The Long Term Investor

At least the markets decided to moderate my losses as the day went on. I still ended the day with a moderate loss. The two stocks that helped me to staunch the losses today were....AMZN and COST.

In the end I STILL got in a good beat of the SP500 today.......0.54%. I will take that as money in the bank for later in the year......as hopefully the gains happening now are compounding......as the BULL MARKET escalates in the second half of the year.

No matter what the markets and the people that drive the short term markets have thrown out there this year.......the RALLY continues.

 

Here is how things stood at the close today.

Dow tumbles more than 300 points as banking sector worries reignite before Fed rate decision

https://www.cnbc.com/2023/05/01/stock-market-today-live-updates.html

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

"Stocks tumbled on Tuesday as traders’ fears around contagion in the regional banking sector returned ahead of the Federal Reserve’s rate decision.

The Dow Jones Industrial Average fell 367.17 points, or 1.08%, to end at 33,684.53. The S&P 500 slid 1.16% and closed at 4,119.58. The Nasdaq Composite dropped 1.08%, ending the session at 12,080.51. The three major averages fell for a second consecutive session.

Bank shares slid, with the SPDR S&P Regional Banking ETF dropping more than 6%. Traders questioned the stability of smaller regional financial institutions after the crisis that engulfed Wall Street in March and brought about the end of Silicon Valley Bank and First Republic Bank. Regional banks PacWest and Western Alliance declined 27% and 15%, respectively.

Meanwhile, JPMorgan Chase’s shares shed 1.6%, giving back some of its gains from the previous session. A day earlier, JPMorgan shares rose after the takeover of embattled regional First Republic Bank. Other large banks including Goldman Sachs and Citigroup also dropped more than 2%. Bank of America fell 3%.

“We think that the concerns around the bank sector, combined with uneasiness regarding the debt ceiling — and most importantly, apprehension over the uncertain future Fed rate policy stance — are all contributing to this risk-off sentiment. So in an area like the bank sector that already was under stress, we’re also seeing greater unease because of these other contributing factors,” said Greg Bassuk, CEO of AXS Investments.

The Fed’s two-day policy meeting, which kicked off Tuesday, is expected to conclude with the central bank announcing another quarter-point rate hike on Wednesday. Per the CME Group’s FedWatch tool, traders are pricing in a roughly 85% chance of a rate hike. Investors will be looking for clues on whether the Fed will keep rates steady after this meeting, or if it will further tighten monetary policy to fight inflation.

Weighing on sentiment Tuesday was word from the U.S. Treasury that the country may hit the debt ceiling sooner than expected. Treasury Secretary Janet Yellen warned on Monday that the U.S. may run out of measures to pay its debts as early as June 1, earlier than the late July deadline Goldman was estimating.

“You have the perfect cocktail for a risk-off day,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “It’s a typical risk-off day with three binary situations staring at us from the short-term horizon.”"

MY COMMENT

The key phrase today is.........Short-Term Horizon".......we will be beyond the FED rate hike in a day and beyond the banking nonsense within a week or two (this time around). We got past it all before....but the massive attention given to First Republic this week brought the issue back down on the markets.

As to the DEBT CEILING......what a big JOKE......as usual. Whatever. Nothing but political games.

 

Earnings are the unmentionable topic.....but.....I am still seeing lots of big companies reporting nice earnings beats. the usual misses also. We continue with the good earnings......contrary to nearly ALL the predictions.

By the way......the people that predicted the dismal earnings......are the same people out there now, telling everyone about the coming recession.

 

Here is one take on the cause of future bank failures.......short sellers.

PacWest, Western Alliance crash as regional bank fears continue to shake markets

https://finance.yahoo.com/news/pacw...ears-continue-to-shake-markets-151815103.html

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

"PacWest (PACW) and Western Alliance (WAL) plunged Tuesday as investors remained convinced the worst was not yet over for troubled regional banks.

The stock drops for both institutions came one day after JPMorgan Chase (JPM) purchased the bulk of First Republic (FRC), in a deal that was designed to restore stability to the banking system after two months of turmoil.

