Is The Bottom Almost Here?

[changegonnacome]

30 minutes ago, Gregmal said:

Rooting for rate hikes you know will create bad outcomes, job losses, divorces, deaths, etc….yuck. Fuck those people. Inflation is just the weasly cover.

 

@Gregmal your a smart guy.....not sure what your mental block on this is you seem to have, if you dont mind me saying so, a conspiratorial zeal attached to your thinking when it comes to this issue....not sure your engaging with it in a rational way.........& after all this time & all the logical arguments you've heard on here - you still dont seem to accept that 5% persistent multi-year inflation in a society/economy creates WAY more aggregate misery & pain in TOTAL and across MORE people than 12-18 months of a minor recession and unemployment ticking up to 5% to solve it such that we can have ANOTHER lets call it 10+ year economic expansion afterwards marked by stable prices, low interest rates & low unemployment.

 

Not nice whats going to happen.....I agree......but sometimes in life you get presented with problems with only bad solutions.....and your duty is to pick the least bad one.....this is one of those.

Edited October 5, 2022 by changegonnacome

[maplevalue]

2 hours ago, Xerxes said:

Can I ask why interest rate hikes seem to have a outsize impact as oppose to QT when it comes to commentator on TV. 
 

everyone talks about the next Fed meeting but what about the $95B rolling off the b/s every month. 
 

why is that the so-call pivot is firmly fixed on the idea of Fed slowing rate hikes and eventually pausing. But no one talks about the un-printing 

 

1 hour ago, Parsad said:

 

Interest rates hikes tend to have a more obvious and immediate impact, thus why they get more of the headlines.  Your mortgage rates rise, your HELOC rates rise, your credit card rates rise, the rate for the new car you are buying goes up, etc.  Cheers!

 

Nobody really knows how much QT affects interest rates so the talking heads find it easier to just discuss the overnight rate.

[Guest]

I agree with Greg on most things but not quite here. I think some bouts of sufferring are incredibly good for people. I also think easy is very bad.

[Gregmal]

9 minutes ago, changegonnacome said:

12-18 months of a minor recession and unemployment ticking up to 5% to solve it such that we can have ANOTHER lets call it 10+ year economic expansion afterwards marked by stable prices, low interest rates & low unemployment.

Square this with what the majority of folks like Roubini, et al are saying, predicting, rooting for, and the course of action they’re proposing to get us there?

 

Even look at how he frames it…if the Fed “wimps out”…in other words, a 12 year old style condescension of the path they’d take that would prove him wrong hoping to assert some sort of bizarre control over the narrative.

 

There has basically been one instance or period of bad inflation in the US and that was the 1970s. We’ve had 18 months of it coinciding with COVID measures and inflation has already begun tapering off in tandem with it. Yet based off a sample size of….wait for it….ONE, all these people are absolutely certain it’s going to go on forever if rates aren’t raised to like 8%…and oh by the way, how they’re financially positioned is just a coincidence? Eh, not buying it. Especially when they’ve been rooting for the same outcome and making the same complaints regarding monetary policy for decades.

Edited October 5, 2022 by Gregmal

[Gregmal]

29 minutes ago, stahleyp said:

I agree with Greg on most things but not quite here. I think some bouts of sufferring are incredibly good for people. I also think easy is very bad.

Suffering is good and useful when it’s earned. Bite off more than you can chew to drive a fancy car..sure. Run up credit cards on showy clothing..eat it. Folks losing jobs or bargaining power for better wages because rich people decided things got too expensive, or because they felt entitled to more interest on their do nothing deposits, or because they were aghast at having to wait in line for a restaurant meal is a little too much for me. 

[aesophawk]

13 hours ago, Sinbius said:

You all dodged the question...I understand there are cheap stocks...the question was "Do you consider the market on average cheap" ...I made that question because it seems there are a lot of bulls here...

 

 

Is it a relevant question if there are cheap stocks available? I'm not bullish or bearish on the economy or the market, but currently there are cheap companies in my circle of competence. Does anything else really matter?

[Parsad]

4 hours ago, Gregmal said:

Square this with what the majority of folks like Roubini, et al are saying, predicting, rooting for, and the course of action they’re proposing to get us there?

