The Long Term Investor

Today is a carry-over day from yesterday. All down at the moment.

This is the reality of the short term....especially at this moment in time.....we are going to see a continuation of down days, weeks and once in a while months.

I see and hear a real DISCONNECT from the daily financial and business reporting on TV and online.......and....what I see and hear on the ground in reality land. Even among people that I know that are investors or in the financial business.....I dont hear or see any of this constant PIVOT stuff that I see in the media daily. In addition I dont know any one that is concerned about the FED.....other than being tired of their constant media appearances. These "things" are the media narrative.......and from what I see with regular people....they are a false narrative.

 

You know I say on here often...that the market bottom happened last June.

Why Stocks Bottomed Last June

https://allstarcharts.com/why-stocks-bottomed-last-june/

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

"This is a question I’ve been getting a lot.

“JC, how could you say we’re already in the 8th Month of a new bull market???”

The things people call me over email or on twitter are not something I would repeat in front of my mother, or daughter, and certainly not in front of any of you guys.

But I’m a big boy. I spent a lot of time on trading floors, dugouts and locker rooms. I’ve heard way worse.

It is interesting, however, to observe the feedback I get from just some basic arithmetic.

This isn’t like some random opinion I have about the economy, or Fed policy or earnings. This is just 3rd grade math.


Are more stocks going up? Are more stocks making new highs? Or are more stocks going down and making new lows?


Since June, the answer has been up and certainly not down.

Notice how the new lows list peaked in Q2. Even though some of the large-cap growth-heavy indexes made new lows later in the year, even for just a hot second, by that point there were almost no stocks left that were going down.



The bottom was in June.

The only people who want to argue against that are the ones left holding the bag in the few remaining names that kept falling.

But that’s only a tiny tiny part of the overall market. They may represent a larger weighting in some of people’s favorite indexes, but now whose problem is that?"

MY COMMENT

I omitted the end of this little article as not relevant.

BUT.....first......who cares when the market bottomed. As a long term investor it is simply not relevant. However.....it is important to give people HOPE for the future and strength to remain invested. At this moment it is clear that the market......DID....bottom in June of 2022. So far this bottom has held up against three or four attempts to breach it. Will it continue to do so? We will find out in hindsight.

 

Notice the use of the word....."narrative. Whose narrative? Why? Whose agenda and whose bias? Over the long term there is no such thing as a market narrative. It all comes down to REAL and ACTUAL results based on business reality and fundamentals. Anyway....

The 2023 investment narrative is already diverging from 2022: Morning Brief

https://finance.yahoo.com/news/the-...erging-from-2022-morning-brief-102349236.html

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

"Despite Wednesday's losses in the major U.S. indexes, stocks are flying out of the gate in 2023.

The Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) are having their best start to a year since 2019.

And in enjoying these gains in the new year, stocks are diverging from the trends that emerged in the second half of 2022. A move that has important implications for investors.

Start with the biggest loser of the day, the Dow Jones Industrial Average (^DJI), which was down 1.81%, or 614 points, on Wednesday, its worst showing in over a month. As of late December, the Dow had outperformed the Nasdaq by 20 percentage points — the most since the dot-com bubble crash two decades prior.

Despite this outperformance, however, the Dow ended 2022 down nearly 9%. There were few places for investors to hide in 2022.

But Wednesday, the Nasdaq outperformed the Dow by 57 basis points. Particularly notable coming on such a negative day for the market. In the first 11 trading days of the year, the Nasdaq is already up 4.69% compared to the Dow's meager 0.45% gain.

If we dive inside the benchmark S&P 500 and look at relative sector performance, 2023's year-to-date sector chart is nearly the inverse of 2022.


S&P 500 Sector performance year-to-date through Jan. 18., 2023.(Source: Yahoo Finance)
Last year's second-worst-performing sector is this year's best: Consumer Discretionary (XLY).

Helping matters are the sector's two largest megacap components — Amazon (AMZN) and Tesla (TSLA) — which are both nicely positive so far in 2023, gaining a little over 4% each.

