The Long Term Investor

The markets are having a nice strong day today. ALL we have to do is hold on for another 49 minutes.......a hard thing sometimes lately.

 

I was talking about my marketing training a bit earlier and how EVERY business is a service business.

Reminds me of a story from my business life.

I was a small business owner for about 22 years. At one point I needed a lot of word processing power......so I researched what was available.....especially printing options. I decided that the IBM Displaywriter was what we needed. I needed two of the systems and two printers. The printers had the capability to hold different papers and envelopes at the same time. With everything it was going to be about a $50,000 deal for IBM.

I called IBM and from that moment on.....they were the most ARROGANT, asses, you can imagine. Their sales people thought they were God. Apparently my little $50,000 deal was JUST small potatos back in the 1980's. I did do the deal with them.....but never forgot the arrogant and demeaning service they provided. Myself and many other people I know were extremely happy when they fell onto hard times not too long after when they stumbled during the PC revolution.

To this day I still have bad feelings for that company based on that one deal.

 

Since I am telling tales from business.....here is another one.......a good lesson. Back in the 1980's in my area due to all the de-regulation and other issues the phone companies were no longer leasing business phone systems to business. Most businesses were buying and having their own phone systems installed. I did the same thing......bought and owned my business phone system.

A business owner friend of mine and I had a mutual friend........a young lady.......that was a sales person for one of the larger phone sales and service companies. She was one of their newest sales people. She was a go-getter and would often go into the office on the weekend.....where she would answer Saturday calls hoping to generate a new client.

Back than in my area there were still a good number of national companies that had local headquarters and were still family owned. Companies like Weyerhaeuser.

One Saturday as she was working....the phone rang. I cant remember the name of the company....but is was one like Weyerhaeuser.......and they wanted to replace the entire phone system n their company HQ. She ended up with a commission in the neighborhood of about $150,000.....as the sales person that brought in that job.

No one else wanted to work on phone duty on Saturday.....but being the low person on the totem pole and having no kids or family she liked to do the phone on Saturday. BECAUSE of her work ethic......she ended up with a HUGE client. She put herself in the right place at the right time.......and "luck" did the rest.

The not so nice end to the story.....her company tried to screw her out of the commission. In the end she won in court and they had to pay.

 

AND.....one other semi-war-story of the same type. EXCEPT......I was the customer in this case.

Back when I was ready to put my income annuities in place......I did my research and decided that I would use a company called "Immediate Annuities". They are known for being a company that sells Income Annuities......as their main product.

I got the number from their web site and called one Saturday morning. i really did not expect anyone to answer but being a..... FANATIC.....I wanted to call right away and not wait till Monday.

The LUCKY lady that answered the phone ended up doing one of the largest deals of her career.......$1.8MILLION in annuities. She said it was the largest single commission she had made.......with little to no work.

I knew I wanted to purchase SIX......five year deferred......Income Annuities. All she had to do is run the current figures and give me a list of companies and payouts.......and send me the various contracts and papers to sign.

It was a SLAM DUNK for her......since I had already done my research and knew the approximate pay-outs and other details. I just needed a person that was licensed to get the actual quotes and put the annuities in place.

I am sure most people that worked there would say it was just "LUCK"......but.......was it luck......or was it because she was willing to work on a Saturday and put herself in that position to get that quick and easy deal.

 

A very good day in the markets today. I was SOLID green today.....10 for 10. I also got in a beat on the SP500 of.....0.40%.

My year to date LOSS is now......(-24.3%). AND.....I feel pretty good about that. It is well off my low point of the year.

 

HERE is the basic market news of the day at the close today.

Stocks rise against backdrop of Fed comments, China COVID surge

https://finance.yahoo.com/news/stock-market-news-live-updates-november-22-2022-122736516.html

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

"U.S. stocks moved sharply higher Tuesday, with gains accelerating into the final hour of trading after a mostly uneventful pre-Thanksgiving session.

