The Long Term Investor

Yet another "small" loss for me today so far. I am being helped by four of my ten stocks that are holding up my portfolio against the losses. The winners today are a different mix.......AMZN, HD, HON, and TSLA.

NOTHING will be clear till the close when we will be talking about short term hindsight.

The ONLY events this week that I care about are the NVDA earnings tomorrow and the COST earnings on Thursday. This week will be basically the end of earnings. It has been GREAT FUN to watch all the earnings BEATS pile up and all the so called "experts" hiding out with nothing much to say about their dismal pre-earnings predictions being WRONG......as usual.

 

AS USUAL.........HERE is my current PORTFOLIO MODEL.

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 60% of the total portfolio and the fund side at about 40% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio.At the same time the funds double and triple up on my individual stock holdings............that I consider the BEST individual businesses in the WORLD.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Microsoft
Nike
Nvidia
Tesla

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (73). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my ten stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis."

#14945

 

I post this for the general retail commentary......not anything specific to BJ's.....since I dont own the stock and dont plan to.

BJ's earnings tell the whole story of the US economy right now

https://finance.yahoo.com/news/bjs-...ry-of-the-us-economy-right-now-142702842.html

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

"BJ's Wholesale (BJ) reported first quarter results Tuesday morning that were a bit shy of expectations, with earnings matching estimates while comparable-store sales were shy of estimates.

Comparable-store sales rose 5.7% in the first quarter, missing expectations for an increase of 5.9%, according to estimates from S&P Capital IQ. Earnings per share of $0.85 matched expectations, while revenue of $4.72 billion was below forecasts for $4.8 billion.

The stock was down nearly 5% early Tuesday after the company suggested second quarter comps are tracking below the 5.7% increase seen in the year's first three months. Costco (COST) shares were down 1.4% in sympathy; Costco is set to report its first quarter results Thursday afternoon.

But commentary from BJ's leadership offered something bigger picture for investors trying to make sense of the US economy right now. And that, we think, is the whole story of today's economy in one place.

A story that continues to suggest consumers growing more cautious while the primary factor driving that caution — inflation — continues to moderate.

During prepared remarks on the company's earnings call, CFO Laura Felice said the company is dealing with an "increasingly discerning consumer environment."

In his own prepared remarks on Tuesday, CEO Bob Eddy added: "We recognize that in today's environment, consumers remain live in their shopping behavior and members are more conscious as they continue to work to stretch their dollar."

Retail sales in April rose less than expected after a drop in March set off alarm bells about the health of the US consumer. Excluding autos and gas, sales rose 0.6% last month.

Economists at Oxford Economics said this report showed consumers "remain inclined to spend though they are becoming more selective in their purchases." A view consistent with the word out from retail execs.

Referencing the theme of "trading down" which dominated big box earnings last week, Eddy noted, "Everybody wants to save money. Everybody feels like it's a bumpy economy out there."

Later on the company's call, however, Felice and Eddy both highlighted expectations that inflation will decelerate through this year.

"We've certainly seen some deflation or disinflation or whatever you like to call it," Eddy said. "[Our] inflation in Q4 was double digits. It was meaningfully lower than that in the first quarter. And I expect that will continue."

"I don't know that we've changed our sort of global inflation input for the year," Eddy added, "but I do think it's receding a little faster than we had in our model."

The latest data on consumer prices showed headline inflation rose 5% over last year in April, the slowest annual increase in two years. On a "core" basis, which strips out the cost of food and gas, prices rose 5.5%, with the bulk of that increase coming from housing costs.

Prices rising less than expected — or perhaps falling into an outright decline as seen in some categories like gas and eggs — will boost real (read: inflation-adjusted) spending power in some parts of household budgets.

Moreover, economists estimate consumers are still sitting on as much as $1 trillion in additional savings relative to pre-pandemic trends.

"As we sit here today, we see a consumer that is continuing to visit and spend in our stores," Felice said Tuesday. "On the margin, while they are spending more with us, they are also being more choosy with their dollars and allocating those dollars in favor of necessities."

MY COMMENT

I think the general commentary above pretty well sums thing up right now. People STILL have a lot of money siting around and are STILL spending....but....they are being more selective.

