Have We Hit The Top?

[Jaygo]

I think Gregmal does have a blind spot just like anyone who is young and hard working probably does. He is thinking if I can do it anyone can. The sad fact is he is partially right but a lot of people just didn't get taught this early in life.

 

I have employees in their 20's complaining about going to work in the rain today. What the fuck, its literally water, suck it up. These guys will never make it because they lack the drive. I shed no tears for these lazy bastards who just want to play fortnight today.

 

However before you say i'm just as blind as gregmal. My aunt is in her late 60's and is not altogether smart, sorry aunti. She is getting killed by inflation and frankly probably is lucky to have the job she has. She will not be using this market to improve her lot in life. She will just be a hell of a lot poorer next year.

 

I think there is a pretty sizable population that is going to be getting crunched by this and will not have the ability to take advantage of it. Much bigger than any of us probably can estimate. Maybe their parents didn't instill the drive in them, maybe they are not too bright maybe they have a physical impediment that dont let them make 40 bucks an hour painting.

 

In my mind, we have some horrendous leadership and this is being caused by them and their agendas, they dont care about the people who are getting hurt because they are the types who are truly blind.

Most politicians are pure scum whether they intend to be or not. And i dont know what type is worse!

 

[Spekulatius]

We can debate what is right or wrong for a long time. What decides this are not you, me or even the Fed, its the 10 and 30 year bond yields. if the 10/30 year bond yields go up, then equities and asset prices will get whacked.

 

As for who get's hurt most, i don't think it's the bottom 25%. The bottom 25% just got a huge pay boost from minimum wage boosts and a strong labor market. Those that still don't work get transfer payments that are indexed to inflation for the most part.

 

Who gets hurt most is the middle class. In a nut shell, It's 8% inflation and 4% wage increases for them. Do this a few times over and you talk about a serious loss of purchasing power that will have an impact - basically 70's all over again. I take a recession over this scenario any day

Edited May 16, 2022 by Spekulatius

[Paarslaars]

59 minutes ago, Jaygo said:

I think Gregmal does have a blind spot just like anyone who is young and hard working probably does. He is thinking if I can do it anyone can. The sad fact is he is partially right but a lot of people just didn't get taught this early in life.

 

 

He would be right if he said "anyone with my potential/capabilities could do this".

People often underestimate the difference IQ can make, we're not supposed to talk about it because it's not 'nice' but it's huge. 

 

Now your comment is true. To go even further, IQ is partially genetic and those we never earned a substantial amount of money, never taught how to manage money to their children either... And these people eventually make up the lower class, never learned how to have money work for them and not smart enough to figure it out themselves. 

 

My wife comes from a low income family where they had to watch how much they spend every month. She makes the worst decisions when it comes to money because she believes it to be 'safe'. She doesn't graps the concept that 'safe' = saving is the exact opposite of safe in an inflationary period.

[Paarslaars]

14 minutes ago, Spekulatius said:

We can debate what is right or wrong for a long time. What decides this are not you, me or even the Fed, its the 10 and 30 year bond yields. if the 10/30 year bond yields go up, then equities and asset prices will get whacked.

 

As for who get's hurt most, i don't think it's the bottom 25%. The bottom 25 just got a huge pay boost from minimum wage boosts and a strong labor market. Those that still don't work get transfer payments that are indexed to inflation for the most part.

 

Who gets hurt most is the middle class. In a nut shell, It's 8% inflation and 4% wage increases for them. Do this a few times over and you talk about a serious loss of purchasing power that will have an impact - basically 70's all over again. I take a recession over this scenario any day

 

I agree the middle class will see it's buying power reduced but that's just humbling, not really that painful.

(here in Belgium the middle class will get stronger as wages will increase equally with inflation while everyone has 25y fixed mortgages at 1-2%).

 

The problem that follows is the reduced spending from the middle class, which will reduce in term reduce companies revenue and cost jobs, that will hurt the lower class most. Not immediately financially as you mentioned the transfer payments are indexed, but unemployment creates a series of other issues (like addictions) due to the lack of productivity and fulfillment...

[Spekulatius]

10 minutes ago, Paarslaars said:

 

I agree the middle class will see it's buying power reduced but that's just humbling, not really that painful.

(here in Belgium the middle class will get stronger as wages will increase equally with inflation while everyone has 25y fixed mortgages at 1-2%).

 

The problem that follows is the reduced spending from the middle class, which will reduce in term reduce companies revenue and cost jobs, that will hurt the lower class most. Not immediately financially as you mentioned the transfer payments are indexed, but unemployment creates a series of other issues (like addictions) due to the lack of productivity and fulfillment...

