Stock Market- Investing

[DawgyNWindow]

Inflation Hits a 13-Year High.

LINK

quote:

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Defenders of big-government pandemic interventions have insisted that any price inflation these schemes have caused is just temporary. But even more data just came in showing price inflation hitting new highs—further spotlighting the destructive consequences of these reckless policies.

The federal government just released the latest Consumer Price Index (CPI) for June 2021, an imperfect but useful metric that tracks general price inflation in a bundle of typical consumer goods. Basically, it attempts to illustrate how much prices are rising for the goods average Americans buy regularly. The June edition shows prices once again sharply on the rise, with a 0.9 percent increase from May to June. From June 2020 to June 2021, the data show that consumer prices rose a whopping 5.4 percent.

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quote:

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Some specific goods saw particularly drastic price hikes year-over-year. Chiefly, used cars and trucks rose 45.2 percent in price, while energy prices spiked 24.5 percent.

This all represents the biggest year-over-year price increase measured since 2008. In other words, price inflation just hit a 13-year high.

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quote:

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While price inflation has many causes, we can trace much of the current surge back to the policy of the Federal Reserve, the central bank controlling the supply of US dollars. The Fed essentially created trillions of new dollars to pump into the economy in the name of “stimulus.”

“The quantity of money has increased more than 32.9% since January 2020,” FEE economist Peter Jacobsen explained in May. “That means nearly one-quarter of the money in circulation has been created since then. If more dollars chase the exact same goods, prices will rise.”

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Our system has really gone off the rails. I used to cringe when Trump extolled the virtues of negative interest rates.

[Guisslapp]

Inflation Hits a 13-Year High.

LINK

quote:

---

Defenders of big-government pandemic interventions have insisted that any price inflation these schemes have caused is just temporary. But even more data just came in showing price inflation hitting new highs—further spotlighting the destructive consequences of these reckless policies.

The federal government just released the latest Consumer Price Index (CPI) for June 2021, an imperfect but useful metric that tracks general price inflation in a bundle of typical consumer goods. Basically, it attempts to illustrate how much prices are rising for the goods average Americans buy regularly. The June edition shows prices once again sharply on the rise, with a 0.9 percent increase from May to June. From June 2020 to June 2021, the data show that consumer prices rose a whopping 5.4 percent.

---

quote:

---

Some specific goods saw particularly drastic price hikes year-over-year. Chiefly, used cars and trucks rose 45.2 percent in price, while energy prices spiked 24.5 percent.

This all represents the biggest year-over-year price increase measured since 2008. In other words, price inflation just hit a 13-year high.

---

quote:

---

While price inflation has many causes, we can trace much of the current surge back to the policy of the Federal Reserve, the central bank controlling the supply of US dollars. The Fed essentially created trillions of new dollars to pump into the economy in the name of “stimulus.”

“The quantity of money has increased more than 32.9% since January 2020,” FEE economist Peter Jacobsen explained in May. “That means nearly one-quarter of the money in circulation has been created since then. If more dollars chase the exact same goods, prices will rise.”

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No expert thinks the Fed should not have done what they did. Where there is disagreement is how quickly the Fed should now pull back their bond buying (120 billion per month) and to what extent and whether they should be buying mortgage back securities.

[dawg80]

Apple, Amazon, ARKK, and other big names indicate a market correction is coming, strategist says. Here’s why. - MarketWatch

[Guisslapp]

One is always coming.

[dawg80]

One is always coming.

You're a frickin' genius! Next thing you'll say is it is going to rain.

[Guisslapp]

You're a frickin' genius! Next thing you'll say is it is going to rain.

Unless you get the timing right, the prediction is at best, useless, or at worst, harmful to investment performance.

[dawg80]

There are legit reasons to be mindful of a correction happening soon. Such as inflated P/E's. I think (yes, it is an opinion) the market is on a razor's edge right now and it wouldn't take much of anything to push it over the cliff for a 10%+ pullback. Example: a resurgence of the China virus causing an economic downturn. Thanks in large part to no leadership in Washington, the recovery trying to come out of the virus crisis is sluggish and thus the economic fundamentals are a house of cards.

[Guisslapp]

There are legit reasons to be mindful of a correction happening soon. Such as inflated P/E's. I think (yes, it is an opinion) the market is on a razor's edge right now and it wouldn't take much of anything to push it over the cliff for a 10%+ pullback. Example: a resurgence of the China virus causing an economic downturn. Thanks in large part to no leadership in Washington, the recovery trying to come out of the virus crisis is sluggish and thus the economic fundamentals are a house of cards.

If the economic fundamentals were a house of cards, you would see something far greater than a 10 percent correction, and it wouldn’t be called a correction.

Corrections are a healthy, but timing them is problematic. I agree that there aren’t huge portions of the market that are undervalued right now and that makes things feel very “toppy”.

But we have also been seeing a rolling correction moving through the market since March where different sectors have sold off and that money rotated into other sectors. An alternative to a correction at the index level is just continued volatility and consolidation as earnings catch up with valuations.

[dawg80]

Here's a more optimistic view of the market, at least for the rest of the year...link wouldn't work, so in summary.