PacWest ended Tuesday down 28%, while Western Alliance dropped 15%. Other regional banks also plummeted, including Zions (ZION), Comerica (CMA) and Key (KEY), which all fell between 9-12%.

One new point of pressure on these companies is being applied by short sellers who appear to be targeting lenders they perceive to be most vulnerable. Data from S3 Partners showed short sellers have increased their bets against regional bank stocks by more than $440 million over the last 30 days.

Since Friday, short interest in PacWest rose to more than 18% of shares, making it the second most shorted regional bank stock for the same period.

PacWest and Western Alliance were also among the financial institutions, along with First Republic, that came under intense scrutiny following the March 10 and March 12 failures of Silicon Valley Bank and Signature Bank.

Both lenders, like First Republic, lost a sizable amount of deposits during the first quarter as customers sought the perceived safety of larger banks or higher yields being offered by money market funds. PacWest, a lender based in Beverly Hills, Calif., lost 17% of its deposits and Phoenix-based Western Alliance lost 11%, while First Republic lost 41%.

Both PacWest and Western Alliance also reported drops in a key measure of profitability, a sign that the regional banking business is becoming more challenging as funding costs and interest rates rise.

Several big bank executives tried to argue Monday that concerns about the regional banking system should lessen with the seizure and sale of First Republic, including JPMorgan CEO Jamie Dimon: "This part of the crisis is over," he said.

Another big bank CEO, Jane Fraser of Citigroup (C), on Monday cited "a palpable sense of relief" during an interview with Yahoo Finance. She called First Republic "the last remaining main uncertainty of the small handful of banks that did not do a good job with asset liability management."


Antelopes and lions

But Dick Bove, financial strategist with Odeon Capital Group, said the short sellers who made a tidy profit betting against First Republic and Silicon Valley Bank are going to keep looking for new targets.

“The antelopes are being prowled by the lions here and the lions are going to find other ones to attack and bring down,” Dick Bove, financial strategist with Odeon Capital Group, told Yahoo Finance Monday, predicting other banks would still fail.

Investors, he said, are looking for banks that have large portfolios of fixed-rate mortgages, a lot of commercial real estate, and a gap between the bank’s real values and published values.

"People made a huge amount of money," he said. "Those people who have driven SVB out of business, who benefitted from the Signature failure, who benefitted from the First Republic slow die, they made a lot of money.

"They are looking around to find another target."

The downward pressure on certain bank stocks may not result in outflows from retail customers but it could lead to more from corporate customers, said Ryan Nash, Goldman Sachs' managing director of regional banks.

It “does start to raise red flags and causes corporate treasurers and CFOs to say, ‘you know what, maybe I should think about diversification,’” Nash added."

MY COMMENT

I have no doubt we are going to see coordinated short attacks on banks that are weak. If they can not survive....that is how the business world operates. It will not matter. Any bank that fails will just be taken over in receivership and parceled out to eager buyers....in bits and pieces if necessary.

In the end the banking segment will be stronger.......after the dead wood is removed. There are no participation trophies in business.

 

FED DAY......and the markets are UP at the moment. BUT......the markets today really dont start till 2:00PM East coast time when the FED makes their rate hike announcement.

If my memory is right the last hike we had.....the markets were up earlier in the day......and than took off with the announcement. BUT.....as the FED began to talk about what they did and why they did it.......the gains disappeared.

That is about what I expect today. The markets will CHEER when the rate hike is the expected 0.25%.....but when the FED tries to talk tough, even if they are going to pause......the markets will do their normal FREAK OUT. This is usually driven by the disappointment of the FOOLS that think the FED is gong to cut rates later this year. They.....the FED..... have been very clear.....they are NOT going to cut rates this year.....but HOPE SPRINGS ETERNAL.

 

The little message in this article can be applied to EVERY economic and financial "expert".