Belgium appears to have automatic indexations of salaries to the CPI. That's the exception and not the case in most other European countries and certainly not in the US and Canada.

 

I agree with automatic indexation to inflation, the inflation is not an issue, at least not short term.

[Castanza]

IQ definitely plays a big role in success. The correlation between IQ distribution and US class breakdown is pretty damning. The further up the social ladder you are the fewer financial variables you have to deal with in life. I'd argue that's why those numbers are better correlated. The further down you go the more mobility between classes you have, but the more "shit" you have to deal with that can impact your ability to make that change. If I'm a blue collar family man I'm not taking additional risks in life during a recession. I'm likely trying to reduce costs, thinking of my immediate family and hoping the local plant doesn't close. Talk to any blue collar worker who went through 2008 and their primary concern would be job availability/security. Most of them didn't give two shits about the "market" because they probably didn't own any stocks other than their 401k. You're not sweating car repairs, college tuition, groceries, little league/local sports costs for your kids if you're upper/upper middle class. You're thinking about not renewing the golf club membership or possibly bumping down to a single vacation. 

 

_______________________________________

 

US Upper Class Percentage of Population = 19% / 111-120 Above Average Intelligence = 15.7% of Population

 

US Middle Class Percentage of Population = 52% / 90-110 Average Intelligence = 51.6% of Population

 

US Lower Class Percentage of Population = 29% / 80-89 Below Average Intelligence = 15.7% of Population 

 

_______________________________________

 

 121+ Gifted and up = 8.5%

 

70-79 Cognitively Impaired = 6.4% (probably not in the workforce)

 

US Poverty Rate Population  = 11.4% (likely the bottom portion of Below Average Intelligence IQ Population)

 

*83 minimum for military entrance. So if you're below that, the government basically is saying there is no job you are capable of performing 

 

 

Edited May 16, 2022 by Castanza

[Gregmal]

I think what’s still not really being answered is this;

 

Saying “fighting inflation” is cool, but, is the worst of it ahead of us or behind us?

 

If some people truly are helpless or lost causes, does removing opportunity for everyone else by killing jobs and economy solve that?

 

Is that fair?

 

Who benefited in 2009? How about in 2020 when many of these same folks said we had to kill the economy to save lives? Only to then implement useless strategies that not only didn’t save lives but likely cost more when accounting for all the side effects.

 

Now they wanna do it again. Raising rates doesn’t do jack for 90% of the inflation issue and at a certain point becomes harmful. Same as lockdowns and restrictions. The only thing worse than not actually accomplishing your objective is then compounding it by causing even more damage. And again, I can’t help but notice that there is a significant overlap between the folks advocating for this, and the folks that would stand to profit from it. Crying on tv about humanity and doing the right thing as you cover your shorts and go long….

[Gregmal]

All this said, I do think savers getting 4-5% relatively risk free would also be very healthy for the economy. 

[changegonnacome]

2 hours ago, Spekulatius said:

I take a recession over this scenario any day

 

Yep - & nobody really talks about it openly.....but every monetary economist knows it - a recession is the circuit breaker in an inflationary wage-price spiral.....it ultimately brings aggregate demand in under aggregate supply for a time, prices as result stabilize/moderate & then this becomes the foundational basis under which you move forward (with price stability) & an appropriate neutral interest rate posture. 

Edited May 16, 2022 by changegonnacome

[james22]

1. The low unemployment rate isn't offsetting inflation for retirees. 

 

2. 

 

[Ross812]

21 minutes ago, Gregmal said:

I think what’s still not really being answered is this;

 

Saying “fighting inflation” is cool, but, is the worst of it ahead of us or behind us?

 

If some people truly are helpless or lost causes, does removing opportunity for everyone else by killing jobs and economy solve that?

 

Supply and demand is out of balance; there are 2 job openings for every worker right now looking for a job. The Fed is trying to thread the needle with QT and rate increases. Suck the oxygen out of the economy to the point of full employment without tipping into job destruction and growth in unemployment. We are probably heading for a balance sheet recession where the real economy is doing well with full employment, but earnings contract.

 

The cause of inflation is coming from the supply side, but inflation turns into an accelerating positive feedback loop regardless of what started it if it is not contained. Sure a smart driven individual can capitalize on the current environment, but on a societal level it is a zero sum game. The velocity of rise and fall at the individual level has just increased. If there is no soft landing for those who are falling, we are going to end up with a lot of unrest and further class stratification.   

