Take Stock Market News with a Grain of Salt

When it comes to reporting on the goings on in the stock market, the reporting often tries to make what is moving the markets more complicated than it actually is. I mean, if you think about it, it's a 24-hour news cycle anyway regardless of whether it is on television, over the Internet, or in various paper publications.

People need to sell news and you can only sell interesting news.

On top of that, the world of stock market information is chockful of analysts and experts and CEOs and all sorts of people who, let's face it, need to be relevant. And of course, they want to be experts for a reason. Therefore, whenever something happens to move the markets this way or that, someone feels the need to explain it away.

I tend to be one who tries to read between the lines a bit.

It is not to say that all of the news about what's happening in the markets is wrong. It's not to say that it's always over or under stated. It is also not to say that there are usually many reasons for market movements.

The stock market is both simple and complex.

While 2023 was not a stellar year in the markets by any measure, the stock market still performed well enough. People made profits. And toward the end of the year the markets did enjoy a rather extended streak of upward movement. 

2024 has of course, started off with mostly down days. The news is looking for all sorts of reasons why that is happening. What the Fed is doing or is expected to do. Mortgage rates. The CPI and jobs reports. The PPI and inflation data. Gas prices. The Houthis interrupting the supply chain. 

And to be fair, all of these things do influence the markets. But it is the "complicated" story. It's the explanation all the experts are pointing to. 

The thing I always try to say is that if you are the average Joe investor, paying attention to a lot of this hype, and that's primarily what a lot of it is, is futile. These are things that may have a day-to-day impact on something in the markets going this way or that way. But the average Joe investor only needs an eye to one thing.

The future.

And even though past history is not necessarily an indicator of future results, a common catchphrase used in the markets, there is one truth that most people can rely on comfortably. That is, the markets have ultimately only one direction.

Up.

Even when the markets correct or crash, they always rebound, and before the next crash or correction end off higher than where they last left off.

While there are many economic and political influences affecting the markets all the time, I think the start to 2024 is more easily explained than what the news is reporting about it. Again, all of the factors being stated do matter. But the underlying simple factor I think carries more weight and is closer to the real reason 2024 is starting off with less than a bang.

Those profits from 2023.

What else happens when the new year rolls in that is important to consider? Taxes. What happens when people have profits on paper that are realized? They are taxed. When trading reconvened on January 2nd, we of course entered into a new tax year. It would have been smart for any investor, long or short term, to hold onto their gains until a new tax year came into play. And that is what most people did.

The start to 2024 is really nothing more than investors now taking some of those profits since they won't have to worry about paying taxes on them until 2025. On top of that, there's the whole year ahead to make all sorts of strategic plans about offsetting the tax bill to come.

That being said, it is important to pay attention to at least some of what is being reported as factors moving the markets. But ultimately it should be a smaller consideration. When we are investing, we are not investing in the markets, per se. We are investing in companies. And so long as you are paying attention to the fundamentals of the businesses you are investing in, what happens in the day-to-day doesn't matter and should not be a formulation of a basis for determining where the markets are going, or what we should do with the individual businesses we are invested in.

The experts need to be relevant. The reporters need something to turn in to their editors to keep their jobs. The analysts need the same. All we need to do as investors is make money. And if we don't allow these outside influences to impact our decisions, we will make lots of it.

Like the way I write or the things I write about? Follow me on my Facebook page to keep up with the latest writings wherever I may write them.

OTHER MONEY COMMENTARY BY JIM BAUER

Don't Just Blindly Enter the Markets
If there is one thing I talk about all the time wherever I write, it is about the importance of understanding and participating in the stock market. I talk about it as much as I do because I think being in the stock market trumps all other means of income and wealth building, aside from owning your own successful enterprise.

Most People Want More Money But Don't Actually Want More Money
The title, I will admit, seems a bit strange, doesn't it? I mean, one either wants more money or they don't. Doesn't everyone naturally want more money? It would seem like a no-brainer to say, most people want more money.

Why Do I Hold Onto QYLD?
Back in March of 2021 I became interested in an ETF, Global X Nasdaq 100 Covered Call ETF (QYLD) and as I do with any investment, did my due diligence to decide whether or not the ETF fit my investment goals and objectives.

Money is What You Make of It, Not How Much You Make

Because I write a lot about money and opine a lot about money, I tend to get all of the usual types of responses that are almost entirely, in my opinion, generic, and all easily debunked or argued against. The rich are all greedy and just want to hoard the money. Workers are exploited with low wages. You can't get ahead in the world if you don't make a lot of money. You can't live on the kinds of wages most companies provide.

