The Long Term Investor

A good strong market open today. I am convinced that the AI trading platforms freaked out yesterday when the China story above hit the wire. I dont see a word about the story today.

 

The early market today.

Stock market news today: US stocks bounce back from worst day in months

https://finance.yahoo.com/news/stoc...-back-from-worst-day-in-months-143338469.html

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

"US stocks climbed early Thursday in a rebound after the major indexes suffered their worst daily sell-off in months.

The S&P 500 (^GSPC) popped about 0.8% at the market open, a comeback from the biggest single-day loss for the benchmark index since October. The Dow Jones Industrial Average (^DJI) rose 0.7%, while the teach-heavy Nasdaq Composite (^IXIC) gained 1.2% after both indexes snapped nine-day win streaks.

Warnings have come from some investors that stocks were ripe for a pullback after a record-breaking rally driven by expectations the Federal Reserve will pivot to cutting interest rates, potentially as soon as March.

The market has stuck to that conviction despite pushback from central bank officials, keeping stock prices aloft until the rally's breather on Wednesday.

There was no clear culprit for Wednesday's sharp slide, and a number of theories were put forward by commentators: worries about the US economy after bellwether FedEx's (FDX) downbeat revenue forecast, year-end profit-taking, and zero-day options trading among them.

In individual stocks, Micron Technology (MU) shares rose more than 8% early Thursday after the memory chipmaker's second quarter revenue forecast topped Wall Street's expectations. The outlook signals a 2024 revival for the memory chip sector, which has suffered a significant slump in prices.

• And the data says...
• 
  A slew of economic data was released at 8:30 a.m. ET on Thursday.
  
  The final reading of Gross Domestic Product for the third quarter showed the US economy grew 4.9% on annualized basis in the period. This came below the prior reading of 5.2%, which economists had expected to hold.
  
  Still, it marked the strongest quarter of economic growth since the fourth quarter of 2021.
  
  Meanwhile, the latest data on initial jobless claims showed 205,000 people filed for unemployment insurance in the week ending December 16, below consensus estimates for 215,000 claims.
  
  "The claims data – along with other recent labor market statistics – are consistent with a job market that is cooling but not freezing," Oxford Economics lead US economist Nancy Vanden Houten wrote on Thursday."

MY COMMENT

Yet another day when there are really....NO....outside events to impact the markets. We are left with business data and fundamentals being responsible for the market action today.....and that is a good thing. Business is booming.

Yet at the same time.....there is an IRRATIONAL....very shallow level of confidence out there in the investing world. People are walking around on eggshells and afraid of their shadow. Why? I have no idea. Perhaps this is a symptom of the massive number of new and/or young investors that rely on, and jump around based, on social media.

I remain fully invested for the long term as usual.

 

At this moment in the day....I am having a good strong day.....ALL....of my stocks are UP nicely.

 

The "fun" of being a speculative stock trader......and....I assume these are the "professionals". God help the amateurs.


Short sellers lost close to $178 billion in 2023

https://finance.yahoo.com/news/short-sellers-lost-close-to-178-billion-in-2023-152135596.html

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

"It's been a tough year to bet against stocks.

Short sellers on Wall Street have lost nearly $178 billion this year, according to data from S3 Partners provided to Yahoo Finance.

The top six stocks these investors have lost money on are all part of the Magnificent 7, with Alphabet (GOOGL) being the lone tech leader not atop the list. The moves reflect the unexpected nature of the 2023 stock market rally which many on Wall Street didn't predict entering the year.

But as hype over artificial intelligence took hold in the spring of 2023, companies like Nvidia (NVDA), Tesla (TSLA) and Meta (META) soared more than 100% this year.

And in recent weeks as the market rally has moved beyond the Magnificent 7, short sellers have felt the pain with other stocks. Since the Nov. 1 Fed meeting, investors have increasingly bet the Fed is not only done hiking interest rates but that rate cuts could come sooner than many initially projected.

This belief spawned a rally in risk assets that included more speculative areas of the market that investors had deemed more susceptible to high interest rates like small and mid cap companies.

Since investors risk appetite has increased, "shorts are more susceptible to getting squeezed when markets are in the midst of a broad based rally," Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance.

And that's played out in the market over the past month.