 

 

[changegonnacome]

1 hour ago, james22 said:

1. The low unemployment rate isn't offsetting inflation for retirees. 

 

2. 

 

 

Precisely (great clip btw).....now take the 10% with IQ's below 83....now add to that cohort, those who are only moderately above 83 & for whom industriousness & consciousness is not in their NATURE (forget nurture). You've got I dunno 20% of the US population who dont have the toolkit to adapt to prices rising at 4/5/10% annually. Sure in the early part of the cycle these folks just get GIVEN raises they probably didn't even ask for, see everybody feels good about things in the early part of an inflationary cycle.....but do they get given CPI? do they know what CPI is & have the wherewithal to ask their employer for it?.....and, most importantly again, this is in the early phase of the inflationary cycle, wait till profit margins at corporates start getting killed....how do wage negotiations go then when lets say the service oriented corporate sector 'hive mind' (Dunkin, Wendys, Walmart), say these salary rises cant continue, our margins are getting whacked!!......"here's CPI minus 5%, now get back to stacking that shelf". Now add to that the squeezed middle as @Spekulatius points out.

 

Inflation is pernicious & insidious......its like letting the fox into hen coop. 

 

 

Edited May 16, 2022 by changegonnacome

[SharperDingaan]

"Supply and demand is out of balance; there are 2 job openings for every worker right now looking for a job. The Fed is trying to thread the needle with QT and rate increases. Suck the oxygen out of the economy to the point of full employment without tipping into job destruction and growth in unemployment."

 

The engineers solution (Fed) is reduce demand by 50% - 1 job opening for every worker looking for a job.

More realistically, a demand reduction of 30-40% so as to accommodate employment friction, job retraining time, etc. In practice, this means higher interest rates, lower market indexes, lower housing prices, sucking liquidity out of the system, and letting the financial zombies fail (moral suasion) - the zombie employees finding a better and more secure job elsewhere. Wall street loses big, main street remains largely neutral.

 

The Wall street solution is index benefits, and pay the poor a guaranteed minimum income. Let 'them' live their lives as they see fit, and let 'us' live our lives as we see fit. A very good solution, as many European nations can attest to; problem is - this is the US, and this solution just does not align with US culture.

 

Most would say that in the early stages, culture wins, and Wall street loses big. In the later stages, a guaranteed income goes into effect, and the politicians of the day come knocking on your door asking for your vote. If you think this is reasonably predictable -  there is your trading opportunity 

 

SD

  

Edited May 16, 2022 by SharperDingaan

[Gregmal]

I just think this notion that there’s people so useless and helpless that they can’t get it right in just about any situation, is crazy. We shouldn’t be pandering to them. We shouldn’t be putting it at the expense of the ambitious or risk takers or producing members of society.
 

Should there be a safety net? Absolutely. I am not even against a UBI. But to derail an economy where the semi competent or better are thriving, thinking you’re going to help someone who refuses to live within their means or seek to improve their means so they can afford a $2 increase in soda prices or $25 extra a week in gas is absurd. And let’s not even get started on the subject matter of what these folks can still manage to afford. Gas and groceries are a problem but a new iPhone every 18 months and $200 shoes always seem to be on display? Like come on.

[Paarslaars]

You don't seem to understand how a truly unintelligent mind works.  They are so easily susceptible to the 'opinions' and 'advice' from others. Advertisement alone goats them into that behavior...

 

You're from the US right? I remember my first week trip ever to the US, the advertisements you guys get on TV are so absurdly aggressive and over the top that my first reaction was "which retard is ever going to buy a product advertised so blatently with lies". But the thing is, the ad's wouldn't be airing if they didn't work... and this stuff simply works on those who fall on the far left side of the IQ bell curve. 

 

You can blame them for making stupid decisions but the truth is they really are too stupid to know better. You can teach them but outside influence will corrupt their mind. 

 

Though I agree  the point you're trying to make, we should not derail our economy for their sake, they won't make good use out of it. This is why the safety net needs to be there and be substantial enough so they enjoy their lives and don't screw up society for the rest of us, while not demotiving those with potential to work and improve themselves.

Edited May 16, 2022 by Paarslaars

[crs223]

Plenty of smart people are not working.  Search “FIRE retirement”.

 

my wife quit when schools sent the kids home.

 

Closed schools, decades of “Fed put”, and stimmies: these take smart people out of the labor pool.

 

How does the economy respond to people not working?  Raise prices of goods and wages.