The S&P 500 (^GSPC) and technology-heavy Nasdaq Composite each climbed 1.4%, while the Dow Jones Industrial Average (^DJI) jumped nearly 400 points, or about 1.2%. The S&P 500 closed above 4,000 for the first time since September, while the Dow notched its highest close in three months.

Federal Reserve Bank of Cleveland President Loretta Mester said Tuesday that restoring price stability remains top priority for herself and other members of the Federal Open Market Committee (FOMC), which sets monetary policy.

"We’re committed to using our tools to put inflation on a sustainable downward trajectory to 2%," she said, in an event hosted by her bank.

Mester's comments come one day after Federal Reserve Bank of San Francisco President Mary Daly Monday said officials may lift the U.S. central bank's key policy rate above 5% if inflation does not ease. Daly also noted that writing off a 75-basis-point hike in December is "premature" and that "nothing is off the table."

In commodities markets, oil pared Monday’s losses after plunging to January lows on fears that fresh lockdowns in China and a reported output increase by Saudia Arabia and OPEC may weigh on demand. Energy minister Prince Abdulaziz bin Salman has since refuted the prospect of an increase in production, helping oil climb back from declines. West Texas Intermediate (WTI) crude futures rose to around $81 per barrel after hitting $75 per barrel on Monday.

On the corporate side, shares of Zoom Video Communications (ZM) dropped nearly 4% after the the video-conferencing platform trimmed its annual revenue outlook and projected further challenges posed by waning demand for online meetings.

Shares of Abercrombie & Fitch Co. (ANF) and American Eagle Outfitters, Inc. (AEO), meanwhile, gained around 21% and 18%, respectively after reporting upbeat earnings that lifted sentiment around the retail sector's outlook.

A steep climb in COVID cases across China has set off a wave of new restrictions for the world's largest economy just weeks after investors cheered the end of aggressive lockdowns in the country.

‘’The specter of COVID is still hovering over the Chinese economy, threatening to cause fresh snarl ups for supply chains and demand for goods,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said in a note Tuesday.

The S&P 500 has started the holiday-shortened Thanksgiving week lower compared to previous years. According to data from Bespoke Investment Group, the Monday of Thanksgiving week has historically seen the index trade slightly lower, with a decline of 0.01%. In years when the index has been down 10% year-to-date or more, like in 2022, performance has been more positive, with an average 0.37% gain."

MY COMMENT

All in all.....a good day for investors. I am really liking how the markets are acting lately compared to early in the year. We seem to be much more into a normal market now....even though the direction is still flat to negative. Looks like we might even be in a good place by the start of the new year.

 

Thanksgiving Eve markets looking good today. I like how the day is progressing so far.

I have been listening and watching the markets so far......while making a pie for tomorrow. I have a really good basic Texas Pecan Pie recipe that came from my mom. So....I often make one or two each year for Thanksgiving and Christmas. I only did one this morning since we are only going to have 7 people tomorrow and we also have one of those GIANT Costco pumpkin pies and will also have a guest bringing a cherry pie.

Now that the pie is done I can focus a bit on what is going on in the markets today.

 

Today seems like a typical pre-holiday market to me.

Stocks rise at market open, oil sinks

https://finance.yahoo.com/news/stock-market-news-lives-updates-november-23-121031350.html

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

"Stocks were slightly higher early Wednesday while the price of oil dropped over 3% ahead of the holiday weekend for U.S. investors.

Shortly after the market open each of the S&P 500, Dow, and Nasdaq were higher by more than 0.1%, with the Dow pacing gains, rising 0.25% about 5 minutes after the opening bell on Wall Street.

Wednesday will serve as the final full day of trading this week, with U.S. markets closed tomorrow for Thanksgiving and markets open for just a half day on Black Friday.

Investors are facing a busy economic calendar ahead of the holiday weekend, with the latest data on weekly jobless claims showing 240,000 new filings for unemployment insurance were made last week, the most since mid-August. Economists expected initial claims to total 225,000 for the week ending November 19.

