rb

I have a funny feeling that Berkshire has provided liquidity for Apple in the first quarter of 2019. :D

We already have a 2 person vehicle. It's called a Honda Civic working uber pool. In addition to that, it's not so clear that people will just jump into 2 person vehicles. That's why you have Uber XL. Engineers may be baffled but that's just the way people are. But I would posit that it's not uberization, or self driving cars, or 2 people vehicles that's behind the stock prices we see now. Auto parts manufacturers are also in the dirt. And self driving electric ubers would still need stamped parts etc. I think it's just one of those sectors that's down because of some cycle narrative. Also maybe fears about slow down in China. But we're not producing a crazy number of vehicles where it's obvious the numbers should crash. A small pullback... ok, maybe. But share prices are back to 2012-2013 levels.

My last post was a bit testy, but our esteemed colleague John, asked for some facts based ideas here. So here it is. The FED doesn't see its job as reacting to inflation in order to bring it down to it's target. It doesn't want it to go out of control in the first place. So they have an idea about capacity and try not to go over it. When it comes to that, at this level of unemployment unless they see a decline in core inflation or a serious jump in productivity the FED is looking for about 100k job creation per month. Above that they'll be in a tightening mood.

+1. That's what the people don't really understand. It's FMOC that sets policy. Each governor gets one vote. The Chairman is also a governor and gets one vote. Is there some hand wringing behind the scenes? Sure. But not that much, because the Chairman doesn't have the power to get a governor to do shit. As others said. Yellen was more dovish and a brilliant economist. Powell was always more hawkish than Yellen. They've put Powell in charge, so what did they really expect? Shouldn't this be what they wanted? I guess Yellen was no good because she was appointed by Obama, so she had to go. Maybe this post should belong in the politics section. Conservatives wanted to sting up Bernake. They were all bitching about loose money before. But now Trump complains about a rate hike and they're ready to wage jihad against the FED. Apparently, in their view, the right way to run monetary policy is to be tight when the economy is weak and be loose when the economy is doing well. This is why the FED was designed to be independent. Because if the US would run monetary policy the way they run fiscal policy we'd all be fucked.

Merry Christmas everyone! Let us all be joyful for the holidays and raise a glass with loved ones!

Yep! It's like the value investor's rally ;D

Anyone remember that Santa Claus rally we were supposed to have? Seems like the jolly fat guy just delivered a yuge lump of coal. Or is it lead? S&P is 6 points from bear market. Merry Christmas!

Yea the banks are fine. But Stephen Mnuchin may not be that bright. Which in itself is not very confidence inspiring either. I think I heard Jamie Dimon yell "WHAT THE ACTUAL FUCK!" when that tweet went out.

These people need to stop tweeting.

Facts: Average annual growth of GDP during recoveries before 1990: 4%+ 1991-2001: 3.5% 2001-2007: 2.7% 2009-now: 2.1% Before sliding into political nonsense, please remember that this downward trend has transcended the political dimension and similar associated trends are in plain sight for progressively weaker recoveries in employment, business capital investment, real productivity etc What great recessions happened in the 90s? Or 00-07? What are these statistics referring to? Rrecoveries from the ‘98 EM stuff, nasdaq bubble, 9/11...stuff like that? That’s not what we are talking about here. Are you honestly saying recoveries were easier from 1929 and 1973? And that things are just getting harder because we keep carrying more debt into these massive every 40 year type crashes? Bah Anyway back to the Fed narrative. Just to be clear my comments earlier have little to do with the recent stock market gyrations. That stuff happens from time to time. I just question the constant raising with nary a pause to see where is the actual neutral rate. Williams and Powell talk like they know where the neutral range is but obviously they don’t because no one does. And the credit markets have staked trillions and trillions of dollars between 2 and 30 years and these guys have been of unwavering view over many months that the neutral rate is below where we are. Even the worlds forex markets don’t believe the Fed otherwise the dollar would be significantly stronger than it is versus a bunch of 0% currencies. If the Fed happens to be right here it will be one of the greatest contrarian bets I’ve ever seen. Actually 2001 was very, very concerning to a whole bunch of economists. Pretty much all recessions since the big one in the 30s has been as a result of the Fed hitting the breaks to cool things down. But the demand was always there. So as soon as the Fed too its foot off the break things started to pick up again. 2001 in itself was a relatively mild recession. But the Fed didn't touch the breaks, it was weak demand. Then it had a jobless recovery. This was very concerning because this was the 1930s type of recession. A large part of the economics profession didn't even think this could happen (the supply side/real business cycle guys). Another large part of the economics profession (the salt water guys) thought that it could happen in theory buy in practice it won't happen in advanced economies, only in EM countries with crappy banks. A few guys back then (off the top of my head Krugman/Stiglitz/Bernake) got really scared about what happened in 2001. They thought it was a really bad sign about what may come. So yea 2001 was different. In a bad way.

