Where Does the Global Economy Go From Here?

[Dinar]

4 hours ago, rkbabang said:

 

This is why Democracy sucks as a way of making decisions. Be careful when you side with the masses as the "m" is usually silent.

 

I would rather be governed by plumbers than by Harvard faculty.   Lack of book learning does not imply absence of common sense.  Plenty of book smart fools at Yale.  

[patience_and_focus]

2 hours ago, rohitc99 said:

averaging 1 Mn per year or less than 0.3% per annum and dropping for last 5 years. i dont think we risk getting run over by any ethnic group any time soon

 

+1

 

Not only that there are relatively very few immigrants using social assistance as compared to natives, it is a lie that is being peddled by stating that legal immigrants use up my hard earned tax dollars into programs like SNAP because of the 1996 act severly restricting access of SNAP and other social program benefits to even legal immigrants (see below - this from CATO institute which is a right leaning organization). That distinction belongs to many of our own esteemed native borns. Infact almost all of the tax dollars go to native borns and among them are many, who, despite given opportunities to climb the economic ladder via hard work and opportunity to study the right trade, refused to do so only to come back and blame the "system". This even in the presence of many of their relatives who were making the most of the opportunity provided by this country. 

 

https://www.cato.org/publications/economic-development-bulletin/poor-immigrants-use-public-benefits-lower-rate-poor

 

"Low‐income immigrants use public benefits like Medicaid or the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) at a lower rate than low‐income native‐born citizens. Many immigrants are ineligible for public benefits because of their immigration status. Nonetheless, some claim that immigrants use more public benefits than the native born, creating a serious and unfair burden for citizens. This analysis provides updated analysis of immigrant and native‐born utilization of Medicaid, SNAP, cash assistance (Temporary Assistance for Needy Families and similar programs), and the Supplemental Security Income (SSI) program based on the most recent data from the Census Bureau’s March 2012 Current Population Survey (CPS)"

 

Conclusion
Low-income non-citizen adults and children generally have lower rates of public benefit use than native-born adults or citizen children whose parents are also citizens. Moreover, when low-income non-citizens receive public benefits, the average value of benefits per recipient is almost always lower than for the native-born. For Medicaid, if there are 100 native-born adults, the annual cost of benefits would be about $98,400, while for the same number of non-citizen adults the annual cost would be approximately $57,200. The benefits cost of non-citizens is 42 percent below the cost of the native-born adults. 

 

Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (hereinafter “welfare law”), Pub. L. No. 104– 193, 110 Stat. 2105 (Aug. 22, 1996); and Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (hereinafter “IIRIRA”), enacted as Division C of the Defense Department Appropriations Act, 1997, Pub. L. No. 104–208, 110 Stat. 3008 (Sept. 30, 1996).

[rkbabang]

41 minutes ago, Dinar said:

I would rather be governed by plumbers than by Harvard faculty.   Lack of book learning does not imply absence of common sense.  Plenty of book smart fools at Yale.  

 

I would rather not be "governed" at all.  The word "governed" is just a friendly euphemism for "forced to do what someone else wants you to do as they rob you."

[Longnose]

34 minutes ago, rkbabang said:

 

I would rather not be "governed" at all.  The word "governed" is just a friendly euphemism for "forced to do what someone else wants you to do as they rob you."

[Dinar]

9 hours ago, patience_and_focus said:

 

+1

 

Not only that there are relatively very few immigrants using social assistance as compared to natives, it is a lie that is being peddled by stating that legal immigrants use up my hard earned tax dollars into programs like SNAP because of the 1996 act severly restricting access of SNAP and other social program benefits to even legal immigrants (see below - this from CATO institute which is a right leaning organization). That distinction belongs to many of our own esteemed native borns. Infact almost all of the tax dollars go to native borns and among them are many, who, despite given opportunities to climb the economic ladder via hard work and opportunity to study the right trade, refused to do so only to come back and blame the "system". This even in the presence of many of their relatives who were making the most of the opportunity provided by this country. 

