The Long Term Investor

A nice BIG GAIN for me today. EVERY stock in the green. I also got in a good beat on the SP500 by 1.22%. It will be a good slog to get back what I lost last week....but it will happen.

The NVDA shares that I bought on Friday are now UP by 4%. Unfortunately I did not realize what was going on Friday since I came back to the big market drop after being out most of the day......I dont know how my gain stacks up to others that bought earlier in the day....but looking at a chart....it appears that I got my shares near the bottom, late in the day.

 

Sounds like you need to go with semi-gloss....Tiresmoke....with active little kids.

 

I got my shares of NVDA on Friday at $764.57. Probably just a few minutes or so before the close. I got home and saw what was going on and made the IMMEDIATE decision to jump in. I was rushing to complete both trades....the sell and the buy.

A VERY decisive trade......with no time to waste thinking.

 

The market today.

S&P 500 snaps 6-day losing streak ahead of Big Tech earnings rush

https://finance.yahoo.com/news/stoc...head-of-big-tech-earnings-rush-200132702.html

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

• "US stocks rebounded on Monday, with the S&P 500 snapping a six-day losing streak as investors braced for a rush of Big Tech earnings.
  
  The S&P 500 (^GSPC) rose 0.9% to climb back above 5,000 after closing below the key level on Friday for the first time since February. The Dow Jones Industrial Average (^DJI) added 0.7%, or more than 200 points. The tech-heavy Nasdaq Composite (^IXIC) also gained 1.1% as AI darling Nvidia (NVDA) rebounded by adding than 4%.
  
  Hopes are now resting on Big Tech earnings this week to reassure and reignite the market. On deck are quarterly reports from Meta (META), Microsoft (MSFT), and Alphabet (GOOG).
  
  The focus Monday was on Tesla (TSLA) as the EV maker cut prices in the US, China, and several other countries. Tesla will report quarterly results on Tuesday after the market close. The Elon Musk-led company has already unsettled some investors with its robotaxi push and decision to have shareholders vote again on Musk's rejected pay package. Tesla shares lost 3.4%.
  
  Meanwhile, the debate over the Federal Reserve's stance on rate cuts continued to rumble after Chair Jerome Powell and fellow policymakers turned more hawkish last week in the face of persistent inflation. Given that, minds are already turning toward Friday's release of the PCE index — the Fed's preferred inflation gauge — as critical to assessing whether rates will stay higher for longer.

MY COMMENT

Looking at the above I guess nothing was going on today....except for a blow-back rally....from last Fridays losses. The big events....tech earnings and the economic data.....will happen late in the week.

 

Ok....one down four to go....days that is. We need to reestablish the positive this week in the markets. We are off to a good start today.

BUY SOMETHING......PLEASE

 

A nice open today and the markets have been good since. From what I hear on business TV there were some good earnings. Day by day we move forward from last Friday and the last 3-4 weeks.

Eventually......this stuff will be eclipsed and made invisible.......as though it never happened....by the long term.

 

A good little article for the current times.

Situation Normal

https://alhambrapartners.com/2024/04/21/weekly-market-pulse-situation-normal/?src=news

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


"Is this normal? I haven’t made any money in like two years. – Question from a recent acquaintance upon hearing what I do for a living."

"Let’s get this out of the way quickly. The answer to his question is yes, this is painfully normal. When you have a bear market – or you have two in four years like we have recently – the recovery time is never quick enough, especially if you are retired – as he is – and not continuing to add to your portfolio. For someone still in the accumulation phase of life, bear markets are a painful gift that allows you to make new investments at cheaper prices. But for the retiree, especially one drawing a regular income from his portfolio, bear markets are the curse that keeps you cursing.

My new friend’s timeline is quite correct. If we measure from the peak of the post-COVID bull (January 3rd, 2022) to today, the return of a 60/40 stock/bond portfolio is actually slightly negative (-1.05% total or -0.46% annualized). The S&P 500 is up a mere 8.2% total (3.47% annualized). That is 2 1/4 years with basically no return and with a nearly 6% slide in the stock market in the first three trading weeks of the new quarter, it feels like things are just going right back down again. Even the reason for the recent decline is the same – rising interest rates – although the recent rise has yet to break above last October’s peak.



