The Long Term Investor

This little article pretty well says it all about the FED.

Powell’s Jackson Hole Nothingburger

https://www.fisherinvestments.com/e...commentary/powells-jackson-hole-nothingburger

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

"The Fed Chair doesn’t say much new at this year’s central banker confab.

“As is often the case, we are navigating by the stars under cloudy skies. … We will keep at it until the job is done.” No, we aren’t quoting the protagonist of a summertime blockbuster or a legendary crooner—that was Fed Chair Jerome Powell waxing poetic to conclude his keynote address about inflation at the big Jackson Hole central banker shindig. Unsurprisingly, pundits have spewed analyses of what Powell’s speech means for monetary policy. But nothing here is a big revelation—nor a roadmap of the Fed’s future actions.

In a speech titled “Inflation: Progress and the Path Ahead,” Powell acknowledged some improvement in prices as pandemic-related distortions eased, though he also reiterated his view that “restrictive monetary policy” is necessary to further cool inflation. In his words: “Based on this assessment, we will proceed carefully as we decide to tighten further or, instead, to hold the policy rate constant and await further data.” The Fed head’s widely awaited words didn’t surprise many observers. As one analyst described it, Powell “hit it more down the middle, with no major future changes in future hikes a welcome sign,” a stark contrast to when he allegedly “took out the bazooka” with a more hawkish-than-expected tone.[ii] Others called the Jackson Hole speech evidence of a “fully data-dependent Federal Reserve,” even though it seems to regurgitate what the Fed has been saying for fully two years under the guise of analysis.[iii] (Actually, even longer than that, considering then-San Francisco Fed President John Williams printed t-shirts in 2015 saying as much.)[iv]

Many applaud the Fed’s seemingly measured approach, but we have some questions. Is this an admission Fed policy wasn’t “cautious” before? We wondered as much going back to March 2020 when the Fed unloaded a barrage of measures, including a shoot-from-the-hip round of quantitative easing (QE). At the time, the Fed argued extraordinary actions were necessary to calm markets. Perhaps—although we could envision a case in which their unexpected moves worsened the panic. Moreover, the economic logic behind massively increasing money supply when lockdowns severely constrained said supply was never clear. But hey, kudos to Powell for his newfound “caution.” Overall, not many question the wisdom or logic behind Powell’s speech—highlighting the non-event Jackson Hole was this year—and regularly is.

Despite all the press, Jackson Hole speeches aren’t as game-changing as people think. The hype picked up in the early 2010s, when former Fed Chair Ben Bernanke’s speeches hinted at new QE programs. Former ECB President Mario Draghi signaled a QE program at 2014’s Jackson Hole gathering. Powell himself may have added to the gathering’s mystique when he introduced a new policy framework in 2020. But generally speaking, the Fed chair’s keynote talk tends to reflect recent past events—which everyone already knows about.

For example, Powell’s speeches this year and last focused on inflation. Is that any surprise? High prices are THE economic story of the past two years. The 2021 address, “Monetary Policy in the Time of COVID,” discussed the Fed’s plans to achieve its dual mandate amid pandemic-driven upheaval. Interestingly, Powell called inflation “… a cause for concern. But that concern is tempered by a number of factors that suggest that these elevated readings are likely to prove temporary.”[v] Two years later, Powell’s call of “transitory inflation” looks to be correct, though the Fed and other central banks can’t exactly claim credit in this year’s speech—not after they U-turned, called inflation “persistent” and launched a historically fast pace of hikes in the face of public and political pressure as prices kept climbing.

Going back to 2020, Powell introduced the aforementioned policy framework, going from a more specific inflation target of 2% y/y to a squishier “inflation that averages 2% over time.” Many viewed the news as a landmark shift, though the new approach seemed mostly like window dressing to us. Before that, in the simpler, prepandemic year of 2019, Powell highlighted the economic challenges tied to trade policy—due largely to the escalation in the US – China “trade war,” which had picked up steam since 2018.[vi] Jackson Hole, in this light, looks mostly like a confirmation of what we all knew—not anything predictive, especially for stocks.

