changegonnacome

Sympathetic to this take if accurate (& without doing a deep dive). However first objection straight out the gate and shooting from the hip- is as follows - stripping out FOOD! costs and some element of HOUSING costs (as imperfect a measure as OER is)…to get an inflation graph to go down and to the right on twitter…..when a lot of non-FinTwit ‘normal’ people would tell you in fact they spend damn near ALL their income on FOOD and HOUSING!…….makes the above feel like an exercise in torturing the numbers to get them to confess to a world that doesn’t exist. But will admit - I’m not sure I’m entitled to an opinion having spent almost ZERO time reviewing the data today. Need to do a deeper dive.

It’s quite amazing - I guess old habits die hard….will go through data later but even a quick glance shows nothing to suggest that what the Fed is doing has started to ‘work’, put this on top of jobs data and it’s kinda scary how little financial conditions tightening have fed through into the real economy….oh and Uncle Joe just increased pay for people who agree to exit the workforce (i.e. retire)

I was out of the loop for the day just saw CPI print in the morning then was off grid. Horrible print. Can someone explain to me why the market rallied during day to end higher? I'm genuinely confused print seems to confirm higher for longer, persistent inflation etc etc.? What am I missing?

Social Security benefits to rise by 8.7 percent in 2023 https://www.washingtonpost.com/us-policy/2022/10/13/social-security-cola-inflation/ This is how you DONT fix inflation……

Right the P/E is low and then think about European stocks on purchasing power parity basis for a USD investor entering into the position unhedged........you've got two ways to win (potentially)........and obviously one big way to lose if the BIG ONE gets dropped in Europe. It should also be noted and its lost on some people as they think about 8% inflation prints in Europe and 8% inflation prints in the USA as everyone being in the same boat........they aren't............the US has monetary inflation mixed with some modest remaining supply chain/energy inflation but its predominately monetary domestic inflation bedeviling the USA .........Europe didn't print trillions and send it to people..... if the Ukraine/energy crisis were to be resolved it would see its inflation problem resolve rather quickly........what would remain would be the inflation that the USA is effectively exporting to Europe via the strong dollar........'our currency, your problem' as the fella once said. As I've said for months Europe remains an interesting risk/reward relative to the structural beta problem thats likely to remain in US markets for the next 6 - 12 months.

But what isnt ordinary is rates rising so quickly and inflation this high............and so given this how likely is the ensuing downturn, once completed, to be of the ordinary (~20% ) kind? ....I'd argue and I guess have argued already that this wont be an ordinary drawdown in the market.....it will be when its done an historically noteworthy one....one that jumps out on the 30 year chart.

Historical bargain....get in there, you brown bear

id argue the macro guys - in particular Bridgewater - Dalio/Prince - have a pretty good clue of what’s happening & likely to happen….you’ve got inflation…you’ve printed too much money…..now policymakers in the US aren’t dumb enough like the UK to add fuel on the fiscal or monetary side…..so a slowdown/recession is coming and it isn’t a choice anyone has I’m afraid some people are acting like it is…..you can do nothing and have a stagflationary grind lower where inflation itself without any intervention from Fed destroys incomes & spending over time and returns price stability. This is the miserable and uncontrolled and untargeted and longer timeline methodology to return price stability. It has outrageous unintended consequences for your society & political system and in aggregate creates way MORE misery and for a longer period of time. Not a good option. The second option is what the Fed is professing a plan to do…..a controlled & targeted return to price stability….where the REAL collateral damage (the unemployed, not asset prices) can be supported with EXISTING government programs and we get through this in 12-18 months. Asset prices will come back in a return to price stability...it's a temporary mark-to-market phenomenon. The third option is a somewhere in between the first two.......history says that this is the most likely path....the Fed will get scared and back off rates too early.....fiscal authorities might get voted in to print more money. I guess the fourth option is just pretend inflation doesn’t exist, that everybody is doing great because ONE data point - unemployment - remains low. As I’ve said many times here before, one should think about inflation as the phenomenon of EVERYBODY (or certainly a great % of the population) losing their jobs slowly and over time via diminished purchasing power...it's a recipe for misery & instability.