The two other sectors besides consumer discretionary that house some of the market's biggest names — Tech (XLK) and Communication Services (XLC) — are also serving as leaders this year.

And let's not gloss over the strength in Real Estate (XLRE), which is up more than 5% after having just endured one of the most challenging housing markets in a generation last year. Another big narrative shift after 2022.

On the flip side, those red sectors in the above heat map — Utilities (XLU), Health Care (XLV), and Consumer Staples (XLP) — were the least-bad sectors after Energy last year. These sectors are also commonly referred to as defensive areas of the market for investors to find shelter in a storm. In the 2023 market, however, it seems safe trades aren't quite safe.

The bond market is also confirming moves back into these formerly unloved, growthy areas of the market that took the biggest hits a year ago.

On Wednesday, the yield 10-year on U.S. Treasury notes (^TNX) plummeted 16 basis points to 3.375%, a four-month low. All else equal, sinking bond yields favor growth stocks that depend on lower interest rates.

And although buying bonds is often seen as investors fleeing to safety, right now the bond bid appears firmly part of a risk on trade.

Finally, throw in Wednesday's market reaction to economic news.

December retail sales surprised to the downside with a drop of 1.1%, which follows a similar negative print in November. Investors seem to be pricing in this objectively bad news for what it is — bad news — instead of trying to play 4D chess with Jay Powell and the Federal Reserve.

Speaking of the Fed, the market's new favorite macro risk assets, bitcoin (BTC-USD) and ethereum (ETH-USD), are each up about 25% this year. Bitcoin and crypto have been particularly volatile around important Fed decisions and inflation data — leading risk markets to the upside at times, and downside at others.

Bottom line: Bitcoin is a clear leader this year among the "fringier" parts of the markets, and, currently, the direction is up.


Bitcoin and Cryptocurrency Returns YTD
Now, some of these pockets of the markets have been exhibiting strength since late last year. Under different leadership, this could change.

But this is a market starting to show the hands of winners over losers.

As Steven Strazza, director of research at All Star Charts tweeted this week: "Breakouts are sticking. Breakdowns are failing. It's not bear market behavior.""

MY COMMENT

A strange little article. I do like the positive theme....but....we are talking about ONLY about 2.5 weeks so far this year. It is a little premature to call a change from 2022 based on a few weeks.

I welcome the positivity.....but.....lets not get too carried away with false comparisons.

 

The day so far.

Stocks fall ahead of tech earnings, Fedspeak

https://finance.yahoo.com/news/stock-market-news-live-updates-january-19-2023-130007540.html

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

"U.S. stocks moved lower at the open Thursday as investors dissected the latest batch of economic data and braced for more Fedspeak and the start of earnings season from corporate tech giants.

The S&P 500 (^GSPC), the Dow Jones Industrial Average (^DJI) and the technology-heavy Nasdaq Composite (^IXIC) were all down by roughly 0.5% at the start of trading.

Bond prices ticked up. The yield on the benchmark 10-year U.S. Treasury note fell to 3.368% from 3.374% Wednesday. The dollar index traded lower Thursday morning.

Stocks plummeted Wednesday after new government data showed a slowdown in consumer spending activity, while a reading on wholesale price inflation showed signs that price pressures are easing in the economy. The S&P 500 had its worst day on Wednesday since mid-December, failing to hold the 200-day moving average, according to the US Market Intelligence team at JP Morgan.

Wall Street will be navigating another round of data, as well as remarks on Thursday from Vice Chair Lael Brainard, Bank of New York President John Williams, and Bank of Boston President Susan Collins. All three Fed speakers will be attending different events before the Fed's next monetary policy meeting, which starts Jan. 31.

On Wednesday, other Fed officials called for more interest rate hikes. St. Louis Fed President James Bullard said policymakers should move interest rates above 5% "as quickly as we can" before pausing the current hiking cycle.

On the economic data front, new US home construction continued to fall in December, the fourth consecutive monthly decline, closing out a disappointing year for the industry.

Residential starts decreased 1.4% last month to a 1.382million annualized rate, according to the government data released Thursday. Single-family homebuilding jumped to an annualized 909,000 rate. Economists surveyed by Bloomberg called for a 1.36 million pace of total residential starts in December.