Is two years a long time? It sure seems that way but in market terms it isn’t really. In fact, this two-year stretch looks just about average based on the last five bear markets.

Click Here for a FREE Portfolio Review →


The question that comes to mind with every bear market is whether there was some way to avoid it and get a better result. The answer, unfortunately, is no. We run portfolios that are more diversified than the standard 60/40 portfolio and we get a smoother ride – less volatility – but we generally end up in about the same place. Or, historically, if we seek to match volatility, we get a higher return; that’s how diversification done right works. Now, we think the smoother ride is valuable because it will, hopefully, allow you to stick to the strategy rather than bail out at the bottom. That is the value of having a better, more diversified strategy and a good investment adviser – you’ll stay in for the recovery rather than turning a temporary loss into a permanent one.

I have been doing this for over 30 years now and I would love to tell you that all that experience allows me to avoid bear markets and fully embrace bulls. But I’m not going to do that because it would be a lie. I have looked at every imaginable market timing method, every macro-based system, every trading tactic and there isn’t one that is repeatable and reliable enough to allow you to get a better result than just riding out the bear phases with a good strategy. There are tactical changes you can make to your portfolio that will make a difference in your long-term returns, but they are all subjective and rely on historical precedent that may or may not repeat. That’s why tactical changes have to be incremental since the one thing you want to avoid is a big mistake. You want to target tactical changes that have a large potential payoff so you can have an impact on your portfolio without wholesale changes. We know, for instance, that the average return in International Developed market stocks is 5.1% in years when the dollar rises and 17.9% in years when the dollar falls. If you get the direction of the dollar right, you don’t have to have a lot of international stocks in your portfolio to impact the total return of your portfolio. And if your initial tactical shift to international is small, the damage if you’re wrong won’t be that great.

Today, investors face a unique set of circumstances. This economic cycle is obviously different than others of recent vintage because of the changes wrought by COVID and the response to it. But is it so different that a change in investment strategy is required? The post-COVID economy is definitely different than the one that prevailed in the period from the 2008 crisis to the pandemic. But is it sufficiently different that strategies that have worked for decades need to be abandoned in favor of…what? There are only so many ways to put together a strategic portfolio, there are only so many assets that can be included or excluded although there are a near infinite weighting schemes (60/40, 60/30/10, 43.5/16.5/10/5/5/20?). Even if you think a strategic (near permanent rather than temporary like a tactical change) change is necessary, what would it involve?

What this really boils down to I think is what you think of the driver of this bear market – inflation and interest rates. Many of the strategic models being used in investing today were built from economic and market data that included one very large trend. The 10-year Treasury yield peaked in 1981 at over 15% and it fell, relentlessly, for the next 39 years until it hit 0.4% in 2020. That downtrend was a secular trend that lasted decades and was only interrupted on a cyclical basis with uptrends in 1983, 1987, 1994, 1999, 2003-07, 2009, 2013, 2017-18. All of those were temporary and rates continued to fall to new lows in each subsequent business cycle over that 4-decade period. If you used data that covered only that period from 1981 to 2020 to build a model, it may be biased to falling rates.

The 10-year yield has been rising now for four years and all the things that don’t normally do that well in a rising rate environment have suffered. The most obvious example is bonds which most everyone has in their portfolio. Like most investors, we addressed rising rates on a tactical basis by reducing the duration of our portfolio. And we are still today at a duration that is less than what is called for in our strategic model. Another obvious example is REITs (real estate) and since we have a generous allocation to them, I can attest personally that they have performed poorly. Even so, our model has produced a result that is exactly what we expected, a return similar to that of a stock/bond portfolio but with lower volatility (risk). I can’t help but think though, with the benefit of hindsight, that we could have done better if we had a strategic model that allocated less to real estate.

