changegonnacome

https://www.marketwatch.com/story/junk-food-is-as-addictive-as-alcohol-and-cigarettes-report-92aebe6e "Junk food is as addictive as alcohol and cigarettes - new report" In some respects it's a great triumph of food science to modify a product so much that it gets to be as addictive as alcohol & cigarettes.......and given the statistics on health outcomes.....the medical costs to society over time of being addicted to doritos is perhaps worse in aggregate than the smaller number of those being addicted to cigarettes.......cigarette use is falling and the users of cigarettes get 'taken out' early and often......Doritos "users" not so much......junk food addicts tend to set themselves up for a lifetime of myriad health problems - numerous and debilitating..........with trickle down & follow-on health issues that come out of insulin insensitivity & various metabolic syndromes. Dr.Peter Attia spoke recently around a number of drugs similar to the GLP-1 class that are currently in trial and that have been shown to be even better at preserving lean tissue inside a calories deficit than Ozempic. I'm curious if anyone here knows what drugs they might be and by what companies. The data I've seen on Ozempic does show significant reductions in weight - which for some is just a slam dunk outcome - but I've also seen how much of that weight is also coming from lean tissue. https://fortune.com/well/2023/09/27/weight-loss-drugs-ozempic-wegovy-risks-for-people-over-65/ This sub-group trial showing the participants losing nearly equal weight fat & muscle is not a great outcome period....but even more so in older adults where loss of lean tissue sets one up frailty, mobility and falls in older age.

Yep quite a consequential election cycle coming up for fwd SPY earnings. Very very hard to see the Trump era corporate tax cuts getting renewed/extended when you think about the budgetary arithmetic.

Good point - the US is engaged in effectively a very large debt funded economic stimulus program......a stimulus program inside an economy operating at already full capacity. Not very clever.....you usually save your high single digit % deficits for a rainy day like a recession or economic crisis. What's also true is that there is a very good correlation between government deficits and corporate profits/margins......which is to say corporates do significantly better when the government is running large deficits......and vice versa. Perhaps another thesis/explanation on the mystery of sustained profits margins through this cycle - which is to say that contracting household purchasing power via inflation has been supported or 'filled in' by expanding fiscal deficits.

So the S&P peaked intraday at 4,790 on Dec 30, 2021 in today's money inflation adjusted upwards from Dec 2021 to today......using the BLS inflation calcualtor https://data.bls.gov/cgi-bin/cpicalc.pl........that would require SPY to be at 5,228 such that one could say that they are flat, in real inflation adjusted terms, from the 2021 peak (exlc. dividends) SPY as you say closed at 4,224 In real terms SPY is down 19.2% from its ATH on Dec 30 2021 to today. As I've said before - there is a correction occuring in asset prices......perhaps not large enough in nominal terms to draw headlines......but enough in real terms to be meaningful.

Well 50yr and 100yr bonds sure maybe. The reality is being smart about it didn't require reinventing the wheel and creating new types of bonds......20/30yr bonds would have worked very well for extending the avg. maturity of the aggregate Federal debt pile. Christ even 10yr notes would have been good! Instead what we have is the below: https://research.stlouisfed.org/publications/economic-synopses/2023/06/02/assessing-the-costs-of-rolling-over-government-debt Like I said - if you were CFO of a corporate during ZIRP but especially during 2020/2021......and your companies debt stack looked like this i.e. most of the debt is gonna roll in the next three years......your CEO/board would fire you. It is criminal how much federal debt has to roll into 5% paper. The graph above should be sloping the other way given where we've come from. In some respects whats occuring at the long end of the curve is a response to the reality above....USA LLC. has a debt maturity profile that when rolled into higher rates at maturity will begin to consume larger and larger proportions of the govs net income (tax revenue).