Applications to build, a proxy for future construction, decreased 1.6% to an annualized 1.33 million units. Permits for construction of one-family homes fell 6.5%.

Initial unemployment claims dropped to 190,000 compared to 205,000 in the previous week. Claims were expected to rise to 214,000, per Bloomberg estimates.

Meanwhile, the Philadelphia Fed Manufacturing Index improved modestly in January to -8.9 from -13.8 in December. This reading came in better than the forecasted -10.3.

Investors are starting to enter what’s likely a challenging fourth-quarter earnings season, with analysts downgrading their forecasts for earnings growth. According to the data from FactSet Research – the consensus for earnings drop is 3.9%, which would mark the first year-over-year earnings decline reported by the index since 2020 if realized.

DataTrek's Nicholas Colas notes that the power of corporate earnings remains a question mark. Fourth-quarter earnings should provide some insight, but commentary from management on this year’s fundamentals will be more important. The problem, in Colas’ opinion, is that no CEO has an incentive to be upbeat right now.

Netflix (NFLX) is set to take center stage as it reports earnings on Thursday after the market closes, kicking off a two-week period during which most of the market's biggest tech companies will report their quarterly results.

The streaming giant's results will be closely watched, with this quarterly update giving a closer look at the company’s subscriber momentum in the final period of last year and any color on its advertising-supported service tier. Additionally, the company could provide potential updates on its planned crackdown on password sharing.

In market specific moves, shares of Alcoa (AA) dropped Thursday after the U.S. based aluminum producer reported lower prices for aluminum products at the end of 2022.

Procter & Gamble (PG) shares were down 1% Thursday morning after the company raised its full-year sales forecast on the back of price increases to cover transportation, commodity, labor costs, and the impact of a strong U.S. dollar hitting its overseas revenue."

MY COMMENT

The markets and media are being FLOODED by an army of FED members speaking over today and yesterday. They need to make it illegal for these ego-maniacs to discuss their FED related opinions. There is too much potential for economic damage and/or market manipulation when these people are constantly out there discussing FED business in public.....especially their own personal views of it all. The FED message should be a single comprehensive release......not.....all this personal, constant, individual, BS that we have to live through day after day.

 

The TOTAL STUPIDITY of the short term and the financial media is on display over the past two days. Yesterday at the open the media was full of articles and opinion about how the markets love the economic data that just came out and how it is positive. After the close yesterday.....today....the narrative is about how the markets hated the same data....that they loved at the open.

This is the FOOLISHNESS of the short term. The ONLY way to avoid this insanity is to ONLY invest for the long term. Over the longer term all this very foolish day to day drama is filtered out of the market results.

 

Many love to beat up on TESLA for political reasons at the moment......but.....they are still THE market leader in the EV space.

Tesla Stock-Price Rout Overshadows Rivian, Lucid Collapses

https://finance.yahoo.com/news/tesla-stock-price-rout-overshadows-144827816.html

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

"(Bloomberg) -- While Tesla Inc.’s epic stock-price collapse dominated headlines over the past year, for some smaller electric-vehicle companies the rout has been even worse, a sign that investors see few attractive alternatives in the sector.

Two of the most prominent new EV makers — Rivian Automotive Inc. and Lucid Group Inc. — have lost roughly 90% of their equity values from their bull-market peaks, compared with a 69% drop for Tesla. The companies have struggled to ramp up output of vehicles amid supply-chain woes just as investors grew leery of highly valued companies with no earnings.

“Tesla’s stock performance has certainly had an impact on the group, and this group’s own production issues have also weighed,” said Canaccord Genuity analyst George Gianarikas.

A Rivian representative declined to comment on the stock-price decline, while Lucid didn’t reply to a request for comment. Both stocks were trading lower in New York on Thursday, Rivian slid as much as 3% and Lucid fell 3.4%.

The staggering 740% climb for Tesla shares in 2020 helped spur investor euphoria around the sector. EV stocks of all kinds — whether the companies were making passenger cars, commercial vehicles, buses or niche autos — exploded as well, with even the tiniest names commanding valuations of several billion dollars. Rivian and Lucid were touted as potential “next Teslas,” with valuations bigger than century-old legacy car companies.