Companies like Carvana (CVNA) and Affirm (AFRM) —both heavily shorted stocks — surged amid the "FOMO" chasing rally, with both stocks rising more than 75% in the last month alone. When that occurs, shorts are forced to buy out their positions, sending shares even higher and extending losses for those betting against the stock.

Investors who had positions against Carvana have now lost $2.25 billion this year while Affirm shorts have lost nearly $1.5 billion, according to S3 data.

"In the case of a heavily shorted name, where higher interest rates would provide a headwind, certainly you'd expect to see a bit of a change in sentiment if rate cuts are widely expected," Sosnick said."

MY COMMENT

BUMMER.....for them. There are basically two worlds in the investing universe.......TRADERS and INVESTORS. Many people dont recognize or understand the difference. Many people think they are one when they are really the other.

Language matters.....and the brokerage and investing industry has very intentionally and significantly over the past years managed to substitute the word "trader" for the word "investor".

Obviously as a LONG TERM INVESTOR....I am not a TRADER. I trust and believe the academic research that shows that trading over the long run will not beat realistic and rational long term investing for the vast number of people.

I dont do Technical Analysis.....I dont believe in it, and, I believe it fosters a trading mentality. I also dont believe anyone....professional or amateur......can predict or anticipate the short term markets......"if" this is true....than much of the result in trading is random chance.....distorted by human behavior.

My investing bottom line is.....If I can not beat the SP500 over the long term....I am cheating myself out of gains that I should have. Fortunately.......and partly due to some lucky big bets over the years and being in the right place at the right time....I am beating the SP500 long term.

 

No doubt weighing on AAPL today.....but.....not a long term issue.

Apple halts online sales of its Apple Watch Series 9 and Apple Watch Ultra 2

https://finance.yahoo.com/news/appl...ries-9-and-apple-watch-ultra-2-200021325.html

"Apple stopped selling its best-selling smartwatches via its online stores at 3:00 p.m. ET on Thursday. The web pages for both the Series 9 and Ultra 2 list them as currently unavailable with no option to purchase them. In-store sales, as well as delivery and pickup of online orders will stop Dec. 24."

MY COMMENT

Looks like they timed this stoppage......online and in stores.....perfectly for holiday shopping.

 

Another....nice gain day for me today. I only had a single stock down today....AAPL. I got beat by the SP500 by 0.06% today.....a minimal amount.

Looks like the SANTA RALLY is alive and well in spite of the little market freak out yesterday afternoon.

 

This looks like MORE market good news.

The Fed's Key Inflation Rate Just Hit 2%; S&P 500 Rallies As Rate-Cut Odds Grow

https://www.investors.com/news/econ...500-rallies-as-rate-cut-odds-grow/?src=A00220

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

"The Federal Reserve's primary inflation rate, the core PCE price index, slid to a 2% annualized rate in the third quarter, new Commerce Department revisions revealed on Thursday. The surprisingly tepid inflation data come ahead of Friday's release of November inflation data that economists expect to be equally tame, if not more so. The data sent the S&P 500 higher and the 10-year Treasury yield lower.

The fall in inflation to the Fed's 2% target in Q3 on an annualized basis even amid strong economic growth helps explain why policymakers are beginning to worry less about an inflation resurgence.

Fed Rate Cut Odds Grow

Financial markets are now betting that the Fed will cut its key policy rate to 3.8% by the end of 2024, down from 3.83% ahead of the revised PCE and GDP data. That's because the rapid ebbing of inflation is making the current 5.25% to 5.5% range of the federal funds rate look increasingly restrictive.

Market pricing now shows 83% odds that the first rate cut will come at the March 20 meeting, up from 79% on Wednesday. Markets now see 42% odds of 1.75 percentage points in rate cuts next year, up from 38% a day ago.

The degree of Fed monetary policy tightness reflects the real federal funds rate, meaning how much its key interest rate exceeds the inflation rate. In Q3, the real federal funds rate was between 3.25% and 3.5%. That compares to the Fed's long-term estimate of the neutral policy rate as 0.5% above its 2% inflation target. The neutral rate is one that neither restricts growth nor boosts it.