 

https://www.cato.org/publications/economic-development-bulletin/poor-immigrants-use-public-benefits-lower-rate-poor

 

"Low‐income immigrants use public benefits like Medicaid or the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) at a lower rate than low‐income native‐born citizens. Many immigrants are ineligible for public benefits because of their immigration status. Nonetheless, some claim that immigrants use more public benefits than the native born, creating a serious and unfair burden for citizens. This analysis provides updated analysis of immigrant and native‐born utilization of Medicaid, SNAP, cash assistance (Temporary Assistance for Needy Families and similar programs), and the Supplemental Security Income (SSI) program based on the most recent data from the Census Bureau’s March 2012 Current Population Survey (CPS)"

 

Conclusion
Low-income non-citizen adults and children generally have lower rates of public benefit use than native-born adults or citizen children whose parents are also citizens. Moreover, when low-income non-citizens receive public benefits, the average value of benefits per recipient is almost always lower than for the native-born. For Medicaid, if there are 100 native-born adults, the annual cost of benefits would be about $98,400, while for the same number of non-citizen adults the annual cost would be approximately $57,200. The benefits cost of non-citizens is 42 percent below the cost of the native-born adults. 

 

Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (hereinafter “welfare law”), Pub. L. No. 104– 193, 110 Stat. 2105 (Aug. 22, 1996); and Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (hereinafter “IIRIRA”), enacted as Division C of the Defense Department Appropriations Act, 1997, Pub. L. No. 104–208, 110 Stat. 3008 (Sept. 30, 1996).

That does not prove that they contribute positively.  

[Spooky]

Looks like Bridgewater is predicting a period of stagflation ahead: https://www.bridgewater.com/research-and-insights/an-update-from-our-cios-transitioning-to-stagflation

[Gregmal]

The inflation game is done. Peak hysteria has passed. Now the last leg of the “inflation is rampant and must be brought back down” argument is that the stock market has bounced a few percent lol. Stick a fork in it. Everything else continues to, wait for it, deflate.

[changegonnacome]

4 hours ago, Gregmal said:

Everything else continues to, wait for it, deflate.

 

If it travels on the back of a boat/truck/plane/shipping container.........its deflating (better still if its coming from overseas, priced in a foreign currency & being bought with appreciated dollars). I'm in total and utter agreement its DEFLATING. End of story.  

 

If "it" has a heart beat, completes tasks & does things for you............its inflating. In a very meaningful way even in the month over month data right now. The question remains, IMO, if the rate of change and/or the supply/demand imbalance here moderates by itself (in response to falling goods prices) or it persists and requires further Fed tightening.

 

An over-heating inflationary economy doesn't require plastic spoon prices going up 20% a year in front of your eyes..........it just requires what we have now which is persistent domestic aggregate demand exceeding the scope of the domestic economy to supply it...............and it will remain so, unless there is further tightening of financial conditions (demand shock) or some positive SERVICES supply shock......a supply shock like 3 million Ukrainians relocating to work in the USA.

 

For context on the above:

Goods - represent something like 40% of average personal consumption

Services - 60% of personal consumption

 

P.S.:

V dirty math - top-line inflation figures running at 9%......7% of which is above Fed inflation target and considered excess..........60% of that 7 excess = 4.2%.....add back 2% ok inflation = 6.2% made in America inflation rate. The Fed is not gonna be cool with that....even if I'm 30% off on the above and i think in reality goods inflation are driving the YoY numbers so i reckon the underlying is more like late 4'/early5%'s inflation...they aren't going to be cool with that either.

Edited August 3, 2022 by changegonnacome

[Gregmal]

1 hour ago, changegonnacome said:

 

If it travels on the back of a boat/truck/plane/shipping container.........its deflating (better still if its coming from overseas, priced in a foreign currency & being bought with appreciated dollars). I'm in total and utter agreement its DEFLATING. End of story.  

 

If "it" has a heart beat, completes tasks & does things for you............its inflating. In a very meaningful way even in the month over month data right now. The question remains, IMO, if the rate of change and/or the supply/demand imbalance here moderates by itself (in response to falling goods prices) or it persists and requires further Fed tightening.

 

An over-heating inflationary economy doesn't require plastic spoon prices going up 20% a year in front of your eyes..........it just requires what we have now which is persistent domestic aggregate demand exceeding the scope of the domestic economy to supply it...............and it will remain so, unless there is further tightening of financial conditions (demand shock) or some positive SERVICES supply shock......a supply shock like 3 million Ukrainians relocating to work in the USA.

