Inflationary Fears Flamed Markets Decline Until Fed’s ‘Transitory’ Statement Entered Investors’ Minds

Happy Saturday All!

I hope that all of you had a great week and once again made progress towards creating generational wealth for you and your family.

However, this week, investors found things in general to be a bit more challenging and I would suggest a sort of a ‘beat down’ in the markets as it legged down for the majority of the week. Especially within the growth sectors of tech and biotech, until we saw a significant swing during Friday’s session. For the week, 8 of the 11 sectors ended in the red & 3 sectors led the decline as follows:  the consumer discretionary sector lost 3.7%, the information technology sector lost 2.2%, & the communication services sector fell 2%.

The market’s sell off, after last week’s record results, were primarily fed by the poisonous and unfounded belief and subsequent fear that inflation is getting out of control and the Fed would need to raise rates to curb it. On Wednesday, the CPI numbers came in above expectations and further flamed the fires of this belief. However, on Thursday the Fed’s Waller reconfirmed that inflation pressures are likely ‘transitory’ and urged patience, which is not something many folks have these days. Nevertheless, investors surprisingly seemed to grasp the concept that we experiencing a temporary rise in prices that is powered by a temporary disruption of supply across many sectors caused by the closure or reduction in production during the COVID pandemic shutdown. This is coupled with the fact that we are getting back to work and life, along with a flood of money from Uncle Sam’s stimulus packages. This situation is breeding the increased willingness to purchase & speculate and further exacerbating the temporary surge of some prices that should be remedied over the next few months as supply issues normalize once again. For an example, check out what is going in the automobile industry by going to buy a car or rent a car and you will see this that temporary situation is evident. 

The CDC also did their part on Thursday to calm investors nerves, indirectly that is, by specifically stating that if you are fully vaccinated, you can resume activities that you did prior to the pandemic. Fully vaccinated people can resume activities without wearing a mask or physically distancing, except where required by federal, state, local, tribal, or territorial laws, rules, and regulations, including local business and workplace guidance. They also stated that if you haven’t been vaccinated yet, then find a vaccine today. This is the first move that the CDC has made recently that I completely agreed with and seemed to clear the air the nation.

At the end of the week, the major indices performed as follows:  The Dow 30 closed at 34,382.13 (-1.1%) for the week & remains up +12.3% YTD & the S&P 500 closed at 4,173.85 (-1.4%) for the week and remains up +11.1% YTD. The Nasdaq closed at 13,429.98 (-2.3%) for the week and remains up +4.2% YTD. The smalls on the Russell 2000 closed at 2,271.63 (-2.1%) for the week & remains up +12.6% YTD.  

The FAANGs ended lower as follows: Apple (AAPL) shares closed at $127.45 down $2.76 from last Friday’s close of $130.21, Amazon (AMZN) closed at $3,222.90 down $68.71 from last Friday’s close of $3,291.61, Alphabet (GOOG) closed at $2,316.16 down $82.53/share from last Friday’s close of $2,398.69, Facebook (FB) closed at $315.94 down $3.14/share from last Friday’s close of $319.08 & Netflix (NFLX) closed at $493.37 down $10.47/share down from last Friday’s close of $503.84/share.  

Leading EV car maker Tesla (TSLA) moved lower again this week to close at $589.74 & down $82.63/share from the $672.37 close. This also came after Elon Musk further upset the croton markets this week by stating that Tesla would not be accepting Bitcoin for payment as it comes with “a high environmental cost with a rapidly increasing use of fossil fuels, especially coal, which has the worst emissions of any fuel.”

