Looks like the market will be testing that 3886 low from last Monday in short order. The Fed isnt going to relent until it sees substantial slowing in the labor market.
The only positive for me in the latest stock market mess is that I was able to close out most of the calls I have sold recently in the market runup for a bit of profit. It's not a lot but it's better than losing money.
I've only been selling options for a little over a year. My spreadsheet says I've netted about $100,000. So I'm not selling a bunch. Early on I let them go until expiration and thus have a lot of cash. This has probably turned out to be lucky as I now have a lot of money to sell S&P puts and slowly get back into the market. I now tend to roll the options out and down/up for a bit of premium if the price is too far away from the strike. I don't really know if selling these small amount of options is terribly profitable but it's interesting and gives me something to do in the mornings during retirement. Thanks for all the feedback.
I would be buying puts at this point -- not selling!
Just curious. When was the last time you executed an option trade?
Looks like the market will be testing that 3886 low from last Monday in short order. The Fed isnt going to relent until it sees substantial slowing in the labor market.
That's how it's looking, for sure.
So -- Like I was saying weeks ago -- this is about leverage, of employers over employees. It's about keeping wages & salaries down.
It's not about Inflation, because the Fed raising interest rates doesn't do anything to reduce the two Supply Side components of inflation. Higher Fed rates do nothing to increase Supplies, and they do nothing to reduce or discourage Price Gouging by monopolies. Remember -- monopolies love supply shortages. That's what they live for! Monopolies have zero incentive to remedy supply shortages. Why would they increase supplies when they've been waiting for these supply shortages for years?
In Capitalist economies, competition is the remedy for supply shortages, because in a competitive market, any competitor can gain market share by increasing production. But if there's no competition, the monopolist can just sit back, enjoy the shortage, rake in higher earnings, reduce production levels, and they might even be able to lay off a few hundred employees! It doesn't get any better than this! ;-)
Rather than pay Workers more to get shipments moving, it looks like the Biden admin is trying to convince the Workers to cave, while their employers haul in record profits.
Biden appears to be on the wrong side on this one. All the Capitalists will be encouraging Biden & the railroad to "be tough" with the rail workers, but if the workers are cornered & squeezed, this could turn into a nationwide General Strike in October, right before the election.
Strap in, brace for impact. This one could get ugly.
Unions and rail companies reached a tentative deal, brokered by Biden Labor Secretary Marty Walsh. Workers can now take off unpaid sick days without fear of repercussions. Union members will now vote on the agreement after a cooling off period.
In other news:
The Fed may be forced to raise by 100 basis points, according to Nisha Patel, director and portfolio manager of fixed income at Parametric Portfolio Associates LLC in New York.
"The idea that inflation had peaked has been dispelled and now the likelihood of that soft landing for the economy has only decreased," she said. "Expect long-bond yields likely to come down leading up to the September meeting as recessionary risk increases."
Others believe 100 basis points is still unlikely.
"The Fed will want to follow what the market expects and the market is really expecting a 75 basis points move - so that's what the Fed will do," said Tom Di Galoma, managing director at Seaport Global Holdings LLC in New York.
August's Inflation Numbers Could Not Have Been Any Worse.
Looking on a month-by-month basis, the very disturbing development was the rise in core inflation. Having dipped to 0.31% in July, it returned to 0.57% in August, a level that hadn't been seen for three decades until this latest inflation scare took hold. There is no way this can be attributed to lasting "base effects," the distortions to year-on-year numbers when an extreme month drops out of the calculation:
All of the gauges below hit new fresh highs of inflation:
The Cleveland Fed's "trimmed mean" inflation rate, which excludes the components that have moved the most in each direction and takes the average of the rest;
The Cleveland Fed's "median" inflation rate, which simply takes the median rate from all the components in the consumer price index;
The Atlanta Fed's "sticky" price inflation rate, which tracks goods and services whose prices cannot easily be changed;
The classic "core" measure that excludes food and energy from the headline CPI, to omit categories over which monetary policy has least control; and
The Services Excluding Energy Services indicator, which gauges inflation in the cost of services.
The expected decline in energy was counteracted by the rise in services inflation, which now accounts for a bigger share of overall inflation:
Spread on the 2's and 10's increases to the highest since 2000. 56 basis points!
My stock market story: for only the second time in hundreds of sold options I was assigned early this morning. A RBLX put that was way out of the money. I'm now the 'proud' owner of 100 RBLX shares that I 'purchased' at $85. I won't make any of you look up the actual stock price of $35.83.