Just to review, strategic is your long-term plan to achieve your goals, while tactical is how you implement the strategy and when/how you might deviate from it. A tactical decision would involve choosing, for instance, international or domestic stocks, long or short-term bonds, etc. A strategic decision would involve determining what percentage of your portfolio will be invested in stocks or bonds or gold or bonds over the long-term, a target allocation for each asset class. Tactical changes are generally short term while strategic decisions are long term, more permanent.

It is a particularly tricky time to be making a decision about strategic versus tactical changes. Interest rates have been rising for 4 years but we don’t know if they will now be in a secular rising trend or if this is temporary like past rises. The 4-year period isn’t unprecedented in the long secular downtrend period; the last similar stretch was 2003-2007. Even if it is a secular, long term, change in trend, there will be periods of falling rates just as there were periods of rising rates during ’81-’20 period. If the economy is near recession – I have nothing to indicate that it is but let’s just assume – then rates would be expected to peak and fall as the economy slows. How low might rates fall? On a purely technical basis, I could easily see the 10-year rate fall to the 2.5 – 3.0% range, a significant drop from the current 4.6%, and still be in an uptrend from the 2020 low. If you make a strategic change now to reduce the interest rate sensitivity of your portfolio, you won’t benefit as much during the periods when rates are falling.

I built our strategic model on data back to 1972 so it includes the end of the last rising interest rate period. I chose 1972 because for some of the asset classes we use that was as far back as the data was available. I also chose it because it was the beginning of the post Bretton Woods era, the change to a floating exchange rate system. And the model performed quite well during that rising rate period of the 1970s so I feel confident it can withstand higher rates. But if rates rise for years – decades – rather than months, the interest rate sensitive portions of our portfolio will chronically underperform and hurt our long-term performance. So, is it time, 24 years after I devised this strategic allocation, to make a more than tactical change?

As with most things in investing – and life – the answer is to move incrementally. A tactical change made today because of rising interest rates, a move that is incremental to reduce the interest rate sensitivity of your portfolio, could turn into something larger and more permanent down the road. There is no reason you have to make that decision today when we have no idea if inflation will continue to bedevil the economy as it did in the 1970s and keep interest rates on a rising path. All we know today is that interest rates are still rising right now. That might continue for years or it might be over in a matter of months.

I believe a strategy, a strategic asset allocation plan, is absolutely necessary for financial success. You shouldn’t be trying to adjust your asset allocation based on every little twitch in the markets, which is what usually happens if you don’t have the anchor of a strategic allocation. Adjustments based on market conditions should be systematic and usually short term – tactical in nature. But short term can last for years because the trends that drive tactical changes can last for years. The dollar rose from 1995 to 2001, a trend that was unfavorable to gold, commodities, and international stocks. The dollar fell from 2001 to 2008, a trend that favored gold, commodities, and international stocks. An investor following the trend of the dollar could have made some simple tactical changes in 1995, 2001 and 2008, changes that were roughly 7 years apart, that would have had a big impact on their portfolio returns.

Changes to your strategy should be made with great reluctance. Tactical changes should also not be made lightly and the most successful ones often come years apart. But they do happen and I think there are several underway right now. It has been a frustrating couple of years for investors but it is also an exciting one. Trends that have been in place for years appear to be changing and to me that means opportunity. Concentrate on what could make a big difference in your portfolio over the next five or ten years, not what might make you feel better right now.

MY COMMENT

The portions that I bolded above are important to any long term investor. Stay the course.....avoid making changes based on FEELING better now.......while ....sacrificing the future.

In other words the old saying continues to be true.....even in the current era of "feelings"......and.....and flexible and personalized "truth"......NO PAIN NO GAIN.

 

And to continue.....I have sensed a lot of market fear and skittishness lately on the part of investors. It is a constant under the surface of LIFE right now and for the past 3-4 years. I like to call it.....investing and post pandemic PTSD.

Investors are fearful. They shouldn’t be

https://www.cnn.com/2024/04/22/investing/premarket-stocks-trading/index.html

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


"Call it an April slump.

Faltering tech stocks, fears that the Federal Reserve will keep interest rates higher for longer and geopolitical conflict have led to a sharp drop in US markets this month. CNN’s Fear & Greed Index, which measures seven barometers of market sentiment, is displaying a solid “fear” reading, down from “greed” just a month ago.

