The Long Term Investor

Looks like the markets petered out today. WELL....who cares we had an EPIC week. As Smokie noted the markets are CLOSED on Monday for Juneteenth. This holiday is something that we knew about here in Texas long before much of the rest of the country.

ANYWAY.....I had a moderate loss today. AND....I got beat by the SP500 by 0.24%. So an all around LOSER day for me today.

Of course the results for the whole week.....more than make up for it. I did manage to end the day with THREE companies in the green......NKE, NVDA, and TSLA.

 

You know with companies like NVDA being on fire lately it is easy to lose track of the fact.......that for me at least.....it is all about the performance of my portfolio as a WHOLE.....not the day to day individual stocks.

Often at any one time I have one or two stocks that are HOT.....like MSFT and NVDA now......and one or two that are COLD....like AMZN and NKE now. BUT......the hot and the cold tend to go in spurts and flip back and forth over the long term. This does not bother me. It is how I want my portfolio to balance itself out. I dont want to see my whole portfolio either ALL on fire or ALL arctic cold.

 

NOW....the KILLER week that just ended.

DOW year to date +3.48%
DOW for the week +1.28%

SP500 year to date +14.85%
SP500 for the week +2.58%

NASDAQ 100 year to date +38.16%
NASDAQ 100 for the week +3.78%

NASDAQ year to date +30.79%
NASDAQ for the week +3.25%

RUSSELL year to date +6.49%
RUSSELL for the week +0.52%

A GOLDEN week for long term investors. Patience pays off. To the BRAVE comes the REWARDS.

As of the close today my entire account is at....+32.41%. Last Friday I was at......+27.86%.

 

HAVE A GREAT THREE DAY WEEKEND EVERYONE.......I know i will. I have two shows this week on Saturday and Sunday. The first one is a little 110 mile drive to one of our favorite venues. Usually a BIG and enthusiastic crowd.

 

Played in BRUTAL 100 degree heat yesterday......outside. It was still 90 degrees at 10PM when we finished. Today we have an outdoor show in the middle of the afternoon in 103 degree heat. I am not looking forward to it. I will go though tons of water, and juice during that three hours. It will basically just be survival mode.

 

The week next week.

Powell speaks, FedEx reports: What to know this week

https://finance.yahoo.com/news/powell-speaks-fedex-reports-what-to-know-this-week-133040330.html

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

"The stock market rally continued last week, with the Nasdaq Composite (^IXIC) clinching an 8th-straight winning week while the S&P 500 (^GSPC) continued its bull run with a 2.5% gain after key news on inflation and a pause in the Federal Reserve's rate hiking campaign.

In the week ahead, investors will again keep their focus on the US central bank with Fed Chair Jay Powell set to testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday morning as part of his semi-annual testimony before lawmakers.

On the corporate calendar, earnings out of FedEx (FDX) after the close on Tuesday will serve as the week's top highlight. The shipping giant is seen as a bellwether of economic activity given its exposure across industries.

Fed Governors Lisa Cook and Philip Jefferson will also be on Capitol Hill this coming week for confirmation hearings before the Senate. Cook was nominated by President Biden to fill a full term as a member of the Fed's Board of Governors, while Jefferson was nominated by Biden to fill the role of Vice Chair.

The economic calendar will also be relatively quiet with investor attention on Thursday's initial jobless claims data continuing to build amid signs the labor market is softening, while initial looks at manufacturing and service sector activity from S&P Global out Friday will provide a look at how the US economy is rounding out the second quarter.

US markets will be closed on Monday in observation of Juneteenth.

With less than two full weeks of trading left in the second quarter and first half of 2023, all three major indexes are currently sitting on gains with the Nasdaq now up more than 30% this year while the S&P 500 is up just less than 15%.

The Dow Jones Industrial Average (^DJI) — which fell 9% last year against a roughly 20% drop for the S&P and 30% decline for the Nasdaq — is up 3.5% so far this year.

Last week, the Fed left its benchmark interest rate unchanged, marking the first time since January 2022 the central bank did not raise interest rates following a policy meeting. Still, the Fed's move was accompanied by updated economic forecasts which suggested two more rate hikes will be needed over the balance of 2023 to bring inflation down towards the Fed's 2% target.

Thomas Simons, an economist at Jefferies, wrote in a note last week the "hawkish shift" in the Fed's interest rate forecast, "helps to reinforce the Fed's message that this 'skip' in June should not immediately be interpreted as the end of the Fed rate hike cycle."

Inflation data out Tuesday morning showed the Fed is making some progress towards its goal of bringing inflation back to 2%, with consumer prices rising at the slowest pace in 13 months in May, according to the Consumer Price Index (CPI).

On a core basis, however, CPI inflation showed prices rose 5.3% over the prior year in May, well above the Fed's stated goal.

As Powell said during a press conference last week, "inflation pressures continue to run high and the process of getting inflation back down to 2 percent has a long way to go."

Still, many economists expect the Fed will not need to follow through on the additional rate hikes signaled by its forecast.

"Although officials are now minded to keep going after that, we think that weaker activity and employment, together with more encouraging signs that core inflation is moderating, will ultimately persuade the Fed that is doesn't need a final hike in September," wrote Paul Ashworth, chief North America economist at Capital Economics, in a note last week.