Durable goods orders for October were also released early Wednesday, showing orders rose 1% last month against expectations for a 0.4% increase, according to data from Bloomberg.

Data on manufacturing activity, new home sales, and the minutes from the Fed's latest policy meeting are also set for release on Wednesday.

Traders are looking to build on recent momentum for the U.S. stock market, with the S&P 500 closing above 4,000 on Tuesday for the first time in two months while the Dow closed at a three-month high.

Over the last month, the Dow is up nearly 10%, while the S&P 500 is up more than 6.5%. The tech-heavy Nasdaq continues to lag, rising less than 3% over that period as higher rates and the collapse of crypto markets weigh on the broader tech industry.

Still, recent market action has some strategists growing more bullish towards year-end, even as high profile teams at Morgan Stanley and Goldman Sachs issued more cautious outlooks for the stock market this week.

"The market is like a coiled spring," BMO Capital Markets' chief investment strategist Brian Belski told Yahoo Finance Live on Tuesday. "I think the market is going to continue to...climb higher. I do really think that there's a good shot that we're going to be well above 4,000 [on the S&P 500] at year-end."

Belski has a year-end price target of 4,300 on the S&P 500, which implies the index could gain another 8% or so through the end of this year.

Elsewhere in markets early Wednesday, the price of oil remained under pressure with WTI futures trading down 3% to around $78.20 per barrel, within a few dollars of 2022 lows amid conflicting reports on Saudi Arabian output this week and news the U.S. is closing in on announcing a price cap on Russian oil exports.

In crypto markets, the fallout from the collapse of FTX continues to reverberate through the industry, though the price of bitcoin was up a few percentage points early Wednesday to trade near $16,580.

On Tuesday, Digital Currency Group, the parent company of troubled exchange Genesis Global, became the latest major crypto player to come out and reassure investors that a bankruptcy filing was not imminent.

In a memo to DCG employees, CEO Barry Silbert said the decision to halt redemptions and new activity on Genesis last week resulted from a "liquidity and duration mismatch in the Genesis loan book."

Silbert disclosed there were intercompany loans made between DCG and Genesis, but argued these loans were made "in the same vein as hundreds of crypto investment firms."

On the earnings side, results this morning from Deere & Co. (DE) sent shares higher by about 4% with the agricultural giant reporting profits that topped expectations.

John Deere tractor is seen during a tractors race called 'Traktoryja' organized as part of traditional Dozhinki harvest festival. Gieraltowice, Wadowice County in Poland on August 28, 2022. (Photo by Beata Zawrzel/NurPhoto via Getty Images)
Other movers early Wednesday included names that released results after Tuesday's market close, including HP (HPQ), Nordstrom (JWN), and Autodesk (ADSK).

HP shares were down about 0.5% early Wednesday after the company announced plans to reduce its workforce by up to 12%, or by 6,000 jobs, by the end of its fiscal 2025 in response to a slowdown in the PC market.

Nordstrom shares dropped as much as 8% early Wednesday after reporting a sales decline in its most recent quarter and forecasting lower profits for the full year.

Autodesk (ADSK) shares were down more than 9% after the company cut its outlook for billings and cash flow this year, citing "less demand for multi-year, up-front and more demand for annual contracts than we expected.""

MY COMMENT

I like the Durable good data. Today is a day focused on the release of data.....which I dont really care much about as a long term person.

Earnings are doing just fine.......yu can tell by the fact that there is very little being said about them.

 

I dont see much being said about it but the Ten Year Yield is way down from the peak a month or so ago. It is now way down in the 3% range at.......3.711%. I suspect this is a big part of the market gain today.

 

HERE we go again......the typical earnings FEAR MONGERING. The current earnings have come in nicely and much better than expected. SO.......just like we have seen EVERY quarter for the past 2+ years........we move on to the bad mouthing and fear mongering of the next quarter.