But Philipp Carlsson-Szlezak, Boston Consulting Group’s global chief economist, thinks there’s too much doomsaying on Wall Street. The economy has been extraordinarily resilient for the past few years — consistently proving the naysayers wrong, he says. For all of the market gloom last week, stocks are still near all-time highs, and this earnings season has been strong.

Carlsson-Szlezak, who co-authored a book on pervasive economic doomsaying, told Before the Bell that the Federal Reserve’s wait-and-see approach to inflation and interest rate cuts should be a vote of confidence for this economy and that recession fears are far off from reality.

Read our full conversation below.

This interview has been lightly edited for length and clarity.

Before the Bell: You literally wrote the book on economic doomsaying. Investors have been worrying about the Federal Reserve keeping rates higher for longer. Are their fears overblown?

Philipp Carlsson-Szlezak: We’re seeing expectations reset — the forecast for six rate cuts this year has vanished, now it’s less than two. The fact that markets are off about 4% relative to that news is not out of the ordinary.

These inflation prints are actually an extreme expression of underlying strength. The vanishing rate cut expectations, well, they’re also an expression of strength. If we had to rush to cut rates to prop up the economy, that would be bad. We can wait because this economy is booming and running ahead.

The market volatility, in my view, is a confirmation that those rate cuts aren’t coming as fast as was hoped and dreamed about.

But valuations are very high, and the markets are still near record highs. I speak with many institutional investors, and I don’t see them folding in fear. I think the market would look different if that were the case.

What about geopolitical worries?

It’s so easy to focus on predictions of a dire meltdown. We have a war in Europe, that is an enormous shift in the geopolitical landscape, an enormous humanitarian shock and an enormous disruption to the European business order. And there is no recession. Isn’t that telling us something about how high the bar can be for geopolitics to flow directly through to the macroeconomy?

A similar point can be made about rising tensions in the Middle East. So far, they have not pushed down a major Western economy. They have the potential to do so, and this is the difficulty with geopolitical risk. If that feeds into an oil price rally and a sharp movement in the oil market, we’re talking about something different. But recall that at the start of the Ukraine war, oil also went up a lot. And did we get a recession in the US from that? Did it pull down the growth numbers in the US? It did not.

I’m not saying there isn’t a risk. And I’m not saying we should look away and shrug off these many geopolitical crises. They all have the potential to magnify and amplify and grow.

But it’s not really possible to say that the real economy has taken a hit from either war in either Ukraine or the Middle East.

Are investors paying too much attention to swings in monthly economic data?

Some of the short-term predictability and forecast ability for the economy is very poor. Economics isn’t really constructed like a natural science in that way.

But I quibble with the notion that markets can’t look through this. As I’ve said, we’re still near record numbers in the equity market. If you believed all the doomsaying about impending stumbles and the economy falling off a cliff edge, then we wouldn’t have these valuations and these prices in various financial markets.

Markets have to react to something. Somebody prices everything at the margin. Of course there’s a reaction to data flow. But I don’t think, for example, that the three consecutive months of inflation surprises to the upside have pushed the equity market into a reset or a correction.

So what comes next? We can’t stave off a cyclical recession forever.

When will the next recession be? You and I both know, that’s so hard to pinpoint, but I don’t think it will be in 2024.It would take a big shock to deliver a recession this year.

What are some economic themes you’re watching in the back half of 2024?

I think we’re still likely to get a rate cut or two. The labor market has cooled. It hasn’t cooled as much as it was expected to, but job openings are down. I also think consumers will continue to be in a position to spend.

The US consumption economy is diversified between goods and services and that diversification has provided a steady floor for us. When services were weak, goods were exceptionally strong. Now that goods are off their overshoots, services are back to trend and carrying the day. So I see little reason to think there is a pocket of weakness that will tear down the whole consumption story.

There are gyrations under the hood, but when you look at the aggregates, it adds up to great numbers."

