DiabloWags said:
dajo9 said:
Here is another insight completely ignored by the media. Every household mortgage in existence a year ago is now valued about ~6% lower. Debt payments are the same but the average household has seen rising nominal wages. That is good for the middle class and bad for banks. Guess what that means in terms of who gets their message out?
You forgot about the part where 50% of Americans have money directly invested in the stock market and their retirement accounts have lost Trillions since the beginning of the year.
And again, even though nominal wages and salaries were up 4.5% (the fastest increase since 1983) as of end of 2021, all sectors of the economy have seen below-trend real wage growth.
The outlook for real wage growth depends on several factors including: (i) the tightness of labor markets, which should lead to more upward pressure on nominal wages than on prices; (ii) whether employers adjust nominal wage growth up to reflect the higher inflation, something that was standard in contracts and bargaining in earlier periods of high inflation but has largely been absent for several decades; and (iii) the outlook for inflation, in particular whether it persists well above the historical expectation of 2 percent annual growth.
I know that the majority of your posts are politically motivated.
But the fact of the matter is that people vote with their pocket books.
Just ask a Republican by the name of George H.W. Bush.
In my humble opinion, I think you are absolutely right about this.
One thing I noticed is that those who have corporate / professional investing experience have learned to look around the corner and be informed from meaningful indicators and not make claims based on lagging data.
Lack of experience or actual insight is what made amateurs claim inflation was transitory when those who were seeing actual data were seeing supply chain constraints as early as beginning of 2021 and my friends were telling me that they had never seen demand outpace supply at such high rate with astronomical lead time in their extensive executive leadership experience. Political blindness or lack of practical experience is what causes some poorly informed people to think that solution to inflation is giving more money to people to continue to generate more demand. Demand is easy to scale up or down, but supply is tough to increase and housing inflation is very sticky.
People like you and me will come out of this just fine. I have excess cash like most do when there is this much uncertainty. As I noted in February 2021, I rotated out of high growth in early 2021 into cyclical like energy, and have advisors who guide me to invest in products that index S&P 500 while providing 20% downside protection that can now be rolled over again. People at our age generally have no mortgage or any other debt and are not subject to the same pain from increased rate. My portfolio has taken a hit but came out better than most because people like you and me have expensive advisors and have access to actual experts in our network.
However, most middle class and lower class do not have the same type of buffer. I think the average savings and net assets for most Americans is not in 8 or 9 figures but most likely below 6 figures. Not a lot of buffer with less than $100K or $50K in cash to handle inflation or the likely recession. Their meager retirement funds are likely even less sufficient with the market hit.
And there will be an increase in unemployment. Without it, inflation will not come under control. And just like I have been hearing since 2020 how constraint supply was, I am hearing that not only tech (which is already obvious) but industrial companies are reducing headcount or implementing hiring freeze. What those with experience know is that when there is uncertainty, the first action is restructuring or reducing headcount since outsourcing or hiring contractor provides more flexibility to scale down or up. Yes, there is still a lot of attrition and Gen Z still has not caught up to what will soon be reduced leverage. But change in leverage is coming.
By the way, I think George H.W. Bush and Bill Clinton were actually very responsible. They increased taxes and cut spending to bring the budget deficit under control. We no longer have responsible politicians on either side, and it's all about cutting taxes and spending more. With higher rates, strong dollar, and the corresponding hit on earnings and cost of FX translation for global companies, more pain will come. And all politicians and tribalist on both sides do is try to spin these things for political points. Shameful.