In the stock market, the conversation has begun to somewhat move away from the play-by-play of what happens next with the Fed as AI hype continues to dominate the conversation.

And it is becoming a near-consensus view that this mania has played — and will continue to play — a key role in driving stocks higher this year.

"We now suspect growing euphoria over AI will drive the S&P 500 to a significantly higher level than we had previously forecast by the end of next year," wrote John Higgins, chief markets economist at Capital Economics, in a note on Friday.

As far back as April, strategists began circling the idea that AI hype was having a broader pull on the stock market.

And with the so-called "Magnificent Seven" megacap tech stocks — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) — having done much of the heavy lifting in turning the market around this year, the fundamental read-through is that incumbent tech giants will be the winners in the AI "revolution" set to sweep the business world.

Though strategists at Goldman Sachs earlier this month made an even bolder argument regarding AI's impact on the stock market, suggesting overall S&P 500 earnings could be 11% higher than currently expected a decade from now because of efficiencies companies may realize from AI.

But if over the long run earnings drive stock prices and economic growth drives earnings, then many remain wary about the prospects beyond what has become a euphoric first half of the year.

"We still think a mild economic downturn may take some heat out of the stock market in the second half of 2023," Capital Economics' Higgins wrote on Friday.

"Let's be clear from the outset: equities have nearly always fared poorly when the economy has turned down," Higgins added. "Since 1855, there have been 34 recessions in the US and the stock market has declined around the vast majority of them. It typically peaked before a recession began, and troughed shortly before it ended."

Stock prices reflect expectations for future earnings discounted to the present. And it can certainly be argued the current market rally has already priced in this heavily-anticipated recession and subsequent rebound.

Or perhaps the market is simply betting the recession "everyone" sees coming never arrives."

MY COMMENT

Not "everyone" is expecting a recession.....I dont. this article has it right. The FED is old news and the recession.....who cares.

It should be a CLEAN week next week with little to no outside distractions for stocks and funds.....just NORMAL market action.....up or down.

We will be done with the first half of the year in just two weeks. Remember all the predictions for how horrible it was going to be? How bad earnings were going to be? The big bad recession? NEVER-MIND.

 

Some good lessons here for a market day off.

Bullish! But Not Because of Arbitrary Bounces

https://www.fisherinvestments.com/e.../bullish-but-not-because-of-arbitrary-bounces

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

"A 20% rise from the low is nice, but meaningless.

One week on from stocks’ ascending 20% above last October’s low, the chatter over this alleged milestone hasn’t died down. Daily, we see headlines mulling whether this marker makes a new bull market official. Some say yes, pairing it with the traditional -20% threshold for a bear market. Some say no, pointing out the fact that some bear market rallies have exceeded 20% before giving way to new lows. We are more inclined to think back to one year ago this week, when stocks officially entered bear market territory, stirring up much of the same what happens now? debate. And it all highlights two timeless truths: Past returns don’t predict the future, and there is no all-clear signal for stocks.

Let us rewind now to June 13, 2022, the date the S&P 500 and MSCI World officially fell into bear market territory. Inflation was still accelerating. It would peak that month, but the high wouldn’t show in the data until July, and the fact that it was the high wouldn’t be clear for several months more. Most analysts anticipated the Fed would hike rates by 0.75 percentage point at its June 16 meeting, which it did, speeding up its tightening cycle and heightening recession fears. Oil prices had just flirted with their early-March highs and sat around $125 per barrel.[ii] European natural gas prices were climbing anew. US GDP was contracting for the second straight quarter, although that also wasn’t reported until July.[iii] Headlines coast to coast wondered how much lower stocks would go. The bear market seal was broken, so surely it would get worse!

Except stocks didn’t sink much from there. They wobbled around the low, then staged a rally in July and the first half of August. A big one. Almost 20%! Headlines’ tenor quickly shifted, with many arguing the bottom was in and a new bull market was underway. We saw studies arguing rallies that big meant falling to new lows was quite unlikely. Sure enough, what increasingly looks like the final drop was still to come in early autumn. But it still wasn’t hugely lower than June’s mark. Stocks reached their low on October 12, with the S&P 500 Total Return Index down -24.5% from its early-year high and the MSCI World Index down -26.1%.[iv] Not fun, but also nowhere near as bad as the epic declines many anticipated when stocks first breached -20%.

Another rally began the next day. There was no announcement. A bell didn’t ring. A starting gun didn’t fire. But unlike July and August’s sucker’s rally, the autumn upturn didn’t spark hope. Instead, burned by the summer fakeout, pundits argued it must be another bear market rally. And with the Fed still hiking, Europe still dealing with natural gas supply concerns and a rising risk of recession, inflation still too high and widespread US recession forecasts, stocks would surely resume falling before too for long. To us, it all looked like the pessimism that normally reigns at bull markets’ beginnings. So did the “L-shaped recovery” chatter that picked up when the rally seemed to pause for a spell in the winter. And the fears erupting from March’s regional banking issues. And the springtime handwringing about the relatively low percentage of S&P 500 constituents participating.

