Have We Hit The Top?

[Spekulatius]

They should call the Sahm rule Sahm heuristic. I do think we are likely looking at very choppy markets near term with a likely downward bias. I think some of thrnAI spending reminds me of the 1997-2000 Telecom boom as well and it could end up in a bust.

 

I am fairly sure it will end up in bust, but I don’t know what year we are 1998, 1999 or 2000? Wide areas of the manufacturing world wide is already in a recession which includes auto, semiconductors, housing, chemical industry and others, The consumer is feeling pinched (investors in retail stocks know this)  so my guess is that we get to see the first consumer led recession since 2007

Edited August 3 by Spekulatius

[frommi]

With WB also selling lots of stock, i would argue the top is in or at least not far away. 1990, 2001/02 and 08 (where the sahm rule triggered) all ended with >20% drops in the market in a short timeframe, i doubt that we get away with anything less than that this time. Market is also very expensive and August/September are the worst months for  the S&P500 if you believe in seasonality.

[Spekulatius]

Not sure it belongs here, but there is a massive Yen USD carry trade unwinding:

 

Edited August 3 by Spekulatius

[UK]

19 minutes ago, Spekulatius said:

Not sure it belongs here, but there is a massive Yen USD carry trade unwinding:

 

 

I think it belongs here, perhaps together with M7/AI unwind and sudden fear of hardlanding, as the main drivers. I see VIX was already almost 30 on Friday...quite a day:)

[Paarslaars]

Yeah I'm guessing that tanked the Nikkei?

 

With regards to a recession, I hadn't heard of this sahm's rule before.

What I found interesting was that it does not discriminate between permanent job losers and temporary layoffs.

The current rise is entirely due to temporary unemployment, isn't this something that can be reversed rather quickly?

 

"Among the unemployed, the number of people on temporary layoff increased by 249,000 to 1.1 million in July. The number of permanent job losers changed little at 1.7 million. (See table A-11.)"

 

 

[changegonnacome]

On 7/27/2023 at 5:43 PM, changegonnacome said:

The nature of Fed induced disinflationary cycles…..is that they always end up behind the curve…..which is to say the Sahm rule comes into play…..once you push unemployment 0.5% above the previous 12m low….whether you like it or not…..or you cut or not…unemployment is gonna make another undesired incremental 1.5% move up.

 

Trust me on this one - the Fed cutting rates is on the balance of probabilities not going to be something to look forward too…..it would be sign that the macro is deteriorating in a way that is making the Fed uncomfortable and they are trying to rescue the situation.

 

A post of mine from a year ago before Sahm rule became fashionable two days ago!

 

Its most likely the Fed is now behind the curve.....but still entertaining the possibility they aren't.......as for sure this disinflationary cycle has been less about demand side getting completely crushed by Fed policy......and more about the labor supply side equation & imports surprising to the upside.

 

Two things that suggest "it's different this time" than the usual disinflationary/interest cutting cycles that have not ended well is this period of disinflationary pressure has been brought on by:

 

- huge wave, unprecedented uptick of inward migration post-COVID in the US - which provided a very large uplift in labor market supply....and a hugely disinflationary tailwind with it

 

& 

 

- USD getting to levels of strength not seen since the Plaza Accord in 80's.....the strong dollar deflated US import prices by a huge degree.....and was hugely disinflationary to the end US consumer

 

Let's see it's gonna be interesting.

 

[UK]

https://fortune.com/2024/08/03/stock-market-crash-bill-gross-dont-buy-the-dip-warren-buffett-berkshire-hathaway-sell-signal/

 

In a post on X early Friday, Gross said there are very few “bull stocks” and pointed to pipeline master limited partnerships, banks, and financials in general.
“Investors should stop talking about buying the dip and start asking about selling recoveries,” the cofounder of PIMCO added.

...

On Saturday, Berkshire Hathaway’s second-quarter earnings report revealed that Buffett’s conglomerate sold a net $75.5 billion worth of stock and nearly halved its stake in Apple. The transactions took place before the recent stock selloff, when the S&P 500 was regularly setting fresh record highs. “You could conclude this is another sell signal,” Jim Shanahan, an analyst at Edward Jones, told Bloomberg. “This was a far higher level of selling activity than we were expecting.” 

 

Anybody expects at least of a short interview by WB next week:)?

[Blake Hampton]

WSJ says Buffett has sold half his Apple position. Sign of a top?

[gfp]

12 minutes ago, Blake Hampton said:

WSJ says Buffett has sold half his Apple position. Sign of a top?

 

Don't think it is a sign of a top in Berkshire 

[Gregmal]

If 5 more underperforming talking heads come to the conclusion we are headed for a "hard landing" I am going to sell all my stocks. There is just no other logical choice. 

[mattee2264]

What does seem to be the case is that if things do get bad then markets are likely to overreact on the downside with the Fed probably less inclined to step in and rescue markets the way they did in previous panic sell-offs.

