“Don’t let these changes in the market, even the big ones [like the financial crisis] … change your mind and never, never, never be in or out of the market. Always be in at a certain level."
- Jack Bogle founder of Vanguard Funds
The Portfolio Performance
The portfolio is UP +14.38% YTD
The S&P 500 is UP +10.07% YTD
ENTER YOUR NAME & EMAIL ADDRESS TO SUBSCRIBE
Days like today aren't fun and can cause investors to doubt themselves and change course. There's no reason to change course if your portfolio is filled with good companies. Today's sell-off was driven by a JOLTS report (Job Openings and Labor Turnover Survey) informing us that The Federal Reserve will likely raise rates again in November. Job openings totaled 9.61 million for the month, a jump of 700,000 from July. Companies are hiring, and a chunk of that is new business starts that need employees. Hires rose 5.857 million, an increase of 35,000. The economy is still hot, and the Fed wants to bring down inflation. There are two ways to fight inflation: demand destruction through higher interest rates and supply infusion by improving the supply of everything: workers, materials, services, and commodities. Unfortunately, while the Fed is raising rates, the Federal government is pumping more and more money into the economy. Our government is fighting itself. Ultimately, the bond market will instruct the government to get on the right path. "Bond Vigilantes" are bond buyers who refuse to buy. The Federal government needs to issue more bonds to keep funding all the spending, but the sales are lagging because the bond vigilantes are saying "NO MORE." When bonds don't sell, the yield goes up. The U.S. 10-year reached 4.8% today and is on track to reach 5% this month. Either the vigilantes win or we get the recession that we are so close to avoiding.
In today's data, we got a tighter labor market, a higher dollar (1.07), higher bond rates, and higher mortgage rates. The 30-year fixed is now close to 8%. That's not good for stocks because it means that the Fed will stay higher for longer (we knew that), borrowing costs are higher, or unavailable for many companies. Travel stocks have been booming due to a strong consumer, and a strong dollar has made international travel attractive. But now analysts are worried about the consumer as credit card and auto loan default rates are ticking up, and student loan payments are starting. With each domino in the data ticking off more worry, investors sold off everything except fossil energy. Fortunately, we have the TBT in the portfolio, which added +4.4% in gains today.
In my opinion, this is a good time to be looking for deep value in great companies.
I coded a new feature into the portfolio to give my subscribers more timely updates. The Consensus Price Target will now automatically update. The consensus price target is an average of all analyst's price targets. This is moderately useful when analyzing a company. I use it in the portfolio to calculate the potential upside percentage. That number is based on other people's analysis, but it is a useful perspective as I'm looking for companies with at least a 20% upside to provide a margin of safety.
None. On days like this, go to work, enjoy your hobby, spend time with family, and think about the major trends and where money will be flowing over the next 3-5 years.
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
ENTER YOUR NAME & EMAIL ADDRESS TO SUBSCRIBE
Rule #1: Don't lose money
Rule #2: See Rule #1
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
RULE #10: Being early and being late is the same as being wrong...move on.
Rule #11: Investing is easy. Waiting is hard; waiting is the hardest part.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
AMD, AMZN, AAPL, ARKK, ARKG, CNRG, ENPH, FB, GNRC, GBTC, GLD, HRTX, HD, MSFT, NVDA
I am invested short in these securities mentioned in this post:
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.