In our view, this pessimism was the best clue that the recovery would have legs. We love quoting Sir John Templeton’s depiction of bull markets’ psychology, and we will do it again: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” The world hasn’t been perfect these last eight months. Far from it. Economic data worldwide are mixed at best. Germany and the overall eurozone are in a recession, by one common definition. Wage growth hasn’t matched the steep rise in living costs pretty much anywhere. Tense politics are fraying everyone’s nerves. S&P 500 earnings are in the red. But for stocks, what matters is that expectations were even worse. When the majority of economists projected recession in the US, UK and eurozone, mixed data become a pretty darned positive surprise. Those tense politics mask gridlock, which reduces legislative risk—as it nearly always does in US presidents’ third years. Earnings were weak but better than expected and revenues held up ok, helping investors anticipate a turnaround as businesses got their costs in check. US inflation hasn’t slowed as quickly as some would like, but it is no longer close to double-digit territory. As for rate hikes and bank failures, banks overall are still lending, supporting continued growth.

When an ok reality beats awful expectations, the positive surprise propels stocks up the wall of worry. That is how new bull markets are born and grow. And it is why we think this looks more and more like a new bull market, although we can’t know that for sure—20% up threshold notwithstanding. If it is, and the first leg is now behind us, remember: To capture it, you had to be ready and willing to own stocks when fear was at fever pitch—when you might not have wanted to, when headlines were warning of far worse in store. The cost of not doing so, of waiting for clarity—whether from some arbitrary 20% threshold, stocks’ return to past highs or something else—is missing returns that could compound not only through the rest of this bull market, but over your entire investment time horizon.

Yet from here, the most important thing isn’t to congratulate yourself on capturing the initial rebound if you did so. Nor is it to lament spilled milk if you didn’t (though, we hope you will file the lesson away for next time). Rather, it is to look forward and assess what comes next without letting past performance dictate your expectations. We are bullish and optimistic about what is in store immediately ahead, but that isn’t because stocks are up 20% from the low. Rather, it is because sentiment, though improved enough for several observers to acknowledge the bull market, remains pretty skeptical in the face of a pretty ok reality. Fed fears still reign supreme. Inflation fears have just migrated from the US to the UK and eurozone, where people anticipate many more aggressive rate hikes are in the offing. Many economists still forecast recession, having only delayed their projected downturns rather than revising them up. Very few people concede that all reality needs to do is beat these very meager expectations, and fewer still recognize the bullish power of gridlock, as Fisher Investments founder and Executive Chairman Ken Fisher highlighted in his new column for the UK’s Telegraph today.

So whether or not you have participated in the recovery to date, we think there is still more ahead—growth you will likely need to capture if your long-term goals involve earning market-like returns, whether for retirement or another purpose. The 20% milestone isn’t a stop or a start. It is just past returns and an arbitrary marker. It isn’t predictive, and stocks should keep looking forward, pricing in the gap between expectations and the likely reality over the next 3 – 30 months. "

MY COMMENT

You have to be in the game to get the gains. Siting and waiting for some magical entry point to magically appear and announce itself to you is a LOSING situation.

Market timing is the primary cause of people under-performing the general averages. Trying to figure out when to sell and when to buy in response to random events and economic data is IMPOSSIBLE. It also IGNORES the basis of ALL successful investing......good fundamental stock and fund picking.

Love to buy and sell in and out of the markets? You are just CHURNING your own account. YES....it feels like you are doing something....being active......but you are just spinning your wheels with worthless motion.

 

Our stock market system....like everything.....is much more fragile than people think. If the young generations do not protect our free market capitalism system and our stock market system.....they will disappear. Once it happens.....they will NOT ever come back.

Unfortunately here is my REALISTIC (cynical?) view of the medium future.....50 to 75 years down the road.

I SUPPOSE it is possible that the stock markets and stock investing could be killed off over the span of 15-30 years. How IRONIC it would be to see the under age 40 generation and the "modern" style of TOXIC, dishonest journalism, TOXIC, dishonest politics, superstition based, dark ages emotion based pseudo science, etc, etc, kill off stock and fund investing.

It would be interesting since there is NOTHING else to support the entire private retirement system where NO ONE other than government workers and teachers has a pension.

To a large degree our investing and financial system is STILL based on TRUST. TRUST in financials, trust in the system, trust in the future of the country, and trust in businesses and the capitalistic system that has produced all that we enjoy in the USA every day regardless of net worth, status, or rank in society.

It would be even more IRONIC if the MEDIA turned out to be the primary catalyst to destroy the systems and society that make us the greatest financial and economic power in the world.

In my opinion, we are at a tipping point at this moment and over the next 10-75 years. My GUESS........I wont be around to see it......over the next 50 years we will develop into the typical science fiction movie plot line......where the country is made up of the small number of Elites that live in their compounds and protected areas. The rest of the people will be made up of the servants of the elites and bureaucrats and the great majority.....perhaps 80% of the population....will live a daily life of trying to scrape by.

The BOTTOM LINE, you get to live in the world, and future that you create and deserve.........SO I DONT CARE. My job is to try to set things up financially to take care of the next two or three or four generations of MY FAMILY over the next 50-75 years.

The silver lining.....people that have no knowledge or understanding of what it was like in the past.....will have NO IDEA what they are missing or what their life could have been like.

 

BUT.....I have no control over the future....so back to the present.

I am closing in a bit on my all time high. I am now 9.45% away from hitting my all time high.

It has been a year and a half process of holding through a very nasty bear market drop and the past six months of nice recovery to get to this point. Over that time I hit the same low in my account four times. Each time I hit that bottom, little bear market rallies came the next day and over a week or two give me back some cushion from going lower.