November PCE Inflation Data

The Dec. 12 update of the consumer price index for November showed core prices rose 0.3% on the month. However, the producer price index, which was released on the morning of the Fed's Dec. 13 policy statement and projections, pointed to a much softer reading for the core PCE price index, and that probably played into Fed chair Jerome Powell's dovish outlook.

The consensus estimate is for a 0.2% rise in core prices, which should lower the annual core PCE inflation rate to 3.4% from 3.5% in October. Yet forecasts for the monthly rise in the core PCE price index range from 0% to 0.2%, suggesting a strong chance of a positive surprise.

Meanwhile, the headline PCE price index, which includes food and energy, is expected to be flat from October, lowering the annual increase to just 3%.

GDP, Jobless Claims

However, the annual inflation rates may come in below forecasts made ahead of Thursday's GDP revisions. For Q3, the core PCE price index rose at a 2% annualized rate, revised down from 2.3%. Headline PCE inflation was cut to a 2.6% annualized rate from 2.8%.

The economy grew a revised 4.9% in Q3, down from the prior estimate of 5.2%, due to somewhat more moderate estimates of consumer spending.

Friday's November inflation data is part of the Commerce Department's monthly personal income and outlays release. Economists are forecasting a 0.4% rise in personal income and 0.3% increase in spending.

The trend of disinflation and solid growth appears to have continued in Q4. Separate data on Thursday showed initial claims for jobless benefits edged up 2,000 to 205,000 in the week through Dec. 16. The four-week average eased by 1,000 to 212,000, which is only modestly above the lowest level of 2023 (199, 500 in January).

S&P 500, 10-Year Treasury Yield

The S&P 500 rose 0.6% in Thursday morning stock market action, bouncing back after Wednesday's late-day 1.5% sell-off. That followed a 16% rally since Oct. 27, which lifted the S&P 500 within 1% of its Jan. 3, 2022, record close.

The S&P 500 rally has come amid a sharp drop in the 10-year Treasury yield, which is key not just for mortgage rates and auto loans, but for stock valuations. Analysts use the 10-year Treasury yield as the risk-free rate for discounting the present value of future earnings. As the 10-year yield falls, those future earnings streams for growth companies look more enticing.

On Thursday, the 10-year Treasury yield fell as low as 3.83%, a level last seen in late July. However, the 10-year Treasury yield firmed up to 3.87%, down just one basis point from Wednesday."

MY COMMENT

The market train....keeps a roll-in. ALL the data continues to come it very nicely for investors. Most if not ALL of the negatives and fear mongering topics have now fallen by the wayside.

 

I used to own NIKE.....now....I am glad that I sold all my shares. I owned that stock for a long time. Here is a very good article from their home town newspaper.....the Portland Oregonian. It has a lot of good detail about their impending MASSIVE lay-offs and cost cutting as well as the earnings today.

Nike seeks $2 billion in cost savings over 3 years, confirms significant layoffs

https://www.oregonlive.com/business...ver-3-years-confirms-significant-layoffs.html

MY COMMENT

What a shame......an ICONIC business....gutted due to management malpractice. Step by step management over many years is responsible for ridiculous decisions, extremely poor focus on basic business, as well as simply idiotic marketing.....that have now gone to the point of imperiling the standing of this once great business.

So glad that I sold all share some time ago......Phil Knight must be livid.

 

Thank you Lori. England....I a appreciate that weather having lived in the Seattle area for about 30 years.

Great post above oldmanram.

As to the thoughts of TomB16. Yes....there are a lot of people feeling uneasy...so I think what you are feeling is not unusual. I think a lot of it is just generalized discomfort with society, culture, and many things right now. I think people are feeling disconnected and beaten down by the constant 24/7 fear mongering and negative media....in general....not just investing. But....yeah...obviously it is as though the markets are "afraid of their shadow" and "walking on egg shells". Ready to freak out at the "drop of a hat". (how do you like that.....three "old platitudes".... in the last two sentences)

 

BUT....in spite of the underlying feelings of doom.....the economy and the markets are BOOMING. And ALL the economic news is coming in strongly in favor of investors.

