Powell's Fed is not only raising interest rates; they're (supposedly) ending QE AND starting QT (Quantitative Tightening), selling assets from their balance sheet.
This is purportedly in an effort to rein in inflation, but much of the CPI increase is due to monopolies, with pricing power, raising prices, recording record earnings, and bragging about it to shareholders. The prime example is gasoline; retail prices are set by oil companies, who have pricing power.
This is going to be painful for the majority of working Americans.
I suspect that it's ultimately a political move by Capital to
ensure a sweeping victory for the GOP in the 2022 elections,
put Republicans in the majority of House & Senate,
cause a recession, which would
reverse the trend of rising wages & salaries,
force people back to work for low wages, in unsafe workplaces, without sick leave;
pass legislation to eliminate collective bargaining for public sector employees,
pass legislation to restrict the activities of union organizers, and
make the nationwide movement toward union organizing much more difficult.
In short, Capital must remain more organized than Labor in order to maintain hegemony.
As the recession and new legislation combine to lower wages & salaries, the U.S. worker/customer/voter class will cease to be a source of income for corporations. So expect corporations to be lining up at the trough for handouts from the U.S. Government, with the biggest political donors being the first in line.
I haven't read Doug Noland. Tell me, for how many of those 10 years has he been saying the crash is coming?
I decided to bump his thread and then saw the last post had been a Friday so decided to mirror it. I don't think the day of the week is relevant to the price action.
During Bear Markets, Friday's are hard pressed to be up. No one wants to be long over the weekend and institutions tend to pull their bids late in the session. Vice-versa is true when the trend is up during a Bull Market.
Agreed, there is little reason for positive sentiment and there are arguments that the market is still overpriced.
I think one has to be careful when they make a blanket statement about the "market" being overpriced.
While the average price decline by the S&P in the history of 19 bear markets taking place over the past 140 years is 37.3% with a duration on average of about 289 days, it cant go unnoticed that nearly half of Nasdaq constituents are more than 50% below their 52-week highs and 58% of the Nasdaq is down more than 37.3%. In fact, 77% of the Nasdaq is "officially" in a bear market (-20%).
Yes, I'm aware that there was a lot of SPAC garbage and Fin-Tech rubbish that got pushed to ridiculous valuations as the FED was accommodative in response to Covid, but still.
Powell's Fed is not only raising interest rates; they're (supposedly) ending QE AND starting QT (Quantitative Tightening), selling assets from their balance sheet.
This is purportedly in an effort to rein in inflation, but much of the CPI increase is due to monopolies, with pricing power, raising prices, recording record earnings, and bragging about it to shareholders. The prime example is gasoline; retail prices are set by oil companies, who have pricing power.
This is going to be painful for the majority of working Americans.
I suspect that it's ultimately a political move by Capital to
ensure a sweeping victory for the GOP in the 2022 elections,
put Republicans in the majority of House & Senate,
cause a recession, which would
reverse the trend of rising wages & salaries,
force people back to work for low wages, in unsafe workplaces, without sick leave;
pass legislation to eliminate collective bargaining for public sector employees,
pass legislation to restrict the activities of union organizers, and
make the nationwide movement toward union organizing much more difficult.
For some reason, your "Labor vs Capital" narrative conveniently ignores the fact that INFLATION is running rampant throughout our Nation and is the #1 concern when lower and middle class voters and working class (such as Hispanics) are surveyed about what they are most worried about.
To claim that the FED is "engineering" a recession to ensure a sweeping victory for the GOP in the 2022elections totally ignores the fact that double digit price increases in food, fuel, and 20 - 30% increases in rents is crushing the working class. Never mind that the narrative that the FED is deliberately "engineering" a Recession to influence an election borders on conspiracy theory.
For some reason, the "Labor vs Capital" narrative that you repeatedly promote here in the OT Forum conveniently ignores INFLATION as a legitimate factor that could push Independents (and even Democrats) towards voting for the GOP in mid-terms. - - - Nope, that's not a possibility at all.
Never mind that the current trend in rising salaries and wages ( +5.5% over the last 12 months ) that you have highlighted is getting thoroughly crushed by INFLATION.
Moreover, nowhere in your narrative is there any mention of what should be done about INFLATION by the FED. The fact that your narrative omits this appears to imply that it isnt really a factor and that we should just maintain the status-quo so as to not disrupt wage gains by Labor or the current 3.6% unemployment rate.
The FED has obviously been late to the game when it comes to reigning in the +42% increase in M2 money supply that it created during Covid, along with the $2.2 Trillion Dollar CARES ACT that Congress passed and Trump signed into law. They are sitting on an unheard of $9 Trillion dollar balance sheet. Are they supposed to just sit back and do nothing about price pressures? Of course not. It's specifically stated in their dual-mandate.
And for what it's worth, gasoline is a derivative of crude oil, which is a GLOBAL commodity that is priced in USD by an 800 lb. Gorilla by the name of OPEC+ which now has 23 members and has included the Russians since 2016. - - - It would be terribly naive to blame oil companies for high gasoline prices, when OPEC+ controls 40% of GLOBAL SUPPLY and has clearly not wanted to ramp up production. Our good "friends" the Saudis (alone) have repeatedly thumbed their nose at us and refused to tap into the additional 2.5 - 3.0 million barrels per day of spare capacity that they command.
Now, if you want to blame the current Administration for high natural gas prices I think that that would be much more realistic given that the Elizabeth Warren's of the world and her friends in the Oval Office have no idea how badly the lack of Nat-Gas pipeline infrastructure is creating supply problems. Ms. Warren seems to believe that banning the export of LNG would solve the high prices. But what she fails to understand is that the gas transmission pipelines are already full. There's no where for additional Nat-Gas to go. - - - Currently, there's an NG pipeline out of Appalachia that is set-up to move Nat-Gas to the Northeast. It's 90% complete, but being bogged down by the Administration and their environmental policies. Ever ask yourself why the Northeast is still hooked on home heating oil to stay warm? It's because of a lack of transmission infrastructure.
None of this should be all that surprising or a secret. It's basic Econ. 101a.
But to claim that the FED is "engineering" a Recession to put the GOP back in power in the upcoming mid-term Elections is at the very least, disingenuous, and at most, farcical.
Agreed, there is little reason for positive sentiment and there are arguments that the market is still overpriced.
I think one has to be careful when they make a blanket statement about the "market" being overpriced.