If Investors Almost Never Know, Why Would Fed Officials Ever Know?

https://www.realclearmarkets.com/ar...reserve_can_see_around_the_corner_897106.html

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

"On April 13, CNN’s business site blasted out the headline “banking is sound.” Who uttered those words? No less than Lael Brainard, former Vice Chair of the Federal Reserve and presently director of President Biden’s National Economic Council. CNN flattered Brainard. Really, what else was she going to say?

The above question isn’t a trick one, and it’s not meant to be. By definition banking is always “sound” to Brainard, Speaker of the House Kevin McCarthy, Senate Majority Leader Chuck Schumer, President Biden, and just about anyone else in power. The previous truth isn’t evidence of a political conspiracy or trouble with the truth or anything else sinister sounding. Instead, it’s just a statement of reality.

Banking is always sound firstly because banks by their name don’t take big risks. Much more important, however, is that even the world’s greatest investors are more often than not only aware of an unsound bank or banks after the fact. If anyone doubts this, notice how at least as of now no major fortunes were made shorting formerly sound financial institutions like Silicon Valley Bank and First Republic.

It’s a reminder that “banking is sound” per Brainard six weeks ago simply because if it weren’t, or it hadn’t been, Brainard wouldn’t be a former Fed official or NEC head. That is so because those who can see what’s unsound ahead of time are billionaires, or soon will be.

The greatest modern example of this truth is John Paulson. While he was already extraordinarily rich by most any measure by 2008, what placed him firmly in the billionaire’s club was a well-timed bet against mortgages. Paulson purchased mortgage insurance on the incredibly cheap, and did so while his coverage at investment banks like Goldman Sachs were saying behind his back that he didn’t know what he was talking about. “Incredibly cheap” is italicized in the previous sentence as a reminder that Paulson was very much alone in his view that mortgages were sound. Markets are information personified, but as evidenced by how cheaply Paulson was able to purchase mortgage insurance, there was a powerful consensus that all was well

Please keep this in mind with the need of pundit types to routinely roll out Ben Bernanke quotes of old about how the mortgage market was fine, banking was sound, etc. Those are used to besmirch Bernanke, but the joke is on those who think they’re scoring a direct hit. To be clear, what’s just been written is not a defense of Bernanke. If there are individuals who have mocked his obnoxious conceit more over the years than yours truly, they would be very few in number. Certainly less than one hand. That Bernanke didn’t have a faint clue about the health of the mortgage market is and was a statement of the obvious, and we know this to be true based on the immense fortune earned by Paulson.

The simple truth is that if the markets had been at all aware of trouble ahead in the earlier parts of 2008, we never would have heard of Paulson. That’s not a knock on him and the risky bet he made in the face of major ridicule as much as it too is a statement of the obvious.

Bringing it all back to the present, prominent centers of editorial opinion who should know better are scoring cheap points by blaming the Fed for not seeing the problems within Silicon Valley Bank and First Republic ahead of time. What a waste of ink. As evidenced yet again by the seeming lack of fortunes made in the demise of both, few if anyone knew. It’s a reminder that “banking is sound” from government officials is less informative than the sky is blue."

MY COMMENT

Not just government officials.....although they are pretty uniformly out of touch with all that happens around them. ALL the so called "experts"........somehow NEVER seem to anticipate any of the big issues ahead of time. If they do.....they certainly never seem to be able to do anything.

Think back to any economic, business and/or financial crisis over the past 50 years. How many of them were anticipated and called out by the "experts" before they happened?

This is why the path to success as an investor is to simply invest according to the actual FUNDAMENTAL BUSINESS RESULTS of the companies that you invest in. Investing according to "expert" opinion.......a JOKE.

 

Since I am ignoring the markets so far today.

Why investors need to guard against 'breakevenitis'
If you need growth to finance longer-term goals, the biggest risk you face is missing bull markets’ big, long-term returns

https://www.thenationalnews.com/bus...nvestors-need-to-guard-against-breakevenitis/

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

"The rise recorded by world stocks in 2023 has led to calls to ditch them for “safety”.

With money market funds and US Treasury bills now yielding up to 5 per cent and stocks recouping much of 2022’s brutal declines, why risk financial “contagion” and another bust?