Look.. zero hedge is in the house! No, there isn't a third mandate for the Fed. Algos and quants don't matter. You don't get a helping hand. What is with all this bullshit? You get guys who spend all their days pontificating about the free market but once they start booking some losses they start crying like little girls and begging for a quasi-governmental agency for help. Grow a set. Ok, rant over. Now over to serious analysis. I'm not picking on you but I'll use your post as a spring board. By reading these boards I think there is some serious misunderstanding about what is meant by inflation when the Fed and pundits are using it. They don't mean actual inflation, they mean inflationary pressures. The fed's job is to look and combat inflationary pressure in order to keep inflation at 2%. It is not to fight inflation - i.e. if inflation gets up to 3%, then try to bring it back down to 2%. So you don't have to actually see inflation tick up for the fed to act. What you actually saw from the fed this week is really, really standard central bank stuff. If you have a strong economy around full employment that's expanding at a faster pace than potential you tighten. Btw, I am in the camp that the fed shouldn't tighten. The reason for that, which is the right argument for tightening, is the headline numbers are painting a wrong narrative. If the economy is doing so great then the labour market is banjo tight. At this level we should see wage inflation, but we don't see that. So maybe the economy is not doing so great. One of the worst mistakes in the history of the fed was the recession of 1937. Maybe we should avoid that this time around. Of course this is also political bullshit. They want the cake and eat it too. A booming economy and low rates. It doesn't work that way. If you have a booming economy rates will go up. If you want lower rates, it's because your economy ain't that good. They also fired Janet Yellen who was a looser money type with Jay Powell who was a tighter money type which conservatives liked. So why are they bitching now? They got exactly what they asked for! Hey rb I’ll have to include you as another tone deaf person like Powell. Tell me which recession we went into because of high inflation other than volcker fighting high inflation back in 70s. The real threat is bubbles (financial stability) and everybody including powell admits this except you. Anyways you just reminded how this board is full of people who have very closed minds and false sense of overconfidence in their views so no need to waste time posting probably. Good luck to all Yep, I'm tone deaf, Powell is tone deaf, the fed is tone deaf. We are lucky that we have a virtuoso like you around to guide us. Here's the thing though. The Fed actually has a stated price stability mandate. It doesn't have all these other mandates that you and other people are talking about. Maybe you should use that great hearing to listen to the Fed.

Look.. zero hedge is in the house! No, there isn't a third mandate for the Fed. Algos and quants don't matter. You don't get a helping hand. What is with all this bullshit? You get guys who spend all their days pontificating about the free market but once they start booking some losses they start crying like little girls and begging for a quasi-governmental agency for help. Grow a set. Ok, rant over. Now over to serious analysis. I'm not picking on you but I'll use your post as a spring board. By reading these boards I think there is some serious misunderstanding about what is meant by inflation when the Fed and pundits are using it. They don't mean actual inflation, they mean inflationary pressures. The fed's job is to look and combat inflationary pressure in order to keep inflation at 2%. It is not to fight inflation - i.e. if inflation gets up to 3%, then try to bring it back down to 2%. So you don't have to actually see inflation tick up for the fed to act. What you actually saw from the fed this week is really, really standard central bank stuff. If you have a strong economy around full employment that's expanding at a faster pace than potential you tighten. Btw, I am in the camp that the fed shouldn't tighten. The reason for that, which is the right argument for tightening, is the headline numbers are painting a wrong narrative. If the economy is doing so great then the labour market is banjo tight. At this level we should see wage inflation, but we don't see that. So maybe the economy is not doing so great. One of the worst mistakes in the history of the fed was the recession of 1937. Maybe we should avoid that this time around. Of course this is also political bullshit. They want the cake and eat it too. A booming economy and low rates. It doesn't work that way. If you have a booming economy rates will go up. If you want lower rates, it's because your economy ain't that good. They also fired Janet Yellen who was a looser money type with Jay Powell who was a tighter money type which conservatives liked. So why are they bitching now? They got exactly what they asked for!