While the average price decline by the S&P in the history of 19 bear markets taking place over the past 140 years is 37.3% with a duration on average of about 289 days, it cant go unnoticed that nearly half of Nasdaq constituents are more than 50% below their 52-week highs and 58% of the Nasdaq is down more than 37.3%. In fact, 77% of the Nasdaq is "officially" in a bear market (-20%).
As someone who is disproportionately interested in the value of high growth technology, I appreciate you saying that and hope that we aren't that far away from the trough.
What is the GOP going to do about inflation that the Dems aren't?
That's not really the issue.
It's the perception that the Dems arent able to tackle the issue, thus there are voters out there that are willing to switch party lines (not too mention Independents) in the upcoming midterms to see if the GOP can do better.
Agreed, there is little reason for positive sentiment and there are arguments that the market is still overpriced.
I think one has to be careful when they make a blanket statement about the "market" being overpriced.
While the average price decline by the S&P in the history of 19 bear markets taking place over the past 140 years is 37.3% with a duration on average of about 289 days, it cant go unnoticed that nearly half of Nasdaq constituents are more than 50% below their 52-week highs and 58% of the Nasdaq is down more than 37.3%. In fact, 77% of the Nasdaq is "officially" in a bear market (-20%).
As someone who is disproportionately interested in the value of high growth technology, I appreciate you saying that and hope that we aren't that far away from the trough.
A few months ago, when I became convinced that the FED wasnt just trying to "jawbone" rates higher, but were totally serious about raising rates and also using their balance sheet to fight inflation, I told friends that the S&P was gonna be hard pressed to stay above 4000 this year and that the next 6 months would be brutal.
That having been said, it's difficult for me to believe that there's a good reason why names that I follow in the Medical Diagnostics space should be trading at only 4 or 5x this year's sales. Even the darling in the sector, Illumina (ILMN) got whacked for 14% on Friday after reporting "so-so" Q1 earnings and acknowledging headwinds from China locking down again. We're talking about the premier genomic sequencing maker of machines that help DX companies and research universities analyze genetic variation.
At $249 a share, ILMN is only trading at 7.5x this year's sales. The entire DX sector is trading as though there has been a cure for cancer and there is no longer a need for diagnosing it.
While I've been critical of growth stock manager Cathie Wood and her portfolio management in 2021 (ARKK and ARKG) which has literally been insane, I do agree with one of her conclusions that she's been making recently . . .
She says that in the Dot-Com mania investors were Chasing the Dream of disruptive tech and innovation.
Today, she says that these same investors are Running Away from Reality.
It's not like he's been saying that a crash is imminent for the last 22 years, though he did correctly call the crashes in 2000 and 2008.
The ongoing theme for the last 13 years or so, since the 2008 crash, is that excessive credit creation was (and is) unsustainable, and that credit bubbles are either inflating, or bursting.
Pick a few Bulletins from the archives, and see if he was right.
I just remember being astonished that a bunch of bankers could commit fraud on a massive scale, crash the entire financial system, and then be rewarded with a bailout and a steady stream of $$$ from U.S. taxpayers.
It's not like he's been saying that a crash is imminent for the last 22 years, though he did correctly call the crashes in 2000 and 2008.
The ongoing theme for the last 13 years or so, since the 2008 crash, is that excessive credit creation was (and is) unsustainable, and that credit bubbles are either inflating, or bursting.
Pick a few Bulletins from the archives, and see if he was right.
I just remember being astonished that a bunch of bankers could commit fraud on a massive scale, crash the entire financial system, and then be rewarded with a bailout and a steady stream of $$$ from U.S. taxpayers.
Powell's Fed is not only raising interest rates; they're (supposedly) ending QE AND starting QT (Quantitative Tightening), selling assets from their balance sheet.
This is purportedly in an effort to rein in inflation, but much of the CPI increase is due to monopolies, with pricing power, raising prices, recording record earnings, and bragging about it to shareholders. The prime example is gasoline; retail prices are set by oil companies, who have pricing power.
This is going to be painful for the majority of working Americans.
I suspect that it's ultimately a political move by Capital to
ensure a sweeping victory for the GOP in the 2022 elections,
put Republicans in the majority of House & Senate,
cause a recession, which would
reverse the trend of rising wages & salaries,
force people back to work for low wages, in unsafe workplaces, without sick leave;
pass legislation to eliminate collective bargaining for public sector employees,
pass legislation to restrict the activities of union organizers, and
make the nationwide movement toward union organizing much more difficult.
For some reason, your "Labor vs Capital" narrative conveniently ignores the fact that INFLATION is running rampant throughout our Nation and is the #1 concern when lower and middle class voters and working class (such as Hispanics) are surveyed about what they are most worried about.
To claim that the FED is "engineering" a recession to ensure a sweeping victory for the GOP in the 2022elections totally ignores the fact that double digit price increases in food, fuel, and 20 - 30% increases in rents is crushing the working class. Never mind that the narrative that the FED is deliberately "engineering" a Recession to influence an election borders on conspiracy theory.
For some reason, the "Labor vs Capital" narrative that you repeatedly promote here in the OT Forum conveniently ignores INFLATION as a legitimate factor that could push Independents (and even Democrats) towards voting for the GOP in mid-terms. - - - Nope, that's not a possibility at all.
Never mind that the current trend in rising salaries and wages ( +5.5% over the last 12 months ) that you have highlighted is getting thoroughly crushed by INFLATION.
Moreover, nowhere in your narrative is there any mention of what should be done about INFLATION by the FED. The fact that your narrative omits this appears to imply that it isnt really a factor and that we should just maintain the status-quo so as to not disrupt wage gains by Labor or the current 3.6% unemployment rate.
The FED has obviously been late to the game when it comes to reigning in the +42% increase in M2 money supply that it created during Covid, along with the $2.2 Trillion Dollar CARES ACT that Congress passed and Trump signed into law. They are sitting on an unheard of $9 Trillion dollar balance sheet. Are they supposed to just sit back and do nothing about price pressures? Of course not. It's specifically stated in their dual-mandate.
And for what it's worth, gasoline is a derivative of crude oil, which is a GLOBAL commodity that is priced in USD by an 800 lb. Gorilla by the name of OPEC+ which now has 23 members and has included the Russians since 2016. - - - It would be terribly naive to blame oil companies for high gasoline prices, when OPEC+ controls 40% of GLOBAL SUPPLY and has clearly not wanted to ramp up production. Our good "friends" the Saudis (alone) have repeatedly thumbed their nose at us and refused to tap into the additional 2.5 - 3.0 million barrels per day of spare capacity that they command.