Ouch is right. I sold 3 RBLX puts at the beginning of the year right at the top of the market. Live and learn.
Spread on the 2's and 10's increases to the highest since 2000. 56 basis points!
Yup, pretty high inversion right now. Makes sense when the Fed is committed to raising rates and there is a sense that long-term we will eventually be back to 0% or very low interest rates. 2-Year Treasuries at 4% nominal sounds pretty good compared to a CD.
Spread on the 2's and 10's increases to the highest since 2000. 56 basis points!
Yup, pretty high inversion right now. Makes sense when the Fed is committed to raising rates and there is a sense that long-term we will eventually be back to 0% or very low interest rates. 2-Year Treasuries at 4% nominal sounds pretty good compared to a CD.
As you well know, the inversion literally creates a self-fulfilling "recessionary" prophecy. Banks stop lending.
NOTE: The yield on the 10 year spiked to 3.70 today.
FYI: Goldman lifted their forecast for Fed Hikes on Powell's Hawkish Signal
Their economists are now expecting rate hikes of 75 basis points in November, 50 basis points in December and 25 basis points in February for a peak Fed Funds Rate of 4.5 - 4.75% compared to 4 - 4.25% before.
Meanwhile, Fed officials cut their growth projections and raised their unemployment outlook.
Unions and rail companies reached a tentative deal, brokered by Biden Labor Secretary Marty Walsh. Workers can now take off unpaid sick days without fear of repercussions. Union members will now vote on the agreement after a cooling off period.
This is not a "done deal" at all.
The Unions still need to actually read, review, discuss, and Vote on the government-imposed contract.
Workers do not get unlimited unpaid sick days off in the new contract. The new contract gives them ONE paid sick day PER YEAR, and 3 unpaid sick days PER YEAR. That's up from zero.
Unions and rail companies reached a tentative deal, brokered by Biden Labor Secretary Marty Walsh. Workers can now take off unpaid sick days without fear of repercussions. Union members will now vote on the agreement after a cooling off period.
This is not a "done deal" at all.
The Unions still need to actually read, review, discuss, and Vote on the government-imposed contract.
You're reading comprehension is terribly poor.
A.) I said that it was a "tentative" deal. B.) I acknowledged that it needed to be voted on. C.) I never said that it was a "done deal"
Anyone buying treasury bonds or ibonds? I used to buy ibonds when I was working because I had the money. $10,000 per year per person.
I have ibonds.
Yah, I have a bunch. I'm tempted to buy another $20,000 worth. But I'm wondering if the next few months is when I should be plowing back into equities. Buying low? I know, nobody knows. Just asking.
Anyone buying treasury bonds or ibonds? I used to buy ibonds when I was working because I had the money. $10,000 per year per person.
I have ibonds.
Yah, I have a bunch. I'm tempted to buy another $20,000 worth. But I'm wondering if the next few months is when I should be plowing back into equities. Buying low? I know, nobody knows. Just asking.
I thought u could only buy 10k per person. Is this per year?
Anyone buying treasury bonds or ibonds? I used to buy ibonds when I was working because I had the money. $10,000 per year per person.
I have ibonds.
Yah, I have a bunch. I'm tempted to buy another $20,000 worth. But I'm wondering if the next few months is when I should be plowing back into equities. Buying low? I know, nobody knows. Just asking.
I thought u could only buy 10k per person. Is this per year?
I thought I'd buy my wife some for an anniversary gift.
Goldman finally throws in the towel. Slashes S&P target from 4300 to 3600.
The higher interest-rate scenario in Goldman's valuation model supports a price-earnings multiple of 15 times, compared with 18 times previously, strategists including David J. Kostin wrote in a note on Thursday. "Our economists now forecast the FOMC will raise the policy rate by 75 basis points in November, 50 basis point in December, and 25 basis points in February for a peak funds rate of 4.5%-4.75%."
Goldman said the risks to its latest forecast are still skewed to the downside because of the rising odds of recession -- a scenario that would reduce corporate earnings, widen the yield gap and push the US equity benchmark to a trough of 3,150. Federal Reserve Chair Jerome Powell has signaled that he would risk a recession to fight inflation, spurring fears that central banks may derail global growth.
It's going to cause investors a lot of pain but will be better for the long term health of our economy. I don't know how high the interest rates need to go to kill inflation but it should be clear to everyone that Powell is going to take us there. My biggest concern at this point is that inflation is a lagging indicator (particularly on the housing side) but I also know that the Fed has a lot of data people and that they aren't taking highlight numbers at face value. I trust they will eventually figure out when to stop.