Thinking that suffers a classic — and expensive — behavioural trap: “breakevenitis,” a term I coined decades ago. Let me explain.

In early March, I told you selling stocks early in a bull market — which seemingly started last October — could be disastrous.

Then came Silicon Valley Bank’s implosion. Credit Suisse’s, too. And renewed recession fears and worries over commercial real estate proving “a second shoe” yet to drop.

Calls to seek “safer” assets like cash and bonds rose … alongside stocks!

Through to April 24, global stocks were 3.5 per cent higher than pre-Silicon Valley Bank levels, creeping ever closer to their pre-bear-market peak.

Enter breakevenitis. As initial bull market rallies build, investors — raw from the prior drop — sell. It feels smart. It provides a dual emotional boost: minimising regret from selling super low and accumulating pride by dodging a feared drop.

Sometimes, the trigger is the prior bull market high — sometimes, it is an arbitrary portfolio value. It may even be about a single stock or three.

Regardless, breakevenitis makes many think “fool me once … but not twice” — using the allegedly “false” rebound to justify getting out.

With global stocks up 20 per cent from last autumn’s lows and fears everywhere, breakevenitis pressure builds.

Consider fund flows. The week of March 10 — as SVB collapsed — investors yanked $7 billion net from equity mutual funds. Since then: another $32.6 billion.

Yes, that is mild compared with the $41 billion outflows in the week of March 27, 2020 — amid the initial Covid-19 lockdowns — but it reveals brewing breakevenitis.

Meanwhile, headline-hyped money market funds had net inflows for five weeks straight before the streak stopped in mid-April. In the week ended April 5 alone, investors piled $42.5 billion into them.

Maybe that seems sensible. But stocks were rising before and since SVB’s failure.

Breakevenitis is rooted in “myopic loss aversion” — the psychological tendency to feel a loss’s pain vastly more than liking an equivalent gain.

Avoiding losses feels right. Hence, past afflicted investors flock to “safe” assets. Relatively high cash-like yields boost that appeal now.

I have long labelled the market The Great Humiliator — and breakevenitis is among its favourite tricks.

If you need growth to finance your longer-term goals, arguably the biggest risk you face is missing bull markets’ big, long-term returns.

Yes, money market funds yield approximately 4.5 per cent. Three-month US T-bills offer 5 per cent. Sounds great after stocks’ 2022 swoon!

But think longer-term: Using America’s S&P 500 for its longest accurate history, stocks average 10 per cent annualised since 1925 — fully double today’s “safe” yields — including all past bear markets.

The difference between 5 per cent and 10 per cent may seem small here and now.

But the magic of compounding is stocks’ superpower. After 25 years, $500,000 compounded annually at 10 per cent becomes $5.4 million.

At 5 per cent? About $1.7 million (largely devoured by inflation). Even at 8 per cent, stocks double that — more than $3.4 million.

Those hypothetical calculations highlight a humongous risk: earning returns too low to finance your goals over your lifetime.

People often dismiss “opportunity cost” as unimportant, intangible. Money not earned feels different from realized losses.

Again, myopic loss aversion! While that “safe” $1.7 million sounds big, over multi-decade retirements, it isn’t what it used to be — especially with pernicious inflation.

Stocks’ compound growth buffers against late life miserliness and worse. Without it, supposedly “safe” assets are a lot less safe.

Furthermore, will today’s 5 per cent “safe” yields last into that long future? I doubt it.

Some may say they will get back into stocks when things look better. But that is market timing. Few are good at it and there is never an all-clear signal in investing.

Capturing those strong long-term equity returns means you can’t exit at breakeven — or any other arbitrary level.

It means owning stocks much more often than not. After March 2020’s lockdown-induced plunge, rebounding world stocks broke even that August 24.

A theoretical breakevenitis-inflicted investor selling then missed another 34 per cent climb. Exiting after the 2007—2009 financial crisis bear market’s May 2013 breakeven point surrendered 75.5 per cent subsequent bull market gains.

Breakevenitis’s approach embodies entrenched pessimism — every new bull market’s foundation, building the proverbial “wall of worry” stocks climb.

