Steady job gains are indeed on the move. Together with this are the signs emerging for the rising of wages. Lastly, pressure is mounting for picking up inflation. There should be more evidences in the comings days for data on producer and consumer prices.
Despite these occurrence mentioned above, investors are confident enough that the Fed is not going to raise interest rates again on next month’s policy meeting. The Fed-funds which is used by traders to input bets on central policy compiles by CME Group Inc. is estimated only to an 8% chance that the Fed will increase the rates this coming June.
One can argue that investors are too sanguine. The slow US growth and last week’s relatively not-so-good jobs report give Fed more cover to wait. The weak global economy and unrestrained financial markets for the past months have also added to this complications experienced by Fed. In addition to this, investors have already been habituated to the Fed stopping the abscess growth every time markets have turned unstable.
The most important thing to understand about picking stocks is this: If you are buying a stock, someone else is selling it. Whatever analysis you have done to tell you that this stock is a good deal at today’s price, be aware that there is someone else on the other side of the trade who has run the numbers and decided that the smart move is to get out now. Stock picking is a battle of wits against other investors, most of whom, you should assume, are at least as informed and rational as you are. That’s why it is difficult for even pros to beat the return they’d get simply from holding an index fund.
But investing in stocks can be exciting, and an intellectual challenge. The basic formula for stock analysis is simple: Pay a price that’s less than the long-term, per-share value of the underlying business. The art of investing is in figuring out how to determine that value.
“Growth” investors tend to focus their analysis on a company’s potential for future profits, and gravitate to those whose earnings are rising the fastest. Often these stocks have a highly compelling story: Maybe the company sells a hot new tech product or the next blockbuster drug, or has found an innovative new way to sell fast-food burritos. Since growth-oriented investors are interested in big future earnings, they are often willing to pay a high price for a stock relative to what it earns right now. The price-to-earnings ratio, or P/E, is a common metric for valuing stocks; growth investors will often be willing to pay P/Es of 20 or more.
Pelosi Says No Stimulus Even as Coronavirus Cases Rise
With days before the elections, House Speaker Nancy Pelosi says “No” to stimulus relief. She then blamed the White House for the failure.
In a letter to House Democrats, Pelosi heaped the blame on the White House. “For a long time now, Congressional Democrats have laid out a strategic plan to crush the virus. The White House and Mitch McConnell have resisted, and on Sunday, Mark Meadows told us why saying ‘We’re not going to control the pandemic.'” Pelosi referred to Chief of Staff Meadow’s interview last Sunday on CNN’s “State of the Union.”
She noted: “From ‘hoax’ to hundreds of thousands dead, the White House has failed miserably — not by accident, but by decision. Now we know why they resisted science at the expense of lives, livelihoods, and the life of our democracy. Again, it was a decision to do so.”
US Treasury Secretary Steve Mnuchin negotiated with Pelosi for weeks. The Speaker set a deadline last week to finish the stimulus package. The deadline allows the legislators to vote on the final bill before the elections.
The Democrats passed a $2.2 trillion Covid- aid 19 bill. But, Senate Republicans and Mnuchin found the budget too expensive. They countered with a lower costing bill at $1.8 trillion. Trump said he can go higher if needed.
In the end, both sides remained far apart in negotiations. Pelosi threw in the towel yesterday.
A Case of Bad Timing
The decision to forego talks on stimulus relief comes at the heels of higher Covid-19 cases. Infections reached a record high over the weekend, with over 83,000 new cases reported. As of this week, there are 1.7 million Americans infected and 227,000 dead. Yet, there are no signs that the pandemic is slowing down.
There are reports that House Democrats could grow in number in this year’s elections. Pelosi committed to writing legislation in aid of struggling American workers. She said: “This week, we continue to put pen to paper, with thanks to our Committee Chairs for their mastery of the legislation and loyalty to America’s working families.” She included a dig on Trump and Senate Majority leader Mitch McConnell. “The President’s words only have meaning if he can get Mitch McConnell to take his hand off the pause button,” she added.
Trump Fires Back
In response, the White House fired back at Pelosi last Tuesday. Trump said “Nancy Pelosi is only interested in bailing out badly-run, crime-ridden Democrat cities and states. That’s all she is interested in. She is not interested in helping people.”
Trump promised that once the GOP wins, they’ll get an aid package ready. He said “After the election, we will get the best stimulus package you have ever seen. I think we are going to take back the House because of her.” Trump looked forward to getting the House back. He said “I think you have a lot of congressmen and women – Republican – that are going to get elected. We will take back the House. We’ll hold the Senate. We’ll hold the White House.”
Other CARES Act Benefits Expiring Soon
Besides a stimulus check, Americans received many benefits under the CARES Act. This bill expired last July, but some of the provisions managed to hold on longer. Here are some of the benefits and their shelf lives.
401(k) hardship withdrawals and loans, unemployment can continue to do so until the end of 2020. You will owe taxes on the withdrawal, but there aren’t any automatic deductions. Tax payments can spread out up to three years. 401(k) loan payments due between March 27 to December 31 will extend to next year, but with interest.
Federal enhanced unemployment benefits ended in July will continue in some other form. Depending on your state’s coverage, some provisions will remain in place until the end of the year. Self-employed, independent contractors, and gig economy workers remain qualified for state benefits. These last until December 31, 2020.
Bans Will Remain
Evictions will remain banned until the end of the year. This is via a “historic” order from the Centers for Disease Control and Prevention.
