.

Regardless of what Powell and the others on the FOMC do now, we should all remember that we are here, in this inflationary mess, because of their previous actions. Inflation is a monetary phenomenon and they are the folks in charge of monetary policy. They underestimated, by a wide margin, the price to be paid for financing $7 trillion in fiscal folly. Expecting them to now get things right is the triumph of hope over experience. A mistake now, to try and correct that last one, seems almost assured. The question, as with so many things in economics, is depth, how deep the gash of the economic slowdown. Parson Powell has already told us that we need to feel pain – repent, ye free spending consumers! – if we are to atone for his mistakes. The only question is how much he can inflict before the economy rolls over or the politicians call for his scalp.

I personally think that slowing nominal GDP growth is going to prove challenging. If the Fed’s goal is to kill inflation by pushing the economy into recession, they’re going to have to overcome the huge pile of cash they left behind last year. Household and corporate balance sheets are remarkably liquid. Yes, there has been some drawdown in the “excess” savings of the COVID era, but it’s only about a quarter of the total so far. At the current pace, the “excess” will be gone in just 3 short years.

The Fed may be able to scare people sufficiently with an economic slowdown to get them to pull back spending temporarily. But as soon as the economy starts to turn up, they’ll start spending again. And, since the savings rate generally rises during recession, they’ll replenish the pile of “excess” savings.

But right now, the economy is slowing and the Fed is pursuing an aggressive tightening policy. The yield curve is almost entirely flat to inverted, the 3-month T-bill rate joining the rest of the curve, from 6 months to 7 years, in rising above the 10-year rate. The inversion of the 10-year/3-month spread has, in the past, heralded a coming recession. Of course, it tells us nothing about timing; the average lead time from inversion to recession in the last four recessions is 14 months. So, yes we’re on recession watch but we will need confirming signals to take action. We have a few now – LEI down six months in a row for instance – but there are important checkboxes, such as credit spreads, that remain blank.

This isn’t a situation that demands immediate action. The trend of the dollar and interest rates is still up at this point and stocks are, despite this rally, still in a downtrend. An opportunity is likely to arise when one of those big trends changes. If it is because rates start to fall there will be an opportunity in bonds. If it is because the dollar gets in a downtrend the opportunity could be in gold or commodities. Stocks would likely benefit from stability, in rates and the dollar.

I will expect to get emails this week about how I’m a Pollyanna because I have the gall to think of the US economy as, for lack of a better word, resilient. Imagine how negative the mood is if mere resilience is the optimistic view. Frankly, I don’t know how you could view the US economy as anything but resilient. It has taken a lot of abuse over the years, from monetary and fiscal authorities, and it keeps coming back for more. The US economy isn’t resilient because of the Federal Reserve or the Congress or the President. It is in spite of them."

MY COMMENT

Agree completely. The resilience in the economy and business is because of the POWER OF FREE MARKET CAPITALISM. It will be a sad day when or if our country ever abandons this system for anything else. Without a free market business system.....the ability of the average person to invest and grow their money for their family will be severely limited. At that point it will be government and others in power that determine the winners and losers. AND....as we have seen all though history they will be very STINGY with sharing....with the average family.

 

HERE is the economic report of the day....which no one will care about....since it is FED day.

Private payrolls rose 239,000 in October, better than expected, while wages increased 7.7%, ADP says

https://www.cnbc.com/2022/11/02/adp-jobs-report-october-2022.html

MY COMMENT

My total focus continues to be....EARNINGS and the ELECTION.....for the short term. I post this stuff.....but....the last thing I am going to let impact my investing is economic releases like this one.

 

Looks like the markets like the FED stuff today.....so far.

Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

https://www.cnbc.com/2022/11/02/fed...-to-the-highest-level-since-january-2008.html

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

"The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.

In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.

The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move. Specifically, some Fed officials along with Wall Street economists and strategists in recent weeks had talked of a “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.

That language was not overt in the post-meeting statement from the rate-setting Federal Open Market Committee, though there was a tweak that could point to an adjustment in policy.

This week’s statement expanded on previous language simply declaring that “ongoing increases in the target range will be appropriate.“

The new language read: “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.“

The statement reiterated that policy changes “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.“

Markets will look to Chairman Jerome Powell’s news conference at 2:30 p.m. for more clarity on whether the Fed thinks it can implement less restrictive policy that would include a less dramatic level of rate hikes to achieve its inflation goals.

Along with the tweak in the statement, the FOMC again categorized growth in spending and production as “modest” and noted that “job gains have been robust in recent months” while inflation is “elevated.” The statement also reiterated language that the committee is “highly attentive to inflation risks.“

The rate increase comes as recent inflation readings show prices remain near 40-year highs. A historically tight jobs market in which there are nearly two openings for every unemployed worker is pushing up wages, a trend the Fed is seeking to head off as it tightens money supply.

Concerns are rising that the Fed, in its efforts to bring down the cost of living, also will pull the economy into recession. Powell has said he still sees a path to a “soft landing” in which there is not a severe contraction, but the U.S. economy this year has shown virtually no growth even as the full impact from the rate hikes has yet to kick in.

At the same time, the Fed’s preferred inflation measure showed the cost of living rose 6.2% in September from a year ago – 5.1% even excluding food and energy costs. GDP declined in both the first and second quarters, meeting a common definition of recession, though it rebounded to 2.6% in the third quarter largely because of an unusual rise in exports. At the same time, housing prices have plunged as 30-year mortgage rates have soared past 7% in recent days.

On Wall Street, markets have been rallying in anticipation that the Fed soon might start to ease back as worries grow over the longer-term impact of higher rates.

The Dow Jones Industrial Average has gained more than 13% over the past month, in part because of an earnings season that wasn’t as bad as feared but also amid growing hopes for a recalibration of Fed policy. Treasury yields also have come off their highest levels since the early days of the financial crisis, though they remain elevated. The benchmark 10-year note most recently was around 4.04%.

There is little if any expectation that the rate hikes will halt anytime soon, so the anticipation is just on a slower pace. Futures traders are pricing a near coin-flip chance of a half-point increase in December, against another three-quarter point move.

Current market pricing also indicates the fed funds rate will top out near 5% before the rate hikes cease.

The fed funds rate sets the level that banks charge each other for overnight loans, but spills over into multiple other consumer debt instruments such as adjustable-rate mortgages, auto loans and credit cards."

MY COMMENT

The talk by Powell will be the big factor today and tomorrow for the markets. We are at this moment.....about 15 minutes from that happening today.

 

They propped up the economy during the pandemic.....that is really funny. You are right Smokie....they dont have a clue what they are doing or why.

It is like they have two goals.....neither of which have anything to do with inflation......CRASH the stock markets......and......CRASH the housing markets. Neither of these has anything to do with fighting inflation.