At this moment if the FED has the brains to simply stop the rate hikes where we are right now....there is a good probability of a rare SOFT LANDING for the economy. We will find out in June at their next meeting if they have the brains to simply stop for now. History tells us....unfortunately....that they will be MORONS.

At the same time.......I and others are seeing high end consumers continuing to spend like crazy on many types of EXTREMELY discretionary items.....especially.....items like art, and other collectables, and "stuff".

We are at a point right now where the economy is going to start to hum along since we are now.......FINALLY......at the end of the pandemic economic closure "stuff" and are seeing things becoming more normal. There is no reason to choke the life out of the economy........just sit and let things take their course. Let the economy run as it wishes for a while.....the rest of the year.....even if inflation stays a bit hot (but historically normal) in the 3-4% range.

 

I had a single......lone stock.....UP today. Of course it was simply a down day so nothing the markets could do. I also got beat by tthe SP500 by 0.06%. A medium level LOSS for me today.

Oh yes......that lone stock that was UP is.......HD.

 

The markets and stocks are caught in the.......Debt Ceiling.......whirlpool.

There is not going to be much that anyone can do over the next couple of weeks other than spin around, and around, and around.......till it spits us out the other side. Unharmed......of course.......other than some small losses.

The markets are EXTREMELY shallow right now. They are being driven by the short term micro AI traders........and......those that freak out every time there is a hint of drama.

In other words the long term and more rational investors are simply watching all the fun and doing nothing. That puts the markets at the mercy of the LUNACY of the short term.

BUMMER.

 

The good news is that the Debt Stuff......will be over in about 2-3 weeks. Same with the next FED meeting.

So......in about 2-3 weeks once we are clear of all this short term drama.....we could be in for a really nice RALLY.

Earnings will be over and have done well......the debt BS will be resolved and forgotten.....and hopefully the FED will still be pausing. it will be the perfect......RALLY CAP TIME.......so turn those hats around backwards and LETS GO.

 

Does not sound like a recession to me.

Amazon sellers averaged over $230K in sales in 2022
More than 60% of sales in Amazon's marketplace is from independent sellers

https://www.foxbusiness.com/lifestyle/amazon-sellers-averaged-over-230-thousand-in-sales-in-2022

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

"Small- and medium-sized businesses in Amazon's marketplace nabbed more than $230,000 in sales on average in 2022, according to Amazon’s Small Business Empowerment Report.

These independent sellers sold more than 4.1 billion products – an average of 7,800 products every minute – showing "the resiliency of U.S. entrepreneurs" amid the uncertain economic climate, Dharmesh Mehta, Amazon vice president of worldwide selling partner services, told FOX Business.

This compares with 2021 when businesses sold more than 3.9 billion products.

"2021 was a unique year as it experienced a huge surge and pull-forward of growth due to COVID, and we saw that sustain and even build further in 2022," Mehta said.

In fact, these independent sellers are outpacing the growth of Amazon’s own retail sales, Mehta said.

More than 60% of sales on Amazon's marketplace come from independent sellers and most of which are small- and medium-sized businesses, he added.

Certain sellers, specifically in rural areas, including parts of Illinois, Louisiana, West Virginia and Wyoming, collectively achieved more than 40% year-over-year sales growth, according to the data.

Overall, independent sellers are helping to boost the U.S. economy by employing an estimated 1.5 million people who are responsible for managing, operating, and supporting their efforts to sell through Amazon’s store, the report said."

MY COMMENT

What? How can this be? Where is the recession?

We are seeing way too much success lately......if things keep going like this we are not going to get our recession.

 

Looks like the housing markets are picking up steam for the Spring.

New home sales climbed more than expected in April

https://www.cnn.com/2023/05/23/homes/new-home-sales-april/index.html

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

"Washington, DC CNN —
"New home sales rose in April, climbing to a level not seen in over a year, as mortgage rates eased and buyers looked to new construction as an alternative to the low inventory of existing homes for sale.

Sales of newly constructed homes were up 4.1% in April from March, and up 11.8% from a year ago, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau.