My favorite one is, I can't afford to save, therefore how can I invest?

In part I say easily debunked or argued against because, like most people, I started at the bottom. Not the top. Yet despite that it has not stopped me from being financially secure, getting ahead, or being able to take advantage of the myriad wealth building opportunities everyone has no matter where they exist financially.

Yes. There are limits. But what the real limit is, is how little people recognize what the real opportunities are, how accessible they are to everyone, and what opportunities are afforded us by what the rich have created to have a shot at joining their ranks on some level.

I am not going to say it is easy. By no means. But nothing that is worth doing in life ever is. It's hard because it is supposed to be. It is hard because the challenge is what drives us forward despite what limitations we have or what hurdles we have to overcome.

I took my first job working for Dominoes Pizza at 14 years old putting circulars on doorknobs advertising pizzas to potentially hungry customers. They paid me $2.85 an hour. That was in 1987. In 1992 I went into the United States Navy and, according to my Social Security statement, by the time I got out in 1996 I was making $13,418 a year.

I started investing shortly before I left the navy. And granted, my expenses were low because I lived on the ship during the time and most of my food was paid for. I started investing with roughly a few hundred dollars. 

But I had a mindset. Live on 80% of your income and sock away the 20% you don't need. When I left the USS Enterprise (CVN-65) in April of 1996 I had a total savings stash worth only around $3k. That was from money saved as well as money earned from investments.

Even 10 years later, according to my Social Security statement, I was only earning $36,951. But during that time I had real expenses. I bought my first investment property when I was 26 in 1999. Most of the downpayment and my ability to do that was based on proceeds, dividends and gains earned on saved money in the stock market.

I continued to save and invest at rates of 20% or greater, acted frugally, and continued to invest and learn about various strategies in the stock market. 

Never once did I ever think of the rich people I worked for as greedy. Never once did I allow myself to feel exploited. Never once did I complain about low wages, and certainly I was mostly always paid low wages.

I worked for big companies like Quad Graphics, Kraft Foods, Coca-Cola, Smurfit-Stone Container Corporation, and Nestlé. I even did a short stint as a pest control guy for a small company called Batzner Pest Management in New Berlin, Wisconsin.

My best year was at Coca-Cola, working in mid-level management and earned $60k. After Coca-Cola I took pay cuts to take on new challenges, and my last full year at Batzner I only made about $36k. The key here is that no matter how much money I made or didn't make, I never deviated from the plan. I never made an excuse to stop saving or to make changes to my investment goals and strategies.

The one thing that remained static was my thinking that it never matters how much you make, but rather it matters what you do with it.

More importantly, throughout my earning career one thing I never changed was my lifestyle. If I made $60k in my best year at Coca-Cola or $36k in my best year at Batzner Pest Management, I was living the same way, saving the same way, and investing the same way.

I even took time off frequently between jobs. In fact, between Nestlé and Batzner, I took nearly two years off.

Because of my investments, my bottom line changed little. My money was making money for me, and while it may not have been a period where I was necessarily getting ahead at the same rate as before the hiatus, I was still not going backwards.

And because despite the lack of new income coming in from a job, my money was still earning an income, and my lifestyle did not change much.

I will admit I did have to make some adjustments. But not unlike adjustments I had to make after I left Coca-Cola and took major pay cuts to do that. I was always viewing money not as a crutch or a limitation, but rather as an opportunity. 

If I look at my entire lifetime to date W-2 wages, from 1989 to 2022, according to my Social Security statement, my lifetime earnings to date are roughly $975k. Breaking that down that's roughly an average annual earnings of $29,546 a year.

I won't tell you what's in the "bank" now. But I can tell you it is an impressive amount of money considering what I ever had to work with. And that amount that's there now could never have been achieved if I had accepted for myself, the generic responses I get now when I talk about money or opine about it.

I lived on paltry wages and saved and invested them. I held a long-standing belief that opportunity is there for anyone who wants to take the time to learn about them, understand them, and exploit them as opposed to ever telling myself that I was the one being exploited.

In other words, rather than make excuses, I took action. I never once was able to allow myself to be convinced I was the underdog and doomed to poverty by the system or by circumstances not necessarily in my control.

I instead made my own circumstances and controlled my own fate and dictated my own financial future. I took hard the stance, no one can stop me from achieving what I want, because I have seen others before me do it. I always saw the possibilities. 

In no way was my desire to ever become a victim of circumstance or blame others for financial issues I may have had along the way. My financial existence was mine in the making, and mine to determine. If I took a job that paid a wage I didn't like, it was never once thought to be the responsibility of my employer to kick more money into my paycheck. It was my responsibility to kick more money into my paycheck by making decisions to increase my wages or wealth through finding a better job or making decisions about money I was already making to increase its value or worth.