 

For context on the above:

Goods - represent something like 40% of average personal consumption

Services - 60% of personal consumption

 

P.S.:

V dirty math - top-line inflation figures running at 9%......7% of which is above Fed inflation target and considered excess..........60% of that 7 excess = 4.2%.....add back 2% ok inflation = 6.2% made in America inflation rate. The Fed is not gonna be cool with that....even if I'm 30% off on the above and i think in reality goods inflation are driving the YoY numbers so i reckon the underlying is more like late 4'/early5%'s inflation...they aren't going to be cool with that either.

Here’s why I’m not worried about that AT ALL. Services is largely middle class and under jobs. Demand there is strong, yes. But the job market is bifurcated. White collar and tech, financial services? That job market is getting crushed this year. So the top end of the jobs market is mediocre at best and the bottom and middle end are historically strong?
 

One, I think that is great. And two…where were all inflation story peddlers when wages for tech and finance guys were going ballistic? When homes in Whitefish Montana went bonkers? When Tesla sales of $100k+ cars took off? Oh yea they were the biggest cheerleaders while the little guy got fucked. Now the tables have turned and I just don’t see how it’s a problem if the supply chain stuff gets fixed. It even makes me bullish and sets the stage for the roaring 20s to really unfold.

[Gregmal]

I mean where was the rage tweeting on wage growth from Bill Ackman when he was writing himself 9 and 10

figure checks? Oh yea, I forgot, when wealthy folks do it, it’s cuz they’re talented, deserving, and superior. When normal people get raises it’s cuz there’s something wrong! Can’t possibly be that they’re undervalued and have been for a long time. Only the haves deserve their raises.

[changegonnacome]

7 minutes ago, Gregmal said:

White collar and tech, financial services? That job market is getting crushed this year. So the top end of the jobs market is mediocre at best

 

Depends where you draw the line but lets say the above are perhaps 35% of the workforce - and I havent seen any data to suggest that these folks salary is stagnant or deflating or their is an excess supply of software developers such that the median salary is falling. Have you?I'd expect the opposite, they will receive FULL CPI linked raises......all I've seen are the headlines about hiring pauses, shopfy bla bla.....headlines arent data. I'm watching the monthly Bureau of Labor statistics like a hawk to see it.......and it isnt there. Check it out: https://www.bls.gov/news.release/empsit.toc.htm 

 

7 minutes ago, Gregmal said:

and the bottom and middle end are historically strong?

 

Say the above is 65% of the US workforce (if Im to accept your premise, which I dont. I think white collar professionals are getting on average far in excess of CPI raises)

 

Well you've got 65% of the US workforce "price" for labor inflating........and not by a little bit....... last month data (May to June) annualized i saw suggested 7.5% inflation

 

14 minutes ago, Gregmal said:

while the little guy got fucked. Now the tables have turned and I just don’t see how it’s a problem if the supply chain stuff gets fixed.

 

Its no problem at all if CPI falls back to 2.5%. Totally agreed.........but how does CPI fall back to 2-ish% exactly in 7.5% wage inflating environment???????....I've agreed with you it goes from 9% to 6% easy peazy....guaranteed take it to the bank.......but how does it go from 6% to 2% when the labor forces wages are rising at 7.5% annullized?

 

You dont think that income & business input costs dont flow through to prices? Then while were at and like previous conversations......which of these two CPI-linked 6% wage increase negotiations do you think, on average works out for the participant (1) 'Little guy', grocery store clerk asking his boss for 6% pay increase to restore his purchasing power (2) Facebook software developer looking for CPI raise........its function of leverage, scarcity, inherent margins in the business they respectively work in, the value they add inside of that................I can tell you the answer it goes way better on average for contestant No.2......he has skills that command pricing power, they value HE adds in a high margin/low capital intensity business is immeasurably larger than clerk....he delivers a huge labor surplus to his employer.......the little guy just isnt creating as much value from which wage increases can flow.....he's working in a grocery store with what 2% net margins......if hes succesful......the grocery store owner has to put up prices  to compensate....and we all know what thats called.