Lucid began trading in July 2021 and its equity value topped out at $91 billion in November that year. Rivian shares peaked just days after its November 2021 initial public offering, valuing the company at $153 billion — more than Volkswagen AG, despite Rivian having zero revenue at the time.

Rising interest rates over the past year and fears of a recession have curbed investors’ risk appetite, causing them to flee unprofitable companies with high expected growth. Rivian is now worth $14.8 billion, while Lucid is valued at $13.7 billion. Even Tesla, which is profitable, plunged, casting a shadow over the rest of the industry.

Lucid built 7,180 Air Sedans in 2022, a far cry from its projection of 20,000 vehicles at the beginning of that year, as it struggled with supply-chain snags and logistics problems. Rivian also narrowly missed its annual production target of making 25,000 cars.

Their sinking share prices will raise the cost of equity financing for the carmakers, which are still investing heavily in their businesses.

Lucid, which had $3.3 billion of cash, said in November it could raise up to $1.5 billion in equity in subsequent months. For now, Rivian has no immediate need to tap capital markets —- the company had about $13.2 billion in cash as of Sept. 30, which it said is enough until 2025, though it’s been spending a lot to bring models to market and expand production.

“People are worried that given the pace of production, they will not be able to make cars fast enough to reach that point where they will not need to raise cash anymore,” Canaccord’s Gianarikas said of Rivian.

The EV startups appear increasingly risky at a time when investors are looking for safe assets. Car manufacturing was already a capital-intensive, supply-chain-focused business. On top of that, the industry is highly sensitive to economic swings and climbing borrowing costs that drive up the cost of financing a car purchase. And as consumers tighten their purse strings, EVs that are typically more expensive than gasoline-powered vehicles are bound to take a harder hit.

“Most unprofitable technology stocks got hard hit last year due to tightening Fed policies and commensurate impact on interest rates,” said Ivana Delevska, chief investment officer at SPEAR Invest. “But in addition to that, fundamentals for EVs deteriorated in the fourth quarter as it became clear that too much supply was coming on the market.”

For Rivian, the selloff has been especially ugly. It has performed worse than Tesla and Lucid, as well as other EV makers such as Nikola Corp., Fisker Inc., Polestar Automotive Holding UK Plc, Workhorse Group Inc. and Lordstown Motors Corp.

The disadvantages of being a smaller EV maker in these times became clearer last week when Tesla announced a price cut across its product lineup, a move that analysts said could come as a bigger blow to its competitors who will be forced to follow. On Friday’s trading session after the cut was announced, Rivian and Lucid shares dropped more than Tesla’s.

Shrunken equity values and price cuts aren’t the only risks the startups face. The pace of EV sales also is expected be slower than previously expected. According to BloombergNEF, while the adoption of electric cars will continue to rise in 2023, it will be at a more tepid pace than the last two years.

“Even without a recession, the risk for the ‘next Teslas’ is elevated,” SPEAR’s Delevska said. “Tesla now has scale and profitability, and while we expect significant downside to that profitability, we don’t think Tesla will go out of business. Many of the newcomers will.”

Tech Chart of the Day

Netflix Inc. stock has almost doubled from its 2022 low as the streaming giant inches closer to Walt Disney Co.’s market value. The Los Gatos, California-based streaming company has not been more valuable than the Mouse House for more than a year now as the streaming company’s stock was hit by back-to-back earnings disappointments in the first half of 2022. Netflix has since embarked on some major changes, including the introduction of a cheaper ad-supported tier to attract new subscribers and retain old ones. The company is slated to report fourth-quarter results after the market closes on Thursday.

Top Tech Stories

• Apple Inc. is working on a slate of devices aimed at challenging Amazon.com Inc. and Google in the smart-home market, including new displays and a faster TV set-top box, after relaunching its larger HomePod speaker.
  
  
• Revenues in global contract chipmaking, or foundries, are projected to fall this year as demand cools rapidly for the advanced chips that have bolstered Asian technology-driven economies Taiwan and South Korea.
  