MY COMMENT

YEP.......some investors cower in fear.....when....the economy is strong, consumers are spending, earnings are good, dire forecasts uniformly fail to happen, economic data is far from bad and at best neutral, the FED is no longer hiking rates, there is no recession, etc, etc, etc.

If these are bad times.....GIVE ME MORE......these are the GOOD TIMES. We are in the middle of a historic bull market in stocks, housing values are rising and as high as ever. The average person that is taking RATIONAL steps to provide for their financial security is doing well.

Bottom line......IGNORE THE CONSTANT DOOM & GLOOM. It is unhealthy.

 

And to continue on the FEAR theme. Another "fear" topic lately has centered around the dollar.

Strong Dollar False Fears Are Back
Emerging Markets can handle a strong dollar.

https://www.fisherinvestments.com/e...commentary/strong-dollar-false-fears-are-back

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

"Whatever the dollar is doing lately, you can be sure many pundits don’t like it. When it is weak, people hate it—it makes America import inflation. And when it is strong, people still hate it. The latter is the case now, with fears centering on the strong dollar’s alleged dangers for Emerging Markets (EM), whose currencies are at multi-year lows versus the greenback. Officials in South Korea, India, Indonesia and Malaysia are all jawboning about a too-strong dollar and intervening in currency markets, with some starting to act. This regularly happens when EM currencies get weak, in large part because sentiment remains scarred from the late 1990s’ Asian Currency Crisis. But it isn’t the big economic risk headlines make it out to be.

For one, now isn’t like the late 1990s. Then, Emerging Asia had high levels of dollar-denominated debt, which they financed cheaply by maintaining currency pegs. When several currencies came under pressure, central banks burned through reserves to defend the pegs, then had no choice but to drop them. The currencies then plummeted, with the sudden devaluations leading to financial crises and IMF bailouts in South Korea, Indonesia and Thailand. Malaysia and developed-market Hong Kong came under severe pressure. But in all cases, it was the fallout from defending and discarding currency pegs that caused havoc—not just the dollar’s swings.

That isn’t an issue today. All but Hong Kong have floating currencies, and their foreign exchange reserve war chests are far larger. Talk of intervention centers more on curbing volatility than on defending certain values. Not that intervention is riskless, but these nations don’t look poised to deplete their reserves in short order.

As for talk of weak EM currencies disrupting trade flows and damaging global economic growth in the process, we doubt it. The dollar was stronger versus a broad currency basket in late 2022 than it is now, and we don’t recall some massive trade crisis then. Rather, weak currencies create winners and losers, which is why a lot of businesses hedge for them. On the plus side, they make export revenues worth more when converted from dollars (or whatever) back to the home currency. That enables exporters to cut prices overseas to gain market share or reap larger profits from currency conversion. The downside is a weak currency makes imported labor, components and raw materials (including energy) more expensive, but it all tends to even out over a cycle. And, again, businesses hedge for currency swings, mitigating a lot of impact at the company-specific level.

Those concepts might be abstract and theoretical, but real-world facts aren’t. Emerging Asian currencies have been weak for a couple of years now. Yet their economies are growing nicely. Indian GDP is among the world’s fastest even when you strip out some of the idiosyncratic items that skew it. After a brief contraction at 2022’s end as household spending hit a speedbump, South Korean GDP rebounded in early 2023 and grew 2.5% annualized three straight quarters through Q4 2023. Indonesian GDP grew 5.0% last year.[ii] Malaysia grew 3.7%, which is slow only in comparison to 2022’s 8.7% jump.[iii] Currency markets aren’t screaming that these nations are in trouble. Rather, weakness is the logical result of these nations’ maintaining swift money supply growth while US money supply was contracting. Yes, the price of money, too, is all about supply and demand.

Lastly, there is no guarantee Emerging Asian currency weakness persists indefinitely. Fed rate cuts, whenever they happen, could alter the all else equal, money flows to the highest-yielding asset calculus. The geopolitical and market jitters that seem to have sparked a flight-to-safety mentality should ease in time, as they typically do.