If those four account LOWS had not held I would have gone back in time to where my account was in 2019......a three to four year WIPE OUT. FORTUNATELY this did not happen. BUT....if it had I would still have simply held through the PAIN.

As usual.....I am fully invested for the long term.....having captured ALL the gains of the past 12 months. NO GUTS NO GLORY.

 

The economic report of the day.

Homebuilders are liking today’s housing market

https://finance.yahoo.com/news/homebuilders-are-liking-todays-housing-market-140053582.html

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

"It’s looking a bit more like a homebuilder’s market.

Builder confidence pushed into positive territory in June for the first time in 11 months, according to the National Association of Home Builders (NAHB)/Wells Fargo housing market index update released Monday. The index reading rose to 55 from 50 in May, marking the sixth month in a row that sentiment increased and the first time it crossed the midpoint of 50 since July 2022.

The newfound enthusiasm reflects that robust foot traffic from homebuyers, little competition from the resale side, and an improved supply chain have together helped tip the housing market in builders' favor. Headwinds still exist, though, as project financing has become harder to come by.

“Builders are feeling cautiously optimistic about market conditions given low levels of existing home inventory and ongoing gradual improvements for supply chains,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala.

Stable traffic returns
As mortgage rates rose rapidly last year because of the Federal Reserve’s aggressive efforts to combat inflation, homebuyers fled to the sidelines. They returned, though, at the beginning of the year, resigned to stomaching the higher borrowing costs.

The NAHB gauge measuring traffic of prospective buyers increased 4 points in June.

“Overall, buyers appear to be adjusting to mortgage rates that have stabilized in the 6% to 7% range,” Toll Brothers Chairman and CEO Douglas C. Yearley said in late May, during the builder’s second-quarter earnings call. “The shock of last year's abrupt spike in rates appears to be wearing off, and buyers are moving on with their lives.”

While the average rate on the 30-year fixed mortgage — the most popular home loan for purchases — sat at 6.69% last week, many builders can offer a rate much lower than that through their financing arms to attract price-conscious buyers.

"So buyers out there today that are buying new homes are not paying 6.5% — the headline rate," John Lovallo, UBS homebuilders and building products analyst, told Yahoo Finance Live last month. "They’re paying under 5% in most cases."

In June, 56% of builders offered incentives to buyers in June, up slightly from 54% in May, according to the NAHB, but lower than in December 2022 (62%). But only a quarter of builders reduced their prices in June, down from 27% in May and 30% in April.


Limited resale inventory
Elevated mortgage rates are also helping builders on the supply side, too, by limiting the number of homeowners who are willing to sell in these market conditions.

“Now with 90% of outstanding mortgages under 5%, the market is seeing the further impact of a low interest rate lock-in effect, existing homeowners are reluctant to give up their low rate mortgages, which has led to historically tight resale inventories,” Yearley said last month.

He cited recent reports that found that about 35% of homes for sale are new builders, compared with the historic average of 10% to 15%.

“On the existing home side … there's just not much out there,” Lovallo said. “So I think buyers that are looking for a home at this point are probably more inclined today than at any point in history to have to focus on a new home.”

That dynamic helped to buoy sales forecasts. Most major builders increased their outlooks for the rest of the year, and the NAHB measures for current sales conditions and sales expectations six months from now both increased in June.

Supply chain improves
Another boost to builders is an improving supply chain wrought by the pandemic. Lumber costs are down. Hiring also has gotten a bit easier.

“Let me say that from Lennar's perspective, it really feels like the supply chain disruptions are behind us with a few minor exceptions,” Lennar Corp. Co-CEO Jonathan Jaffe said last week during the builder’s earnings call.

But project financing remains a headwind, especially after the failure of several regional banks this year roiled markets.

“Access for builder and developer loans has become more difficult to obtain over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows,” NAHB's Huey said alongside the new data."

MY COMMENT

Some good news here in general and for the big home builders. That is one tough business. The WEAK do not last long.

 

I expected the down open today. Not based on anything factual....just a feeling. Yesterday I just started thinking that the three day weekend had broken the momentum of the markets.....a little bit. I have no facts or other reason for this....it was just a feeling. AND....I see it is happening.

Of course......simply the coming together of a random feeling and a random market day.

 

NOW....back to facts.

Fed Stands Pat, Pundits Speculate Further

https://www.fisherinvestments.com/e...tary/fed-stands-pat-pundits-speculate-further

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

Rate hikes still aren’t market drivers.

"If we had the misfortune of being the people who write about daily stock market movement, we would probably say something like this today: Stocks initially fell on news the Fed decided to pause its rate hikes Wednesday, but markets recovered to finish the day flattish as Fed head Jerome Powell and the Fed’s own forecasting materials made it clear the fight against inflation isn’t over. But thankfully, we don’t have that job, so we won’t try reading into the market’s 25-minute-long dip or the ensuing 40-minute bounce back. Nor will we square those zigs and zags with the precise moment it occurred during Powell’s press conference to see what could possibly have triggered traders. All of this is too subject to emotions and algorithms to draw meaningful conclusions from. Yet we do have some beef with the popular view that the Fed must do more to tame inflation—and that doing more necessitates falling stocks.