Why an economic slowdown could be a nightmare for corporate earnings in 2023: Morning Brief

https://finance.yahoo.com/news/economic-slowdown-earnings-nightmare-morning-brief-103121935.html

This "stuff" is nearly always uniformly WRONG. Why? Because this sort of media stuff is usually based on general economic data......NOT......actual business data and projections for specific companies. It is ALL generalized....off the cuff....opinion.

Basically this constant "stuff" is simply LAZY journalism.

 

I am setting a GOAL for this year.....for the last FIVE market weeks of 2023. My goal is to get my YTD loss below 20%.

Right now I am at a YTD LOSS of (-23.6%).

Of course.....My goal is TOTALLY passive. I will not be actively doing anything to achieve my goal. I will simply be waiting, watching, and depending on the markets to get me there by year end.

With the GIANT hole that the markets made for themselves in the first couple of months of 2022......I will consider it a major victory if I can end the year below........(-20%).

 

This is very good news for the shorter term markets.....at least as to the FED speculation.

U.S. business activity weakens further in November: S&P Global survey

https://finance.yahoo.com/news/u-business-activity-weakens-further-150711173.html

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

"WASHINGTON (Reuters) - U.S. business activity contracted for a fifth straight month in November, with a measure of new orders dropping to its lowest level in 2-1/2 years as higher interest rates slowed demand.

S&P Global said on Wednesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 46.3 this month from a final reading of 48.2 in October. A reading below 50 indicates contraction in the private sector. Activity is slumping under the weight of the Federal Reserve's most aggressive interest rate-hiking cycle since the 1980s aimed at curbing inflation by dampening economic demand.

The flash composite new orders index dropped to 46.4, the lowest level since May 2020, from a final reading of 49.2 in October. Outside the initial wave of the COVID-19 pandemic, this was the worst reading since 2009.

"Companies are reporting increasing headwinds from the rising cost of living, tightening financial conditions - notably higher borrowing costs – and weakened demand across both home and export markets," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

But there were some glimmers of hope in the fight against inflation. The survey's measure of prices paid by businesses for inputs slipped to 65.7, the lowest level since December 2020, from a final reading 67.0 in October. That reflected an easing in supply bottlenecks.

Businesses were also raising prices for their products at the slowest pace in just over two years, in part because of ebbing demand, with some firms reporting concessions and discounts to entice customers to place orders.

The moderation in the price measures fits in with data this month showing a significant slowdown in consumer and producer inflation in October.

The survey's flash manufacturing PMI dropped to 47.6 this month, the lowest reading since May 2020, from 50.4 in October. Economists polled by Reuters had forecast the index at 50.

New orders remained subdued, but price pressures continued to abate as manufacturers signaled the first improvement in supplier performance since October 2019. But the faster lead times were often because of reduced demand for inputs.

Average input prices increased at the softest rate in two years, but factories still faced challenges finding skilled labor. This suggests the slowdown in inflation will be gradual as wages remain sticky.

The survey's flash services sector PMI decreased to 46.1 from 47.8 in October. Services businesses also reported weak demand and a moderation in input prices."

MY COMMENT

Assuming that anyone pays attention to this "stuff"......we should see this trigger more FED pivot speculation. A foolish game being played by the media and short term traders.

 

In REALITY.....nothing that happens today matters......until.....the FED minutes come out this afternoon. As usual the FED wil drive the short term markets.

 

HERE is some good news for those of us that already own a home. Of course averages are meaningless when it come to real property......it is all local, local, local. Even city or regional data is worthless. I prefer to think of real estate in terms of the BEST school districts. Owning a home in a GREAT school district is a big savings for people with kids. It allows them to send their kids to the public schools rather than paying the big tuition for private school.

U.S. October new home sales jump despite higher mortgage rates

https://www.marketwatch.com/story/u...-october-11669216932?siteid=yhoof2&yptr=yahoo

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

"The numbers: U.S. new home sales rose 7.5% to a seasonally-adjusted annual rate of 632,000 in October from a revised 588,000 in the prior month, the Commerce Department reported Wednesday.