Now, if you want to blame the current Administration for high natural gas prices I think that that would be much more realistic given that the Elizabeth Warren's of the world and her friends in the Oval Office have no idea how badly the lack of Nat-Gas pipeline infrastructure is creating supply problems. Ms. Warren seems to believe that banning the export of LNG would solve the high prices. But what she fails to understand is that the gas transmission pipelines are already full. There's no where for additional Nat-Gas to go. - - - Currently, there's an NG pipeline out of Appalachia that is set-up to move Nat-Gas to the Northeast. It's 90% complete, but being bogged down by the Administration and their environmental policies. Ever ask yourself why the Northeast is still hooked on home heating oil to stay warm? It's because of a lack of transmission infrastructure.
None of this should be all that surprising or a secret. It's basic Econ. 101a.
But to claim that the FED is "engineering" a Recession to put the GOP back in power in the upcoming mid-term Elections is at the very least, disingenuous, and at most, farcical.
I'm not ignoring the inflation (that is, the INFLATION) that's crushing the working class. But I think that we have to break the inflation down into components, and figure out how much of that inflation can effectively be addressed by the Fed, and the few tools that the Fed has at its disposal.
Today's inflation has several main components:
Supply shortages (the "too few goods" part) + Covid-related disruptions (China's Covid-Zero shutdown) + "Labor shortages" at ports + War-related disruptions, sanctions (Ukraine/Russia) + Continuation of Saudi crude production slowdown from Covid/2020 demand collapse;
Past Fed stimulus / Covid relief for working class - increasing money supply (the "too much money" part)
Pent-up demand from 2020 / Covid shutdowns / savings from not spending during shutdown, WFH
Increased Labor costs / higher wages & salaries
Price gouging by monopolies with pricing power / insufficient competition + Gasoline + Food
Fortunately, in an article that I've linked to previously, Matt Stoller did the rough calculation of how much of our inflation is due to an "excess of government stimulus," and how much is due to corporate opportunism & price gouging.
So here's the problem: IF about 60% of our inflation is due to corporate price gouging, why would we risk crashing the economy by raising interest rates so aggressively?
Why wouldn't we simply pass a Windfall Profits Tax in the short term, until updated anti-trust enforcement can help to create more competition in the marketplace. That would reduce the incentive for corporations with pricing power to jack up prices beyond what they need to recover their increased costs.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
From what I can gather, you're aligned with the Larry Summers philosophy, which Stoller debunks pretty convincingly in the article above.
If the Fed's raising of interest rates won't stop the biggest component of inflation -- corporate price gouging -- then why do it? Why risk crashing the economy??
That's why I engaged in the speculation that I did. I also couldn't help but notice the wailing & gnashing of teeth regarding inflation in the nation's financial press, and various news & messaging outlets. That's what got me suspicious.
It's still astonishing to me that economists and economic pundits would see increased demand & purchasing power from the working class as a bad thing! Capital sees workers as an expense to be minimized, so Capital's leverage over Labor increases as the working class gets poorer.
Capital doesn't see the working class as customers -- but they most certainly are. Given a choice between having poor customers, or having customers with disposable income, wouldn't any business prefer to have the wealthier customers?? Wealthier customers are wealthier workers.
This is why Neoliberal economies are unsustainable. Corporations have been extracting wealth from the working class for over 40 years, to the point where most people, in the U.S. and in the world, can't afford the goods & services they produce.
Now that Labor has shown some signs of organizing and seizing economic and (potentially) political power, it appears that Capital is looking to cut off the flow of $$$ to the working class, acknowledging that the greater the oversupply of Labor, the more competition there is among workers, and the harder it is to organize a union.
So no, I'm not ignoring INFLATION. I just don't think it's as simple as you & Larry Summers are making it out to be.
Powell's Fed is not only raising interest rates; they're (supposedly) ending QE AND starting QT (Quantitative Tightening), selling assets from their balance sheet.
This is purportedly in an effort to rein in inflation, but much of the CPI increase is due to monopolies, with pricing power, raising prices, recording record earnings, and bragging about it to shareholders. The prime example is gasoline; retail prices are set by oil companies, who have pricing power.
This is going to be painful for the majority of working Americans.
I suspect that it's ultimately a political move by Capital to
ensure a sweeping victory for the GOP in the 2022 elections,
put Republicans in the majority of House & Senate,
cause a recession, which would
reverse the trend of rising wages & salaries,
force people back to work for low wages, in unsafe workplaces, without sick leave;
pass legislation to eliminate collective bargaining for public sector employees,
pass legislation to restrict the activities of union organizers, and
make the nationwide movement toward union organizing much more difficult.
For some reason, your "Labor vs Capital" narrative conveniently ignores the fact that INFLATION is running rampant throughout our Nation and is the #1 concern when lower and middle class voters and working class (such as Hispanics) are surveyed about what they are most worried about.
To claim that the FED is "engineering" a recession to ensure a sweeping victory for the GOP in the 2022elections totally ignores the fact that double digit price increases in food, fuel, and 20 - 30% increases in rents is crushing the working class. Never mind that the narrative that the FED is deliberately "engineering" a Recession to influence an election borders on conspiracy theory.
For some reason, the "Labor vs Capital" narrative that you repeatedly promote here in the OT Forum conveniently ignores INFLATION as a legitimate factor that could push Independents (and even Democrats) towards voting for the GOP in mid-terms. - - - Nope, that's not a possibility at all.
Never mind that the current trend in rising salaries and wages ( +5.5% over the last 12 months ) that you have highlighted is getting thoroughly crushed by INFLATION.
Moreover, nowhere in your narrative is there any mention of what should be done about INFLATION by the FED. The fact that your narrative omits this appears to imply that it isnt really a factor and that we should just maintain the status-quo so as to not disrupt wage gains by Labor or the current 3.6% unemployment rate.
The FED has obviously been late to the game when it comes to reigning in the +42% increase in M2 money supply that it created during Covid, along with the $2.2 Trillion Dollar CARES ACT that Congress passed and Trump signed into law. They are sitting on an unheard of $9 Trillion dollar balance sheet. Are they supposed to just sit back and do nothing about price pressures? Of course not. It's specifically stated in their dual-mandate.
And for what it's worth, gasoline is a derivative of crude oil, which is a GLOBAL commodity that is priced in USD by an 800 lb. Gorilla by the name of OPEC+ which now has 23 members and has included the Russians since 2016. - - - It would be terribly naive to blame oil companies for high gasoline prices, when OPEC+ controls 40% of GLOBAL SUPPLY and has clearly not wanted to ramp up production. Our good "friends" the Saudis (alone) have repeatedly thumbed their nose at us and refused to tap into the additional 2.5 - 3.0 million barrels per day of spare capacity that they command.