One popular viewpoint entering Wednesday’s meeting was that if the Fed’s work were finished, we would see it in sluggish or falling GDP, a sinking stock market and higher long-term interest rates. Therefore, the decision to pause and keep the fed-funds target range at 5.0% – 5.25% means the Fed will probably have to hike more later to make up for a premature victory declaration, setting up more trouble for markets down the road. We beg to differ. There is no preset relationship between short-term interest rates and economic growth, nor between economic growth and inflation, so GDP is a poor thing to use as a report card. As for stocks, they have a long history of rising during rate hike cycles. Last year, it seems to us the Fed’s huge inflation U-turn caught many investors—who took officials’ words and projections too seriously—off guard, with the surprise contributing to the cavalcade of worries that drove the downturn. But the Fed continued those hikes for seven months after stocks’ latest low. That looks to us like markets got over the twist, priced in the Fed’s actions and moved on. Lastly, for rates, last we checked long rates move primarily on inflation expectations, so 10-year US Treasury yields’ downward trip since last October would imply markets simply see lower inflation ahead, which looks pretty sensible given economic trends and input prices.

Might we offer another way to look at all of this? The primary way the Fed would affect the economy is through lending. The fed-funds rate influences banks’ funding costs, and banks’ business model is to borrow at short rates, lend at long rates and profit off the spread between them. If bank funding is expensive and loan rates aren’t high enough to justify the risk of new lending, then credit dries up, the economy gets less fuel and growth slows or contracts. So “tight” Fed policy would be evident first in weak lending, which we would define as loan growth slipping below the core inflation rate. As it happens, that was the case throughout most of 2021 and into early 2022, tied largely to the reversal of pandemic-era emergency lending. Loan growth didn’t start topping the core inflation rate until after the Fed started hiking last spring, and it accelerated through yearend. It didn’t start slipping back toward the core inflation rate until March’s regional banking tremors. Perversely, you could argue money was tight before the Fed started hiking, loose while they were actually hiking, and is now inching toward tight-ish. Given monetary policy hits the real economy at a significant lag, if you think rate hikes are behind the slowdown, it seems sensible enough for the Fed to wait and see if it slows further, lest they overshoot.

With that said, we don’t think rate hikes deserve credit for the lending slowdown. Overall and on average, banks still aren’t passing rate hikes to depositors. Yes, some savers have ditched their favorite megabank for a money market fund or online savings account, where rates can be closer to the fed-funds target. But the national average deposit rate was just 0.39% in May, the latest figure available. Deposits, though down from early-2022 highs, remain far above pre-pandemic levels. So it doesn’t look like banks’ low-cost funding base is eroding fast. Rather, the lending slowdown seems more like a function of a high base effect from 2022 and banks taking a wait-and-see approach during the regional banking dust-up. With the dust there settling, it wouldn’t surprise us to see lending remain resilient.

Mind you, our analysis operates on a pretty specific, Milton Friedman-ish view of how monetary policy and the economy intersect. This thinking has gone out of fashion with most Fed folks, who seem to focus more on labor markets and wages, despite the Fed’s own research from last month showing those have a minimal impact on future prices. At his post-meeting press conference today, Powell flagged “loosening of labor-market conditions” as something the Fed needs to see continue before they can be confident inflation will slow back to their 2% year-over-year target. So we don’t think it is wise to try to predict the Fed’s next move based on loan growth trends.

But we also don’t think it is wise to use the infamous “dot plot” of Fed forecasts, which also came out Wednesday, as a prediction tool. Doing so largely overlooks the evidence from just last year that you can’t take it to the bank. Yet that is what the world did Wednesday afternoon, noting the forecast points to two more rate hikes this year and four rate cuts in 2024, presuming the Fed moves in single 0.25 percentage point increments. Please, dear readers, don’t get sucked into this. One, these dot plots are always in flux. March’s version showed the median forecast was for the fed-funds range midpoint to finish 2023 at 5.1%, which is basically where it is now. The update bumps the median forecast to 5.6%. It moved! And a moving target is useless. Two, focusing on the median ignores that the dot plot contains 18 individuals’ forecasts, and those 18 run the gamut. Three, even if the median forecasts prove correct, it is impossible to know how the Fed would get there. What if it indeed hiked twice more this year … and then cranked rates up to 7.5% – 7.75% by next May before cutting steeply to 4.5% – 4.75% by yearend 2024? That would fulfill the median forecast, technically, but it could be a surprise.

Rather than try to predict the Fed, which we think is impossible, we suggest simply waiting, seeing what they do, and assessing the pros and cons of each decision as it happens. With loan growth and inflation slowing, a pause seems fine to us. Not necessary, as there is no indication a couple more hikes would tip the scales, but fine. "

MY COMMENT

The FED......a joke at this point. Their ability to drive the markets down is now over.

There never was any reason for legit long term investors to do anything in response to the FED. NOW....there is REALLY no reason. Sit and wait....do nothing.....that is what the REAL smart money is doing.

 

HERE is reality.

How Returns Happen

https://www.fortunesandfrictions.com/post/how-returns-happen

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

"It's been one heck of a June so far...

Historical Returns for the S&P 500 (since 1926)

Average return per year 10.1%
Average return per month 0.84%
Average return per week 0.21%
Average return per day 0.04%

Actual Return Over Last 12 Trading Day
5.98%








How did we possibly realize 6+ month's worth of expected returns in just a couple weeks?