[Gregmal]

22 minutes ago, changegonnacome said:

 

Depends where you draw the line but lets say the above are perhaps 35% of the workforce - and I havent seen any data to suggest that these folks salary is stagnant or deflating or their is an excess supply of software developers such that the median salary is falling. Have you?I'd expect the opposite, they will receive FULL CPI linked raises......all I've seen are the headlines about hiring pauses, shopfy bla bla.....headlines arent data. I'm watching the monthly Bureau of Labor statistics like a hawk to see it.......and it isnt there. Check it out: https://www.bls.gov/news.release/empsit.toc.htm 

 

 

Say the above is 65% of the US workforce (if Im to accept your premise, which I dont. I think white collar professionals are getting on average far in excess of CPI raises)

 

Well you've got 65% of the US workforce "price" for labor inflating........and not by a little bit....... last month data (May to June) annualized i saw suggested 7.5% inflation

 

 

Its no problem at all if CPI falls back to 2.5%. Totally agreed.........but how does CPI fall back to 2-ish% exactly in 7.5% wage inflating environment???????....I've agreed with you it goes from 9% to 6% easy peazy....guaranteed take it to the bank.......but how does it go from 6% to 2% when the labor forces wages are rising at 7.5% annullized?

 

You dont think that income & business input costs dont flow through to prices? Then while were at and like previous conversations......which of these two CPI-linked 6% wage increase negotiations do you think, on average works out for the participant (1) 'Little guy', grocery store clerk asking his boss for 6% pay increase to restore his purchasing power (2) Facebook software developer looking for CPI raise........its function of leverage, scarcity, inherent margins in the business they respectively work in, the value they add inside of that................I can tell you the answer it goes way better on average for contestant No.2......he has skills that command pricing power, they value HE adds in a high margin/low capital intensity business is immeasurably larger than clerk....he delivers a huge labor surplus to his employer.......the little guy just isnt creating as much value from which wage increases can flow.....he's working in a grocery store with what 2% net margins......if hes succesful......the grocery store owner has to put up prices  to compensate....and we all know what thats called.

The grocery store owner simply needs to open his checkbook because the workers enable the store to run profitably. Most of these people have never had any leverage, now they do.

 

What I think also is under discussed is the mirage effect in employment. Where did you say all the labor demand was? Oooh, services. So all the stuff that kind of got held back and is now experiencing the reopening rush…Which too, will pass. I started my life back up sooner then most after March 2020. Summer of 2020 and especially in FL winter ‘21 I went out to eat and did more shit than I’d probably done the previous 4 years inside of 6 months. Now? I don’t even really go out to eat any more. Order sushi once a week. These things are eb and flow and create an illusion no different than when you saw the rampant big tech hiring sprees in 2020/21, fintech in 2021, etc. 

 

Companies see crazy demand and they react and then it passes and they slam on the breaks when they should have just chilled from the get go. Housing is a great example. Why are builders looking to hire anyone for pretty much any price? Because home prices are crazy. Why are home prices crazy? A lot of it has to do with the bottleneck around supply chain. So it’s actually an interesting dilemma where you see this gold mine, but like a little investor taking advantage of a 99 share odd lot, there’s only so much you can do to capitalize. Then once the supply chain corrects, the prices have to adjust, and if you misread your  inputs or relied on higher prices and margins….time to backtrack.

 

So as before, much is just time. By year end I think stuff comes down big. And by spring/summer 2023 I think we re actually comping lower on much of the cpi inputs. 

[changegonnacome]

1 hour ago, Gregmal said:

The grocery store owner simply needs to open his checkbook because the workers enable the store to run profitably. Most of these people have never had any leverage, now they do.

 

 

Greg - grocery stores are 2% net margin businesses........I don't think I need to explain to you the implications of that in the context of what you said above.

[Gregmal]

5 minutes ago, changegonnacome said:

 

Greg - grocery stores are 2% net margin businesses........I don't think I need to explain to you the implications of that in the context of what you said above.

Some are, some aren’t. Why can Costco pay people well and trade at 40x, why does shop rite do it right, why are chick fila workers always smiling, why do Publix workers love working there?
 

Meanwhile every A&P I’ve ever been to has shut and food emporium I’ve seen 3 locations fail inside a decade just in my county. That’s business.

 

Restaurant business is another good example. You can’t get tables at decent waterfront places near me. Booked til September. This was back in June. People who go there pay obscene prices. Workers make good money. Then look at QSR.