Analysts polled by The Wall Street Journal had forecast new-home sales to fall to a seasonally-adjusted annual rate of 570,000.

The data are often volatile. Sales in September were initially reported at 603,000.

Key details: The median sales price of new houses sold in October jumped to a record $493,000, up from $455,700 in the prior month.

The supply of new homes for sale rose 1.5% between September and October, equating to a 8.9-month supply at the current sales pace. This is up from a 5.7-month supply in January.

Regionally, sales rose sharply in the Northeast and the South but dropped in the Midwest and the South.

Big picture: New home sales continue to buck the trend in many housing indicators. With the Federal Reserve continuing to raise interest rates, mortgage rates have hit 20-year highs and affordability has been declining. There could be some buyers rushing to complete purchases before homes get even more expensive. Other analysts point to a high cancellation rate for new home sales that is not reflected in the data.

Looking ahead: “The median and average new home price delivered was sharply higher in October, suggesting the high-end consumer has been able to withstand the increase in mortgage payments. Overall, while the rebound was encouraging, this report does little to change the outlook that housing will remain a drag on economic growth for several more quarters,” said economists at Contingent Macro."

MY COMMENT

AMAZING......that the average MEDIAN PRICE is now just about $500,000. That probably gets you a nice house but nowhere near luxury or custom.

CONSIDER.....how things have changed for real estate over the past 32 years.

We bought our 5th home in 1990. At that time we paid $720,000.....probably equal to a $4MILLION house today. In fact I know from recent sales that is about what that house is worth today.

That small neighborhood of about 60 houses......had a price range of about $500,000 to $720,000 at that time. I am talking about a neighborhood that at the time was too expensive for Doctors or Lawyers. The whole neighborhood was big company CEO's, Professional Athletes, and very high powered business people. We had at least four current or former Pro Football players, a Pro Baseball player, and a couple of Pro Basketball players. We had the President of MSFT about five houses down.

We were the crazy outliers of the neighborhood....being LOWLY small business owners. We were also the youngest people in the neighborhood at age 41. We moved there to get into a great family neighborhood and schools for our kids. Before that we were living in an old Farm House on about 8 acres of low bank, prime, Puget Sound waterfront. That was a great property but the house was only about 1600 sq ft and we had a growing family. AND....being waterfront.....it was not a neighborhood feel for kids. So, we made the choice to move into a traditional neighborhood for our kids. It turned out to be a great choice.

What is AMAZING in how property prices have progressed is the FACT that......today's median price of about $500,000......would have bought homes back than in that neighborhood.

Buying a home is a great investment. Most people that buy a well located home.....will make a nice profit. The BIG BONUS is the lifestyle and place to live that it provides in the meantime.

What allowed us to buy that house was our INVESTING RETURNS. We made really good money in my business......much more than most people.....but it was the added money from our long term investing that allowed us to buy that house and do many of the things we have done over our lives.

 

Speaking of the neighborhood above.

We had never lived in that type of neighborhood prior to that time. It was very interesting to see the HUGE amount of UPWARD and DOWNWARD mobility that went on. It was an eye-opener that having money was not a guarantee of life long success.

It was also interesting to meet people that were top corporate management. Most of the men were older guys that did not come from wealth or power. They were guys that had gone through WWII and had gotten an education after the war and worked hard and made something of themselves. Very down to earth people. The women tended to be either long term wives that had also worked hard and helped their family be a success......or.....some TROPHY WIVES.

We lived there for 10 years till my one kid graduated from High School........at that point we moved back to Texas. It did turn out to be a great FAMILY area to raise kids.