HSW

Well the FED has the power to effectively slow down the rest of the world too via dollar strength (its nice to be the reserve currency), which is deflationary over time and which is also the point and added bonus for Jay-P............so sending the rest of the world into a recession is kind of the point and hell its working.

Its about that ....but its about way more than that @Gregmal.... Inflation is a mental tax on an economy that impairs long term planning & business investment - it destroys long run economic prosperity for everybody Inflation has history of destabilizing societies/democracies....you look around recently?.....the USA is pretty polarized already politically......would you like to see Jan 6th v2.0? I could go on and on.....

Yes….and GoFundme page

Its not about him Greg of course, but you know that already - its about working poor people.........the bottom 1/3 of your brothers and sisters and fellow countrymen....who got 5% pay increases, in an 8% inflationary economy....who have modests incomes, barely getting by already and well a 3% destruction in their purchasing power for them is ghastly....so yeah....screw your dude aboves 401k....maybe he'll have to buy a smaller boat when he retires.....I'll say a prayer for him

I know a way affordability get solved......the old fashioned way. Now in an inflationary economy.......nominal prices dont have to fall......they can just stay still and fall in REAL terms.

Yep natural overseas buyers of MBS's etc. could turn easily turn into sellers but certainly stop buying new issuances, just as the Fed is also selling.......and then well you've got the banks who used to step into this stuff but not so much any more since Dodd-Frank.........guess we are going to see the unintended consequences of all the re-tooling of financial system that was done post-08......the problem with shadow banks versus real banks.....is the shadows ones go AWOL in a crisis

HSW

HSW

Mario Gabelli big fan of CNHI....and your 100% right EXOR nudges them to do the right thing for the business and the right financial engineering when it makes sense......the West is short people, the mechanization of agriculture you'd imagine is done but like lots of things where people think a trend is over....there's way more white space in precision agriculture for CNHI/DE to help farmers drive efficiency's

Never popular to take the other side of good guy/bad guy media narratives on the internet but I'll try my best. To be clear I dont think there are any good guys or bad guys in international relations..not us, not them. I think there are only shades of grey and maybe lesser versions of bad guys at the margins. Nation states are at the end of the day if you were to give them a clinical psychological diagnosis - narcissistic sociopaths. You said he's not really cornered.......but what if this war, as many have made the case for & I subscribe too, is an expression of Putin/Russia's sense that its very long term sovereignty & survival is at stake as NATO each year expands further East to his doorstep (for a 'defensive' organization, it sure starts to look offensive if you put on Russian/Putin military glasses) he is cornered and getting more cornered by the day. Very hard for people to think of 'their' side as an existential threat to another.......but regime/state existential thinking is rooted in paranoia, as it should be....we are talking about existence itself here which nation states are mainly concerned with perpetuating......when you see a scorpion in your bed, do you wait to think about its intentions?.....the only rational course of action is to assume it is an existential threat and jump out the window and destroy that scorpion if you can. Some people seem to think the use of nuclear weapons by him is impossible........I wish I had their confidence. This war is an expression of Russia's right to exist, its right to 'feel' safe & respected.....to take even the hint of existential threat thinking OFF the table.......put simply its right not to have a scorpion in its bed. There is no higher calling for a nation State with a nuclear arsenal. He was feeling cornered before Feb 2022, thats what precipitated the invasion. I can assure you he feels more cornered now & cornered nuclear rats are net-net & in aggregate not good for everybody. Sure he made it worse for himself but it doesn't change the math here. The answer is IMO to respect Russia's feelings of existential threat and back off. It is not the USSR but it is a great power by virtue of its nuclear arsenal & one can argue its energy reserves. Ukraine's sovereignty should of course be respected too but it should also get the memo that Ukraine's role is to be prosperous/pragmatic democracy that strives to have good relations with BOTH the East and the West. See you need to ask what started this whole Ukraine thing (and the Georgia invasion in 2008, just after the 2008 Bucharest NATO summit when Georgia/Ukraine were said to be on a pathway to joining NATO) in the first place......and it was Putin feeling CORNERED by the USA (some use the word NATO, I can assure Putin think of it as just the USA).........in the same way the USA might feel cornered by say China if President Xi supported/aided and abetted a coup/regime change in Mexico in 2014 and had subsequently placed his own son on the board of Mexico's largest gas company.....and calls had leaked of President Xi instructing the Mexican President to do X,Y,Z or else he wouldn't get financial/military aid. While China also was sending increasingly offensive weapons in the late 2010's/early 2020's to Mexico to support some violent skirmishes Mexico was having with the USA on its Southern border. The Monroe doctrine simply wouldn't allow what I laid out to occur.....Mexico would be invaded and become the official/unofficial 51st state. In existential threats there is no response too extreme, its god damn survival stuff.....its why people should alarmed about the path we are on.....a cornered rat with nuclear weapons & existential paranoia has the power to turn us all into cornered rats with thoughts of our own survival. I get tired of good guy and bad guy narratives.....there are rarely any truly good guys in international affairs....Hitler the notable exception but lets safe the Hitler comparisons for when they are warranted & lets hope they never are again.........radical pragmatism should be what we all encourage in our politicians.....if Fox news and CNN ran international affairs we'd already be on World War 50 by now.