 

I think it’s both situational, sometimes regional and worker specific, and while not macro, not totally micro, call it midcro. I guess I see enough ways businesses can exist and have happy and decently paid employees. When I started my biz back in 2012 I couldn’t believe how for basically $20 an hour back then, you could more or less own people and get them to do whatever you wanted. That’s not a nice way of stating it, but that’s how it was. Or you could get a revolving door of mediocre labor for $12 an hour. $10 off the books, It seemed too good to be true. I guess maybe this starts fitting into this whole ESG thing… I dunno. But the talk these days, especially with inflation, seems to paint outcomes that are too binary which I don’t think is accurate at all. 

[changegonnacome]

18 minutes ago, Gregmal said:

Some are, some aren’t.

 

A great great deal of businesses in America, mainly retail & mainly concerned with selling essentials to low-middle income workers in neighborhood's you don't frequent......have a net margin profile in the low single digits.....when their HR opex costs go up....there's nowhere else for that expense to go except into the price of the goods they sell......but oh wait these are the same stores where these low income workers shop themselves.....thats weird their pay went up last year......but their more money is buying less than it was before.....you catch my drift, you hear me barking.

 

Think we've beat this topic around the bush - I get your thesis and I think you get mine. The great thing about this game is we're gonna get the answer to our macro musings soon enough and we can do a post-mortem then.

[Gregmal]

Wasn’t it awesome how pissed off and aggressive all the bearish folks got about a great jobs report today? How hard they tried to slant and manipulate it as a negative thing? The obvious hand wave of “job growth = inflation = Fed HAS TO raise!”…..such self serving pieces of shit. 

[Gregmal]

I know wage-price spiral is the catchy new buzz word. Unfortunately there has been zero sign of that in the real world.

[LC]

Now the dorks are talking about a share repurchase tax:

 

https://finance.yahoo.com/m/d6ad8053-511f-3651-9afa-cc291a568254/a-stock-buyback-tax-is-added.html

[Gregmal]

8 minutes ago, LC said:

Now the dorks are talking about a share repurchase tax:

 

https://finance.yahoo.com/m/d6ad8053-511f-3651-9afa-cc291a568254/a-stock-buyback-tax-is-added.html

It’s a step in the wrong direction fundamentally, but when you do the math it’s kinda much ado about nothing. Still way more efficient than dividends. 

[Blugolds]

37 minutes ago, Gregmal said:

It’s a step in the wrong direction fundamentally, but when you do the math it’s kinda much ado about nothing. Still way more efficient than dividends. 

 

Yes still way more efficient than div...but it opens a door, how long does that 1% stay that low...thats how they introduce stuff...nbd its just 1%, pocket change..so they agree and then once it passes they start to creep it up over the years...Gov HOPING to cause a shift from buybacks to increase in div so that money is passed on to shareholders and they get their cut...forcing taxes to be paid. Never underestimate the gov motivation to change the rules of the game to allow them to reach their hands into the avg guys pockets..I laugh at the other quote below...about comparing the carried interest loophole only raising $14B in taxes...like that seems insignificant vs the $125B from the repurchase tax..The fact that they even have the option to carry interest vs the avg guy is a joke and I cant believe more people dont throw a fit about it, the avg guy probably doesnt even have a clue. Also that $14B sounds low as other sources claim closing it could raise 1.4-18B anually...so ofcourse they pick the very bottom end of the estimate LOL..nothing to see here folks, minor technicality. 

 

I would consider the below paragraph a POSITIVE.

 

"Democrats may agree to scale back elements of a proposed 15% minimum tax on large companies, according to reports. They may also remove a provision that would close the carried interest loophole, which allows private-equity partners to pay the lower capital-gains tax rate on income rather than ordinary income-tax rates."

 

 At the time, the administration estimated that a 1% repurchase tax could generate about $125 billion in revenue over 10 years. For comparison, the carried interest loophole would have raised $14 billion in taxes.

 

Treating carried interest income as ordinary compensation income could raise between $1.4 billion and $18 billion annually. A significant majority of voters across parties support legislation that would close this loophole.

https://ourfinancialsecurity.org/2021/10/close-the-carried-interest-loophole-that-is-a-tax-dodge-for-super-rich-private-equity-executives/

 

For comparison...if they would have used the HIGH end of the estimate of carried interest loophole tax raise...$18B annually...over 10 years, thats $180B over the decade...and MUCH closer to that $125B from the 1% repurchase tax...but we wouldnt want people to realize potentially thats how much money these special folks are hiding from uncle sam...better to distract them by focusing on the people on welfare getting their $500/month check and living off the system...those are the people in front of you in line at the store...they are the real problem. 