  
• China plans to launch a government-backed app to integrate a variety of services including ride-hailing, a sign of more state involvement in a sector wracked by controversy.
  
  
• Twitter Inc. has more than enough money to make its first interest payments, expected to total about $300 million. But with the payment date fast approaching, there’s nevertheless some anxiety over what the impulsive billionaire, Elon Musk, might do to ease the social-media company’s $12.5 billion debt burden.
  
  
• Tesla CEO Elon Musk was on his way to the airport in August 2018 when he made a “split-second decision” to tweet that he was “considering” taking the company private with “funding secured” because he’d just read a news article revealing that Saudi Arabia was investing heavily in the electric-carmaker, his lawyer said.
  
  
• Donald Trump’s campaign is asking Facebook’s parent company to reinstate his access on grounds he’s a declared 2024 presidential candidate and that keeping him off the platform is interfering with the political process."
  

MY COMMENT

Many if not most of these small car companies will go under or end up as acquisition targets. That is just the reality of new businesses.

I do own TESLA as about 1% of the various portfolios that I own and manage. I am satisfied with that small exposure to this industry. I like the fact that TESLA has pricing power and the ability to capture market share by flexing that pricing power. That is how these small companies die.

 

YES....we are in the social media and influencer age of investing. No one can shut up. It is hard for many people to simply invest based on data, fundamentals, and their view of the markets long term.

 

OK.....off to my amp tech to drop off my poor ailing Deluxe Reverb.

Not a big deal......simply a cost of doing business and the reality of 55 year old equipment. It is amazing how little maintenance these things actually require. It is a rare thing to have to get service. So I dont really mind. It gives me the opportunity to have them go through EVERYTHING....not just the current issue....and bring everything back up to perfect operating specs. I doubt that the cost will be more than about $100 to $150.....really minimal compared to the hours and hours of use that I put on these things. I dont normally use this particular amp a lot anyway. It is my third in line amp.....at the moment.

My current primary amps.....Musicman 112RD50 from 1982.......or.......custom modded little Chinese amp. These two amps give me the option for either 50 watts or 20 watts. I dont need more than that with the fact that most shows involve a sound-man and the amp is miced through the front of the house sound system and the stage monitors.

 

A typical 2022 day for the markets today. Obsessive focus on....nothing. As usual same old issues that the markets have been freaking out over for the past 6-9 months now.

I was definately RED today......with only two stocks UP in my account.....AAPL and GOOGL. I also got beat by the SP500 by .78% today.

Nothing I can or am willing to do. I will not even begin to consider doing anything in response to irrational market stupidity.

 

I like this little article........although.....I am not a fan and never use Technical Analysis.

Bulls and Bears Almost Evenly Split

https://www.bespokepremium.com/think-big-blog/bulls-and-bears-almost-evenly-split/

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

"As we noted in last night’s Closer, the S&P 500 has seen a bit of technical damage done in the past few sessions. In spite of the turn lower, sentiment readings have improved. For the AAII sentiment survey, bullish sentiment has risen up to 31%. That 7 percentage point jump makes for the largest week-over-week increase and the highest reading since the week of November 17th.



Bearish sentiment plummeted to 33.1% of respondents which is down sharply from just a month ago when more than half of those responding reported as pessimists. The four straight weeks of declines is now the longest such streak since August leaving bearish sentiment only 0.2 percentage points above the second half of 2022’s low reached in the first week of November.



As a result of the big moves, the bull-bear spread has narrowed all the way to -2.1. As we have frequently noted over the past few months, we are currently on a record streak of 42 weeks in a row with a negative bull-bear spread. This week’s reading is now the narrowest reading in the spread during that streak.



Taking into account other sentiment surveys, this week’s readings also showed a healthy improvement in sentiment, putting a record streak on the ropes. Below, we show our sentiment composite combining the AAII bull-bear spread with that same spread from the Investors Intelligence survey as well as the NAAIM Exposure index. At the moment, sentiment is only slightly more bearish than the historical norm with the composite at -0.14. While that does extend the streak of negative readings to 54 weeks in a row (tying an identically long streak that ended in June 2009), it is one of the least pessimistic readings of the current streak. In other words, across surveys sentiment may not have turned bullish, but it appears to be much less bearish than at other points in the past year.