So we suspect this will go the way similar EM currency fears went in 2013, 2015 and 2018: lots of fear and little fallout. Those bouts proved to be bricks in the long 2009 – 2020 bull market’s wall of worry. This latest round should do the same, especially with so much attention heaped on it."

MY COMMENT

I hear the drums in the distance.....pounding out their message.....DOOM, DOOM, DOOM.

NO.....that is not drums....it is simply the constant little din of the financial media spouting sensational opinion BS while searching for clicks. It is the little fear inducing whispers of the day traders and a small number of market manipulators trying to make short term money.....with planted stories and opinion quotes...often legal.

 

A big part of the problem for investors right now and their emotions is the fact that.....in the current environment....even the investing and business TV shows are probably at least 50% to 70% politics and non-investing news and commentary. The NOISE is relentless and continues to grow louder and louder. It wears people down. Even though it continues to get harder and harder to IGNORE IT ALL....that is what you have to do.....in order to keep your sanity as a long term investor.

 

Oh yes the markets. VERY strong today after a......"whole"....90 minutes. By the insane definitions of today....ninety minutes is long term. I will take it.

US stocks climb as earnings season kicks into high gear

https://finance.yahoo.com/news/stoc...gs-season-kicks-into-high-gear-133138960.html

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

"US stocks climbed on Tuesday, on track for further gains as tech-focused investors prepared for a fresh wave of earnings highlighted by struggling Tesla (TSLA).

The S&P 500 (^GSPC) rose about 0.5% after staging a comeback from a six-day run of losses the previous session. The Dow Jones Industrial Average (^DJI) inched up roughly 0.4%, while contracts on the tech-heavy Nasdaq Composite (^IXIC) also stepped up 0.4%.

The gauges are looking to build on a positive start to the week that saw the S&P 500 close below 5,000 for the first time since February. Stocks rebounded as investors jumped back into the likes of AI darling Nvidia (NVDA), which had lost ground amid worries about higher-for-longer interest rates.

Many in the market are looking to this week's rush of Big Tech earnings to pull stocks out of the slump that has dogged them since the start of the year — though some on Wall Street hold out less hope.

Tesla's earnings are likely to be a catalyst for the S&P 500, given the stock's weight in the index. The results, due after the market close, are seen as pivotal for Elon Musk's EV maker, whose shares have been hit hard by a disappointing delivery outlook, the cancellation of plans for a long-awaited sub-$30,000 model, and a strategy switch to robotaxis, among other headwinds.

As the first "Magnificent Seven" to report, Tesla sets the stage for highly anticipated results from Meta (META), Microsoft (MSFT), and Alphabet (GOOG) later in the week, though some suspect the megacaps' momentum is fading.

Meanwhile, legacy automaker GM (GM) got the ball rolling on earnings on Tuesday, posting strong first quarter results and upping its full-year guidance. Its shares popped around 5%. Spotify (SPOT) stock jumped after the audio streamer swung to a profit amid an earnings beat."

MY COMMENT

I like the little negative opinion digs in the above. personally....I will simply wait a day or two for the reality of the numbers......and...ignore the speculative opinion.

 

As a MSFT owner....I like this little bit of news.

Coca-Cola signs $1.1 billion deal to use Microsoft cloud, AI services

https://finance.yahoo.com/news/coca-cola-signs-1-1-133847075.html

 

AND....there has been a lot of negative housing news lately....here is a little bit of HOPE.

US new home sales rebound in March

https://finance.yahoo.com/news/us-home-sales-rebound-march-143402179.html

 

As a GOOGLE shareholder I like this new attitude. It is time for these big tech companies to embrace competition and business reality. It is now hand to hand combat for customers, earnings, and survival. The tough, the focused,the productive, will move forward. that is exactly how free market economics is supposed to work. Be complacent and be gone.

Google search boss warns employees of ‘new operating reality,’ urges them to move faster

https://www.cnbc.com/2024/04/23/goo...warns-employees-of-new-operating-reality.html

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

"Key Points

• Google search boss Prabhakar Raghavan told employees to prepare for a different market reality, because “things are not like they were 15-20 years ago.”
• At a recent all-hands meeting, Raghavan said user behavior is changing, competition is heating up and regulation is becoming a bigger challenge.
• Raghavan said he’s shortening the amount of time that his reports have to work on certain projects.