THE MACRO & RATES 

On Tuesday, the job openings report confirmed a rise to 8.123M in March & the NFIB Small Business Optimism Index report for April also confirmed a rise to 99.8.  On Wednesday, the CPI report surfaced confirming an .8% m/m rise in April. The Treasury Budget report for April confirmed a $225.6B deficit & the weekly MBA Mortgage Applications report showed a 2.1% rise. On Thursday, the PPI for final demand report confirmed a rise by .6% m/m. The index for final demand rose .7% m/m. For the week ending May 8 the initial jobless claims report confirmed a drop by 34k to 473k, while continuing claims for the week ending May 1 dropped by 45k to 3.655M. On Friday, the total retail sales report confirmed a flat m/m performance in April. The preliminary May reading for the University of Michigan Index of Consumer Sentiment fell to 82.8. The total industrial production report confirmed a rise by .7% month/month in April, while the capacity utilization rate rose to 74.9%. Import prices moved higher by .7% m/m in April , while export prices rose .8% m/m in April.  Business inventories also rose .3% month/month in March. Next week, we will receive the existing home sales report and the PMI index report.

The yield curve was relatively calm this week as the 10-yr yield rose 6 basis points wk/wk to close 1.64, while the 2-yr settled flat wk/wk at .14%. The U.S. Dollar Index ticked higher from 90.22 to 90.32. 

VISTA STORIES FROM THE DOW 30

Chevron & Noble Midstream Partners LP Announce Complete Merger

IBM Introduces World’s First 2-Nanometer Chip Technology

Visa Collaborates With Wave, Offering Instant Payouts To Canadian Small Business Owners

Walmart Health Enters Agreement To Acquire With Telehealth Provider MeMD

Disney Reports Mixed Second-Quarter Earnings – Disney+ Miss Expectations

McDonald’s Announce Increase In Hourly Wages By 10% For +660 U.S. Owned Restaurants

BIOTECH MAY HAVE FOUND GROUND

The Biotech sector took another hit through Thursday, but rebounded solidly on Friday. The Nasdaq Biotechnology ETF (IBB) closed at $149.68 slightly off from last week’s close of $149.71. The NYSE ARCA Biotech Index (^BTK) closed at 5,564.58 up 29.28 points from last week’s close of 5,535.30. The SPDR S&P Biotech ETF (XBI) closed at $126.92, +3.63% on Friday, but down ~$1 from last Friday’s close of $127.74. The BTK’s 52-wk range is $$97.15-$174.79 and had been getting threes since the early part of March!

Cytovia Therapeutics, Inc., a biopharmaceutical company developing allogeneic “off-the-shelf” gene-edited Chimeric Antigen Receptor (CAR)-NK cells derived from induced pluripotent stem cells (iPSCs) and NK cell engager multifunctional antibodies, announced this week that Jason Aryeh, a long time biotech investor and board director, has been elected to the Cytovia Board of Directors, effective immediately. In addition, to support the rapid development of the company, Elizabeth Schwarzbach, PhD and Boris Reznik, PhD have joined the Strategic Advisory Board and Elysa Mantel has been appointed as Vice President, General Counsel and Corporate Secretary.

GOLD & SILVER MARKETS TICKED HIGHER

Gold prices closed again above $1800/oz at $1,845, up $11 from the $1,834 close last week. This Friday silver prices closed at $27.52/oz. down $.04 from the $27.56/oz. close last Friday. Hecla Mining (HL) reported impressive Q1 2021 financial and operating results last week and closed at $7.56 up from the $7.27 close last Friday.  See our update story here for greater details.

OIL

Oil prices moved +.7% this week to close at $65.35/bbl and are up +34.7% YTD. It is definitely time may be time to be looking for a Tesla!

TRADING

We are back to 5-trading sessions again next week.

Thanks again for your attention this week. Please continue to share your thoughts, questions, & ideas as we move forward. 

In the meantime, please enjoy the balance of the weekly newsletter’s videos, quotes, updates. 