As we wrote last Monday, this isn’t a big deal for investors. Even if Powell laid out a detailed roadmap, monetary policy changes don’t have a preset economic impact. Would raising the federal funds target range from today’s 5.25% – 5.50% to 5.50% – 5.75% crimp businesses’ willingness to invest in new equipment or hire labor? We don’t think so—the US economy is far more complex than that, and companies factor in many other criteria (e.g., the business cycle, legislation and regulation, industry and sector trends) beyond monetary policy. There isn’t any real sign keeping rates high going forward would have any effect on markets. It is the status quo, after all, not a surprise—and surprises move stocks most. That was the story of early 2022’s U-turn—not the hikes themselves, which stocks’ climb amid rate hikes since October shows.

Now, this doesn’t mean investors should ignore monetary policy. The Fed has made mistakes in the past, so monitoring for errors is worthwhile. But when it comes to a widely watched speech filled with vague, squishy, non-committal words, we don’t think there is anything there for investors to act on."

MY COMMENT

YES.....the FED is now simply not very relevant. NO....I dont care when or if they start to lower rates. I would welcome them to sit where they are right now for the next 12-18 months. The impact on longer term stock investors will be NOTHING.

Jackson Hole.......just an excuse for a government paid vacation with the Elites during the prime August time span. Nothing but cocktail parties and various events that are meaningless.

 

Here is the open today.....all the big averages GREEN at the moment.

Stocks open little changed Tuesday after S&P 500′s first back-to-back winning sessions in August

https://www.cnbc.com/2023/08/28/stock-market-today-live-updates.html

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

"Stocks were near flat Tuesday as investors looked to the final days of what’s been a difficult August for the market.

The S&P 500 traded just below the flatline along with the Dow Jones Industrial Average. The Nasdaq Composite
dipped 0.2%.

Tuesday’s moves come a day after the S&P 500 notched its first two-day advance of the month. The benchmark index rose 0.6% on Monday, while the Nasdaq advanced 0.8%. The Dow gained 200 points in the previous session.

Shares of retailer Best Buy added 5.1% after reporting an earnings beat. Telecommunications firm AT&T was also trading higher, while Salesforce ticked down 1.5% ahead of quarterly results.

Monday’s leg up can be characterized as a respite from what’s shaping up to be a tough month for stocks. With just three sessions left in August’s trading month, the Dow is on pace to finish 2.8% lower. The S&P 500 and Nasdaq
are poised for losses of 3.4% and 4.5%, respectively.

“It’s a lot of digestion right now as we pulled back a little bit off the year-to-date highs,” said Chris Barto, an investment analyst at Fort Pitt Capital. Traders are “getting back to their desks from summer and looking at their portfolios and reallocating towards the end of the month.”

Data on home prices, job openings and consumer confidence will also be due out Tuesday morning."

MY COMMENT

Consolidation going on and as above.....traders returning from vacation. YAWN......nothing to see here. A few earnings BEATS still limping in at the end of earnings.

 

Looking for an excuse to justify buying NVDA?

Nvidia's forward PE ratio tumbles to lowest in eight months

https://finance.yahoo.com/news/nvidias-forward-pe-ratio-tumbles-181637108.html

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

"(Reuters) - Increased analysts' estimates since Nvidia's strong quarterly report last week have left the world's most valuable chipmaker trading at its lowest forward earnings multiple in eight months.

Nvidia's stock added nearly 2% to $468 on Monday, leaving it down almost 1% since last Wednesday, when the Santa Clara, California company far exceeded expectations with its quarterly revenue forecast as an artificial-intelligence boom fueled demand for its chips.

At that price, Nvidia shares are trading at the equivalent of around 33 times expected earnings over the next 12 months, according to Refinitiv data. That forward PE compares to over 46 a week ago, and it is now at its lowest since December 2022.