Yep it's a standoff - super low inventory is allowing homes to transact at affordability levels that are nose bleed. Cant move, wont move versus have to/need to buy is levitating nominal house prices for now. Investors aren't stepping into this mess.....it's forced sellers, selling to somewhat forced buyers (or buyers with means who are betting on rate cuts soon or have no need for financing at all). Underneath the surface - in the markets i look at - inflation adjusted home prices are indeed falling vs. 2021 peak.....staying flat is the new price fall......and affordability can be restored slowly over time via a kind of monetary illusion....a few years of stagflation will for sure restore some affordability. What happens next is the great puzzle - pressure is building behind the supply dam for sure......folks have postponed retirement and downsizing sales.....each deferred sale....is a future supplier of inventory......but so too is demand....the rent vs. buy math in the markets I follow doesn't require 3% rates to make sense.........5% would do the trick....such is the short squeeze in the rental market. The high level math seems clear - housing is undersupplied.....a temporary dislocation in pricing if it occurs...will be just that

Probably the greatest missed opportunity in a generation.......one of the great sins of omission of our time - as measured by the dollar amount over a 30yr period......and for which no public servant at treasury will ever lose his or her job over!

Yep we're headed for stagflation in the current standoff......Joe Sixpack cant expand his purchasing power YoY right now....the median russell 2000 stock hasnt a chance to rally with that backdrop....and the Fed cant cut cause labor markets & by extension inflation haven't slackened sufficiently....Buffett the old dog can smell stagflation coming and is buying oil in the ground.

Yeah I think your right - the range of outcomes for upward movement in headline long term rates specifically are capped.....the fiscal debt situation & daily growing entitlement spending makes it so that rates moving much much higher from here is a math problem no politician can solve and no electorate will vote for. You wanna kill inflation & the economy - just do reverse helicopter money.....cut gov spending and raise taxes. Never gonna happen. The upward move on the long end of the curve recently is just that......it's effectively the bond market cutting government spending in real time. The budgetary math is starting to break. Nearly 5% across the curve bingo today: The treasury did a horrible job on duration during 2020/2021......while the rest of America was re-financing their mortgages into 30yr paper at 3%......the treasury did close to diddly squat......we should have got the guy who came up with the Austrian 100yr bond...thats my type of treasury secretary....selling that paper into the 2021 bond bull market. Genuis. Anyway seems to be that absent a recession that kills inflation and allows the Fed to ease........some version of yield curve control is the way out here......fiscal authorities get to extend and pretend.......the curve gets re-inverted....and continue to hope that that inversion drives nominal spending contraction in the household sector via the credit channel.

This just aint so - I wish it was. We've got a domestic services inflation problem.....this excludes housing/OER....that domestic inflation problem assures we aren't getting back anywhere near to 2%.....the US is "stuck" at 3%+ inflation.....and its got nothing to do with housing. It appears to me that we are AGAIN heading into year end wage comp discussions with almost ZERO weakness in the labor market.....which assures, most likely a re-acceleration or an underpinning of high core inflation in early 2024, as nominal wage increases turn into nominal spending increases that exceed the meager productivity growth of the US economy. This says nothing about the risks skewed to the upside to external supply shocks of energy etc. tumbling out of global macro (middle east etc.) Given the rate insensitivity of the consumer to monetary policy.........it appears to me that the bond market, acting rationally, and spotting this insensitivity is beginning to incorporate higher inflation expectations plus higher for longer Fed rates........in doing so....so called bond 'vigilantes' are going to do what Powell has failed to do to the lowly consumer.......they are going to force the fiscal authorities hands to shrink their nominal spending......debt servicing costs are going to start overwhelm federal and state budgets.....forcing spending cuts and/or tax increases on political leadership....this is going to be the transmission mechanism this time that effects the consumer in way that is meaningful enough. We saw post-GFC and the fight against deflation.....the weakness inherent in monetary policy to affect nominal spend in the real economy.......interest rates and even QE are weaker sauce than we realized....they effect very well financial instruments/asset prices.....but Wall St. is not the economy....what we discovered during COVID is the inherent power of fiscal stimulus over the monetary kind.....this is money that actually circulates in the real economy and flows into real goods and services...not the financial economy. Seems to me that this current 'landing' question gets resolved one of two ways.......the first is an outbreak of enforced or voluntary federal/state fiscal tightening in the face of rising debt servicing costs......or number two.......a fiscal financial crisis is engineered whereby the Fed is forced to buy treasury issuance directly.....i.e. fiscal debt get's monetized directly by the Fed..........it would be a crossing of the rubicon to a certain extent..........and the final FU to those holding US gov paper especially overseas given what this would do to the dollar......effectively the US authorities will play its trump card as the reserve currency....and it will rug pull the global monetary system. Interesting times. The game, so to speak continues into 2024 I think, the voluntary fiscal restraint is only going to occur post-Nov 2024......the car crash fiscal restraint is of course government shutdowns etc.