International law.....when I see it written down it makes me laugh every-time....in the international system there is no law, the UN is nothing but a talking shop.......and the US has shown time and again a complete disregard for what one might call international law, cause in fact it just doesn't exist in any meaningful way......as Mearshimar says the international system is anarchic.........put simply in the international system when you call 911....nobody answers......the Ukraine situation is unique in that the US had become entrenched in first a kind of proxy 'mini-cold war' in Ukraine against Russia in 2010's (2014 Coup/regime change, Biden/Burizma, US presidents telling Ukraine president who to investigate) which meant when the tanks rolled in 2022 it did answer Ukraine's 911 call and rallied the West to help Ukraine fight Russia.......in other instances in places like Syria where the US had shown little strategic interest in 'containing' Russia the 911 calls went unanswered in the main including chemicals attacks etc.

Exactly........what does it look like to 'win' against Putin..........I mean the narrative in the press is to win, to beat Putin on his doorstep no less, humiliate him.........is it a good idea to corner a rat who has nuclear bombs? Guess we'll find out...........I mean what would it look like to win the battle in Ukraine, but loose the planet via nuclear conflict.......where are the god damn off ramps here people!!......ones that respect the reality that the country your trying to beat, holds the worlds destruction at its fingertips.......as folks cheer on Ukraine's advancement to Russian borders with NATO weapons in hand I'm not so sure we should be feeling so joyous. An existential threat to a nuclear superpower is the final chapter in the bad version all our life stories.

Only to the extent that raising the incremental borrow cost to the fiscal authorities can increase the potential level of fiscal responsibility….for example the infrastructure bill spending could/should be deferred till later…..every project should be progressed with haste to a shovel ready position but the real deployment of capital & labor should be deferred into an economy printing 5%+ unemployment, not 3.5%…..this is the way Keynesian economies should work….but the problem with Keynesiam isn’t Keynes it’s lizard brain politicians

For sure there is an institutional / bureaucratic self-preservation element to what the Fed is doing now.......luckily and in this unique instance it also happens to be the right thing do IMO.

yep and thats exactly what Im saying in the above post.......they arent now thinking this way, which is great news in getting back to 2, makes it much easier.......but if Fed were do nothing like many seem to be suggesting....& they took a transitory stance again and for a second time it turned out not to be the case.....well it would be disaster to 'fix' then as inflation psychology would take hold in the caveman brain