Now, if you want to blame the current Administration for high natural gas prices I think that that would be much more realistic given that the Elizabeth Warren's of the world and her friends in the Oval Office have no idea how badly the lack of Nat-Gas pipeline infrastructure is creating supply problems. Ms. Warren seems to believe that banning the export of LNG would solve the high prices. But what she fails to understand is that the gas transmission pipelines are already full. There's no where for additional Nat-Gas to go. - - - Currently, there's an NG pipeline out of Appalachia that is set-up to move Nat-Gas to the Northeast. It's 90% complete, but being bogged down by the Administration and their environmental policies. Ever ask yourself why the Northeast is still hooked on home heating oil to stay warm? It's because of a lack of transmission infrastructure.
None of this should be all that surprising or a secret. It's basic Econ. 101a.
But to claim that the FED is "engineering" a Recession to put the GOP back in power in the upcoming mid-term Elections is at the very least, disingenuous, and at most, farcical.
I'm not ignoring the inflation (that is, the INFLATION) that's crushing the working class. But I think that we have to break the inflation down into components, and figure out how much of that inflation can effectively be addressed by the Fed, and the few tools that the Fed has at its disposal.
Today's inflation has several main components:
Supply shortages (the "too few goods" part) + Covid-related disruptions (China's Covid-Zero shutdown) + "Labor shortages" at ports + War-related disruptions, sanctions (Ukraine/Russia) + Continuation of Saudi crude production slowdown from Covid/2020 demand collapse;
Past Fed stimulus / Covid relief for working class - increasing money supply (the "too much money" part)
Pent-up demand from 2020 / Covid shutdowns / savings from not spending during shutdown, WFH
Increased Labor costs / higher wages & salaries
Price gouging by monopolies with pricing power / insufficient competition + Gasoline + Food
Fortunately, in an article that I've linked to previously, Matt Stoller did the rough calculation of how much of our inflation is due to an "excess of government stimulus," and how much is due to corporate opportunism & price gouging.
So here's the problem: IF about 60% of our inflation is due to corporate price gouging, why would we risk crashing the economy by raising interest rates so aggressively?
Why wouldn't we simply pass a Windfall Profits Tax in the short term, until updated anti-trust enforcement can help to create more competition in the marketplace. That would reduce the incentive for corporations with pricing power to jack up prices beyond what they need to recover their increased costs.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
From what I can gather, you're aligned with the Larry Summers philosophy, which Stoller debunks pretty convincingly in the article above.
If the Fed's raising of interest rates won't stop the biggest component of inflation -- corporate price gouging -- then why do it? Why risk crashing the economy??
That's why I engaged in the speculation that I did. I also couldn't help but notice the wailing & gnashing of teeth regarding inflation in the nation's financial press, and various news & messaging outlets. That's what got me suspicious.
It's still astonishing to me that economists and economic pundits would see increased demand & purchasing power from the working class as a bad thing! Capital sees workers as an expense to be minimized, so Capital's leverage over Labor increases as the working class gets poorer.
Capital doesn't see the working class as customers -- but they most certainly are. Given a choice between having poor customers, or having customers with disposable income, wouldn't any business prefer to have the wealthier customers?? Wealthier customers are wealthier workers.
This is why Neoliberal economies are unsustainable. Corporations have been extracting wealth from the working class for over 40 years, to the point where most people, in the U.S. and in the world, can't afford the goods & services they produce.
Now that Labor has shown some signs of organizing and seizing economic and (potentially) political power, it appears that Capital is looking to cut off the flow of $$$ to the working class, acknowledging that the greater the oversupply of Labor, the more competition there is among workers, and the harder it is to organize a union.
So no, I'm not ignoring INFLATION. I just don't think it's as simple as you & Larry Summers are making it out to be.
Thank you for sharing the Stoller article. Very informative.
Also, conservatives everywhere thank you for blaming liberals for failed conservative policies. For 99% of people neoliberal just means liberal. You are doing a good job of helping the conservative cause.
I just remember being astonished that a bunch of bankers could commit fraud on a massive scale, crash the entire financial system, and then be rewarded with a bailout and a steady stream of $$$ from U.S. taxpayers.
A.) CDS was never traded on a securities exchange or cleared subject to a regulatory agency.
B.) AIG, the main player in CDS was not regulated by a federal insurance regulator. There was none. Only state insurance regulators.
C.) The money from TARP was paid back.
D.) We are fortunate to have had Ben Bernanke at the helm of the FED. He didnt freeze. He jumped into action and guaranteed all counter-parties of AIG.
E.) Had Congress had their way, they would have conducted months and months of meetings and inquiries, putting AIG into receivership. Meanwhile, our country (and world economies) would have suffered a Great Depression the likes that no one had ever seen.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
Hey Wags, mostly by luck I'm sitting on a lot of cash. Let me know when I can start trickling back into stocks (I'm only half kidding). I will say though I'm only going to dribble into an S&P 500 ETF going forward. I suck at stock picking, I don't understand bonds, and the Paul Merriman global diversified fund portfolio didn't do much for me over 14 years. Don't let me down.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
Hey Wags, mostly by luck I'm sitting on a lot of cash. Let me know when I can start trickling back into stocks (I'm only half kidding). I will say though I'm only going to dribble into an S&P 500 ETF going forward. I suck at stock picking, I don't understand bonds, and the Paul Merriman global diversified fund portfolio didn't do much for me over 14 years. Don't let me down.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
Hey Wags, mostly by luck I'm sitting on a lot of cash. Let me know when I can start trickling back into stocks (I'm only half kidding). I will say though I'm only going to dribble into an S&P 500 ETF going forward. I suck at stock picking, I don't understand bonds, and the Paul Merriman global diversified fund portfolio didn't do much for me over 14 years. Don't let me down.
. Get a 10K I Bond while you wait.
OMG...I'm pulling a bunch of money out of retirement accounts and taxable accounts to buy my recently deceased MIL's house and the one place I'm not pulling money from is my IBonds. I'm not sure though that I have enough laying around to make the yearly 10k purchase. Thanks for the comment. though.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
It's not that I'm not aware of the housing sector. It's that the housing sector is increasingly influenced by international buyers & sellers and Private Equity firms who are able to pay cash for properties in the hopes of turning them into rental income, or just keeping them empty.