Those needing mortgage relief due to coronavirus can still request help. They can choose between six months of deferral or lower payments. While the CARES Act doesn’t specify the duration, it’s likely available as long as the pandemic is ongoing. At the least, this covers loans until the end of the year.
Finally, the student loan moratorium remains in effect until January 2021.
To paraphrase a famous saying: When Elephants and Donkeys fight, it’s the grass that suffers. A week to go before the elections and much-needed relief remains unavailable. Americans who remained resilient must now endure a few more months. They will need to fend for themselves while Congress and the Senate bicker over details.
Watch this as Donald J. Trump, the President said that House Speaker Nancy Pelosi is only interested in bailing out badly-run Democrat cities and states:
Who is to blame for these negotiations made in bad faith? Is it the Democrats led by Nancy Pelosi and their spend-at-all-costs proposal? Or is the GOP, who insisted that lower is better? Let us know what you think by leaving your comments below.
Stocks Post Its Worst Day in A Month
Wall Street took a beating Monday as stocks posted its worst day in a month. Rising coronavirus cases and a fading stimulus relief led investors to sell-off.
The Dow Jones Industrial Average closed 2.3% lower. It fell down 935 points during the day before settling 650 points lower. All Dow stocks closed in the red except Apple, which eked out a .01% gain. It was the Dow’s worst day since September 3.
Meanwhile, the S&P 500 closed for the day at 1.9%, marking its worst day since late September. The tech-heavy Nasdaq Composite, which bounced back from its lows in the morning, finished lower at 1.6%.
While all sectors across the board experienced losses, some got crushed more. These include energy, industrials, and financials.
Higher Cases of Coronavirus
With eight days remaining before the elections, investors are starting to get jittery. Despite lots of talks, Congress has yet to approve a stimulus package. Cases of coronavirus are jumping in all states, and it recently hit a daily high average of 68,767 last Sunday.
Meanwhile, big tech companies are set to report earnings later this week. This lot includes Microsoft, Apple, Google, Facebook, and Twitter. Fawad Razaqzada of Think Markets noted that the reports can inject further volatility. In the note, Think Markets believed that “on a more macro level, ongoing US stalemate over US fiscal stimulus and the rapidly spreading Covid-19 is going to determine the direction for the wider markets.”
Tom Lee, head of research at Fundstrat Global Advisors, thinks Covid is a big influence over the market. He said “It’s almost as important as the Fed right now. Covid is suppressing the economy, and it’s essentially offsetting easy money. If we didn’t have Covid, people would be going out and spending money. It’s acting as a huge headwind.”
No Relief in Sight
Brad McMillan, CIO of Commonwealth Financial Network, thinks the reality hit investors hard. He told CNN business: “I think a big difference this time around [is]…there’s been a tremendous amount of hope baked into the market for quite a while, and we saw some things over this weekend that hit those assumptions hard.” The negotiations for a new relief package is gone at least until after the elections. Senate Majority Leader Mitch McConnel adjourned the Senate after confirming new Chief Justice Amy Coney Barrett. They will resume their session on November 9, or six days after the elections.
Without a clear stimulus plan, the US economy could start to double-dip. And if the rise in coronavirus cases continues, the business will shut down again. This nightmare scenario is haunting the market at present. Steven Wieting, the chief strategist at Citi Private Bank, sees dimmer prospects. “The ability to fight the virus further right now is very much in question, and it’s a political question.” Wieting believes that Washington could take months before anything gets done. This made investors tentative.
Tom Lee added that “We have a lot of things to be anxious about in the next couple of weeks. That’s why this is a pre-election market. But post-election, I think a lot of things that make people nervous turn into a tailwind. The post-election stimulus is a when not an if. Even if it’s a mixed Congress, I think there’s still some common ground. It’s just the scope that’s different. It would be a smaller package.”
Eight Days Remaining
The final eight days before the elections usually brings good vibes for Wall Street. This year, the bulls will need some extra running following Monday’s selloff spree.
Sam Stovall, chief investment strategist history, observed this bull phenomenon. Since 1944, the S&P 500 rose on average 2.5% in the eight days before elections. The index is up 17 out of 19 times, or 89%. The biggest rise came during the recent financial crisis, with the S&P 500 roaring back 18.5% in a bear market rally. That year, Democrat Barack Obama won over the GOP’s John McCain. The market sunk back to new lows after the election. It bottomed out four months later. The first decline in 1968 (-0.8%), happened as Richard Nixon won over Democrat Hubert Humphrey. The other was in 1988 when Republican George H.W. Bush won against the Dems’ Michael Dukakis.
Wall Street needs to get its act together with eight days remaining. A short, decisive victory by either party can help uplift America’s image. And with all the drama removed, maybe the market can go back to its winning ways.
Watch this as Stocks fall sharply at open amid Covid-19 resurgence:
Stock investors of The Capitalist, are you selling off right now, or are you holding off for a bigger payday? Do you think the market will rally in the next few days, or do you foresee better days after the elections? Share with us your stock scenarios as we count down to the elections. Leave your thoughts in the comment section below.
US Housing Sales Boom Will Last Until 2021
Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.
Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion.
Why do people buy houses during a recession?
During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.
The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap.
The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy.
Demand coming from the rich
Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”
People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.
Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said: “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.”
Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”
Shrinking inventory of houses for sale
With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data.
Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”
Demand won’t last forever
The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities.
The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.
Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:
Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.
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