 

Dont get me wrong, people gaming the system make me mad as well, but it really grinds my gears when the avg guy doesnt realize how so many are able to legally game the system for order of magnitude more and nobody has a problem with it, IF they even know about it or realize it. Meanwhile those in the middle of the pack...arent in the upper echelons enough to benefit from the special rules...but make too much to benefit from any breaks...and end up paying 30-40% in taxes. I get smoked every year. Allow me to take minimum amount I need from my employer to pay bills and keep the rest of the income in an "investment account" to get the snowball rolling...then when I finally want to use that money I'll just pay my LTCG tax on it rather than my 30%+ and I would be all for it! 

 

Oh well...guess I'll just have to keep skipping the Starbucks and pick myself up by the bootstraps, work harder and apply myself till I get to the next level. 

 

Edited August 6, 2022 by Blugolds11

[Spekulatius]

1 hour ago, Gregmal said:

Wasn’t it awesome how pissed off and aggressive all the bearish folks got about a great jobs report today? How hard they tried to slant and manipulate it as a negative thing? The obvious hand wave of “job growth = inflation = Fed HAS TO raise!”…..such self serving pieces of shit. 

Good jobs reports are good for the economy , but not good for stocks and almost never have been, except in a deep recession. That’s nothing new.

[Gregmal]

59 minutes ago, Spekulatius said:

Good jobs reports are good for the economy , but not good for stocks and almost never have been, except in a deep recession. That’s nothing new.

Well I still have a good amount of October and November IWM puts so by my count we ve got like 50% downside til Kyle Bass’s “another 30-40% down; they’re JUST. GETTING. STARTED!”Prediction. 
 

In the meantime these clowns can keep peddling their bullshit, trying to manipulate the market, and trying to scare people into a few bucks profit on their short position. 

[changegonnacome]

13 hours ago, Gregmal said:

I know wage-price spiral is the catchy new buzz word. Unfortunately there has been zero sign of that in the real world.

 

Real world  Oh yeah you've been able to discern, with certainty, what proportion of food price inflation were experiencing for example is simply a hydrocarbon & supply chain temp price issue? You've managed to untangle the wage inflation effects inside of all of that 9% inflation and are comfortable none of this inflation is related to wages feeding into prices domestically? That there exists zero pass through of increased wage costs to prices in as we spoke about low single digit margin businesses?

 

This I admit is hard to untangle with certainty, its complex. I remain open to the possibility I'm wrong here its too hard to tell right now with supply chain disruptions, energy and wages going up as they have been. I suggest you keep a bit more of an open mind on the wage-price spiral thesis - the sign in the "real world" your looking for is a backdrop of oil @ $60 & no supply chain issues with 2-3% inflation then I'd suggest you declare victory on this. I'm remaining humble, on this particular piece of the inflation puzzle, until there is actual real world data stripped of oil/supply chain inflation distortions to see if wage-price inflation is occurring underneath.....nobody can be sure sure cause too many variables are moving at the same time. I have my theories you know them but they are just that theories. I cant point to real world data.

 

In regards to the piece where there is really "real world" signs of a problem........its very much real and showing up in the Bearau of labor statistics data right now (I gave you the link, did you go look?) and its happening in real time in the month over month data......MoM May to June non-farm payrolls, right now, in the real world are inflating at an annualized rate in the 7%+ range. 

 

Whatever way you slice it or spin it the BLS data (which this jobs report shows is not abating) is terrible for stonks and very very bad for stocks in the short to meduim term. Why?

 

(1) Rising wages in a full employment economy against a back drop of a weakining consumer means underlying profit margins are getting squeezed

(2) If profit margins are getting squeezed so are earnings....bad for the E.....in your P/E

(3) If the wage rises are centered around low to low-middle income workers (the little guy) and then we agree that these workers on average are more likely to work in low single digit margin businesses/industries with little pricing power......well then I guarantee you wage increases are feeding through into prices in those sectors. So you've got wage inflation that isnt hydrocarbon or supply chain related happening that is driving domestic price inflation.