The decades-long transfer of the nation's wealth from Labor (our formerly huge Middle Class) to Capital is nearly complete. Over 50% of U.S. households are barely surviving, paycheck to paycheck. Even if they could afford monthly payments, even at higher interest rates, they don't have the $$$ for a down payment. So higher interest rates will keep working class individuals & families out of the market for single-family homes, opening the door for foreign buyers and private equity firms to purchase properties on a large scale, and charge exorbitant rents to the working class.
With higher interest rates, those who have the cash to buy assets will be unaffected. Those who need to borrow, especially to finance depreciating assets like housing, will get creamed.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
It's not that I'm not aware of the housing sector. It's that the housing sector is increasingly influenced by international buyers & sellers and Private Equity firms who are able to pay cash for properties in the hopes of turning them into rental income, or just keeping them empty.
The decades-long transfer of the nation's wealth from Labor (our formerly huge Middle Class) to Capital is nearly complete. Over 50% of U.S. households are barely surviving, paycheck to paycheck. Even if they could afford monthly payments, even at higher interest rates, they don't have the $$$ for a down payment. So higher interest rates will keep working class individuals & families out of the market for single-family homes, opening the door for foreign buyers and private equity firms to purchase properties on a large scale, and charge exorbitant rents to the working class.
With higher interest rates, those who have the cash to buy assets will be unaffected. Those who need to borrow, especially to finance depreciating assets like housing, will get creamed.
It's difficult to respond to you because after I make a fundamental economic point, you change the subject and deflect towards something that fits into your nice and tidy "Labor vs Capital" narrative.
Claiming that the housing sector is "increasingly influenced by international buyers and sellers and Private Equity firms" has very little to do with my point about how the Fed will achieve lower inflation since 40% of the U.S. economy is the housing market. - - - Moreover, its as specious a claim as a poster on this thread who has suggested (in a similar manner) that the "wealthy" Millionaires in California are the one's that have been overheating the housing market with their wealth. Never mind that there are only 72,000 millionaires in California given nearly 40 million residents. Never mind that there is clearly a lack of housing supply.
I've been genuinely trying to foster a discussion based on factual economic data, but more often than not your'e unable to "see" it given that your entire outlook revolves around your "Labor vs Capital" narrative. This isnt the first or second time that I have experienced this with you.
I should have known better when you initiated this discussion with your claim that the FED was "engineering" a Recession so as to make sure that the GOP would take power in the upcoming midterms.
I think it would be a further waste of my time to continue in this discussion. Good luck to you.
IF Powell's interest rate increases are intended to reduce inflation, they're doomed to fail, because they won't affect enough of the inflation components.
I believe that you severely underestimate the power that the FED commands and the impact of the cost of money on our economy.
You also dont seem to be aware of the fact that the housing sector makes up 40% of our nation's economy. Drive mortgage rates high enough and the FED will achieve the much lower rates of inflation that it seeks.
It's not that I'm not aware of the housing sector. It's that the housing sector is increasingly influenced by international buyers & sellers and Private Equity firms who are able to pay cash for properties in the hopes of turning them into rental income, or just keeping them empty.
The decades-long transfer of the nation's wealth from Labor (our formerly huge Middle Class) to Capital is nearly complete. Over 50% of U.S. households are barely surviving, paycheck to paycheck. Even if they could afford monthly payments, even at higher interest rates, they don't have the $$$ for a down payment. So higher interest rates will keep working class individuals & families out of the market for single-family homes, opening the door for foreign buyers and private equity firms to purchase properties on a large scale, and charge exorbitant rents to the working class.
With higher interest rates, those who have the cash to buy assets will be unaffected. Those who need to borrow, especially to finance depreciating assets like housing, will get creamed.
LMK when real estate in California depreciates so we can all buy some. I find your posts quite interesting but you say some real head scratchers which calls into question everything else you write.
Hey Wags, mostly by luck I'm sitting on a lot of cash. Let me know when I can start trickling back into stocks (I'm only half kidding). I will say though I'm only going to dribble into an S&P 500 ETF going forward. I suck at stock picking, I don't understand bonds, and the Paul Merriman global diversified fund portfolio didn't do much for me over 14 years. Don't let me down.
In my younger days, I was a "technician" and tried to time the market using a handful of technical indicators. As I got older (and away from my former floor trading career in NYC trading NYA stock-index futures) I began to understand that the only way towards real wealth is to put a lot of your "eggs" into a growth stock (basket) that was involved in an innovative and disruptive technology facing a massive addressable market. It took me until I was about 15 years removed from my frenetic floor trading career to figure this out and to become more of an "investor" than a "trader". So I started to immerse myself in the fundamentals of diagnostic and life science companies and their management teams. This is obviously not the path that the average investor or head of a household takes given the amount of risk that it entails. It can be extremely risky and volatile. I've been the poster child for that. But... no one says you have to go whole "hog" and put everything into a basket of growth names. You could still allocate most of your capital towards an index ETF like the SPY and add some alpha via a growth name or two.
Former Fed Vice Chairman Richard Clarida (now returned to academia at Columbia) was down on The Farm on Friday making a speech at the Hoover Institute. He said that the Fed will need to raise rates well into "restrictive territory" in order to slow economic growth and inflation.
He said that if inflation continues to be at 3% a year from now, "simple and compelling" arithmetic by a widely cited policy guide known as the "Taylor rule" means that rates will need to rise to 4% in order to get inflation back under control.
Clarida's remarks came at a conference convened by Stanford's John Taylor, the author of that rule.
Former Fed Vice Chairman Richard Clarida (now returned to academia at Columbia) was down on The Farm on Friday making a speech at the Hoover Institute. He said that the Fed will need to raise rates well into "restrictive territory" in order to slow economic growth and inflation.
He said that if inflation continues to be at 3% a year from now, "simple and compelling" arithmetic by a widely cited policy guide known as the "Taylor rule" means that rates will need to rise to 4% in order to get inflation back under control.
Clarida's remarks came at a conference convened by Stanford's John Taylor, the author of that rule.
The Taylor Rule was developed in the 1960s - 70s, with a completely different economy.
This was pre-Globalization, so there was no such thing as a "supply chain disruption." Products sold in the USA were Made in the USA. We didn't have freighters stacked high with shipping containers full of consumer products, anchored just outside Long Beach, LA, Oakland, and Seattle, waiting to be off-loaded.
We also had infinitely more competition then, and very few national brands, because the Sherman Anti-Trust Act was enforced vigorously to keep markets competitive, even at the regional level. Nearly all markets were very competitive, so price-gouging wasn't a thing. If anyone had tried it, they would've lost business. No one had pricing power. (Except the Saudis, who had just sent their sons to Business School, where they learned about Inelastic Demand.)