Nvidia's stock has more than tripled this year amid soaring demand for its top-of-the-line processors used to power generative AI technologies that can read and write in human-like ways.

Price/earnings ratios help investors gauge the value of companies, but relying on analysts' estimates of future earnings creates uncertainty.

"Any time you use a forward-looking thing that involves an estimate in a very new market and very uncertain economic environment, I think at a minimum you have to take it with a pretty huge grain of salt," warned Ross Mayfield, an investment strategy analyst at Baird.

Benchmark Research analyst Cody Acree has a "buy" rating on Nvidia but pointed to the company's reliance on Taiwanese chip foundry TSMC, which also serves Apple and other big customers, as a factor that could keep Nvidia from selling as many of its high-end chips as it would like.

"It's not just demand, but what they can actually deliver," Acree said.

In its report last week, Nvidia, with a stock market value of $1.14 trillion, also said it would buy back $25 billion of its shares, suggesting chief executive Jensen Huang views them as undervalued, even after gaining 220% year to date.

Following its report, analysts on average expect Nvidia's revenue for the fiscal year ending in January 2024 to reach $53 billion, nearly double the previous year, according to Refinitiv data. The company's net income is seen quintupling to over $22 billion in the same fiscal year before reaching $35 billion the following year."

MY COMMENT

I will NOT be adding any more NVIDIA....it is already an oversized position in my accounts.

I have looked around lately and cant find anything I would want to add to my accounts. SO.....I sit with my little eight stock, very concentrated, portfolio. I do have my two funds.....Fidelity Contra and SP500 Index.....to try to balance that concentration out a bit.

 

HOUSING....still a mess for potential buyers.

U.S. home prices rise month-over-month in June, according to S&P CoreLogic Case-Shiller

https://www.cnbc.com/2023/08/29/us-...-according-to-sp-corelogic-case-shiller-.html

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

"U.S. home prices rose on a monthly basis in June while annual prices were unchanged, adding to a growing body of evidence that housing costs have already begun to recover.

The S&P CoreLogic Case-Shiller national home price index, which covers all nine U.S. census divisions, increased month over month by 0.7% in June on a seasonally adjusted basis after rising by 0.8% in May. Another index tracking the 20 largest metro areas rose 0.9% on a monthly basis, topping estimates in a Reuters poll of economists for a 0.8% gain.

On a year-over-year basis, the national price index was unchanged in June versus a 0.4% fall in May. The 20-city index was down by 1.2% in June after sliding 1.7% annually in May, a possible sign that an anticipated bottoming in prices could be materializing.

Craig Lazzara, managing director at S&P DJI, underscored the trend, noting that the National Composite has risen 4.7% year to date, faster than the historical median full-year increase.

“We recognize that the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month’s report are consistent with an optimistic view of future results,” he said.

The housing market has been highly sensitive to the Federal Reserve’s aggressive interest rate hiking campaign, with sales cooling precipitously after the Fed started hiking rates in March 2022. But demand has remained relatively resilient against the highest mortgage rates since 2001, and an acute shortage of existing homes on the market has propped up prices in recent months.

That could be unwelcome news to the U.S. central bank. In a speech at the annual Jackson Hole Economic Policy Symposium on Friday, Fed Chair Jerome Powell cited a “possibly rebounding” housing sector among a number of robust economic indicators that might force the Fed to continue hiking rates.

The strongest gains were recorded in Chicago and Cleveland, and the greatest price declines in San Francisco and Seattle."

MY COMMENT

By now potential buyers should be used to the current markets. If you want to buy a house you just have to accept that conditions are not going to drastically change any time soon.

 

Here is some more housing market info:

Home prices could surge over the next year as affordability crisis worsens
US home prices may continue to climb this year, despite steep mortgage rates

https://www.foxbusiness.com/economy/home-prices-could-surge-next-year-affordability-crisis-worsens

 

So far today.....the force is with......the markets.

The general averages are strengthening as the day moves forward. If we can have a good three days......we have some potential to cut the August losses in half.