As an aside.....there was one family that lived a couple of houses down from us. The guy was a mid-level manager at MSFT.
BUT......he had an employee number below 50....he was a very early MSFT employee. Over the first 4-5 years that we lived there MSFT stock split many times and the price soared. By the time we left that family rather than buying a lake house.......went out and bought an entire lake with a large, multi-building, camp on the lake. Talk about being in the right place at the right time....being one of the first 20-50 employees of MSFT.

 

I have been running around all afternoon. I finally got a chance to check my account. YES.....another very nice day. I was in the green....with only one down stock.....HD. I also got in a beat on the SP500 by 0.31% today.

A very good way to enter Thanksgiving....with a day off for investors and the markets. With only a half day on Friday......we need to end the week with a good GAIN.

 

HERE....is the story of the day which might carry us to a good gain on Friday.

Fed minutes show 'substantial majority' support slowing pace of rate hikes

https://finance.yahoo.com/news/fed-minutes-november-23-fomc-195233940.html

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

"A “substantial majority” of Fed officials believe it will soon be time to slow down the central bank's current pace of rate hikes.

Minutes from the Federal Reserve's policy meeting earlier this month released Wednesday showed signs the central bank is set to shift away from its campaign of raising interest rates by 0.75% at its policy meeting next month.

"A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee's goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate," the minutes showed.

"In addition, a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate."

The minutes showed that while the pace of rate hikes might slow, how high the Fed ultimately raises interest rates during its current cycle has likely increased in recent months.

Officials noted that persistent inflation suggests rates will likely settle at levels "somewhat higher than they had previously expected."

Following the release of these minutes, stocks pushed higher on Wednesday afternoon.

In the minutes, officials noted that with the policy rate approaching a “sufficiently restrictive” stance, the level the Fed ultimately raises interest rates to has become more important than the pace of rate hikes.

“Participants agreed that communicating this distinction to the public was important in order to reinforce the Committee’s strong commitment to returning inflation to the 2 percent objective,” according to the minutes.

Several participants also felt that continued rapid policy tightening increased the risk of instability or dislocations in the financial system.

While the new focus has become how high the Fed will raise rates, many participants felt that there was significant uncertainty about the ultimate level of the federal funds rate needed to bring inflation back down to 2%.

Officials felt that purposefully moving to a more restrictive policy stance was prudent risk management given high inflation and upside risk to inflation. Members commented that recent data on inflation provided very few signs that inflation pressures were abating.

The minutes echoed Fed Chair Powell’s comments in the post-meeting press conference at the beginning of the month. Fed Chair Powell laid the groundwork to begin slowing down the pace of rate hikes at the central bank’s last policy meeting, but said the question of when to moderate the size of increases is less important than how high the central bank will ultimately raise rates to tame inflation.

Powell said interest rates will now need to rise higher than forecast until the Fed gets to a level that is “sufficiently restrictive.” Interest rate projections from the Fed’s policy meeting in September estimated rates would peak at a level of 4.6% next year. The Fed will release new projections at its December policy meeting.

In early November, the Fed raised interest rates by 75 basis points for the fourth straight meeting to a range of 3.75% to 4% that brought rates to their highest level since the end of 2007.

Markets are pricing in a 50-basis point move for the December meeting.

Fed Governor Christopher Waller said last week recent inflation data makes him more comfortable with the idea of raising rates 50 basis points at the central bank’s December meeting.

Cleveland Fed President Loretta Mester echoed Waller's comments in an interview this week, saying the Fed can likely "slow down" from its current pace of rate increases at its December meeting.

Though, some Fed members are still leaving 75 basis points on the table. San Francisco Fed President Mary Daly said Monday it’s premature to take another 75-basis point rate hike off the table if forthcoming inflation reports came in hot."

MY COMMENT

There is no way to predict what the FED will do in December.....but based on these minutes I am going with 0.50%. That might be the catalyst that we need to trigger a nice year end rally.

These minutes seem to indicate that the WORST of the rate increases is coming to an end....although wee will see lesser rate increases going forward for some time and the rates will stay high for some time.

This is good news for year end 2022.....and....for the coming year, 2023.