Man, that Princess Bride must have been one messed up movie.

Lol, sometimes you do it for fun, to see what comes out of it. Sometimes you wanna get a few of these mortal names right just to keep your skills sharp. But I agree that if quality is on sale you should focus on that.

Exactly. He's just saying to the Fed: don't break the economy like you did before. Personally, I went into this with plenty of cash, been buying, and will continue to buy, luckily I don't manage OPM (poor hedge fund managers, total bloodbath ...). Right. He's saying don't slow down the economy while I'm here. Let it break down bad for the next guy. I manage OPM. My clients are cool with everything that's going on. In fact I'm meeting one of my larger ones tomorrow. We're cooking dinner together. No anxiety about the meeting what so ever. I can't speak for how the hedgies are doing. They'll pretty full of crap. Maybe they're hiding under their desks pretending that the phone doesn't ring. You must have done a great job choosing your clients, good for you. Regarding dinner, you can never know, let him be the first one to take a bite, then wait 30 minutes to see what happens. Of course, if you watched Princess Bride... sometimes this does not work out so well. Early Merry Christmas and Happy Government Shutdown! I did. They're a great bunch. No worries about the dinner. I'm doing most of the cooking. Merry Christmas Meiroy!

Exactly. He's just saying to the Fed: don't break the economy like you did before. Personally, I went into this with plenty of cash, been buying, and will continue to buy, luckily I don't manage OPM (poor hedge fund managers, total bloodbath ...). Right. He's saying don't slow down the economy while I'm here. Let it break down bad for the next guy. I manage OPM. My clients are cool with everything that's going on. In fact I'm meeting one of my larger ones tomorrow. We're cooking dinner together. No anxiety about the meeting what so ever. I can't speak for how the hedgies are doing. They'll pretty full of crap. Maybe they're hiding under their desks pretending that the phone doesn't ring.

You don't necessarily need low interest rates to have yourself a housing bubble. In Canada we had a nice one in the late 80s and back then interest rates were above 10% and going up.

I wouldn't touch BBBY it's one of those things that looks like it could work out but they never actually do. I'll take a closer look at FLEX. It looks a bit like a dog's breakfast but it has a lot of cash and working capital so the valuation looks statistically quite cheap. May be worth throwing some money at it.

Wouldn'y they ask for higher tolls to compensate for those?

If the fed were keeping the rates on the floor as you say as in way below what they should be you should see an inflationary spiral. Is that what you're seeing?

Right. Because boom-bust and bank runs were so much fun.

. +1. Great point about volatility. It's funny to see these people wet their panties with the VIX at.... 28. Markets take a dip off of high valuations and the Fed is conspiring.... to do its job. Pfft. Let it burn.

yes it is. It's witching day. A quadruple witching day to be exact.

Aug 24, 2015 was a glorious day. I remember being in line at the Ministry of Transportation to renew my license plates and trading on my phone. But I was thinking the same. That it feels different this time around. Two reasons for that in my view. 1. Stocks were already very expensive. The recent drops haven't made them very cheap overall. 2. This feels like the "real one". I don't think this is just a dip. This is merciless selling and could go on for a while. It may be the time that the young 'uns learn what the stock market is all about.

Thank you.