In investing, small hinges swing big doors.

The current value of a company reflects investors' assessments of the company's future profits, discounted back to the present day.

Consider that IBM is 112 years old. Coca-Cola is 137 years old. Citigroup is 210 years old.

If companies can live this long, and make profits for this many years, don't overlook how bonkers actual analyst models are for stock valuations. They must find a way to account for potential profits that are decades into the future.

When opinions about small things change, they change for all future years. Even if we assume some new technology or piece of news will marginally improve a company by say only 1%...it might be 1% for many decades. It can have an overwhelming impact.

News of AI's potential to improve efficiencies for nearly all businesses, and the Federal Reserve (seemingly) currently succeeding in taming inflation, are good current examples. The market's recent jolt upward reflects investor opinions quickly recalibrating.

Prices are brutish, irreverent, and unsympathetic to investors putzing about on the sidelines.

Consider just some of the historical 1-day returns of the S&P 500:

• March 15, 1933: +16.61%
• October 13, 2008: +11.58%
• March 24, 2020: +9.38%

Of course many of these followed really bad days. But if we don't know which days will be good and which days will be bad, and the stock market goes up over time, the recipe for success is obvious.

We need to give ourselves the highest probability of capturing periods like the last couple weeks.

Back on March 20, 2020, amidst the Covid-19 chaos, Ben Carlson advised his readers:

Just make sure you don't become addicted to your dry powder.

As I've written before — markets are whippy, and will frequently be accommodating to people who zig and zag with their portfolio. Even if it's a rubbish approach, simply because of inherent volatility, market-timers will often find themselves momentarily better off for having actively traded their portfolio based on illogical whims.

But at some point the music stops, and stocks never look back again.

Don't avoid market timing because it can't work, avoid it because if it doesn't work, the results are unnecessarily catastrophic. When and how will you justify to yourself to get back in? Why would you willingly sign up for an agonizing investment experience?

March 9, 2009 is the day we bottomed out during the Great Financial Crisis — and never looked back. The day that clowned anyone who said "Well, I'll just step to the sidelines for a little while. After the market goes down more, I'll get back in. Just wait this out for a bit."

The S&P 500 is up 765% since then.







The average annual return of the S&P 500 is 10.1% per year. It's perspective on a long term average, but it's mostly useless otherwise. Of course markets don't know what a calendar is, nor concern themselves with accommodating our expectations and hopes.

Instead, markets whip, stall, and doddle. They rise, fall, crash, burn, recover, and then, almost inevitably...at some point...they rip higher.

Without ever telling us when it's about to occur.

That's how returns happen."

MY COMMENT

This .....IS.....how returns happen. They come in BIG spurts......and....they come in little dribbles that are so small we dont even realize it is happening. At the same time people are being jerked up and down over and around by their emotions.

There is NO REASON to play the game.....just sit and wait. Good things come to those that simply wait.

 

Speaking of the irrelevant short term....here is the markets today.

Stocks fall as caution saps momentum

https://finance.yahoo.com/news/stock-market-news-live-updates-today-june-20-2023-104226173.html

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

"Stocks slipped early Tuesday as wary investors eyed potential headwinds for the recent rally with markets set to resume after a holiday break.

At the opening bell, the S&P 500 (^GSPC) was down about 0.4%, while the Dow Jones Industrial Average (^DJI) fell 0.5%, or about 180 points.The Nasdaq Composite (^IXIC) dropped 0.3%.

Worries about the health of China's economy, the second-biggest in the world, persisted as Beijing's latest cut to a key lending rate fell short of hopes.

Markets are also bracing for Fed Chair Jerome Powell's two-day testimony to a House committee to start Wednesday, watching for any clues to whether policymakers will resume their rate-hiking campaign in July. A clutch of Fed officials are lined up to speak Tuesday.

MY COMMENT

Is this all you got? Not much going on today.....at least as an excuse for the daily market.

I prefer to think that the weekend being long broke the momentum some. In addition we are now just in an EDDY......compared to the whirlpool we have been swirling in for the past six months. Investors are exhausted and just siting and recharging for a day or two.

At the same time the media is in a FRENZY to find some issue to fear monger.......and so far failing miserably to find anything that catches any attention.

In other words a day or more for some CONSOLIDATION of the markets and investors. this is how things happen in a BULL MARKET.

 

Learn from the BEST of the BEST.

Fidelity legend Peter Lynch: 'I never said to invest in the stock market'

https://finance.yahoo.com/news/fide...-to-invest-in-the-stock-market-120755736.html

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

"Peter Lynch never said to invest in the stock market.

The legendary former Fidelity Magellan fund manager and author of the pioneering book on investing “One Up On Wall Street,” which will celebrate its 35th anniversary next year, drove home that point in a conversation with Yahoo Finance as we discussed what has changed since that book first came out.

“So the reason I wrote 'One Up On Wall Street' was to help people that wanted to do investing. I'm not saying do it, but if you do it, there's a certain way to do it. If you don't do it that way, you probably are gonna have an unfortunate outcome,” said Lynch, now 79.

Since the first edition published in 1989, nearly two million copies of the book have sold around the world and it’s been translated into 23 languages. Lynch’s books that followed include “Beating the Street,” and “Learn to Earn: A Beginner's Guide to the Basics of Investing and Business.”