Wearing a hoodie with the words “We use Math” on the front, Google search boss Prabhakar Raghavan had an important message for employees at an all-hands meeting last month. But he first wanted them to settle in and get comfortable.

“Grab your boba teas,” Raghavan told the crowd, gathered in a theaterat the company’s headquarters in Mountain View, California.

Raghavan, who reports directly to CEO Sundar Pichai and leads key groups including search, ads, maps and commerce, was addressing Google’s knowledge and information organization, which consists of more than 25,000 full-time employees.

“I think we can agree that things are not like they were 15-20 years ago, things have changed,” Raghavan said, according to audio of the event obtained by CNBC. He was referring to the search industry, which Google has dominated for two decades, emerging as one of the most profitable and valuable companies on the planet along the way.

Raghavan said Google’s digital ad business had become “the envy of the world.” He noted that over the last three years, annual revenue has grown by more than $100 billion, exceeding Starbucks, Mazda and TikTok combined.

At a company long known across Silicon Valley for its free, gourmet lunches and endless on-campus perks, Raghavan’s comments serve as the latest warning to employees that growth for Google is getting harder.

“It’s not like life is going to be hunky-dory, forever,” he said.

Over roughly 35 minutes, Raghavan peppered his reality check address with sports metaphors and rallying cries.

“If there’s a clear and present market reality, we need to twitch faster, like the athletes twitch faster,” he said.

He referenced heightened competition and a more challenging regulatory environment. Though he didn’t name specific rivals, Google is facing pressure from the likes of Microsoft and OpenAI in generative artificial intelligence.

“People come to us because we are trusted,” Raghavan said. “They may have a new gizmo out there that people like to play with but they still come to Google to verify what they see there because it is the trusted source and it becomes more critical in this era of generative AI.”

Raghavan had some tangible changes to announce. He said the company plans to build teams closer to users in key markets, including India and Brazil, and revealed that he’s shortening the amount of time that his reports have to complete certain projects in an effort to move faster.

“There is something to be learned from that faster-twitch, shorter wavelength execution,” he said.

Google’s cloud business has also instructed employees to move within shorter timelines despite having fewer resources after cost cuts, sources with knowledge of the matter told CNBC.

“With a huge opportunity ahead, we’re moving with velocity and focus,” a Google spokesperson told CNBC, when asked to comment on Raghavan’s address. The spokesperson highlighted the addition of generative AI to search and improvements in search quality, adding, “There’s lots more to come.”

In March, Google named company veteran Elizabeth Reid to the role of vice president, leading search and reporting to Raghavan.

‘High highs and low lows’

In many respects, Raghavan’s tone was nothing new. Google has been in cost-cutting mode since early 2023, when parent Alphabet announced plans to eliminate about 12,000 jobs, or 6% of the company’s workforce. Job cuts have continued this year, with more layoffs in early 2024, and CFO Ruth Porat said in a memo last week that the company is restructuring its finance organization, a move that will involve additional downsizing.

But Raghavan is making clear that what’s happening now isn’t just a continuation of 2023. He noted that his group’s last all-hands meeting was three months ago, though for some it felt like three years.

“We’ve had a lot go on in these last three months,” consisting of “really high highs and low lows,” he said.

In that time, Google introduced its AI image generator. After users discovered inaccuracies that went viral online, the company pulled the feature in February. Google has been reorganizing to try and stay ahead in the AI arms race as more users move away from traditional internet search to find information online.

In Alphabet’s upcoming earnings report on Thursday, Wall Street is expecting a second straight quarter of year-over-year revenue growth in the low teens. While that marks an acceleration from the few quarters prior, the numbers are also in comparison to some of Google’s weakest reports on record.

Even though Alphabet reported better-than-expected revenue and profit for the fourth quarter, ad revenue trailed analysts’ projections, causing the company’s shares to drop more than 6%. Meanwhile, the AI boom is forcing a renewed focus on investments.