(4) Inflation that isn't supply chain & hydrocarbon related requires deeper and further Fed intervention later this year and next which isnt priced into the market (quite the opposite rate CUTS are priced in for 2023!!!) and this will be terrible for stonks (super long duration assets) and stocks via the P in their P/E 

(5) Go look at Jay Powell's recent Q&A....the Fed wanted to see SLACK returned to the labor market in response to their tightening.....does adding a shock 500k jobs sound like slack returning to you? do you think this means a more dovish or hawkish Fed come September?......seems like an overheating economy is getting hotter to me.

(6) Inflationary problems, are like lots of problems, the longer you dont address them the larger the remedy required later to fix them.....'transitory' inflation is about turn three years old. Inflation expectations are an important part of inflationary psychology. 

 

I further expanded a number of stonk related shorts I had on Friday.........market participants are reading the data all wrong here IMO.......I'm happy to see the return of some meme stock mania last week......shows the reddit retail crowd went back to the Casino ATM for one more withdrawal to "win back" all their losses....thats good.........just because stuff has fallen 80%.....doesnt mean it cant fall another 80%.

 

My portfolio is starting to look more and more like this - 120% long mainly low P/E international stocks hedged with US-centric stonk short book & where long in the US...its with hard asset rich inflationary beneficiaries with catalysts (MSGE/CLPR), special situations (TWTR) and levered buyback entities with long term fixed rate debt buying back gobs of stock if/when US equity markets tank further (LBTYA). I feel good about what that looks like returns wise if I'm completely wrong on my US macro framework...it should do quite well. Anyway my two cents for what it worth.

[Gregmal]

I see wages rising as a massive lagging event resulting from all the noise made over the past 6-12 months. If you put shit out there enough eventually even the dodo worker catches on and companies have to play ball. The wage increases are probably the last leg of all the cause and effect. It is of absolutely no surprise that at the utter peak of mania on inflation talk, workers are seeking the largest increases yet. In fact, it makes perfect sense. Weren’t we just saying a few months ago how we had to stop inflation because they’re too dumb to ask for pay hikes? Now they are and it’s terrible? 
 

Oil to be honest, I’m starting to wonder if I got caught by that same pump and dump money flow action on as well. The long term story is there for sure, but like with everything else, plummet, recover, super spike, tank. I got the spike but missed the down move probably because of political views influencing my belief oil was destined to stay much higher for much longer. 
 

Investment wise I haven’t really done jack other than add to what I already like. Got much less short exposure than I did earlier, covered all my tech stuff because it seems they bottomed first, and just have a larger than normal handful of IWM puts expiring in q4 cuz I had a shit ton of realized gains I was ok offsetting and 2) think all this noise dissipates and we have a conclusion of the inflation story by end q3/q4. 
 

But like with COVID, I’ve just grown so tired of all these bullshit artists on the news and internet purposely screaming fire and trying to manipulate the narrative and the way investment decisions are made. On the highest levels like with Ackman they’re actually trying to manipulate monetary policy! Lowest level you have the Twitter clowns. In between CNBC and Bloomberg crowd. Fuck these people. I always enjoyed the days where Nasdaq was off 3%, S&P 2.5% and Dow 1.5% but the headline is “Dow plummets 500 points!”….which is the least newsworthy of all but simply most effective since 500 is a “big” number. Shows in a nutshell what the agenda is.

Edited August 6, 2022 by Gregmal

[changegonnacome]

15 minutes ago, Gregmal said:

I see wages rising as a massive lagging event resulting from all the noise made over the past 6-12 months. If you put shit out there enough eventually even the dodo worker catches on and companies have to play ball. The wage increases are probably the last leg of all the cause and effect. It is of absolutely no surprise that at the utter peak of mania on inflation talk, workers are seeking the largest increases yet. In fact, it makes perfect sense. Weren’t we just saying a few months ago how we had to stop inflation because they’re too dumb to ask for pay hikes? Now they are and it’s terrible?

I hope your right and I’m very very wrong…….I really do……I may have larger than usual short US stock exposure & an international long book in my investment account…..but I’m a USA salary resident cheerleader with my best earning years ahead of me..……big big big picture ‘Changegonnacome Inc’ is unbelievably long a thriving US economy. A 1970’s style stagflation, followed by a Volcker-esque recession is not good for my family or anybody I give a shit about. I hope I’ve got this very wrong but I’ve yet to see much disconfirming data based evidence that I am & it’s why I value your pushback…what you describe is exactly how I will be wrong…..so appreciate your strong views on the matter. Even if we fundamentally disagree.