It’s not hyperbole to say that Lynch was the rockstar of the investing world during his 13-year tenure from 1977 to 1990 at the helm of Magellan — duties he began at the tender age of 33.


Peter Lynch took the helm of the Fidelity Magellan fund at age 33 and turned into a supernova. (Photo courtesy of Peter Lynch)
Lynch headed up one of the most lauded mutual fund successes in history. During his tenure, Fidelity’s Magellan fund racked up a 29.2% average annual return for those investors who held the shares throughout. In other words, if you invested $1,000 in Magellan on May 31,1977 and held on until May 31, 1990, that small investment would have ballooned to around $28,000. It was the best performing mutual fund in the world under his watch, climbing from around $18 million in assets to over $14 billion with over a million shareholders. "One out of every 100 Americans was invested in Magellan at the time of my tenure," he said. Pretty incredible.

Peter Lynch’s fame is not one made of pixie stardust, but rather a plain approach to investing. His secret to success: ‘buy what you know’ was the kind of common sense explanation most people could understand and act on without any special insider periscope. What goods and services are you and family and friends buying? Use that as clues to start doing some homework to learn more about the company.

Lynch, who now serves as vice chairman of Fidelity Management & Research, retired from Magellan at the age of 46.

Edited excerpts from our interview:

Looking back at “One Up On Wall Street,” is there anything you would have changed?

I wouldn’t change a thing. The sales have been remarkable. It's really wild. So, that's kind of fun. All the royalties I received, you know, my wife and I gave to charity, and they're still coming in. I didn't do it to make a profit.

(But) it's just bothersome to me that people aren’t more careful. Now, the internet, they didn't have that 35 years ago, and now people look up a refrigerator, airplane tickets, vacations…but then they put $10,000 or some stock they hear about at a party or on a bus.

For some reason, people, this is the term, play the market. It's such a dangerous verb. You don't play the market. And maybe I didn't stress that enough in the book. It's very important to point out, I did not say invest in the stock market. So the reason I wrote “One Up On Wall Street” was to help people that wanted to do investing.

What are the biggest changes for investors today since you wrote One Up?

Data is more available now. The things I was talking about are a lot easier for average folks now, people who want to do some work.

Back 35 years ago, we all, say, it was Nike, used to wait for their quarterly report to come into our office, into the mailroom. We’d open the mail up, and say, yay, their inventories have finally gone down. They had too much. We'd go buy more Nike. Now it's instantaneous. And Joe Q Public or Suzy Q Public gets at the same time as all the professional investors and everybody around the world.

There's great information. They put the investor presentation up online, they put out the results. You can look at the balance sheet without having to write to (the) company and they mail you their quarterly report and then it's a month old. The information for the public has increased dramatically. If they want to do the work today, it's simple. There’s way more information available.

And now commissions are down a lot. But just because the costs are down, don't be a trader. You know, buying three stocks a day and on Friday you sell three, buy three more next week. That's not investing. That's gambling.

Your main thesis still remains– the idea that you should buy stocks in companies that you know. Correct?

That's step one. But you have to know other certain steps. Let's say two companies have share prices that have gone from $50 to $4. And one has $300 million in debt, and one has no debt, and $200 million in cash. They're both losing money. Which one should you buy? Which one should you look at?

If you can add four and four and get fairly close to eight, you can handle a balance sheet. You look at the left side, how much cash they have. Look at the right side.How much debt do they have? They're both losing money. Why would I buy the stock with a terrible balance sheet?

You need to understand the company story.

So say my stock at the start of the year is $20, sometime this year, it’s traded at $28, then $14 and finished at $20. During the year, it went from $14 to $28. So what do you do? If you understand the story, and it goes down, you buy some more.

How do you know when the story has run its course?

Companies are dynamic. Things change.

When Walmart was 25 years old. It had gone up tenfold. Wow, a 10-bagger, that's all over now.

But they're only in 18% of the United States — a 25-year old company, in 18% of the United States. Small towns, small cities. It then went from 18% to 23% to 26% and over the next three decades, they kept doing it and beat the hell out of Sears and Kmart. It then goes up 30-fold.

You have to ask: what’s the inning of the ball game?

I had a big position at McDonald's in the eighties, and people were saying it's overpriced. Well, they missed this, (that) there are 200 countries in the world. McDonald's went overseas and for the next two or three decades kept growing. Again, I'm not recommending Walmart or McDonald's, of course.

But what inning in the ballgame? Was McDonald in the middle innings? Maybe… they were in every city in the United States. Maybe there's no room here, but overseas…The same thing happened to Starbucks. You know, there's more Starbucks outside of the United States by a lot than there are in the United States.

One of your core pieces of advice is that it's a long range outlook.

Unless the story changes.

At some point, Toys ‘R’ Us went from a great story to a bad story. Same with Staples. Same with Gap. Same with Limited. When Gap and Limited, when they're in every single mall in America, where could they go? Well, unlike Starbucks and McDonald's, Coca-Cola and Johnson & Johnson that went to, you know, another 50 countries or so. I mean, I saw four Burger Kings in Istanbul. I saw Popeyes in Hong Kong and Singapore. You have to make sure you're following the story. You don't just buy it and forget about it.

You have to say, whoops.

Who’d have guessed what happened to Xerox? Who would have guessed what happened to Eastman Kodak? IBM? Xerox? You have to keep following the story.