I'm resolutely a market timer and that hasn't been a great strategy for me historically. I have some other reasons to prefer remaining in cash (for flexibility) and will continue to do so until the market becomes so compelling I can't avoid it. We are nowhere close to that yet, but if it drops another ~20% (S&P at 3000) I would start to get more interested. S&P bottomed out at 2300 in March 2020 but I don't see us hitting those lows.
This last Fed Meeting by Powell showed that the FED was exponentially more "hawkish" than ever.
There were no "tea leaves" that could be read that offered easing up anytime soon. Fed Funds futures were already forecasting lower rates next year in Q1 and Powell threw a bunch of cold water on that market assessment.
What is troubling to me is the fact that the FED hasnt engineered a "soft" landing since 1994. Moreover, they've never attempted the simultaneous raising of rates and QT that they are conducting.
This increases the risk of them throwing the economy into a deeper economic contraction.
What is also at work here in the equity markets is the fact that the analyst community still hasnt even begun to slash earnings estimates. They are still super bullish. Perhaps today's throwing in the towel by Goldman is the first shot across the bow in that regard.
Theyre track record has been far off the mark.
For example, on September 30, 2021 the bottom-up price target for the S&P was 5,049 one year out. Nearly one year later, the S&P closing price was 3,757. The analysts overestimated by about 34% nearly one year ago.
The forward 12-month P/E ratio is 15.8 which is well below the 5 year average of 18.6 and the 10 year average of 17.0
Bottom-Up EPS for 2022: 224.57 Bottom-Up EPS for 2023: 242.31
But I really question if this year's EPS estimate can stay above 220 let alone next year's showing 8% YoY growth given that there is a good chance that interest rates will remain higher FOR LONGER.
October has historically shown itself to be a Bear Killer with major lows given strong seasonality in Nov. Dec. and Jan. But given one year T-Bills at 4% there is definitely now competition to equities. There is no longer any TINA.
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
Have my 25 year old granddaughters swimming in cash. Normally a horrible position to be for someone so young, but things are going on sale by the day. Just too soon.
So with cash, just like an emergency fund, it affords security in these harsh times, but more importantly is "dry powder" for better times.
But as you say the market timing youngers out there could be feeling a lotta pain.
You also speak of the hawkish behavior of the Fed. I don't disagree much with getting the job done right now and do not procrastinate, but have listened to the likes of Jeremy Siegel this AM who basically said one year ago the Fed "underestimated" inflation---remember "transitory" (ouch)---May be overreacting right now. Some seeing inflation already leveling (I didn't say downward)
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
Except for the impact the market has on the broader economy, young people disproportionately benefit from these sorts of corrections.
I am not saying that this chart is accurate (for one, it ignores retirement accounts and company equity that people might have) but I think it's directionally pretty helpful. Young people are mostly not able to sock away a lot in the market and don't mind when it goes down. They do mind when they get laid off because their company needs to cut costs to improve stock performance.
But as you say the market timing youngers out there could be feeling a lotta pain.
You also speak of the hawkish behavior of the Fed. I don't disagree much with getting the job done right now and do not procrastinate, but have listened to the likes of Jeremy Siegel this AM who basically said one year ago the Fed "underestimated" inflation---remember "transitory" (ouch)---May be overreacting right now. Some seeing inflation already leveling (I didn't say downward)
As Mark Fisher* points out, when someone like Jeremy Siegel comes on CNBC and starts ranting emotionally about how pathetically bad the FED has been, that tells you that we are getting close to a tradeable low. Real close.
Volume was running +40% higher today and 7 million S&P puts traded today. Sentiment is extremely negative.
That smells like some heavy duty liquidation to me.
* Mark Fisher was the biggest floor trader on the commodities exchange in #4 WTC.
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
Have my 25 year old granddaughters swimming in cash. Normally a horrible position to be for someone so young, but things are going on sale by the day. Just too soon.
So with cash, just like an emergency fund, it affords security in these harsh times, but more importantly is "dry powder" for better times.
But as you say the market timing youngers out there could be feeling a lotta pain.
You also speak of the hawkish behavior of the Fed. I don't disagree much with getting the job done right now and do not procrastinate, but have listened to the likes of Jeremy Siegel this AM who basically said one year ago the Fed "underestimated" inflation---remember "transitory" (ouch)---May be overreacting right now. Some seeing inflation already leveling (I didn't say downward)
This "hawkish" Fed policy is NOT designed to reduce inflation.
IF our CPI increases were due to "too much money" in consumer markets, then the current policy would be effective. But that's only a part of it.