Tech gremlins it seems- https://www.reuters.com/world/uk/lse-says-investigating-incident-some-shares-not-trading-2023-10-19/

My sense now too - he is a war time leader for now....but once a moments breath can be had by the Israeli people i expect them to throw him out of power.....not only for the fact that Israeli intelligence seemed completely blind to this attack (which would be enough to warrant his resignation) but also because dividing a nation against itself when your surrounded by real enemies & threats is the lowest form & most cynical political calculation a nation's leader can engage in.

Fear no more - the windfall tax has already happened - and it's a nothing burger. Bank of Ireland will have PBT of about €2.15bn this year ((Mkt Cap €10bn)......the Irish Minister for Finance (who owns a majority stake in AIB and PTSB) decided to hit the THREE domestic banks with the dreaded windfall tax by increasing the bank levy (FDIC type insurance).....a grand total of an extra 120m between them all..........BOI on the hook for max €50m ....so now its 2023 profts will be €2.1bn! Everybody wins......Government can say they went after greedy banks.......electorate doesn't really understand quantum of windfall taxes realtive to bank earnings or uplift since rate rises....the irish exchequer doesn't need the money, they are drowning in money.....and theyre the largest shareholders in the bloody banks anyway (excluding BOI). Political theatre at its best https://byrnemccall.ie/2023/10/11/banking-levy-increased-in-budget-2024/#:~:text=Ireland will revise how it,Minister Michael McGrath said today.

Irish stock's trade at times with their UK counterparts...especially those with dual listings on the ISEQ & LSE....the divergence between the economies from a macro perspective is just night and day. Irish homebuilders for example are facing a completely different set of circumstances versus their UK peers.....yet Glenveagh Properties moves with Taylor Wimpy & Persimmon.

HSW

For sure what I meant more was that given the volatile nature of inflation that floats around the 1.5% to 2.75% range is fine.......whats not fine is where we are now potentially....which is inflationary volatility that is let's call it 'headline worthy 'and so feeds into inflation psychology and anchoring....this sticky supercore base we have now is dangerous jumping off point to easy vol trips to headline catching 4%+ inflation.......as you say inflation & price stability is where inflation is NOT part of business planning. We are not there yet.

Yeah OER nonsense etc makes headline not a great read.....psychologically including it actually doesn't help "fight" inflation.......people walk into wage neg with a CPI figure But again SuperCore....made in America inflation just wont go down......this is just not good IMO.....in and off itself you might be able to live with it where it is.....but as I've said before.....SuperCore where it is becomes the foundation on which trips BACK to 4 or even 5%+ on headline can be achieved You can't get inflation with a 2-handle with supercore where it is......and as I've been consistent on it becomes the basis for trips to 4 or 5%.......inflationn is not good.......what's worse is volatile inflation.

Yep one of the biggest mistakes treasury made during the crisis was that they didn’t extend maturities….they should have been issuing 30/50/100yr bonds like maniacs. instead a huge chunk of existing federal debt is going to roll over into higher rates to say nothing about all the incremental ‘new’ issuance…very poor treasury mgmt…and what happens when civil servants and committees run the show.

Well in an economy with genuine inflation - when somethings price isn't going anywhere for years....its actually going down in real terms...inflation compounds like anything else...rents become more affordable by staying flat while folks get 4% pay increases....before you know it rents in real terms are 8-12% below peak relative to incomes. Take house prices - OK no major house price falls except in frothy markets......but in reality relative to their 2021 peaks and in real terms lots of properties I was looking at have remained flat or slightly down vs. 2021 in nominal terms.......in practise given two years of solid inflation prints their price to me in real terms have actually fallen as they've failed to match inflation (assuming cash purchase, not mortgage obvs!) In some respects the question of affordability in US housing can be fixed with a little time and inflation.....that acts a little like a pull back in housing but has a minor wealth effect as everybody gets to hang on to their nominal ATH so they sleep well at night and still go to Ruth Chris's steakhouse on Friday nights.