MY COMMENT

YES.....sentiment and everything else about the markets is slowly normalizing. Imagine a market where the FED members did not come out and try to tank the markets on the UP days. I cont mind them raising rates and I dont mind them holding rates high for a long time........but.....I am very tired of them constantly needing to jaw-bone the markets down. This is not good for investors and is not good for the health of the country.

 

I am NOT confident in this happening....but....if it does it will be much sooner than I expected. My view is that we will see at least four more rate increases. if we only get two that will be a very POSITIVE event for investors and the markets. it will mean the end of the FED being much of a factor in the short term markets. There is not much power in reporting daily that the FED.......is still siting and not doing anything.

Fed to deliver two 25-basis-point hikes in Q1, followed by long pause: Reuters poll

https://finance.yahoo.com/news/fed-deliver-two-25-basis-000849008.html

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

"BENGALURU (Reuters) - The U.S. Federal Reserve will end its tightening cycle after a 25-basis-point hike at each of its next two policy meetings and then likely hold interest rates steady for at least the rest of the year, according to most economists in a Reuters poll.

Fed officials broadly agree the U.S. central bank should slow the pace of tightening to assess the impact of the rate hikes. The Fed raised its benchmark overnight interest rate by 425 basis points last year, with the bulk of the tightening coming in 75- and 50-basis-point moves.

As inflation continues to decline, more than 80% of forecasters in the latest Reuters poll, 68 of 83, predicted the Fed would downshift to a 25-basis-point hike at its Jan. 31-Feb 1 meeting. If realized, that would take the policy rate - the federal funds rate - to the 4.50%-4.75% range.

The remaining 15 see a 50-basis-point hike coming in two weeks, but only one of those was from a U.S. primary dealer bank that deals directly with the Fed.

The fed funds rate was expected to peak at 4.75%-5.00% in March, according to 61 of 90 economists. That matched interest rate futures pricing, but was 25 basis points lower than the median point for 2023 in the "dot plot" projections issued by Fed policymakers at the end of the Dec. 13-14 meeting.

"U.S. inflation shows price pressures are easing, yet in an environment of a strong jobs market, the Federal Reserve will be wary of calling the top in interest rates," noted James Knightley, chief international economist at ING.

The expected terminal rate would be more than double the peak of the last tightening cycle and the highest since mid-2007, just before the global financial crisis. There was no clear consensus on where the Fed's policy rate would be at the end of 2023, but around two-thirds of respondents had a forecast for 4.75%-5.00% or higher.

The interest rate view in the survey was slightly behind the Fed's recent projections, but the poll medians for growth, inflation and unemployment were largely in line.

Inflation was predicted to drop further, but remain above the Fed's 2% target for years to come, leaving a relatively slim chance of rate cuts anytime soon.

In response to an additional question, more than 60% of respondents, 55 of 89, said the Fed was more likely to hold rates steady for at least the rest of the year than cut. That view lined up with the survey's median projection for the first cut to come in early 2024.

However, a significant minority, 34, said rate cuts this year were more likely than not, with 16 citing a plunge in inflation as the biggest reason. Twelve said a deeper economic downturn and four said a sharp rise in unemployment.

"The Fed has prioritized inflation over employment, therefore only a sharp decline in core inflation can convince the FOMC (Federal Open Market Committee) to cut rates this year," said Philip Marey, senior U.S. strategist at Rabobank.

"While the peak in inflation is behind us, the underlying trend remains persistent ... we do not think inflation will be close to 2% before the end of the year."

In the meantime, the Fed is more likely to help push the economy into a recession than not. The poll showed a nearly 60% probability of a U.S. recession within two years.

While that was down from the previous poll, several contributors had not assigned recession probabilities to their forecasts as a slump was now their base case, albeit a short and shallow one as predicted in several previous Reuters surveys.