What would you tell a young person getting started investing in the market today about evaluating companies?

Put together a $100,000 paper portfolio of at least 10 stocks to see if you're good at this. You ought to be able to write at least three or four bullets–not full sentences even. Why do I own this one? Three months later look to see what happened to the facts. And then three months later, look at the facts, value, what's happened to the story, what's happened to fundamentals?

Now you're ready to go.

The main thing is to keep an eye on the fundamentals of what happens to the company's business. You know, this crap of buy low, sell high, you know, buy high, sell higher is fine too.

Tesla and Apple are good examples. But I’m not saying to buy those.

What was your strategy for finding those home runs?

One way I did well was buying small companies. One I couldn’t even pronounce the name of: Au Bon Pain Co.. They bought the St. Louis Bread Company in 1993 for $23 million and changed the company name to Panera. Then Panera was acquired by JAB Holding Co. for $7.5 billion and became a private company.

Then there are the surprise stories. Look at Stop & Shop, the grocery store near where I live, started in Boston and then they opened Super Stop & Shop and closed the other one. It might be twice the size, three times the size.

Here's what they do. They make no money in milk, no money in bread, and a lot of things they occasionally break even. But if you buy a birthday card for your mother, or your kids, you have no idea what a good deal it is for them. There's a great profit margin on her birthday card for the grocery store– two or three times the margin, plus they added a drugstore to create traffic. It was a 10-bagger. And what a shock.

There are also the turnaround ones that you hear about if you're working in the industry, if you're in the steel industry, the insurance industry, shipping, chemistry, railroads, you might see things get better before the money managers on Wall Street see it.

You don't need a lot of these in a lifetime. When things go from terrible to semi terrible to ok, you can make a lot of money.

Any you missed that you regret?

Yes. 30 years ago, how dumb is this? I had a great opportunity to make a fortune on Apple. My daughter bought me an iPod for my music.

I did not look at Apple.

Apple is not like biotechnology companies. They are really complex. They're in phase one, phase two, phase three. They're large, complicated molecules. I mean, the odds of you knowing that you will make a difference in biotechnology, even if you're a biologist is pretty, difficult.

But Apple, it's not a complicated company. It's not high tech to me.

It was the early 2000s and The iPod was selling for $225, I think. [The iPod was released in Oct of 2001.] And they were making like $175 profit. But the company wasn’t doing that well. They were selling the computer for 900 bucks, making $25.

The iPod turned the whole company around.

That's when it blew out. And then the iPhone can along. [It came out in 2007.] Oh, by the way, I think it was a $9 stock with no debt and four or $5 a share in cash.

Apple, unlike Bethlehem Steel or US Steel, doesn't have these huge plants and all this equipment. Somebody else is making all this stuff. They had a very nice balance sheet. If I followed my own advice, I could have had a 10-bagger, or more in Apple. I really fell asleep on that one.

What’s your perspective on the crazy things that have come out of the pandemic like the crypto craze and the meme stocks?

They're always there. I mean, there's always periods of time when something goes cuckoo on the upside. Remember the famous Tulip bubble hundreds of years ago?

Today, there are more gamblers. You can gamble on a basketball game. Not, the who's gonna win bet. But when he or she's gonna make the next foul shot?

Unfortunately people are more speculative now.

There are new kinds of stocks than when I was running Magellan. There are cannabis stocks or marijuana stocks. There are crypto stocks, sports betting stocks. I mean, there's a zillion biotechnology stocks. Those didn't exist. There's more ways to gamble now than 35 years ago. That means there's more ways to lose.

Is it all about doing the homework?

One point I made in One Up that's still true is that the key organ in your body when it comes to investing is not the brain, it's the stomach.

You have to do the work and use your brain, but who's got the stomach when something bad happens, like oil goes up, or a recession, Covid, the Ukraine invasion, people being murdered left and right, January 6th and what happened in Washington DC. These are things that happen and then the market goes down.

What does your stomach do? Are you getting up at night? I mean, can you sleep with your stocks? If you're getting up at 3:00 AM and looking things over, you shouldn't be investing.

Any parting thoughts?

Even if something looks good, you have to say, can (the company) make money? Are they making money? You go in a store, you say, wow. But maybe you went into the 240th Gap or 300th Limited and thought it was attractive. But there's only room for 248 of them. Some people have said to me, ‘I listened to you, walking into a store and buying it that day.’

Well, I never said that.

It's the start of the exercise. That's when it gets interesting. Let me do some work again. The key thing is that is fun and researching stocks is fun. This is not like doing your taxes. If you can't understand the balance sheet, go to some other stock. If you can't understand what they're doing with the accounting, or you can't figure out what it does, when you look at the numbers, try some other one.

You learn a lot. I was probably right six times out of 10, maybe six and a half. But the times the stock went down, if the story was good, I would buy more."

MY COMMENT

This is the simple key to investing....identify a great company.....do the basic research.....buy the stock. In real life very difficult for most people. They just GUESS....they wing it....with visions of all the money they are going to make. they fall victim to all the speculative....trading....mentality that is pushed by all brokers today.

If you find out that you are NOT making money with stock picking......just buy the SP500. It will do all the hard lifting. It will reflect the companies that are booming and doing well with higher weighting in the average and more exposure to the best of the best companies.

The single most important variable in investing......UNDERSTAND YOURSELF.