Fed’s favorite inflation gauge shows prices rose at 3.2% annual rate in November, less than expected

https://www.cnbc.com/2023/12/22/pce-inflation-november-2023-.html

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

"Key Points

• The core personal consumption expenditures price index rose just 0.1% in November and was up 3.2% from a year ago, both close to expectations.
• On a six-month basis, core PCE was up 1.9%, below the Fed’s 12-month target.
• Including food and energy costs, so-called headline PCE actually fell 0.1% on the month and was up just 2.6% from a year ago.

Fed’s favorite inflation gauge shows prices rose at 3.2% annual rate in November, less than expected

A gauge the Federal Reserve uses for inflation rose slightly in November and edged closer to the central bank’s goal.

The core personal consumption expenditures price index, which excludes volatile food and energy prices, increased 0.1% for the month, and was up 3.2% from a year ago, the Commerce Department reported Friday.

Economists surveyed by Dow Jones had been expecting respective increases of 0.1% and 3.3% respectively.

On a six-month basis, core PCE increased 1.9%, indicating that if current trends continue the Fed essentially has reached its goal.

“Adding in the further sharp slowdown in rent inflation still in the pipeline, it’s hard to see any credible reason why the annual inflation rate won’t also return to the 2% target over the coming months,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics.

Markets reacted little to the report, with Wall Street set for a mixed open Friday in its last session before the Christmas.

Elsewhere in the report, consumer expenditures in November increased 0.3% while income rose 0.4%, numbers that were in line with expectations and indicative that spending was continuing apace despite ongoing inflation pressures.

Including food and energy costs, so-called headline PCE actually fell 0.1% on the month and was up just 2.6% from a year ago, after peaking above 7% in mid-2022. That was the first monthly decline since April 2020, according to Fed data.

The 12-month numbers are significant in that both show inflation making continued progress toward the Fed’s 2% target.

“The Federal Open Market Committee is not yet ready to declare victory on inflation, but the outlook is much better than it was just a few months ago,” wrote Gus Faucher, chief economist at PNC Financial Services. “The slowing in core inflation opens the door for fed funds rate cuts in 2024; the timing will depend on core PCE numbers over the next few months.

The Fed prefers PCE as an inflation measure over the more widely followed CPI as the former focuses more on what consumers actually spend rather than the latter’s measure of what goods and services cost. Though policymakers watch both measures, they are more concerned with core prices as a longer-run inflation gauge.

November’s report reflected a shift in consumer appetite, as prices for services increased 0.2% while goods slumped 0.7%. A 2.7% slide in energy prices and a 0.1% decrease in food helped hold back inflation for the month.

Much of the market’s focus lately has been on the Fed’s inflation view and what that will mean for interest rates.

For each of its last three meetings, the Federal Open Market Committee has heled the line, keeping its benchmark overnight borrowing rate targeted between 5.25%-5.5%. At its meeting last week, the committee indicated it is done raising rates and expects to implement cuts totaling 0.75 percentage point in 2024. Markets expect the first rate cut to happen in March."

MY COMMENT

Very good news and an indication of a completely NORMAL economy with very good consumer participation. AND....therefore....good news for investors and the outlook for 2024. PARTY TIME.

 

As to the FED.

The Biggest Problem at the Federal Reserve Is a Lack of Original Thought

https://www.realclearmarkets.com/ar...ve_is_a_lack_of_original_thought_1000587.html

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

"Just watch the quarterback’s feet. That’s a variation of the words used by Hall of Fame quarterback Steve Young to explain the outcome of a football game. Young’s point is that film study of the QB’s foot movement to the exclusion of everything else would indicate to the wise football mind which team won.

Football is incredibly cerebral. Evidence supporting the previous claim concerns QB footwork once again. Even though that’s what a knowledgeable fan would watch, most watch the QB from the torso up to see if passes are completed. Most, including yours truly, don’t have a faint clue what they’re watching.

Thankfully economics is exponentially easier to understand than football. Credentialed economists won’t admit this as they vainly and obnoxiously try to “chart” supply and demand, human action, and what they imagine is the right amount of what they laughably describe as “money supply,” but economics is 1st grade relative to the staggering amounts of information that football players must internalize, and that they must be able to act on in split-second fashion.

To understand economics, and in particular whether or not an economy is growing, just watch prices. If they’re falling for popular goods and services, you know the economy is in fine shape care of booming growth.

Think the radio at the dawn of the 1920s. It was a brilliant advance, but also incredibly obscure. If you had one, you were rich.