While many will suffer breakevenitis, you can avoid it — by keeping long-term goals top of mind.

Why buy stocks to endure downturns and sell back near breakeven (or worse, at a small loss)? Invest for growth, let compounding’s magic work for you and don’t let recent turmoil scare you from stocks."

MY COMMENT

YES.....this is why I stay fully invested all the time. I dont want to miss out on the BULL MARKET gains. Short term rates can be tempting.......as safe and a sure thing. BUT.....they never last for the long term and they never give the sort of compounding that stock returns do over the long term.

Now if I could lock in a return of 10% or more in a 30 year treasury.....sure that would be a good bet. You could have done this in the early 1980's.......but NEVER since that rare time.

In fact I did LOCK IN rates well above 10% in the early 1980's in my KEOUGH plan......by buying 30 year Treasury Zero Coupons. BUT.......as rates went back down to normal a few years later.......I sold them all. Why? I sold them because as rates normalized the value of my Treasuries SKYROCKETED. There was no reason to hold them to maturity when I could capture just about all of the 30 year gain in way less than 30 years. There was little to be gained by siting on those Treasuries till maturity.

My early 1980's treasuries were a great bet.....but there has NEVER been rates like that since.....and....the only way for any normal investor to achieve those sort of gains is by being in the stock markets......not CD's or Treasuries, or any other sort of interest paying safe investment.

 

The market today is still of course....treading water.

Stocks edge up as Fed’s decision looms

https://finance.yahoo.com/news/stock-market-news-today-live-updates-may-3-115856193.html

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

"U.S. stocks rose at the market open on Wednesday as Wall Street prepared for an interest rate decision from the Federal Reserve due later in the day.

The S&P 500 (^GSPC) added 0.13%, while the Dow Jones Industrial Average (^DJI) gained 0.17%. The technology-heavy Nasdaq Composite (^IXIC) edged up 0.18% at the open.

Federal Reserve officials kicked off a two-day policy meeting on Tuesday morning that is widely expected to end with another quarter-point interest rate hike. That would bring the federal funds rate target range to 5%-5.25%, marking the first time it topped the 5% mark since the lead-up to the global financial crisis. The bigger question is what officials may signal about another potential tightening at their June meeting.

On Wednesday morning, government bonds were lower. The yield on the 10-year note ticked down to 3.4% while the two-year note yield dipped to 3.9%. Oil prices fell — futures for West Texas Intermediate, the U.S. benchmark, dropped nearly 3% to $69.62 a barrel — below $70 for the first time since March.

Some market participants have anticipated Wednesday’s expected rate hike could be the last of the cycle. But Chairman Jerome Powell could confirm or steer away from those assumptions.

The Fed will announce its latest policy decision Wednesday at 2 p.m. ET. Powell is set to hold a press conference at 2:30 p.m. ET.

Analysts say inflation remains sticky, the labor market is still hot but softening, and the economy is resilient. Plus, recent bank failures could set up the case for a pause, along with the Treasury Department's new projections adding more caution to the mix as lawmakers may have less than a month to reach a debt-ceiling deal.

“Today was always likely to mark the end of the US central bank's tightening cycle — not that it has explicitly signaled this — but we've now reached a stage in which every rate hike could have unwanted and unintended consequences,” Craig Erlam, Senior Market Analyst at OANDA, wrote in a research note.

“With that in mind, it would be perfectly reasonable to pause today especially when we're already starting to see signs of the labor market softening and inflation easing,” Erlam added.

Meanwhile, the sale of First Republic Bank’s assets to JPMorgan (JPM) on Monday did not appear to have quelled investor fears in the banking sector.

The S&P 500 regional banking index (KRE) rose more 1% Wednesday after falling on Tuesday. A handful of individual regional bank stocks that bore the brunt of sell orders Tuesday, including shares of PacWest Bancorp (PACW), are up more than 7%.