April’s month-over-month gain is further evidence that the new construction market is being boosted by exceptionally low inventory of existing homes for sale. Homeowners with ultra-low mortgage rates are reluctant to sell and buy another home at a much higher rate. Sales of existing homes has been down for the past two months while new home sales have been rising.

Sales of new single‐family houses were at a seasonally adjusted annual rate of 683,000, up from a revised 656,000 in March. Sales were higher than last year’s estimated rate of 611,000.

After climbing through much of February, mortgage rates reached as high as 6.73% in early March. But as uncertainty moved through the financial industry due to bank failures in mid-March, rates fell during the rest of the month, according to the weekly average rate from Freddie Mac, and have been under 6.5% since mid March. This drop in rates brought an increase in mortgage applications.

In some good news for buyers, prices of new homes dropped from March, the report showed. The median price for a new home dropped to $420,800 in April, down from a revised $455,800 the previous month.

Sales were uneven nationally, with an increase in the South and Midwest and a decline in the Northeast and West. In April, sales grew 17.8% to a seasonally adjusted annual pace of 443,000 in the South and sales rose 11.8% to 76,000 in the Midwest. But sales were down 9.1% to a seasonally adjusted annual pace of 140,000 in the West and sales sank 58.6% to 24,000 in the Northeast.

“New home sales growth can be attributed in part to a resilient job market, which has remained relatively stable despite other economic woes,” said Kelly Mangold of RCLCO Real Estate Consulting. “Low unemployment rates and work-driven relocations continue to fuel sales, along with traditional demographic drivers.”

In addition, she said, home builder sentiment remains high, as the lack of resale inventory has allowed for strong sales and the ability to maintain pricing power due to inventory scarcity in many regions."

MY COMMENT

Looks like home buyers have discovered the benefits of buying a "new" home. I am sure some of this ties in with the fact that people are fleeing many cities and are willing to move outside the city a bit to get a new......and nicer.....house in a neighborhood with better schools.

Buyers appear to have adapted very quickly to the new 6% to 7% mortgage rates. People understand that the INSANE rates in the 2% to 4% range that existed for a few years were simply a HUGE aberration.

This is yet another story-line that tells me that the economy is doing just fine. Recession? What recession?

Now....if the FED is smart they sill just sit down and shut up and claim credit for a soft landing.

In my little neighborhood of less than 100 homes we now have three homes for sale. They range from a low of $1.4MILLION to a high of $1.8MILLION. Our larger area of about 4200 homes has about 47 homes for sale. Sales over $1MILLION still appear to be slow.

 

I mentioned the poor DOW the other day.

That Dog of a Dow

https://www.fisherinvestments.com/en-us/insights/market-commentary/that-dog-of-a-dow

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

"Properly constructed indexes are leaving the Dow in the dust this year.

Has the rally stalled? Financial headlines coast to coast seem stuck in a malaise, implying stocks are struggling through an L-shaped recovery after last October’s low. You would be hard pressed to know the S&P 500 is up 10.1% year to date (through Thursday’s close) and 18.6% since October 12.[i] Nor that global stocks are up 10.0% year to date and 21.2% since the low.[ii] We suspect there is a simple reason for this, one The Wall Street Journal also hit on Friday: Most commentary references the Dow Jones Industrial Average, which is struggling and up a measly 1.2% this year.[iii] In our view, the focus on this broken index—not to mention its 2023 returns in a vacuum—probably deserves a good chunk of the credit for the continued pessimism.

The Dow has oodles of sentimental value due to its history—the first attempt to broadly measure the stock market—but let us be clear: That is about the extent of its worth. With only 30 stocks, it doesn’t accurately reflect the broad US economy and the thousands of publicly traded companies that participate in it. It weights its constituents by share price rather than market value, giving some very small companies outsized influence over its returns, while downplaying some huge firms. It omits reinvested dividends, which are a large source of long-term compound returns for folks in the real world (especially decades ago, when dividend yields were overall higher). We get why it exists—early investors needed an easy way to measure the market’s returns with just a pen and paper—but we have computers and powerful software now. Hence, we also have broad, market cap-weighted indexes like the S&P 500 for the US and the MSCI World Index for the world, both of which include reinvested dividends (aka total returns).