Cost of living and end of stimmies/student loan seems to be tempting more labor off the sidelines - it’s an impressive number MoM nominal wage increases have moderated too….those numbers if they were stay down where they are would indeed be consistent with 2% inflation…. The only issue being what company have you ever worked that institutes a pay rise in August…..and given the level of worker comp friction/strikes…. it’s clear a wave of inflation catchup wage increases are coming…..likewise EoY performance & comp season is rolling around AGAIN with a super tight labor market backdrop. Pluses and minuses but I think we are headed for an inflation flare up in the next number of months….which is gonna cement the higher for longer thesis

Yep good assessment - hedge funds can successfully have large AUMs that underperform all the time vs. SPY or other benchmarks......the question is whether you are selling an investment product that is supposed to be correlated or uncorrelated.....absolute return or something else.....the simplistic view is always what one would have made if they put their whole portfolio with Bridgewater or <insert> fund manager.......but sophisticated institutional & international investment houses.....are attempting to put large clumps of capital into diversified and inversely correlated sub-managers to achieve some higher level portfolio diversification aim.....lots of bridgewaters solutions for these guys are some form of diversification AWAY from SPY. Macro hedge funds do this too.......short shops also....as an institution/family office you dont give 100% of your money to Jim Chanos and hope he outperforms the SPY....he wont....you give him 2% of your AUM....& when SPY is down 20%...he's up and your portfolio has a smoother ride.....he's selling something akin to insurance. The reality is someone like Bill Ackman/Pershing...is what people think of as 'normal' hedge fund......he's predominantly long, US large cap...and he says that by picking superiorly he'll out perform SPY......you go to Ackman to outperform SPY.......you go to Bridgewater et al for something else than simple outperformance....thats not the job to be done so to speak.

@james22 Let me separate the Monopoly 7 from the ARKK stuff.......Monopoly 7 is its own animal........its a hide out for fearful fund managers....but its also to be fair a place where AI & Metaverse dreams can play out (absent anti-trust)......these are at the end of the day finest companies ever to exist with leverage points into adjacent opportunities which are just immense if uncurtailed by competition authorities. The window dressing fund thing possibly has more influence than I think....but not really interested in single digit short term moves in stocks. Not my game.

No…..simply because the government as indebted as it’s become post-covid & running outrageous peace time deficits….can only continue to function in a world of inflation….deflation would blow the doors off the fiscal situation…and it won’t be allowed to happen….Dalio and his big debt cycle thesis is correct….we are two crisis deep (GFC & COVID)….each one saw significant levels of debt moved from corporate & household balance sheets to the sovereign….look at the annual deficit & then the debt pile in its totality….then realize that a deflationary bout if it occurred would spell tier 1 trouble for the fiscal authorities in the US and Europe….to the extent that a deflationary cycle happens by ‘accident’….well we figured out how to get inflation back from covid….and it turns out it’s very popular politically….you send people money in the mail and you don’t raise their taxes even though you should. Short version of where we are IMO….is that all risks are skewed to the unexpectedly high inflation side of things….geopolitically….and for the simple reason that it’s in the best interests of the politicians…..and simply you can argue that in some ways it’s in the best interest of us all….the ‘system’ had to get bailed out in 2008 & in 2020…there are no free lunches in life…...and inflating away the debt that we used to stabilize society then by inflating away a chunk of it now is the cowards way out. The alternative….tightening our belt…increasing taxes, reducing conspicuous consumption ….working harder and expanding productivity…is not what happens in wealthy developed societies. Betting on politicians to be cowardly & short term minded….is ordinarily a slam dunk….i think a short term deflationary surprise is possible….but for the reasons above I just don’t expect it to stick around for a hot second.

I expect the exact opposite….the ARKK stuff is in trouble again IMO….most likely catalyst is another hike & even more higher for longer talk but more importantly repricing of that reality