Separately, hiring at private companies unexpectedly rose by 296,000 for April, above economists call for 148,000, according to payroll processing firm ADP. Other data out on Wednesday showed that ISM services PMI increased to 51.9 in April from 51.2 in March and slightly above economists estimates of 51.8."

MY COMMENT

The last first.......the hiring data is another dagger in the heart of the recession story-line. We are seeing much economic data that "seems" to be a signal of a recession.....but.....I believe much of that data is simply reflecting a NORMALIZATION finally happening from the Covid economic shut down. I think at this crazy moment....the most accurate data reflecting the economy is the hiring data.

As to the rest of the info above.....obviously....the only thing that matters today will be the announcement later today.

 

Here is more on the hiring data mentioned above.

US private payrolls increase solidly; wage growth cools

https://finance.yahoo.com/news/u-private-payrolls-beat-expectations-123148975.html

 

For those that want to talk about the FED today......here you go.

Federal Reserve expected to raise interest rates 0.25%, investors debate next steps

https://finance.yahoo.com/news/fede...25-investors-debate-next-steps-120301341.html

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

"The Federal Reserve is expected to announce a 0.25% increase in its benchmark interest rate on Wednesday, a move many believe could be the final rate hike of the current cycle.

As part of its most aggressive rate hiking campaign since the 1980s, the US central bank has increased the target range for its benchmark interest rate — the fed funds rate — by 4.75% since March 2022; Wednesday's expected rate hike would take the target range to 5%-5.25%, the highest since September 2007.

After kicking off its latest two-day policy meeting on Tuesday, the Fed will announce its latest policy decision Wednesday at 2 p.m. ET. Fed Chair Jay Powell is set to hold a press conference at 2:30 p.m. ET.

"I believe they will signal they expect to pause," Luke Tilley, chief economist for Wilmington Trust, told Yahoo Finance in an interview. "The data that's come out in wake of the last [Summary of Economic Projections] fits with the median forecast — not to say everyone thinks the same thing — but a lot of statements from FOMC participants point to them wanting to take a pause here."

In March, the Fed's latest set of economic forecasts showed most officials expected interest rates to rise above 5% this year and remain there.

Data from the CME Group showed investors are placing a nearly 95% chance on the Fed raising rates by 0.25% on Wednesday.

Wilmer Stith, bond portfolio manager for Wilmington Trust, told Yahoo Finance he thinks the Fed will want to keep their options open based on recent economic data. Stith pointed to stronger inflation readings — particularly in the services sector — and the latest employment cost index figures as signs the economy remains strong.

"I think they'll use the language to get their point across that we may just have to stay higher for longer and we're not necessarily going to pause," said Stith. "I don't see them saying we're going to pause now. I think the Fed will want to push back against rate cuts that the market has priced in."

The most recent inflation data, the personal consumption expenditures index, showed that when excluding the more volatile costs of food and energy prices rose 4.6% over last year in March. The Fed targets 2% annual inflation.

The employment cost index showed workers' pay and benefits rose 1.2% in the first three months of this year, or an annualized rate of 4.8%, faster than the 1.1% rise in last year's final quarter.


Employee costs have continued to rise, which some economists see as a sign inflation pressures will remain stubborn in the months ahead. (Source: BLS)
This week's meeting also comes on the heels of the FDIC's brokered sale of First Republic (FRC) to JPMorgan (JPM) early Monday morning, the latest domino to fall in the bank crisis that has seen four banks collapse sine early March.

JPMorgan CEO Jamie Dimon said Monday the seizure of First Republic puts to rest an excruciating period of panic in the banking system, telling analysts on a call "this part of the crisis is over."

The Fed raised rates back in March amid an even more uncertain backdrop following the failures of Silicon Valley Bank and Signature Bank.

Last month, New York Fed President John Williams told Yahoo Finance in an interview he's watching credit conditions closely amid this bank turmoil, but said he had so far not seen broader impacts on consumer and business spending or other parts of the economy.

"Right now you're not seeing any strong signs of those effects happening, but it's something I’m very much watching for," Williams said.

Wilmington Trust's Tilley, for his part, doesn't see risks from the banking system as clearly in the rearview as Dimon and others.