Year-to-date returns are one way to see the impact. But looking a bit further back, to the recovery’s start last October (which we think looks increasingly like a new bull market’s start), is perhaps even more helpful. Exhibit 1 does this, showing the Dow, the S&P 500 Price Index (without dividends), and the S&P 500 Total Return Index, all indexed to 100 at market close on October 12. Before sliding sideways this year, the Dow bounced highest and fastest off the low, while the S&P 500’s rally started slower but had more staying power, with reinvested dividends adding more returns as time progressed.

Exhibit 1: A Tale of Three Indexes


Source: FactSet, as of 5/19/2023. Dow Jones Industrial Average, S&P 500 Price Index and S&P 500 Total Return Index, 10/12/2022 – 5/18/2023. Indexed to 100 at 10/12/2022.

For investors who check their portfolios regularly, this split probably created some confusion. An investment portfolio’s returns are weighted by holding size—comparable to the S&P 500’s market cap weighting. Last autumn, we suspect investors with broad, diversified portfolios were a tad flummoxed that their accounts didn’t show quite as big a bounce as the Dow figures splashed across headlines. The risk here is that a Dow focus leads folks to upend a diverse portfolio for the sake of catching up to a broken index. As the chart shows, that wouldn’t have been necessary, as diversified indexes quickly caught up (and passed) the Dow.

There are also implications for more hands-off folks, which leads to the impact on sentiment generally. With Dow-oriented discussion dominating, simply reading the headlines gives the impression stocks aren’t doing anything. That there hasn’t been any material bounce for those who patiently endured a bear market. That probably contributes to the dogged persistence of recession forecasts, not to mention the heaps of attention on gold as it continues flirting with all-time highs. This, too, can lead to investment errors, which was the Journal article’s main point.[iv] But also, it has the benefit of keeping expectations low and building a nice wall of worry for a young bull market to climb.

Understand, we aren’t saying a weak Dow predicts a strong S&P 500. Stocks don’t predict stocks, and one index doesn’t predict another. Rather, we are theorizing that because a broken and underperforming index dominates the mainstream financial conversation, it helps tamp down sentiment, helping widen the already-yawning gap between expectations and reality. That gap is what propels stocks, and it looks quite wide to us."

MY COMMENT

The DOW at this point is simply a historical remnant. A bit of left-over investing culture from the past.

Besides being only 30 stocks here is the BIG ISSUE with the DOW:

"It weights its constituents by share price rather than market value, giving some very small companies outsized influence over its returns, while downplaying some huge firms. It omits reinvested dividends, which are a large source of long-term compound returns for folks in the real world."

The use of the DOW by the media mentioned above is INTENTIONAL DISTORTION. It is simply the usual......fear mongering.

 

All the doom and gloom experts are starting to panic......WHERE IS MY RECESSION?

Companies are talking about 'recession' less. Economic data helps explain why.

https://finance.yahoo.com/news/comp...conomic-data-helps-explain-why-093051668.html

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

"Wall Street has been waiting for a recession that hasn’t materialized roughly five months into the year.

Executives at S&P 500 companies are talking about recessions less on earnings calls for the third straight quarter, per FactSet. S&P Global’s flash US composite PMI showed US economic output reached a 13-month high in May. Even the consumer slowdown teased by some companies doesn’t appear widespread quite yet.

“The economy is still on sound ground, with consumers willing to spend and businesses continuing to hire and invest despite fears that a recession is around the corner,” Oxford Economics Lead US Economist Oren Klachkin wrote in a note titled "Recession remains out of sight" on Friday. "We maintain our call for a mild recession to begin in Q3 but see a risk that it might start later. Consumers – the main engine of the US economy – will keep spending so long as incomes continue to rise."


Companies have been mentioning "recession" less than the quarter prior for nearly a year.
To be fair, there are still signs of a slowing economy. Just ask Target (TGT) about its consumer discretionary spending or take a look at the guidance cuts from Home Depot (HD) and Lowe’s (LOW). The Conference Board’s Leading Indicator Index (LEI) has fallen 4.4% over the last six months and points to a recession midway through 2023.