The other more influential components of CPI increases are
ongoing supply shortages (many due to the reluctance of shipping, trucking, & rail employers to increase their workers' compensation);
monopolies with pricing power using the threat of inflation as cover to raise prices;
the point above is especially true for gasoline/energy prices, which increase prices throughout the economy;
increased demand for energy worldwide due to U.S. sanctions on Russia & Saudi production limits;
Again, Powell's interest rate increases are NOT designed to do anything about the largest components of inflation. In his own words, they're designed to "get the Labor market back into balance" with reduced supply levels.
Capital saw that there were 2 job openings for every unemployed worker, and decided that this was the greatest threat to the economy. So Powell, at the behest of Capital, is crashing the economy. The "benefits" of this policy, to Capital, are:
getting back to having a surplus of Labor, and employers having maximum leverage over Workers;
with a Surplus of Labor, desperate Workers will accept low pay & poor working conditions;
with a Surplus of Labor, anyone organizing for a Union will be fired (illegally);
with a Surplus of Labor, employers will be able to force more knowledge workers back into the office, instead of working remotely.
"That's not a bug; it's a feature."
This was all obvious months ago, when Powell embarked on this policy adventure. Here's a piece with Powell's testimony in front of Congress:
Powell's concern about Inflation is a smokescreen. The primary objective of his policy is to increase unemployment, keep wages & salaries low, and go back to a surplus of Labor, no matter how many peoples' lives are hurt or destroyed by it.
Workers are Customers. So lowering Wages & Salaries means lower revenue for all consumer-serving businesses.
That's just cruel -- not just on Powell, but for the leaders of both political parties to approve & encourage this.
And it seems like the timing of it is so the hardest impact is going to be felt in the month before the midterm elections.
This is why I've been buying TZA for months. It's a 3x reverse index fund that tracks the Russell 2000. As the "loose hands" shake out, the Russell 2000 should get hit harder than the S&P500 & DJIA.
cbb - this makes zero sense. Are you really claiming that the "elites" are using Powell to destroy the economy, including the large corporations they own and run, in order to make it easier for them to hire people? Talk about cutting off your nose to spite your face.
The dislocation that is about to come is not going to be great for most people. It's not going to be great for low income workers who lose their jobs and it's not going to be great for capital owners either. It's not going to be great for investors and it's not going to be great for borrowers or lenders. Asset prices will fall. Real estate "tycoons" will be wiped out because they are leveraged, and this will be no different than the last few delevering events.
You can argue that battling inflation is a poor short-term proposition for wealthless laborers, because they can obtain increased wages to offset inflation, but we need to be real here. We can't have high inflation for any extended period of time so we have to do something about it.
We're already seeing asset prices "moderate" which is what Powell set out to do.
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
Except for the impact the market has on the broader economy, young people disproportionately benefit from these sorts of corrections.
I am not saying that this chart is accurate (for one, it ignores retirement accounts and company equity that people might have) but I think it's directionally pretty helpful. Young people are mostly not able to sock away a lot in the market and don't mind when it goes down. They do mind when they get laid off because their company needs to cut costs to improve stock performance.
"Benefit??"
I suppose, if you look at young peoples' lower exposure to Capital losses a "benefit"(!!). Hard to call a 10% to 30% (or more) loss a "benefit", regardless of age.
Most retirement accounts don't make it easy to limit losses. There usually aren't any reverse or short funds, nor insured cash funds that would help people ride out the 'storm'. No reverse/bear funds, no precious metals. Just strap in & take the L.
Another [sarcasm]"benefit"[/sarcasm] for younger workers will be having to produce more at work, work longer hours, pay/benefit cuts, spending more time at the office (vs home/remote), more time commuting, and more pressure -- all to survive the next round of layoffs.
During this time, rents aren't likely to go down, food & gasoline will still be expensive...
Lots of young investors will be forced to cash out their shares.
If you check in with under-30 workers a month from now, I don't think that they'll be using the word "benefit," and I don't think they're going to be grateful for their "new normal."
This Fed policy is also going to crush a lot of small businesses, especially restaurants.
cbb - this makes zero sense. Are you really claiming that the "elites" are using Powell to destroy the economy, including the large corporations they own and run, in order to make it easier for them to hire people? Talk about cutting off your nose to spite your face.
That's exactly what I'm saying.
Only a few large corporations have the potential to be "destroyed." If they're well capitalized, and sitting on a lot of cash, the coming shakeout will be an immense buying opportunity.