The world's biggest economy was expected to grow at a mere 0.5% this year before rebounding to 1.3% growth in 2024, still below its long-term average of around 2%.

With mass layoffs underway, especially in financial and technology companies, the unemployment rate was expected to rise to average 4.3% next year, from the current 3.5%, and then climb again to 4.8% next year.

While still historically low compared to previous recessions, the forecasts were about 1 percentage point higher than a year ago."

MY COMMENT

Sounds great to me.....but....before you get all excited remember that these people being polled are the MORONS that got us into this mess to begin with and are the same people that are uniformly wrong on nearly every economic prediction.

BUT.....we are quickly approaching the end of the rate hikes whether it is two months or about four months. The light at the end of the tunnel will soon be here.

Of course.....the day to day financial media is totally ignoring this for now.

 

HERE is the latest personality to jump on the......"we are in a bull market".....bandwagon.

Jim Cramer says an ‘obsession’ with mega-cap tech names is overshadowing a bull market

https://www.cnbc.com/2023/01/19/jim...ech-names-is-overshadowing-a-bull-market.html

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

"Key Points

• CNBC’s Jim Cramer on Thursday said that the carnage in tech stocks like Tesla, Salesforce and Amazon is concealing a bull market in other names.
• “We had a very traditional bull market based on the dollar and interest rates peaking,” he said."

MY COMMENT

I am not a big Cramer follower......so....see article for the rest of his reasoning. I do.....however.....agree that we have left the ACUTE stage of the bear market. Now it will be a question of how long we simply linger and fester. We still need to see some sustained market rallies.

 

Another musical ICON bites the dust.

Legendary singer-songwriter David Crosby dies at 81

https://www.cnbc.com/2023/01/19/legendary-singer-songwriter-david-crosby-dies-at-81.html

I was not a big fan....too tame for my taste. BUT....he was an iconic figure in the music business for decades.......and.......a superb musician and singer. We are seeing and will see over the next ten years a massive passing of the torch in music and entertainment.

RIP.

 

Markets mixed today obviously. What matters for me is the SP500 and NASDAQ being positive. The DOW is trying to be positive but at the moment is slightly in the red.

Feels like a good chance for a green close today.

 

I like this little article. I will say.......I am 100% in stocks in all my accounts that I own or manage. However......my situation is a little different since I do not rely on that money for retirement or living expenses. I am definitely NOT encouraging anyone to be 100% in stocks.....unless.....that is the right thing for you and your financial situation. i just think this little article is good discussion and commentary.

Is It Realistic to Have 100% of Your Portfolio in Stocks?

https://awealthofcommonsense.com/2023/01/is-it-realistic-to-have-100-of-your-portfolio-in-stocks/

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

"A reader asks:

Is it crazy to be 100% in stocks from age 32 to sometime in my 50s for my retirement accounts?

And another reader asks a similar question:

I don’t get why people work a 30+ year career while investing in stocks only to glide path into a heavier bond allocation around retirement. Why not just stay 100% in stocks, benefit from share price appreciation and collect dividends for life?

Both of these questions came about from a recent post I wrote that contained this long-term stock market data:


I’m a huge proponent of long-term thinking when it comes to investing but even over the short-term the results for the stock market hold up surprisingly well historically speaking.

One of the craziest things about the historical performance of the U.S. stock market is you have been more likely to earn a return of 20% or more in a given year than experience a loss.

Over the past 95 years, there have been 34 times when the S&P 500 has ended the year with gains in excess of 20%. That’s more than one-third of the time.


There have only been 26 times when a year ended in a loss or a little more than 25% of the time.

When you combine this with the fact that stocks as an asset class have offered higher returns than bonds or cash, it’s understandable that investors would question why they should allocate to other investments.

So does it make sense to keep 100% of your portfolio in stocks?

Allow me to answer this in the most finance way possible — it depends.

In theory, young people investing for retirement should absolutely have 100% of their portfolio invested in equities.

The biggest risk in the stock market is a crash which brings lower prices.

Your best-case scenario as a young saver/investor is that you get to put more savings to work at lower prices. This assumes you have the fortitude and ability to continue saving when times get tough but your biggest asset when you’re young is human capital (your future earning and savings power).