But the larger numbers aren’t flashing warning signs. The U.S economy grew 1.1 % in the first quarter, and the Atlanta Fed currently sees 2.9% growth in the second quarter. Retail sales increased in April.

The labor market is still robust with the unemployment rate at its lowest level since 1969. And even inflation, which remains historically high, grew at its slowest pace in two years in the most recent month.

As Baird strategist Michael Antonelli points out, stocks, which are often viewed as forward-looking, don't seem to be pricing in a recession yet. The S&P 500 remains up nearly 8% this year.

“What does the S&P at 4200 and the 30-year at 4% tell us,” Antonelli told Yahoo Finance Live. “Is that screaming recession? Probably not. Is that screaming boom? Definitely not. Is that screaming slow growth while we deal with inflation? Probably."

The same could be said for markets predicting interest rate hikes, too. After the last CPI print on May 10, markets priced in a nearly 100% chance of a pause in the Federal Reserve’s interest rate hike campaign at the June meeting. As of Tuesday afternoon, markets had priced in a 67% chance of a pause in June.

Market predictions for rate cuts in November 2023 have scaled back, too. Once at a roughly 75% chance of a cut at the November meeting, markets have now priced in a 56% chance.

"It's not increasing because of the debt ceiling," Antonelli said. "It would only increase if economic data was accelerating and inflation was still high."

BlackRock CIO of fixed income Rick Rieder points to the housing sector where a sector-wide recession over the last year is on the upswing. Homebuilder confidence recently reached at its highest level since July 2022 and new home sales on the rise.

Still even Rieder, who said he “believes the economy is in much better shape than people think,” sees a recession coming at some point.

Perhaps when, and how bad, is what predictions might’ve overstated entering 2023.

“I think (the economy) is moderating,” Rieder told a room full of reporters on Tuesday. “I don’t think it’s a given that we’re going into a deep recession.”"

MY COMMENT

A begrudging acknowledgement of what is actually the TRUTH.

BUT......as an investor......I dont really care one way or the other if we have a recession. I expect to do well regardless.

 

As to the DEBT CEILING.

BLAH, blah, blah, , blah, blah, , blah, blah, , blah, blah, , blah, blah, , blah, blah, , blah, blah.

 

Poor house hunters......they have to operate in a "normal world" of mortgage rates.

Mortgage demand drops again as rates cross back over 7%

https://www.cnbc.com/2023/05/24/mortgage-demand-drops-again-as-rates-cross-back-over-7percent.html

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

"Key Points

• Mortgage applications to purchase a home dropped 4% for the week and were 30% lower than the same week one year ago.
• Applications to refinance a home loan decreased 5% from the previous week and were 44% lower than the same week one year ago.

The average rate on the popular 30-year fixed mortgage crossed over 7% on Tuesday, according to Mortgage News Daily. That is the highest level since early March.

Rates have been rising on a combination of concerns among investors. First, uncertainty over what the Federal Reserve will do with interest rates, given a still strong economy; second, the battle over raising the debt ceiling and the possibility of a U.S. default.

Both of those already had rates climbing last week with mortgage demand pulling back. Total mortgage application volume dropped 4.6% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Last week, the weekly average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.69% for loans with a 20% down payment, according to the MBA. That rate was 5.46% the same week one year ago.

Mortgage applications to purchase a home dropped 4% for the week and were 30% lower than the same week a year ago.

“Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications,” said Joel Kan, vice president and deputy chief economist at MBA.

Applications to refinance a home loan decreased 5% from the previous week and were 44% lower than the same week one year ago. That is the lowest level in two months. Not only are there very few borrowers who could benefit from a refinance, given that rates were so much lower a year ago, but banks have been tightening lending due to recent bank failures.

Even if the debt crisis is resolved before a default, rates don’t have a lot of reason to move significantly lower anytime soon.

“Credit the progressive improvement in bank sentiment, mixed but resilient economic data, and a Federal Reserve that has been steadfast in its reminders about their ‘higher for longer’ rate mantra,” wrote Matthew Graham, chief operating officer at Mortgage News Daily."

MY COMMENT

It is, what it is. If you want to buy a home you just have to deal with it.