Yahoo Finance writer Myles Udland cites history to support the market enjoying more gains in 2021. So far, the market has gained 16.2% this year, which places it in the middle of other such years with similar metrics. Things like what bonds have been doing, the US Treasury, inflation, employment numbers, etc...According to Udland the stock market's appreciation in value is nothing special in 2021, when compared to historic records, and he predicts a slow and steady climb into early spring, 2022.

From the article:

But data from Bespoke Investment Group suggests that history is very much on the market's side this year. In years when the market acts this well in the first six months of the year, we tend to see further gains and limited downdrafts through the balance of the year.
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In a report published Wednesday, Bespoke looked at the S&P 500's performance for each year since 1928, and pulled out the 10 years with year-to-date paths most correlated to 2021. In these similar years, the average gain for the S&P 500 through July 14 was 20.1%, with a median return of 18.8%.
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"With this year's gain of 16.2%, the magnitude of the gains so far this year is relatively close to the median of the 10 prior years," Bespoke wrote.
*

[dawg80]

Monday was a 2% "dip" in the market...of which I took advantage and added to my positions in 7 equities. Now the market has erased that and is moving on.

Question remains: is the market over-priced? The Dow is at 34,000+ unless we are to believe (think) it will go to 40,000, then 50,000, then 60,000 the market is priced too high. Take a look at some individual stocks, all dividend aristocrats/kings, all considered "forever stocks." JNJ at $170, PG at $140, as is WMT. If you were to put together a portfolio of this divie masters, blue chippers, to include those, and maybe KO, MMM, O, etc...(5 stocks)it would cost an investor right at $200,000 just to produce a portfolio returning a mere $400/month ($4,800/annual 2.4%). Of course you can mix in higher yielding stocks but those are more risky. If you created such a portfolio of "blue chippers" it would take only one crash to wreck your entire thing. Can't/won't happen? Hmmm....look at GE and worse, Sears & Roebuck and others like them, all once considered unshakable "blue chippers."

Last year, 2020, there were 10 million brand new stock market investors. Many of those focused on the popular meme stocks using online platforms like Robinhood and Webull, but there were also more serious investors, first-timers. It is encouraging to see new investors, especially young folks, since many first-timers are in their 20's. This is a good thing. But I would hate to see them get clobbered and lose all interest in remaining in the market.

[Guisslapp]

If the S&P500 earns $220 next year like some are forecasting, the current price isn’t that outrageous. You are paying less than $20 for a dollar of earnings. Not phenomenal, but not crazy. Right now, it would take closer to $80 in 10 year treasuries to yield you a dollar of “earnings”. The risk premium is about right.

Lower interest rates support higher valuations, because using capital for debt rather than equity pays you ever decreasing amounts, and makes future earnings closer to par with present earnings (the discount rate).

Chasing dividend yields over the past decade or so has been a recipe for underperformance. Growth has been trumping value. There are rational explanations for why that has happened, and personally I expect that to continue over the next decade.

The reason I believe this is because like e-commerce and the Internet has been disruptive over the past couple of decades, there are other disruptive trends converging right now and these trends not only create headwinds for large incumbent companies (like the blue chip companies you mentioned) but offer new very large total addressable markets.

These companies will grow into the new Amazon, Apples and Googles. Buy them when they are young and profit.

[dawg80]

So...what is the advantage of a reverse split? I can see, maybe, a company doing one when their PPS is mired in pennies and they hope to remain on an exchange. But, in general....?

GE just did a 1 for 8 reverse split. So now instead of holding 16,900+ shares I now own 270 shares. Price jumped from about $13/share to $104/share. I suppose the divie will go to .08/share. It should. But, financially and as for the future of the stock trading on the market, what does GE hope to accomplish by pricing out many retail investors?

[Dowty]

So...what is the advantage of a reverse split? I can see, maybe, a company doing one when their PPS is mired in pennies and they hope to remain on an exchange. But, in general....?

GE just did a 1 for 8 reverse split. So now instead of holding 16,900+ shares I now own 270 shares. Price jumped from about $13/share to $104/share. I suppose the divie will go to .08/share. It should. But, financially and as for the future of the stock trading on the market, what does GE hope to accomplish by pricing out many retail investors?

Can't speak much on the actual advantage of a reverse split, but given that RH and others now offer fractional shares, it's really hard to actually price someone out anymore. Any Joe schmo with free cash in his account can trade BRK.A now.

[johnnylightnin]

So...what is the advantage of a reverse split? I can see, maybe, a company doing one when their PPS is mired in pennies and they hope to remain on an exchange. But, in general....?

GE just did a 1 for 8 reverse split. So now instead of holding 16,900+ shares I now own 270 shares. Price jumped from about $13/share to $104/share. I suppose the divie will go to .08/share. It should. But, financially and as for the future of the stock trading on the market, what does GE hope to accomplish by pricing out many retail investors?

It was to boost the stock price to what GE viewed as in par with their peers.

That said, it’s only the 5th since 2012 for an S&P 500 listed company.

[dawg80]

It was to boost the stock price to what GE viewed as in par with their peers.

That said, it’s only the 5th since 2012 for an S&P 500 listed company.

Maybe as time goes on some new investors will think GE is on par with its peers, but right now most know it is concocted, artificial. I say that as a longtime GE stockholder and still am. But the company has been a big disappointment.