"I don't think anything has been put to bed because banks are still impaired by losses on long-term securities," said Tilley. "Those unrealized losses are still there and they will affect banks' decisions about lending, and they have to be very cautious."

Results of the Fed's senior loan officer survey — a quarterly report that offers a view into bank lending and credit conditions — will be available to policy makers when they meet, though this data won't be released publicly until after the central bank's meeting.

Federal Reserve Bank of Cleveland President Loretta Mester, a non-voting member of the FOMC, told Yahoo Finance in an interview last month the Fed is closer to the end of its tightening journey than the beginning.

"What we really need to do is we need to make sure that we get that inflation rate on that sustainable downward path. That's my focus," said Mester. "The tightening of credit conditions, either from the Fed or perhaps from banks, tightening their lending standards, that's more of a mechanism for getting that done."

And while Fed officials, notably Powell, have continued to emphasize the need to get inflation to come down above all else, recent turmoil in the banking system likely brings a sooner end to this current rate hiking cycle.

"When the Fed increases interest rates, it exposes any fissures in either the financial markets or the economy. For instance, the recent tightening in monetary policy has contributed to the recent stress in the banking system," wrote Ryan Sweet, chief US economist at Oxford Economics, wrote in a note to clients last week.""Odds are rising that this will be the final hike of this tightening cycle.""

MY COMMENT

TODAY......will be the ultimate INTELLIGENCE TEST for the FED members.

 

Who would have guessed this would happen.

Olive Garden owner Darden Restaurants buys Ruth’s Chris Steak House for $715 million

https://www.cnbc.com/2023/05/03/oli...restaurants-buys-ruths-chris-steak-house.html

MY COMMENT

We took our kids to Ruth Chris in the early 1990's when they were 6 and 9 years old. NO GUTS NO GLORY. It was the downtown location in Seattle and the restaurant was very crowded. The kids were dressed up. You would think that with little kids they would have put us at some obscure table.....but.....they put us in the most central table.....right in the center of the main dining room of the restaurant. We had a great waiter who interacted beautifully with the kids. It was a positive experience for us, the kids, and everyone else in the restaurant......luckily.

The kids.....now grown up still remember that experience and the great waiter. Their primary memory is what we labeled the....."CRUMB CROUPIER"......the waiter who came around with the little metal device and scraped up all the table crumbs from the table cloth. The kids were amazed...... they had never seen anything like that before.

 

A mixed market today as we wait for the FED......the SP500 is basically FLAT.

I notice that in the background....the vast majority of articles that I am seeing today that are totally overshadowed by the FED.....are STILL the banking crisis. That topic is STILL the darling of the financial media even today.

The short term day to day markets and their concerns are so CRAZY. It was so nice in the OLD DAYS....when this obsessive focus on the day to day events was NOT the norm for investors. BUT....those days are long gone.....it will no doubt only get MORE extreme from here going forward.

 

I have a nice little gain in my account at this moment. I am hoping that it turns into a nice bigger gain after the FED is done and the markets close today. I currently have 7 of 10 stocks UP. The losers today are......NKE, COST, and NVDA.

 

BREAKING NEWS.......the FED hikes rates by......drum roll please.......0.25%.

I believe it is totally CLEAR that "if" we now pause....there will NOT be any rate cuts this year. It is time to simply IGNORE the FED going forward in the markets. It may "be time"....but the odds of that happening are probably ZERO.

Little to no market reaction......since this rate hike was TOTALLY anticipated. I am now waiting for the Q&A.....FREAK OUT.

Actually.....do I really care about any of the above......NO. As a long term investor it is fun to watch the daily drama....but long term what is happening to day is meaningless.

 

Here is more info if you care. This hike was TOTALLY expected.....now for the real circus.....the comments by Powell.

Fed increases rates a quarter point and signals a potential end to hikes

https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html

 

Here is what counts in the real world.