 

Fed is increasingly backward looking with its data-dependent approach and insistence they won't overreact to a single month's data (they failed to pre-empt inflation so it would be apt if they failed to pre-empt recession as well!) and with inflation above target still will need to see a meaningful deterioration in the labour market before cutting aggressively. Problem is that by then the economy is already in recession and in a vicious cycle (job cuts, reduce consumption, which reduces profits, which results in more job cuts etc) and while an interest rate cut might boost market confidence it won't reverse deteriorating fundamentals overnight. And when the market is used to disproportionately aggressive cutting cycles even a few 25-50 bps cuts won't be enough to satisfy it. 

 

As for AI it is almost 2 years since Chat-GPT got released and there's been a huge amount of capex spend and that is expected to lead to an acceleration of growth rates which is an incredibly difficult hurdle to overcome especially in a deteriorating economy. And any deceleration in capex spend is going to hit semis hard and they've become a huge part of the market. And with Mag7 approximately 1/3 of the S&P 500's market cap any selling pressure is going to hurt the rest of the market and the chances of a healthy rotation into small caps and other industry sectors is far less likely in a deteriorating economy where fear is on the rise and a flight to quality will mean defensives, bonds, gold etc which will have a net negative impact on the S&P 500 market price. 

 

 

 

 

 

 

[gfp]

11 minutes ago, mattee2264 said:

they failed to pre-empt inflation

 

What on earth in the Fed's toolkit would have made any difference at all in the type of inflation we experienced?

 

[Gregmal]

31 minutes ago, gfp said:

 

What on earth in the Fed's toolkit would have made any difference at all in the type of inflation we experienced?

 

Yea I don’t get it. Like 80% of the inflation we saw was directly caused by supply chain and issues related to the government deciding to shut down the country during COVID. Close businesses, ban people from leaving their homes, give out stimulus money to compensate….none of this was anything the Fed had any business getting involved in at all. The Fed at this point is just redistributing the assets some have nots acquired during the “pandemic”. 

[brobro777]

Holy Moly look at Nikkei go!

 

Things are getting interesting!

 

[charlieruane]

Fun stuff!

[Blake Hampton]

Buffetts about to start a recession by himself lol

[UK]

“Japanese stocks are being taken to the woodshed, absolute chaos there this morning and it’s setting off a renewed bid for global fixed income,” 

 

Chaos is a ladder:)

[Paarslaars]

Sure is chaotic out there all because of a simple rule of which the creator herself said it is likely not applicable here...

 

Now comes the hard part, holding off until the panic peaks, going all in and not looking at the market for a while.

Edited August 5 by Paarslaars

[UK]

36 minutes ago, Paarslaars said:

Sure is chaotic out there all because of a simple rule of which the creator herself said it is likely not applicable here...

 

Now comes the hard part, holding off until the panic peaks, going all in and not looking at the market for a while.

 

Not sure if this rule (whatever it means, I still do not know:)) has much to do with this. After constantly going up with a very low volatility for almost a 2 years, recent M7/AI FOMO and very bullish sentiment / little fear left, market was just ripe for a something like this this. Perfect setup as they say:). Even anecdotal evidences / contra indicators were all flashing red in a last few month: it seems everyone wanted to invest again, particularly into this "chip company with a market share of 80 percent":). Valuation wise, SnP is still at only some 20x forward earnings, not very scary in isolation, but perhaps also it could easily go until at least an average of a last 20 years of 16x, but 16-18x still would be just normal or nothing special. But with an Autumn and US election coming maybe all this has a decent chance to even become of a something more special. I have no idea, but my gut felling is it is to early for a usual dip buying. It might be even not to late to sell something. As always, I will not be playing these games of a musical chairs with a bulk of my portfolio, but would love to move to the offensive side of the positioning again:). We will see.

 

Edited August 5 by UK

[brobro777]

I wonder if the BOJ reverse the 25 basis point rate raise

 

NQ futures -944 damn haha

 

[UK]

8 minutes ago, brobro777 said:

I wonder if the BOJ reverse the 25 basis point rate raise

 

Maybe they can, but then maybe also all this could develop into a big currency problem. Maybe a time has come for a test of this "Japan fiscal and monetary experimet"?

[brobro777]

2 minutes ago, UK said:

 

Maybe they can, but then maybe also all this could develop into a big currency problem. Maybe a time has come for a test of this "Japan fiscal and monetary experimet"?

 

Man who knows, I don't know anything about currencies

 

But watching the Nikkei get whacked tonight reminded me of that Nick Leeson dude

 

 

 

[Parsad]

I'm like a horn dog when volatility hits like this...over 50% cash and waiting for another fat pitch!  Cheers!

[Sweet]

49 minutes ago, Parsad said:

I'm like a horn dog when volatility hits like this...over 50% cash and waiting for another fat pitch!  Cheers!

Got a decent cash pile for a few months now but not 50% - dam.

 

Not seeing anything that is fat enough worth pitching at right now.

[Sweet]

BAC is down 10% on IB, wonder if that is a mistake on IB or real, can’t see it anywhere else.

 

Edit:

 

AMZN down 10% too

META down 10%
GOOG down 10%

ABNB down 10%

TSLA down 8%

UBER down 12%

Nasdaq 100 down 6%

 

Most surprising of all, C only down 3% lol.

 

 

Edited August 5 by Sweet