Investing & Inspiration

1. “Cash – in savings accounts, short-term CDs or money market deposits – is great for an emergency fund. But to fulfill a long-term investment goal like funding your retirement, consider buying stocks. The more distant your financial target, the longer inflation will gnaw at the purchasing power of your money.”  – Suze Orman
2. “Bitcoin, in the short or even long term, may turn out be a good investment in the same way that anything that is rare can be considered valuable. Like baseball cards. Or a Picasso.” – Andrew Ross Sorkin
3. “I think you have to learn that there’s a company behind every stock and there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” – Peter Lynch
4. “Historically, there has been a bull market in the commodities every 20 or 30 years.” – Jim Rogers
5. “The markets generally are unpredictable, so that one has to have different scenarios. The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.” – George Soros
6. “Stop trying to predict the direction of the stock market, the economy or the elections.” – Warren Buffett
7. “An important key to investing is to remember that stocks are not lottery tickets.” – Peter Lynch
8. “Learn everyday, but especially from the experiences of others. It’s cheaper!” – John Bogle
9. “When purchasing depressed stock in troubled companies, seek out the ones with the superior financial positions and avoid the ones with loads of bank debt.” – Peter Lynch
10. “No stock price is too low for bears or too high for bulls.” –  John F. Heerdink, Jr.
11. “Investment is most successful when it is most businesslike.” – Ben Graham
12. “Value stocks are about as exciting as watching grass grow, but have you ever noticed just how much your grass grows in a week?” – Christopher Browne
13. “Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.” – Benjamin Graham
14. “Individual who cannot master their emotions are ill-suited to profit from the investment process.” – Benjamin Graham
15. “I made my first investment at age eleven. I was wasting my life until then.” – Warren Buffet
16. “I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.” — Warren Buffett
17. “There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction, and cash flow. It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.” – Jack Welch, former CEO of GE
18. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble” ― Warren Buffett
19. “If you buy things you do not need, soon you will have to sell things you need.” – Warren Buffet
20. “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert G. Allen
21. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” – Warren Buffett
22. “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett
23. “Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer
24. “The person who starts simply with the idea of getting rich won’t succeed; you must have a larger ambition.” — John D. Rockefeller
25. “Know what you own, and know why you own it.” – Peter Lynch
26. “Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part ownership of a business.” – Peter Lynch

27. “Wise spending is part of wise investing. And it’s never too late to start.” – Rhonda Katz

28. “Invest for the long haul. Don’t get too greedy and don’t get too scared.” – Shelby M.C. Davis

29. “Fear incites human action far more urgently than does the impressive weight of historical evidence.”
    -Jeremy Siegel