The good news is that by the end of the 1920s, radio penetration into the American home was basically complete. What was a brilliant luxury of the well-to-do at the beginning of the ‘20s existed as a summons to producers capable of mass-producing a luxury, and a similar summons to investors willing to back producers in their quest to democratize access to what was then a must-have gadget.

The happy reality is that by the closing years of the 1920s, radios were cheap and ubiquitous. As Mark Mills pointed out in his wonderful book The Cloud Revolution, RCA was the Apple and Google of its time for making radios common. The economy was booming, but if you lived in a cave with limited access to information, all you’d need to know in order to understand economic conditions upon emerging from the cave would be knowledge of the ubiquity of radios at falling prices. Growth personified.

It’s worth keeping in mind as economists and those who report on them watch the proverbial QB from the torso up in their attempt to understand the U.S. economy. Economists and reporters who tell us what’s on the mind of economists watch the economy in the way that the typical NFL or minor league NFL (college) fan watches football. They don’t have a clue.

Evidence supporting the above claim is all around us, but reached us on Wednesday via a front page article in the Wall Street Journal on the Fed. Fed watcher Nick Timiraos reported that Fed economists fear too much optimism, exuberance, or insert your adjective from investors. Fed officials are allergic to original thought.

Indeed, they believe near monolithically that economic growth is the path to higher prices. Believing what’s untrue, they arrogate to themselves what they imagine is the power to put people out of work in order to moderate price hikes allegedly born of economic growth. You can’t make this up.

Back to reality, the investment that Fed officials fear is a sign of talent being matched with capital on the way to the mass production of formerly dear items. In other words, if you accept an incorrect definition of inflation (rising prices) as the correct one, soaring investment should thrill you. The latter signals the falling prices on the way.

Alas, Fed officials are stuck in their unoriginality. That’s the bad news. The good news is that if the Fed’s power even remotely resembled what economists imagine it to be, the U.S. economy would be too wrecked and investment too scarce for any kind of growth in the first place. So while a lack of original thought plagues the Fed, the soaring investment that concerns the central bank signals that the Fed is happily powerless to stop what it mindlessly fears. "

MY COMMENT

Yes....the FED and for that matter most academic economists are incompetent. We would be a lot better off if they just shut up....got out of the way....and let the free market economy take care of itself. Most of the issues we have had over many decades are caused by economists. My view.....the greatest danger and issue we have in the economy is....economists.

 

And as to the above......the bottom line of why the economy is often screwed up.....government meddling.....which is supported by the government bureaucracy of economists.

 

HEY......where is the recession? What happened to the recession? GOSH...all the headlines and tens of thousands of articles about the coming recession.....were simply busy work.....baloney...garbage....nothing. Imagine the hours of time that people spent worrying about the coming recession.

To me it was obvious....if you simply observed what was going on around you and with people you see in daily life....that there was never much chance of a recession. Same with stock earnings and many other topics....the experts are usually WRONG. As I always say....to be so wrong so often....defies all laws of probability.

 

As to the dismal day NIKE is having....all I can say is.....what do you expect then you GUT your retail outlet base and give up massive exposure of your products in malls and other public places.

Remember this strategy:

"Under a shift announced in 2017, Nike significantly slashed its number of retail partners to better focus on direct-to-consumer (DTC) sales. As of September 2021, Nike had “exited about 50%” of its retail partners, Nike finance chief Matthew Friend said at the time"

and....a story from a few months ago.

After years of focusing on DTC, Nike is quietly bringing more wholesale partners back into the fold

https://www.modernretail.co/operati...g-more-wholesale-partners-back-into-the-fold/

COMBINE this stupidity with their constant other marketing IDIOCY......and you have an ICONIC business that has squandered their huge retail and marketing advantage. Great job NIKE management.

BUT....you can be sure that management has not squandered their bonuses and massive compensation packages.

As a person with a marketing background and a business background.....what management has done at NIKE just pisses me off. So irritating.....as a former long time owner of this company. I should still own my NIKE stock.....I should be enjoying that company for many years to come.....it should be a sure winner in my portfolio......BUT NO....it was all squandered by management. SO....they gave me no choice but to BAIL......as I said it just...pisses me off.