When I write about or opine about money, I am doing so from a point of view of someone who never made much money but was able to build wealth anyway. It's part of the reason I am so strongly opinionated about it. It's why I get a little hot under the collar when someone says to me, "Yeah, you just say that because you have money."

You're just another rich guy lecturing the poor.

But I wasn't always that guy. I was the other guy. The guy who averaged under $30k a year who got somewhere despite it. Do you want to call $30k a year a decent wage? Hardly. And again, I lost ground several of those years, taking time off between jobs. Living off investments and making no income. And despite low wages and year-long hiatuses, still made my way through it. Still walked away with more money than I left off with.

The bottom line is that if you want to be a victim, that's a choice. If you want to allow yourself to be limited financially by circumstance, that's your choice. If you don't want to participate in the opportunities everyone has to get ahead, that's also your choice.

But it's not the rich guy's fault. It's not the cheap boss' fault. It's not societies fault. It's not the government's fault. It's not wage disparity's fault. It's not rich business owners or shareholder's fault.

It's yours.

Like the way I write or the things I write about? Follow me on my Facebook page to keep up with all of my latest posts from all the places I write. Or follow me on Twitter @jimbauer601 to advance the conversation.

Plummeting McDonald's Sales May Be An Economic Signal

A couple of years ago I wrote that one thing about downturns in the economy is that it causes people to, of course, scale back their purchases, and that means low-end retailers such as Dollar Tree, Dollar General, Walmart, and even thrift stores like Goodwill will tend to do very well since consumers are more concerned about value than necessarily quality, or customer service. That is not to disparage any of those companies on either quality of product, or quality of service, but simply to suggest that price becomes king in that kind of an environment. In that commentary I suggested that when the economy begins to fire up a bit, retailers to look at to buy shares in are slightly higher end, or steps up from the deep discounters. Places like Target and Kohl's, for example.

During the same period I also wrote about how well McDonald's stock performed throughout the entire recessionary period. To put it literally the stock was on fire, and that was because people were flocking to McDonald's stores, particularly interested in their value menu which offered consumers the best bang for their buck when it came to dining out. Even when it came to coffee, a cheap cup of what is arguably a noteworthy brew was just what the hurting consumer needed to get their coffee fix at a price that went easy on their wheezing wallets.

Interestingly enough, Starbucks did not fare all too poorly during the recession either, but that's another story. There's a different dynamic going on there.

McDonald's sales have taken a turn for the worst, having seen percentage decreases for nine straight months, and even Walmart has been seeing some declining sales.

With gas prices lower and jobs numbers higher, the shortfall in sales at McDonald's may actually be a lagging indicator of better times ahead. What it suggests is that people may be stepping up to slightly
higher end operators like Wendy's, Chipotle, and Panera Bread to name a few. Five Guys burgers are a strong competitor in this sector as well, and have been one of the fastest growing quick serve hamburger chains for some time now.  My gosh, if they went public, I would be one of the first guys in line.

Shake Shack may shake things up a bit as well for McDonald's. And actually Wendy's stock has been seeing new highs, so to my mind these are very clear signs that there is a paradigm shift in where consumers are spending their dollars.

And the begging question? Could it be that with lower gas prices and better job prospects, consumer confidence may be rising, and consumers are now willing to spend a little more elsewhere?

If that's the case, it could well be a signal that the economy may be getting better. I think it is too soon to tell for sure. Certainly I am not going to use hamburger sales alone as any indicator in the macro-economic picture. But in the micro it seems to at least make a suggestion which I think is worth taking a close look at.

People are beginning to make a shift in their spending, and McDonald's horrible sales numbers are making that all too clear. Stocks that I think are ripe for this environment are Wendy's and Chipotle (I'd stay away from Shake Shack), Whole Foods, Target, and I will go ahead and throw Darden Restaurants into the mix as well. These are companies I want to own right now. I think these companies are primed to benefit from any improvement in the economy, and I think stocks to avoid right now are stocks like Dollar Tree, Walmart, and yes. McDonald's. But do watch the company very closely. McDonald's has historically been able to weather many storms and has an uncanny ability to right its ship eventually. I do not recommend writing it off completely in the short term. But these other companies, I think, have a lot more going for them as it currently stands, and that is where I would put my investment dollars.

We're up for a ride, and the ones who will win are those who are treats to the American consumer if it becomes all too clear that we are headed for better times. In this case playing the value play is not as good a bet as playing the upgrade play.