All that this Taylor-rule-based exercise with interest rates will accomplish will be to burst the credit bubble, and these guys have to know that. Raising interest rates will have no effect on supply chain disruptions, and no effect on gasoline prices.
To be fair, interest rates have been far too low for far too long, so over-leveraging and speculative excess have been far too common.
These guys have to know that their abrupt raising of interest rates, after over a decade of hideously low rates, is going to break the economy. How are "zombie companies" going to make their debt payments? From operations? In a recession??
I'm not saying that inflation -- sorry -- INFLATION -- isn't a huge problem. It IS a huge problem. It's horrible, and it's hurting people and will ultimately kill people. But raising interest rates is only going to affect a small percentage of it. The majority of the inflation, which is due to continuing supply chain disruptions and price gouging by monopolies, won't be affected at all.
If anyone really wanted to Whip Inflation Now (that's for us old guys!), they'd
implement a Windfall Profits Tax to heavily tax earnings from price gouging;
do fewer & more modest interest rate increases;
release emergency funds to provide bonus pay to clear jams at ports.
This looks like a political ploy to blame Biden & the Dems for the inflation. Case in point: Here's a sample of the political crap that I have to scroll through every day:
Mike Rowe: The reality is starting to sink in
Rowe & the interviewer are simply fanning the flames of outrage, without directly blaming the inflation on Biden & the Dems. The video inside shows a few guys roping cattle -- NOT techie programmers.
Unfortunately, there's no mention of two key facts:
Gasoline & diesel prices are set by oil companies & refiners, not by the President nor any political party;
Oil companies are crowing to their shareholders about how they recorded record profits by raising prices!
The people who should be getting the blame for this sad state of affairs -- the oil companies -- are being spared. With the amounts of $$ that oil companies pay to Fox, it's not likely that anyone will inject any truth into this narrative.
The question remains -- why crash the economy on purpose?
I'll stick with my original speculation, and I'll add another item:
To increase outrage, and to blame the crash on Biden & the Dems for political purposes;
To "not let a perfectly good disaster go to waste." Look for Congress to start passing out more $trillions in bailout checks to corporations.
IF Congress starts handing out bailout checks to corporations, like they did in 2020, it'll be because U.S. consumers no longer have enough $$ to keep U.S. corporations afloat through operations.
Former Fed Vice Chairman Richard Clarida (now returned to academia at Columbia) was down on The Farm on Friday making a speech at the Hoover Institute. He said that the Fed will need to raise rates well into "restrictive territory" in order to slow economic growth and inflation.
He said that if inflation continues to be at 3% a year from now, "simple and compelling" arithmetic by a widely cited policy guide known as the "Taylor rule" means that rates will need to rise to 4% in order to get inflation back under control.
Clarida's remarks came at a conference convened by Stanford's John Taylor, the author of that rule.
The Taylor Rule was developed in the 1960s - 70s, with a completely different economy.
This was pre-Globalization, so there was no such thing as a "supply chain disruption." Products sold in the USA were Made in the USA. We didn't have freighters stacked high with shipping containers full of consumer products, anchored just outside Long Beach, LA, Oakland, and Seattle, waiting to be off-loaded.
We also had infinitely more competition then, and very few national brands, because the Sherman Anti-Trust Act was enforced vigorously to keep markets competitive, even at the regional level. Nearly all markets were very competitive, so price-gouging wasn't a thing. If anyone had tried it, they would've lost business. No one had pricing power. (Except the Saudis, who had just sent their sons to Business School, where they learned about Inelastic Demand.)
All that this Taylor-rule-based exercise with interest rates will accomplish will be to burst the credit bubble, and these guys have to know that. Raising interest rates will have no effect on supply chain disruptions, and no effect on gasoline prices.
To be fair, interest rates have been far too low for far too long, so over-leveraging and speculative excess have been far too common.
These guys have to know that their abrupt raising of interest rates, after over a decade of hideously low rates, is going to break the economy. How are "zombie companies" going to make their debt payments? From operations? In a recession??
I'm not saying that inflation -- sorry -- INFLATION -- isn't a huge problem. It IS a huge problem. It's horrible, and it's hurting people and will ultimately kill people. But raising interest rates is only going to affect a small percentage of it. The majority of the inflation, which is due to continuing supply chain disruptions and price gouging by monopolies, won't be affected at all.
If anyone really wanted to Whip Inflation Now (that's for us old guys!), they'd
implement a Windfall Profits Tax to heavily tax earnings from price gouging;
do fewer & more modest interest rate increases;
release emergency funds to provide bonus pay to clear jams at ports.
This looks like a political ploy to blame Biden & the Dems for the inflation. Case in point: Here's a sample of the political crap that I have to scroll through every day:
Mike Rowe: The reality is starting to sink in
Rowe & the interviewer are simply fanning the flames of outrage, without directly blaming the inflation on Biden & the Dems. The video inside shows a few guys roping cattle -- NOT techie programmers.
Unfortunately, there's no mention of two key facts:
Gasoline & diesel prices are set by oil companies & refiners, not by the President nor any political party;
Oil companies are crowing to their shareholders about how they recorded record profits by raising prices!
The people who should be getting the blame for this sad state of affairs -- the oil companies -- are being spared. With the amounts of $$ that oil companies pay to Fox, it's not likely that anyone will inject any truth into this narrative.
The question remains -- why crash the economy on purpose?
I'll stick with my original speculation, and I'll add another item:
To increase outrage, and to blame the crash on Biden & the Dems for political purposes;
To "not let a perfectly good disaster go to waste." Look for Congress to start passing out more $trillions in bailout checks to corporations.
IF Congress starts handing out bailout checks to corporations, like they did in 2020, it'll be because U.S. consumers no longer have enough $$ to keep U.S. corporations afloat through operations.
I remember reading about some failings with the Taylor rule in the aftermath of the Great Recession. I didn't post because I don't remember the specifics and didn't want to do the research, but yes, the Taylor Rule has it's problems (as do just about any finance / economic theory because it is a soft science).
Former Fed Vice Chairman Richard Clarida (now returned to academia at Columbia) was down on The Farm on Friday making a speech at the Hoover Institute. He said that the Fed will need to raise rates well into "restrictive territory" in order to slow economic growth and inflation.
He said that if inflation continues to be at 3% a year from now, "simple and compelling" arithmetic by a widely cited policy guide known as the "Taylor rule" means that rates will need to rise to 4% in order to get inflation back under control.