But.....WATCH OUT.....you will soon be seeing the SCREAMING HEADLINES regarding September being the worst month for stock in the year. Since there is really NOTHING happening right now you will see this sort of thing being emphasized as a general click-bait strategy.

 

Here is the economic data of the day.....which no one will care about.

Stocks near flat with consumer confidence data on deck

https://finance.yahoo.com/news/stoc...n-deck-stock-market-news-today-104157607.html

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

"Consumer confidence reverses summer gains in August

After gains in June and July, consumer confidence slipped in August, new data from The Conference Board showed Tuesday.

The Conference Board's Consumer Confidence index came in at a reading of 106.1, down from 114 in July and below the 116 expected by economists.

"August's disappointing headline number reflected dips in both the current conditions and expectations indexes," said Dana Peterson, chief economist at The Conference Board in a release. "Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular."

Gas prices have risen in recent weeks with a 15% rise in oil prices in July and natural disaster events in the US impacting energy markets. Elevated diesel prices are now adding to worries that inflation could re-accelerate amid pressure in energy markets.

The Conference Board's report also jived with the JOLTS report released on Tuesday, with consumers growing less optimistic in their assessment of the labor market.

"Assessments of the present situation dipped in August on receding optimism around employment conditions: fewer consumers said jobs are 'plentiful' and more said jobs are 'hard to get,'" Peterson said.

"Hard data confirm that employment gains have slowed, overall wage increases are less generous compared to a year ago, and the average number of weeks of unemployment is ticking upward."

Job openings fall below 9 million for first time since March 2021

Signs of a labor market cooldown continued on Tuesday as new data showed the US economy ended July with fewest number of job openings since March 2021.

The latest Job Opening and Labor Turnover Survey, or JOLTS report, released Tuesday revealed there were 8.8 million jobs open at the end of July, a decrease from the 9.16 million job openings in June. Economists surveyed by Bloomberg had expected 9.5 million openings in April.

The report also showed a decline in the quits rate, which is closely watched by economists as elevated quits are seen as a sign of confidence among workers. In July, the quits rate fell to 2.3%, the lowest since Janaury 2021."

MY COMMENT

YES.....good news above that supports the view that the FED is now DONE. Stick a fork in them.

AND......no one is even whispering about recession anymore. We have totally moved on from that topic.

We have now escaped from the clutches of the FED. We are now free of the recession mania. AND....we are probably done with the disruptions and distortions of the covid shut-down......even though the general media continues to HYPE Covid. We are now back to a NORMAL stock market.

 

My account......looking great so far today.

I have a nice fat gain right now. ALL.....eight stocks are in the green.

My leaders for the day so far......MSFT and AAPL are both over 1% gain so far......and.....GOOGL and NVDA are both over 2% gain for the day so far.

GO BABY GO......SHOW ME THE MONEY. ITS A RALLY.

 

You have to admit.....the PAIN of being in stocks and funds during a BEAR MARKET.....is all worth it when the bull returns. It is FUN to be an investor.

BUT...you dont want to get so addicted to the short term fun that you begin to CHURN your own account to satisfy your BRAIN'S craving for chemical stimulation.

It seems like just about everyone has now accepted that the BEAR market is over and we are in a new BULL market. Now it is just a question of how long we can ride the bull before being bucked off.

The answer to that is going to be.....EARNINGS, EARNINGS, EARNINGS.

 

NOW.,...that is what I like to see......a BIG GAIN today. Eight for eight green across the board. AND....a strong beat on the SP500 by 0.95%. Today and hopefully the next couple of days will put a BIG dent in the small losses for August.

Here is the level of gains that I saw today:

Over 4%

NVDA

Over 2%

GOOGL
AAPL

Over 1%

MSFT
AMZN
COST
HD

NEARLY 1%

HON

 

I LOVE the rule of 72's.