[Jaygo]

On 5/14/2022 at 1:25 PM, Gregmal said:

Do people really think inflation is going to continue at 8% for the next several years? Its funny to me how last year there were like 2-3 people here tops who said this would happen, everyone else was in the transitory, camp. Now, everyone thinks its 5-10% a year in perpetuity. I guess thats why markets move and sentiment is powerful. But again, most of this "inflation", is fixable. So yea, tech stock based comp will blow for a few years. But the idea that markets need to price in 5%+ inflation OFF OF the already elevated base, seems to a little ridiculous to me. 

 

Similar to the housing market, the labor market is so tight that people ARE getting meaningful raises simply due to supply/demand imbalances. We all know the government lies about inflation. But again, theyre handling it right now, exceptionally well. Dining, travel, home improvement. AT THESE PRICES. So we can talk generally about "oh inflation"...great. Plug in x% inflation in perpetuity and get a crazy bearish picture. Tell me how stupid shit like 2x4s, automobiles, desktop computers, etc....are going to go parabolic on prices for the next half decade? I'd take the other side of that bet all day. Energy and housing will take time, but Im pretty certain policies will start shifting either soon, or starting in November to be more favorable on that front too. It just seems like we have big and popular story, and people are getting carried away with applying it to the future. 

We buy about 100k per year in traffic paint. Last year there were some shortages due to lack of resins available from the cold weather in Texas. Prices went crazy if you could get it. We went from paying 17 bucks a gallon to being happy to pay 30. I explained the situation to my customers and have been adjusting prices upward as needed. 
 

The past couple years I have been making weekly calls to Sherwin Williams and ppg trying to get supply at any price.

 

guess what, I got a call from ppg this week asking if I would need any paint this month. “Oh yes I would, how much by the way?”

 

The rep tells me I can have as much as I need delivered for 19 a gallon! I guess it was transitory after all! I think gregmal is not far off on his call. 

[Jaygo]

To add to the above, this is not the first time I have seen a surcharge disappear in the last week. 

[Gregmal]

47 minutes ago, Paarslaars said:

You don't seem to understand how a truly unintelligent mind works.  They are so easily susceptible to the 'opinions' and 'advice' from others. Advertisement alone goats them into that behavior...

 

You're from the US right? I remember my first week trip ever to the US, the advertisements you guys get on TV are so absurdly aggressive and over the top that my first reaction was "which retard is ever going to buy a product advertised so blatently with lies". But the thing is, the ad's wouldn't be airing if they didn't work... and this stuff simply works on those who fall on the far left side of the IQ bell curve. 

 

You can blame them for making stupid decisions but the truth is they really are too stupid to know better. You can teach them but outside influence will corrupt their mind. 

 

Though I agree  the point you're trying to make, we should not derail our economy for their sake, they won't make good use out of it. This is why the safety net needs to be there and be substantial enough so they enjoy their lives and don't screw up society for the rest of us, while not demotiving those with potential to work and improve themselves.

Basically. So there’s that, and then of course also the sketchiness/fox in the hen house element commonly threading all the “concerned citizens” whom will happen to profit from said events. It’s not like we haven’t seen how this game is played before. It’s hardly different than Ackmans Herbalife crusade. We must help those most vulnerable! Ha yea, sure man. 

[Gregmal]

We have decades of data available to easily determine what’s a quick fix and what isn’t. Readily available commodity based stuff is simple, and that’s a huge chunk of this “inflation” issue that everyone who wrote it off last year now thinks will go on forever. Energy and housing? Yea that’ll take a little longer but hey, stop voting like retards and that will work itself out too.

[Gregmal]

https://nypost.com/2022/05/16/walmart-targets-college-grads-for-210k-store-manager-gigs/

 

$200k for college grads to work at Walmart? They must be stopped!

[changegonnacome]

1 hour ago, Gregmal said:

“concerned citizens” whom will happen to profit from said events.

 

44 minutes ago, Gregmal said:

Yea that’ll take a little longer but hey, stop voting like retards and that will work itself out too.

 

Greg enjoy chatting with you & were in some of the same names.....but a little bit like when you conflate the economy with the markets as if they are the same thing, you also often conflate the way it should be, with the way it is. 

 

To be clear:

 

(1) I'm looking to compound wealth (2) I try to asses how the political economy intersects with the equity markets to position my assets in a sensible manner for long run success (3) dont confuse my 'concerned citizen' overtones with the reality that what I'm trying to asses is how the Fed/political class sees this issue & what drives their incentives & decision making to address it. Wether my views and views of those holding the steering wheel of power align (as they do in this case) is basically immaterial to me. The question is do I have the assessment right around their thinking & what they'll do. THIS is what I've been trying to communicate over the last few posts.