Clarida's remarks came at a conference convened by Stanford's John Taylor, the author of that rule.
The Taylor Rule was developed in the 1960s - 70s, with a completely different economy.
This was pre-Globalization, so there was no such thing as a "supply chain disruption." Products sold in the USA were Made in the USA. We didn't have freighters stacked high with shipping containers full of consumer products, anchored just outside Long Beach, LA, Oakland, and Seattle, waiting to be off-loaded.
We also had infinitely more competition then, and very few national brands, because the Sherman Anti-Trust Act was enforced vigorously to keep markets competitive, even at the regional level. Nearly all markets were very competitive, so price-gouging wasn't a thing. If anyone had tried it, they would've lost business. No one had pricing power. (Except the Saudis, who had just sent their sons to Business School, where they learned about Inelastic Demand.)
You're wrong. The Taylor Rule wasnt developed in the 1960's - 1970's. Try 1993.
I remember reading about some failings with the Taylor rule in the aftermath of the Great Recession. I didn't post because I don't remember the specifics and didn't want to do the research, but yes, the Taylor Rule has it's problems (as do just about any finance / economic theory because it is a soft science).
Former Fed Vice Chairman Richard Clarida (now returned to academia at Columbia) was down on The Farm on Friday making a speech at the Hoover Institute. He said that the Fed will need to raise rates well into "restrictive territory" in order to slow economic growth and inflation.
He said that if inflation continues to be at 3% a year from now, "simple and compelling" arithmetic by a widely cited policy guide known as the "Taylor rule" means that rates will need to rise to 4% in order to get inflation back under control.
Clarida's remarks came at a conference convened by Stanford's John Taylor, the author of that rule.
The Taylor Rule was developed in the 1960s - 70s, with a completely different economy.
This was pre-Globalization, so there was no such thing as a "supply chain disruption." Products sold in the USA were Made in the USA. We didn't have freighters stacked high with shipping containers full of consumer products, anchored just outside Long Beach, LA, Oakland, and Seattle, waiting to be off-loaded.
We also had infinitely more competition then, and very few national brands, because the Sherman Anti-Trust Act was enforced vigorously to keep markets competitive, even at the regional level. Nearly all markets were very competitive, so price-gouging wasn't a thing. If anyone had tried it, they would've lost business. No one had pricing power. (Except the Saudis, who had just sent their sons to Business School, where they learned about Inelastic Demand.)
You're wrong. The Taylor Rule wasnt developed in the 1960's - 1970's. Try 1993.
This is what I'm talking about with cbb. Says some interesting stuff but then you realize that his main point is based on a false factual underpinning.
Former Fed Vice Chairman Richard Clarida (now returned to academia at Columbia) was down on The Farm on Friday making a speech at the Hoover Institute. He said that the Fed will need to raise rates well into "restrictive territory" in order to slow economic growth and inflation.
He said that if inflation continues to be at 3% a year from now, "simple and compelling" arithmetic by a widely cited policy guide known as the "Taylor rule" means that rates will need to rise to 4% in order to get inflation back under control.
Clarida's remarks came at a conference convened by Stanford's John Taylor, the author of that rule.
The Taylor Rule was developed in the 1960s - 70s, with a completely different economy.
This was pre-Globalization, so there was no such thing as a "supply chain disruption." Products sold in the USA were Made in the USA. We didn't have freighters stacked high with shipping containers full of consumer products, anchored just outside Long Beach, LA, Oakland, and Seattle, waiting to be off-loaded.
We also had infinitely more competition then, and very few national brands, because the Sherman Anti-Trust Act was enforced vigorously to keep markets competitive, even at the regional level. Nearly all markets were very competitive, so price-gouging wasn't a thing. If anyone had tried it, they would've lost business. No one had pricing power. (Except the Saudis, who had just sent their sons to Business School, where they learned about Inelastic Demand.)
You're wrong. The Taylor Rule wasnt developed in the 1960's - 1970's. Try 1993.
This is what I'm talking about with cbb. Says some interesting stuff but then you realize that his main point is based on a false factual underpinning.
Yup.
I simply posted Richard Clarida's comments from an interview from last Friday regarding inflation and the Taylor Rule and for some strange reason, it serves as the catalyst for an "essay" that is based on a false factual underpinning. Strange indeed.
First close under 4000 in the S&P. The "crash" continues.
I suspect the downward trend will continue for a while even with sporadic rallies here and there. Nothing good right now on the macroeconomic front. Unemployment is still too low and supply too limited. With the sugar high of free money coming down and geopolitical conflict continue to make supply chain and inflation worse, we will be in a full blown stagflation. With too many people thinking that they are too smart to learn from history or that high inflation was transitory and you can continue to reduce unemployment to unhealthy levels (thinking it is to be cheered when it will lead to inflation that will hurt even worse), fluff the markets with excess liquidity (why not just continue to print money, they said), and not consider the supply side (whether parts, labor, etc.), the pain that this country unfortunately feel most of this year was inevitable. People may care deeply about social issues and geopolitical issues, but they will vote on how much poorer they feel now. Doesn't matter who or what was responsible. If you run on making the country better for the average person, and the average person is much worse off, they are not going to be in a mood for excuses.
I rotated to cyclicals, energy and value in 2021 but even those are now getting hurt. My advisor invested some of what I liquidated in 2021 to commodities, metals and REITs. But there is really nothing safe right now.
This is a bit like irresponsible spender who rang up their credit card bills and are now paying the price. With interest rate going up, our debt service will be just that much more expensive. The FED is a blunt instrument, inflation a tough nut to crack, and recession the only way to bring this under control.
Having said all that, I tend to invest a lot more when the market is hurting, especially when I start hearing from reports and research that one or two of the macroeconomic conditions are showing signs of improving. My closest friends and I are tracking that very closely. From my general experiences, including those here, people are more interested in politics or theory than actual facts and data, so won't share my insight real time as I have in the past. But generally, too many inexperience investors investing at the peak and not enough when it is down. While I expect the market to go down further, I expect to start investing heavily as soon as either Ukraine situation resolves, the China zero-COVID policy is amended, and inflation slows down (that will take awhile and will require a deep recession to avoid a double dip recession by easing too early) with unemployment rate is back up to a healthier level and demand meeting the supply level. Saving up a lot of dry powder from selling in early 2021.
First close under 4000 in the S&P. The "crash" continues.
From my general experiences, including those here, people are more interested in politics or theory than actual facts and data . . .