The Rule of 72: How to Double Your Money in 7 Years
The Rule of 72 is a shortcut to estimate how long it will take you to double your money.

https://money.usnews.com/investing/articles/the-rule-of-72

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

"Wouldn't it be great if you could quickly determine how much your savings will be worth in the future? Or how much you need to earn on your savings to reach a goal?

It's easy to set a savings goal but far less easy to know if you'll reach it. You could say "I want to have $1 million by age 65," but how do you know if you're saving enough to reach that goal?

Luckily, there is a shortcut to estimate how much your savings could be worth in the future by using the rule of 72, and the only math required is basic division.

What Is the Rule of 72?

The rule of 72 is a shortcut investors can use to determine how long it will take their investment to double based on a fixed annual rate of return. All you do is divide 72 by the fixed rate of return to get the number of years it will take for your initial investment to double.

For example, if your investment earns 6% per year on average, you would take 72 divided by 6 to determine that it will take 12 years for your money to double.

How to Use the Rule of 72

Investors can use the rule of 72 "to estimate how much they need to save in order to arrive at a desired goal for a big purchase or retirement," says Steve Azoury, a chartered financial consultant and owner of Azoury Financial.

You can apply the rule of 72 to any investment size or rate of return and can even use it to reverse engineer how much you need to invest and at what rate of return to reach a given goal.

For example, if your goal is $1 million by age 65 and you are 35 currently, you know you have 30 years to reach that goal. Based on the rule of 72, you'd need to earn only 2.4% to double your money in 30 years. The equation would be 72/R = 30. R is the rate of return. Solving for R gives 2.4.

So if you have $500,000 saved now, you can afford to invest it fairly conservatively for a 2.4% rate of return and still reach your $1 million goal in 30 years without making any other contributions.

How Accurate Is the Rule of 72?

The rule of 72 is a simplified version of the future value formula, which calculates how much a sum of money will be worth in the future at a fixed rate of return.

The rule of 72 is the most accurate for rates of return between 6% and 10%. You might want to avoid using the rule of 72 for investments with low rates of return because it could suggest your money will double sooner than it actually will, says Derek Miser, investment advisor and CEO at Miser Wealth Partners.

A more accurate version of the rule of 72 would be to use 69.3 instead of 72, but you won't get nearly as neat of numbers this way. You could also use the Rule of 70, which is closer to the true time value of money, but not quite as messy as 69.3.

Another limitation of the rule of 72 is that it is based on a constant rate of return each year, which seldom reflects reality.

"A rate of return is actually impossible to predict," and "investments are never that consistent in real life," Azoury says. "Unfortunately, the rule of 72 doesn't factor in losses, and rates of return can actually change each and every year."

The rule of 72 becomes less accurate with more volatile investment returns.

It also "doesn't work if you're looking for a large return in a short timeframe," Miser says. For example, if you try to apply the rule to an investment that you want to double in less than a few years, it will likely result in an unrealistic growth rate.

"The rule also doesn't take into account inflation or tax rates, both of (which) could have significant impacts on investment returns," he says.

Alternatives to the Rule of 72

As fun as all this math is, an easier way to see how much your investments will grow over time is to use a free online compound interest calculator like the one offered by investor.gov. The beauty of this calculator is it allows for future monthly contributions as well, so you can see how increasing your savings rate will impact your long-term return."

MY COMMENT

The RULE OF 72's is a primary tool that I use all the time in my thinking. It is a way to VISUALIZE the future for you and your family........and your money.

It is also a way to ENCOURAGE yourself to invest for the long term and stick with it. The small dollars you are saving and investing now turn into big dollars when you can visualize them doubling every 6-7 years.

My primary investing goal.......to average a total return of at least 10% per year over the long time.....is based on the rule of 72's. I am content and happy to double my money about every SEVEN years.

Of course for this rule to work out in real life requires a predictable return over the long term. It requires rational, realistic, stocks and funds. It requires little to no market timing or short term trading. BASICALLY it requires a return equal to the long term return of the simple SP500 Index.