However, as you age that human capital slowly dwindles and your portfolio eventually becomes your biggest asset.

Most older investors allocate at least a portion of their portfolio to cash or fixed-income assets at this point because they no longer have as much time to wait out bear markets or save more money at lower prices.

Look no further than the history of bear markets to see why most investors tend to get more conservative as they age and their financial assets grow:


The average bear market lasts about a year from peak-to-trough. But the average time to break even is closer to 3 years.

The shortest bear market in modern times was the Covid crash which took just 7 months to reach new all-time highs again. The longest was the 1973-94 bear market which took almost 6 years.

That is a long time to be selling off your stocks when they are down.

The whole point of switching from a mindset of accumulating wealth to preserving wealth is you don’t want to get into a situation where you are forced to sell at a big loss during a market crash. Cash reserves and bonds can help in that situation to give your stocks some time to come back.

I do understand the desire to continue compounding your assets even in retirement.

The simple math of compounding shows that the majority of your dollar gains will come later in life once you’ve built up a war chest of assets.

Let’s assume you start saving $10,000 a year at age 25, increase that amount by 2% per year to account for inflation, grow your assets at 7% per year and do so for 40 years when you retire by age 65.

Here’s how things shake out in terms of saving vs. investing in this simple example:


In this example, your investment gains don’t overtake the total amount saved until age 48.

At year 20, investment gains from compounding make up around 45% of the ending value. By age 65, compounding accounts for more than 70% of the overall value.

Saving is far more important the younger you are while investing matters a whole lot more as age and build up your savings.

Obviously, no one’s actual retirement plan works out as neatly as it does on a spreadsheet. But there is something to be said about allowing your assets to continue compounding even while you are retired.


Like most things in life, there are trade-offs involved when thinking through this exercise.

The stock market can rip your face off in the short-term but remains your best long-term bet when trying to beat the rate of inflation over the long haul.

I suppose some investors could live off the dividends from their stock portfolio but those cash flows aren’t set in stone. The 2008 financial crisis saw dividends fall by more than 31% for the S&P 500. That was far less than the 56% crash in prices but would still be painful from a cash flow perspective.

I’m 41 years old. My retirement portfolio is 100% in stocks or equity-like investments with a time horizon of well over a decade.

But I also keep a liquid reserve in cash or short-term bonds for shorter-term goals, spending needs or emergencies.

I would imagine that liquid reserve will grow as I approach retirement and my time horizon changes but I will always have a decent allocation to stocks.

The answer to the question of how much to keep in stocks is more about your emotions than what finance theory says.

Some investors, even young ones, need an emotional hedge because it can be difficult to see your life savings seemingly evaporate before your eyes on occasion in the stock market. Others understand the volatility involved in the stock market and don’t need as much fixed income to survive.

As always, portfolio management requires some balance between your ability, need and willingness to take risk with your money.


There is no universal answer for every investor so it’s important to think through both the upside surprises (long-term compounding gains) and the downside shocks (lengthy bear markets)."

MY COMMENT

EVERY investor faces this decision......how much to have exposed to stocks at any particular age. It also depends on the return that you can get from non-stock assets.

There was a time in my life that I put 100% of my retirement money (Keogh account with $30,000 going in per year) in US 30 year zero coupon TREASURIES. This was in the mid 1980's when interest rates on 30 year treasuries were way over 10%. I was a small business person with big overhead and the high rate of return along with absolute safety was a no-brainier.

When rates normalized.....I sold off all those Treasuries at a HUGE profit and....... I went to 100% in stocks and funds in all accounts....retirement and non-retirement.

When I approached my early retirement at age 49......I converted five years of living money into laddered CD's. Over time I saw that I could reduce that to about 3 years of cash for living expenses. When the stock market was hitting highs or performing well..... I would replenish the cash.

NOW....with my annuities and Social Security.....I have no need to have any funds in cash so it is 100% in stocks and funds.

So for me.....the answer to should you have 100% in stocks......has depended on the rate of return from various investments available at any particular time.........and my sources of income and future needs at any particular time.