When you look at it, in addition to "re-balancing" the Labor market (i.e., getting back to Capital's desired Labor surplus), another "benefit" is the opportunity to buy a huge number of shares from the U.S. working class & small business owners & retirement funds at a discount. It's a massive transfer of wealth from Workers to Capital (oligarchs, large corporations, and shareholders).
"Zombie companies" that can't roll over their debt will go down -- or get a U.S. Taxpayer bailout.
The key activity to look out for, as this plays out, is the amount of U.S. Taxpayer $$$ that gets paid out in the form of U.S. Gov't contracts, military aid, investment in corporations (like the CHIPS Bill), and straight "free money", like Jeff Bezos's $10 billion NASA contract/bailout.
Large corporations get their revenue from Worker/Customers. When that source of revenue dries up, where will they go? To the big, bad Federal Government, of course.
It seems that the Government isn't so bad -- as long as it's writing checks. Your Tax Dollars At Work!
There will also be a flurry of M&A activity, as larger corporations buy out competitors for pennies on the dollar.
It's just an event that has a beginning and an end. When it's over, a few people & corporations will have increased their power & leverage over the rest of us, and the vast majority of Americans will be much worse off.
We have a group of sociopaths in charge of economic policy, as we did in 2008. They have enough economic and political power to influence economic policy to their advantage. They're willing to take a short-term hit in order to advance their long-term financial position. And they don't care who gets crushed in the process.
I can imagine that this Bear Market must be hitting younger investors pretty hard. They really havent known anything but an accomodative FED and a Bull Market for the last 14 years.
Except for the impact the market has on the broader economy, young people disproportionately benefit from these sorts of corrections.
I am not saying that this chart is accurate (for one, it ignores retirement accounts and company equity that people might have) but I think it's directionally pretty helpful. Young people are mostly not able to sock away a lot in the market and don't mind when it goes down. They do mind when they get laid off because their company needs to cut costs to improve stock performance.
Somehow I doubt the typical American in his 60s has $200K+ socked away in non-retirement accounts.
The rest of those figures seem pretty specious as well.
The typical American lives paycheck to paycheck.
"The Federal Reserve reports that 36% of Americans don't have enough money on hand to cover a $400 emergency."
The figures you cite are for the Americans who have brokerage accounts, which is not most people. Only 15% of Americans directly hold stock (meaning outside of retirement accounts).
cbb - this makes zero sense. Are you really claiming that the "elites" are using Powell to destroy the economy, including the large corporations they own and run, in order to make it easier for them to hire people? Talk about cutting off your nose to spite your face.
That's exactly what I'm saying.
Only a few large corporations have the potential to be "destroyed." If they're well capitalized, and sitting on a lot of cash, the coming shakeout will be an immense buying opportunity.
When you look at it, in addition to "re-balancing" the Labor market (i.e., getting back to Capital's desired Labor surplus), another "benefit" is the opportunity to buy a huge number of shares from the U.S. working class & small business owners & retirement funds at a discount. It's a massive transfer of wealth from Workers to Capital (oligarchs, large corporations, and shareholders).
"Zombie companies" that can't roll over their debt will go down -- or get a U.S. Taxpayer bailout.
The key activity to look out for, as this plays out, is the amount of U.S. Taxpayer $$$ that gets paid out in the form of U.S. Gov't contracts, military aid, investment in corporations (like the CHIPS Bill), and straight "free money", like Jeff Bezos's $10 billion NASA contract/bailout.
Large corporations get their revenue from Worker/Customers. When that source of revenue dries up, where will they go? To the big, bad Federal Government, of course.
It seems that the Government isn't so bad -- as long as it's writing checks. Your Tax Dollars At Work!
There will also be a flurry of M&A activity, as larger corporations buy out competitors for pennies on the dollar.
It's just an event that has a beginning and an end. When it's over, a few people & corporations will have increased their power & leverage over the rest of us, and the vast majority of Americans will be much worse off.
We have a group of sociopaths in charge of economic policy, as we did in 2008. They have enough economic and political power to influence economic policy to their advantage. They're willing to take a short-term hit in order to advance their long-term financial position. And they don't care who gets crushed in the process.
Sorry, you only bolded the first part of my question and completely ignored the subordinate clause. You missed the part where I asked if you were really stating that Powell was cratering the economy just to make it easier to hire people. Obviously that is not the case and your long response makes it clear that you don't really believe it either.
The figures you cite are for the Americans who have brokerage accounts, which is not most people. Only 15% of Americans directly hold stock (meaning outside of retirement accounts).
Gallup finds that 58% of Americans report that they own stock. Down from 62% before the Great Recession of 2008.