“We’re in a new cost reality,” Raghavan said. With generative AI, the company is “spending a ton more on machines,” he said.

Organic growth is slowing and the number of new devices coming into the world “is not what it used to be,” Raghavan said.

“What that means is our growth in this new operating reality has to be hard earned,” he added.

Raghavan said that additional challenges are emerging as the company is “navigating a regulatory environment unlike anything we’ve seen before.”

He cited the European Union’s Digital Markets Act and said the company is still learning what its obligations will be from the European Commission. The DMA, which officially became enforceable last month, aims to clamp down on anti-competitive practices among tech companies.

“That does have its impact on us,” Raghavan said.

Raghavan urged employees to “meet this moment” and “act with urgency based on market conditions.”

“It won’t be easy,” he said. “But these are the moments and the history of industries that will define us.”

120 hours a week

Raghavan said Google has to address its “systemic” challenges and build “new muscles that maybe we have let fall off for a bit.”

He praised the teams working on Gemini, the company’s main group of AI models. He said they’ve stepped up from working 100 hours a week to 120 hours to correct Google’s image recognition tool in a timely manner. That helped the team fix roughly 80% of the issues in just 10 days, he said.

However, Google still hasn’t brought back the ability to generate images of people. Demis Hassabis, Google’s AI leader, said in February after the tool was taken down that it would be re-released in weeks.

Raghavan clarified that the failure in image generation wasn’t due to a lack of effort.

“I want to be clear, this wasn’t some case of somebody slacking off and dropping the ball,” he said.

Raghavan said the company has shown the ability to move quickly on important matters. As an example, he highlighted an effort in 2023, when the Bard team (now Gemini) and Magi team, which focuses on AI-powered search, launched products within a matter of months.

It was something the company couldn’t have accomplished, he suggested, with bigger numbers.

“The realization was ‘gosh, if we had thrown 2,000 engineers at these projects, we wouldn’t have got it done,’” he said, indicating that the company would be paying close attention to the size and scope of teams.

Raghavan also spoke to critics of the company’s bureaucracy.

Employees have complained for years that Google’s growing bureaucracy has crippled their ability to launch products quickly. That worsened as the company rapidly expanded its workforce during the pandemic.

In 2022, in addition to Google’s annual survey called Googlegeist, Pichai launched a “Simplicity Sprint” to gather employee feedback on efficiency.

“The number of agreements and approvals it takes to bring a good idea to market — that’s not the Google way,” Raghavan said. “That’s not the way we should be functioning.”

Raghavan said leaders are actively working on removing unnecessary layers in the hierarchy, echoing prior comments from Pichai.

“We’ve learned a lot the last few quarters,” Raghavan said. “I cannot tell you that all the stumbles are behind us. What matters is how we respond and what we learn.”"

MY COMMENT

I like this reality based focus and the sports team analogy. The early days of CODDLED tech workers are over. Produce or get out...will be the new norm going forward. It is time for these big tech companies to crack the whip and motivate their workers to achieve like never before. After all....many of these people will find out that their job is at risk from AI in the near future.

The return of old fashioned WORK ETHIC and pushing company CULTURE of achievement and success. I like it....and as show above...the message and lesson has to come from the top down.

 

OK....the markets are PUSHING up today.....as we enter the mid-morning time frame.

SHOW ME THE MONEY..........

 

So far a very good day for my portfolio.....EVERY....stock green and strong gains in many of the holdings. SMCI and PLTR....junior positions....are showing very good strength today.

My little....decisive, snap, but educated, decision to buy more NVDA near the close last Friday.....is paying off over the past couple of days. I bought at $764. At this moment the stock is at $824.

Nice gain....but what counts is STILL the long term performance of the company. that is what I like about this company and their management. They never seem to lose focus of the need to constantly push and drive their products and company into the future. I have never seen any complacency in this company...they are the definition of FOCUS. Great management in action.

 

Zukodany mentioned TSLA a few posts back.

I just heard on business TV that they have laid off about 2700 workers here in Austin. From what I see online that is about 11% of the Gigafactory workforce here.