Here’s how the Federal Reserve’s latest quarter-point interest rate hike impacts your money

https://www.cnbc.com/2023/05/03/how...sis-point-interest-rate-hike-impacts-you.html

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

"Key Points

• The Federal Reserve raised interest rates by a quarter of a point at the end of its two-day policy meeting.
• This 0.25 percentage point hike marks the 10th time the Fed has raised its benchmark interest rate over the past year or so, the fastest pace of tightening since the early 1980s.
• A wide range of borrowing costs — from mortgages and credit cards to auto loans and student debt — are affected by the rate increase

"The Federal Reserve raised the target federal funds rate by another 0.25 percentage points on Wednesday.

This marks the 10th time the Fed has raised its benchmark interest rate over the past year or so, the fastest pace of tightening since the early 1980s.

Even though the Fed’s rate-hiking cycle has started to cool inflation, consumers are now paying record high rates to borrow.

“Credit card rates are above 20%, rates on home equity lines of credit have doubled and any recent mortgage debt or auto loans have come at a high price, too,” said Greg McBride, chief financial analyst at Bankrate.com.

What the federal funds rate means to you

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

This rate hike will correspond with a rise in the prime rate and immediately send financing costs higher for many forms of consumer borrowing. On the flip side, higher interest rates also mean savers will earn more money on their deposits.

Here’s a breakdown of how it works:

How higher rates are affecting your wallet
Credit cards

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. As the federal funds rate rises, the prime rate does, as well, and your credit card rate follows suit within one or two billing cycles.

Credit card annual percentage rates are now over 20%, on average, an all-time high. With most people feeling strained by higher prices, more cardholders carry debt from month to month.

“Now people are racking up debt and borrowing at high rates and that’s troublesome,” said Tomas Philipson, University of Chicago economist and the former chair of the White House Council of Economic Advisers.

With this rate increase, consumers with credit card debt will spend an additional $1.7 billion on interest, according to an analysis by WalletHub. Factoring in the hikes between March 2022 and March 2023, credit card users will wind up paying at least $31.7 billion in extra interest charges over the next 12 months, WalletHub found.

Home loans

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

Rates are now off their recent peak, but not by much. The average rate for a 30-year, fixed-rate mortgage currently sits at 6.48%, according to Bankrate, down slightly from November’s high but still much higher than it was a year ago.

“This goes to show just how hard it is for many buyers to overcome today’s persistently high home prices and mortgage rates,” said Jacob Channel, senior economic analyst at LendingTree.

Other home loans are more closely tied to the Fed’s actions. Adjustable-rate mortgages, or ARMS, and home equity lines of credit, or HELOCs, are pegged to the prime rate. Most ARMs adjust once a year after an initial fixed-rate period. But a HELOC rate adjusts right away. Already, the average rate for a HELOC is up to 7.99%, according to B

Auto loans

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

The average rate on a five-year new car loan is now 6.58%,according to Bankrate.

The Fed’s latest move could push up the average interest rate even higher, right at a time when borrowers are already struggling to keep up with bigger monthly loan payments.

Student loans

Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by rate hikes. The interest rate on federal student loans taken out for the 2022-23 academic year already rose to 4.99%, and any loans disbursed after July 1 will likely be even higher. Interest rates for the upcoming school year will be based on an auction of 10-year Treasury notes later this month.

For now, anyone with existing federal education debt will benefit from rates at 0% until the payment pause ends, which the U.S. Department of Education expects to happen sometime this year.

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

Savings accounts and CDs

While the Fed has no direct influence on deposit rates, the rates tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock-bottom for years, are currently up to 0.39%, on average.

Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are as high as 4.5%, much higher than the average rate from a traditional, brick-and-mortar bank, according to Bankrate.

Rates on one-year certificates of deposit at online banks are closer to 5%, according to DepositAccounts.com.

With more economic uncertainty ahead, consumers should be taking aggressive steps to secure their finances — including paying down high-interest debt and boosting savings, McBride advised.

“Grabbing a 0% credit card balance transfer offer or putting your emergency fund in a high-yield online savings account are good first steps.”"

MY COMMENT

BUMMER for those that like to use DEBT and LEVERAGE.