It's been my experience that when people on a forum spend all of their time obsessing over politics, racism, wealth inequity, or theory, they rarely have any skin in the game. I think that this thread fully reflects that, and why sharing any of your real-time insight into the financial markets would be a waste of time.
First close under 4000 in the S&P. The "crash" continues.
I suspect the downward trend will continue for a while even with sporadic rallies here and there. Nothing good right now on the macroeconomic front. Unemployment is still too low and supply too limited. With the sugar high of free money coming down and geopolitical conflict continue to make supply chain and inflation worse, we will be in a full blown stagflation. With too many people thinking that they are too smart to learn from history or that high inflation was transitory and you can continue to reduce unemployment to unhealthy levels (thinking it is to be cheered when it will lead to inflation that will hurt even worse), fluff the markets with excess liquidity (why not just continue to print money, they said), and not consider the supply side (whether parts, labor, etc.), the pain that this country unfortunately feel most of this year was inevitable. People may care deeply about social issues and geopolitical issues, but they will vote on how much poorer they feel now. Doesn't matter who or what was responsible. If you run on making the country better for the average person, and the average person is much worse off, they are not going to be in a mood for excuses.
I rotated to cyclicals, energy and value in 2021 but even those are now getting hurt. My advisor invested some of what I liquidated in 2021 to commodities, metals and REITs. But there is really nothing safe right now.
This is a bit like irresponsible spender who rang up their credit card bills and are now paying the price. With interest rate going up, our debt service will be just that much more expensive. The FED is a blunt instrument, inflation a tough nut to crack, and recession the only way to bring this under control.
Having said all that, I tend to invest a lot more when the market is hurting, especially when I start hearing from reports and research that one or two of the macroeconomic conditions are showing signs of improving. My closest friends and I are tracking that very closely. From my general experiences, including those here, people are more interested in politics or theory than actual facts and data, so won't share my insight real time as I have in the past. But generally, too many inexperience investors investing at the peak and not enough when it is down. While I expect the market to go down further, I expect to start investing heavily as soon as either Ukraine situation resolves, the China zero-COVID policy is amended, and inflation slows down (that will take awhile and will require a deep recession to avoid a double dip recession by easing too early) with unemployment rate is back up to a healthier level and demand meeting the supply level. Saving up a lot of dry powder from selling in early 2021.
I love everything about your post and would ordinarily be in complete agreement but the rally after March 2020 shook me a bit. Nothing really improved except the market, largely because the Fed came to the rescue. But it has shaken my faith in what sort of data you can use to predict when things might start to improve.
In other words, I wouldn't be surprised if the market rallies long before we hit what should be peak negative sentiment. I deployed a small amount today (my first purchase outside of 401(k) in a few years and expect to continue to drip some in as the market continues to move down. I won't be surprised by some mini rallies but do expect the market to be negative the rest of 2022.
First close under 4000 in the S&P. The "crash" continues.
I suspect the downward trend will continue for a while even with sporadic rallies here and there. Nothing good right now on the macroeconomic front. Unemployment is still too low and supply too limited. With the sugar high of free money coming down and geopolitical conflict continue to make supply chain and inflation worse, we will be in a full blown stagflation. With too many people thinking that they are too smart to learn from history or that high inflation was transitory and you can continue to reduce unemployment to unhealthy levels (thinking it is to be cheered when it will lead to inflation that will hurt even worse), fluff the markets with excess liquidity (why not just continue to print money, they said), and not consider the supply side (whether parts, labor, etc.), the pain that this country unfortunately feel most of this year was inevitable. People may care deeply about social issues and geopolitical issues, but they will vote on how much poorer they feel now. Doesn't matter who or what was responsible. If you run on making the country better for the average person, and the average person is much worse off, they are not going to be in a mood for excuses.
I rotated to cyclicals, energy and value in 2021 but even those are now getting hurt. My advisor invested some of what I liquidated in 2021 to commodities, metals and REITs. But there is really nothing safe right now.
This is a bit like irresponsible spender who rang up their credit card bills and are now paying the price. With interest rate going up, our debt service will be just that much more expensive. The FED is a blunt instrument, inflation a tough nut to crack, and recession the only way to bring this under control.
Having said all that, I tend to invest a lot more when the market is hurting, especially when I start hearing from reports and research that one or two of the macroeconomic conditions are showing signs of improving. My closest friends and I are tracking that very closely. From my general experiences, including those here, people are more interested in politics or theory than actual facts and data, so won't share my insight real time as I have in the past. But generally, too many inexperience investors investing at the peak and not enough when it is down. While I expect the market to go down further, I expect to start investing heavily as soon as either Ukraine situation resolves, the China zero-COVID policy is amended, and inflation slows down (that will take awhile and will require a deep recession to avoid a double dip recession by easing too early) with unemployment rate is back up to a healthier level and demand meeting the supply level. Saving up a lot of dry powder from selling in early 2021.
I love everything about your post and would ordinarily be in complete agreement but the rally after March 2020 shook me a bit. Nothing really improved except the market, largely because the Fed came to the rescue. But it has shaken my faith in what sort of data you can use to predict when things might start to improve.
In other words, I wouldn't be surprised if the market rallies long before we hit what should be peak negative sentiment. I deployed a small amount today (my first purchase outside of 401(k) in a few years and expect to continue to drip some in as the market continues to move down. I won't be surprised by some mini rallies but do expect the market to be negative the rest of 2022.
I think that makes sense and depends on what your long term view is. I am in retirement so my risk profile is a bit more conservative. And it is company specific. For example in tech, do I think in 10 or 20 years, I can imagine Shopify being a 400 billion market cap. Sure. Do I see Tesla being a 8 trillion company. Not really. So, I can understanding investing in Shopify now even with a potential bear market driving it down by another 20% or so. Tesla as a short term play maybe but I have a hard time seeing high growth over the long term. Same with Roku. How big do I think streaming and advertisement to get for a company too heavily invested in hardware? But if it is a company you really like, I think valuation now makes sense since there is no way to time the market and most gains are made during short periods of time. If you try to time it, you will most likely miss out. I just need some reason to be optimistic for the near future.
Today was clearly a buyer's strike. The ball got rolling last night in the futures market in response to the Nikkei getting hit.
What added to the negative momentum was the plunge in crude oil which pulled the leg's out from one of the sectors that people had been rotating into since the invasion of Ukriane and had propped up the S&P. The XLE was down 8% and the daily chart looks like it may have formed a double-top.
The FED is getting the negative wealth effect that they desire.