 

You can argue all day if 'they' the Fed/politicians are right or wrong in their views.....but your opinion of their view, doesn't change it.....and they run the Fed and you don't.....what I've outlined in previous posts, I believe, is pretty standard orthodoxy in monetary economist circles re: the effects of inflation on different socio-economic groups..........and that the Fed's mistake in the 70's was to act too slowly to tackle inflation, which allowed inflation expectations to embed in the economy such that they became unanchored, the Fed lost all credibility until Volker stepped in & jacked up overnight rates up to 20% and sent unemployment up to 11% re-anchoring inflation back at ~2-3%.....at a huge cost (I'm aware of the Volcker did jack shit and he was just lucky with timing theories, one for another thread)

 

So your Jay Powell.....you're surrounded on a daily basis with orthodox monetary economists, Volcker is lauded in the halls of power and just recently passed away. You ask your staff what they think and they tell you what I've been telling you. You look at Volcker's portrait on the wall & you ask him what to do.........and he says "dont let inflation expectations embed in the economy, like my Fed Chair predecessor did, kill inflation now with a mild recession if you have too, keep hiking lest you end up with a major recession later like the one I had to impose".......Jay says "but maybe supply chains, maybe oil, maybe Russia".......Volcker laughs & says "thats what my Fed Chair predecessor said too and I'm hanging up here on this wall and I bet you couldn't even tell me the other bozos name"  

 

My point - Uncle Jay knows what to do, orthodoxy has trained a generation of monetary economists at the Fed what to do and what not do.........and once on the pathway to re-anchoring inflation to 2% they will be on autopilot with Volcker's voice ringing in their ears to take a little pain now, to safe a-lot of pain later. I, personally, think they will be doing the right thing with this strategy but the Fed doesn't care what I think either. 

 

 

[Gregmal]

All good. I am personally not considering or referring anyone here as part of the wealthy elitist cabal lobbying for economic destruction. Everyone here I assume has the same goals, to compound wealth. 100% agree. My understanding of that as I’ve come to exist as an American, is that it’s best done, on a risk adjusted basis, through accumulation of assets, preferably good ones. Indestructible ones. One s that others want/envy. 
 

My belief is that the Fed is being deliberate in taking their time. This would have gone away substantially last year but we just couldn’t resist doing the COVID scare shit again in the winter and then on top no one forecasted Russia into the model. But now virtually all of the USA is 100% open. The comps are about to start getting tougher and I think the Fed is rightfully weary of much of the rhetoric they’re getting from hedge fund guys and politicians. IMO they’ve done a great job since the GFC, and nevertheless there’s always someone whining about them. They see widgets aren’t increasing 15% a year for 5 years. They see a lot of this isn’t in their hands it’s in the hands of politicians and voters. So I expect them to continue doing exactly what they’ve told us they’ll do. 
 

I’m just getting confused on the inflation definitions people are using because I’m assuming they are referring to CPI which they must not know how it’s calculated if they’re expecting large ramps from here. And if we don’t get those, we stop hearing about the urgency to raise rates, instead how we re “beating inflation”, and nice story heading into November. Things are sooo bad for democrats right now that at some point I think you have to start looking at what dots can be connected and how likely they are. With the bulk of the inflation being easily fixable and the comps getting hard to beat, I think it’s a low hanging fruit of a victory for them to take. Which off the back of an already healthy economy and job market spins well on your election post card. 

[Gregmal]

This is essentially the crux of what governments do. They create problems, blow them up, and then fix them and take credit for saving the world.

[changegonnacome]

33 minutes ago, Gregmal said:

My belief is that the Fed is being deliberate in taking their time.

 

With you on the indestructible assets part for sure  

 

On the Fed, I guess my view is a simple but differing one from you, which is alot of people are going to be blindsided by how much carnage the FED will be willing to impose on financial assets first, then the real economy next in an effort to re-anchor inflation............I hope they get tailwinds with Ukraine, Oil, China all chipping in on the supply side of the equation....it could all work out swimmingly heading into 2023.....but I guess what I'm saying is if they dont get those tailwinds and in fact those headwinds remain or increase.....I think their resolve & determination to bring inflation back to a ~2-3 handle, using the tools they CONTROL to do so, is grossly grossly underestimated and by extension under-priced in the market. We'll find out, thats the beauty of this game.

Edited May 16, 2022 by changegonnacome