30. “With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future.” — Carlos Slim Helu
31. “If we like a business, we’re going to buy as much of it as we can and keep it as long as we can. And when we change our mind, we don’t take half measures.” – Warren Buffett
32. “The most contrarian thing of all is not to oppose the crowd but to think for yourself.” — Peter Thiel
33. “Never depend on a single income, make an investment to create a second source.” Warren Buffet“Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.” ― Warren Buffett
34. “The key to making money in stocks is not to get scared out of them.” – Peter Lynch
35. “Courage taught me no matter how bad a crisis gets … any sound investment will eventually pay off.” — Carlos Slim Helu
36. “Investing puts money to work. The only reason to save money is to invest it.” – Grant Cardone
37. “As time goes on, I get more and more convinced that the right method of investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.” — John Maynard Keynes
38. “Given a 10% chance of a 100 times payoff, you should take that bet every time.” — Jeff Bezos
39. “Money is always eager and ready to work for anyone who is ready to employ it.” ― Idowu Koyenikan
40. “The secret to investing is to figure out the value of something – and then pay a lot less.” – Joel Greenblatt
41. “We don’t have an analytical advantage, we just look in the right place.” – Seth Klarman
42. “Men, it has been well said, think in herds. It will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay
43. “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros
44. “In investing, what is comfortable is rarely profitable.” — Robert Arnott
45. “Don’t look for the needle in the haystack. Just buy the haystack!” — John Bogle
46. “No Price is too low for a bear or too high for a bull.” — Anonymous
47. “Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future.” — Anonymous
48. “Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
49. “Wise spending is part of wise investing. And it’s never too late to start.” –Rhonda Katz
50. “If there is one common theme to the vast range of the world’s financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.” — Carmen Reinhart
51. “It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble.” ― Robert Shiller
52. “A bull market is like sex. It feels best just before it ends.” — Barton Biggs
53. “The investor’s chief problem — even his worst enemy — is likely to be himself.” — Benjamin Graham
54. “No profession requires more hard work, intelligence, patience, and mental discipline than successful speculation.” – Robert Rhea
55. “The most contrarian thing of all is not to oppose the crowd but to think for yourself.” — Peter Thiel
56. “Money is like a sixth sense – and you can’t make use of the other five without it.” – William Somerset Maugham
57. “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” — Albert Einstein
58. “The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
59. “Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” – Peter Lynch
60. “Investing puts money to work. The only reason to save money is to invest it.” – Grant Cardone
61. “Formal education will make you a living; self-education will make you a fortune.” – Jim Rohn
62. “You cannot save time for your future use however you can invest time for your future.” – John F. Heerdink, Jr. 
63. “We always live in an uncertain world. What is certain is that the United States will go forward over time.” – Warren Buffett
64. “Never test the depth of the river with both of your feet.” – Warren Buffet
65. “Know what you own, and know why you own it.” – Peter Lynch
66. “Liquidity is only there when you don’t need it.” -Old Proverb
67. “There is no such thing as no risk. There’s only this choice of what to risk, and when to risk it.” – Nick Murray
68. “If you want to be a millionaire, start with a billion dollars and launch a new airline.” – Richard Branson
69. “Fear incites human action far more urgently than does the impressive weight of historical evidence.” – Jeremy Siegel
70. “In investing, what is comfortable is rarely profitable.” – Robert Arnott
71. “Spend each day trying to be a little wiser than you were when you woke up.” – Charlie Munger
72. “The entrance strategy is actually more important than the exit strategy.” – Edward Lampert
73. “The rivers don’t drink their own water; Trees don’t eat their own fruits. The sun does not shine for itself, And flowers do not spread their fragrance For themselves. Living for others is a rule of nature” – PopeFrancis
74. “It is impossible to produce superior performance unless you do something different from the majority.” – John Templeton
75. “Inaction and patience are almost always the wisest options for investors in the stock market.” – Guy Spier
76. “Remember that the stock market is a manic depressive.”  – Warren Buffett
77. “An investment in knowledge pays the best interest.” – Benjamin Franklin
78. “I believe the returns on investment in the poor are just as exciting as successes achieved in the business arena, and they are even more meaningful!” -Bill Gates
79. “Every portfolio benefits from bonds; they provide a cushion when the stock market hits a rough patch. But avoiding stocks completely could mean your investment won’t grow any faster than the rate of inflation.” – Suze Orman
80. “The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital… the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.” – John F. Kennedy
81. “If all the economists were laid end to end, they’d never reach a conclusion.
    -George Bernard Shaw
82. “The riskiest thing we can do is just maintain the status quo. I get up at 4:30 in the morning, seven days a week, no matter where I am in the world. I think it is important for people who are given leadership roles to assume that role immediately. What I’ve really learned over time is that optimism is a very, very important part of leadership.” – Bob Iger, Former Ceo of Disney
83. “In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” – Ben Graham
84. “In investing, what is comfortable is rarely profitable.” -Robert Arnott
85. “The fundamental law of investing is the uncertainty of the future.” -Peter Bernstein
86. “How many millionaires do you know who have become wealthy by investing in savings accounts?” -Robert G Allen
87. “Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.”-Ivan Boesky
88. “Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner
89. “The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru
90. “I talk about macro themes a lot because they are fun to talk about, but it is the risk management that is the most important thing. The risk control is all bottom-up. I structured the business right from the get-go so that we would have lots of diversification.” -Michael Platt
91. “Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” -Larry Summers