 

Even look at how he frames it…if the Fed “wimps out”…in other words, a 12 year old style condescension of the path they’d take that would prove him wrong hoping to assert some sort of bizarre control over the narrative.

 

There has basically been one instance or period of bad inflation in the US and that was the 1970s. We’ve had 18 months of it coinciding with COVID measures and inflation has already begun tapering off in tandem with it. Yet based off a sample size of….wait for it….ONE, all these people are absolutely certain it’s going to go on forever if rates aren’t raised to like 8%…and oh by the way, how they’re financially positioned is just a coincidence? Eh, not buying it. Especially when they’ve been rooting for the same outcome and making the same complaints regarding monetary policy for decades.

 

+1!  Why can't you be articulate like this without the politics and cursing.    Cheers!

[Spekulatius]

Following the talking heads in TV with their well known biases is not the way to make money. Never has been.

 

Right now, everyone seems to become a macro investor. That hasn’t been the way to make money either. It’s not that macro doesn’t matter, it is because it is so hard to predict.

 

 

 

[mattee2264]

I think an era of cheap money has resulted in a lot of distortions. Since the GFC growth has been anaemic. So low interest rates have done very little to stimulate growth but a whole lot to stimulate asset prices. Instead of encouraging productive investment most companies have found it more profitable to engage in financial engineering borrowing to fund buybacks. 

And by encouraging speculation we've had a bubble in technology stocks and an associated M&A craze. Cheap money has also encouraged silly economic theories like MMT which make governments think they have no need to fund massive fiscal packages because central banks will always be there to keep government debt cheap and buy up most of it. 

 

But now everyone is worried that high interest rates will plunge us into a deep recession and are complaining about falling asset prices and the evaporation of all the speculative gains they've made during the pandemic. 

 

A recession is a price worth paying to re-establish Fed credibility and anchor inflation expectations closer to the 2% target and cool demand until the supply side normalizes and can handle higher demand. Government policy needs to focus on easing immigration and slowing down the pace of the energy transition and those steps will allow lower interest rates in the future. But of course it is much easier for governments to blame the Fed both for causing inflation and then the subsequent recession. And a more reasonable level of interest rates will establish a more appropriate cost of capital and encourage more productive investment. And if it results in some zombie companies going under and companies getting rid of unproductive staff then that is a good thing and those resources can be reallocated more productively. 

 

 

[changegonnacome]

11 hours ago, Gregmal said:

Square this with what the majority of folks like Roubini, et al are saying, predicting, rooting for, and the course of action they’re proposing to get us there?

 

They are jihad extremists and they also say whatever will keep them in the headlines & on the cartoon network (CNBC). The last time I let Roubini wind me up like he's winding you up was 2010, suggest you do the same. Ignore. 

 

11 hours ago, Gregmal said:

oh by the way, how they’re financially positioned is just a coincidence? Eh, not buying it. Especially when they’ve been rooting for the same outcome and making the same complaints regarding monetary policy for decades.

 

You can level this stuff at Roubini for sure and you can always question a persons intentions once they have a financial interest in an outcome but in financial markets your required to have an opinion and then express it via a financial position. Whats new/wrong about that? Your opinions are only as good as your ability to monetize them. You get paid if your opinion is correct...not sure Bill Ackman should vilified for his inflation opinion and how he chooses to express that.....if he's right he gets paid, if he doesn't he loses. Same with his UMG position etc. Now if your argument is Bill Ackman is so influential that he can convince Jay Powell to put millions of people out of work to help his interest rate swaptions position....mmm Ok....yeah maybe but I dont think so.

 

But you really cant ignore now the chorus of respected voices on this inflation issue being 'real', persistent and a problem....which now incudes luminaries agreeing like Druckenmiller & Larry Summers.........oh and I forgot an up and coming dude nobody has probably heard of here called Jay Powell at a little D.C. hedge fund called 'the Fed'   Cause well nobody else opinion matters & Jay-P has been pretty transparent about what issues we've got.

 

Anyway as I've said a billion times before here and for months now, I dont listen to anybody, I look at the MoM BLS data for non-farm payrolls, I look at the unemployment rate & participation rate vs. NAIRU and then anecdotally I look around to see if I can borrow money inflation adjusted for negative real interest rates (I can & just did so at 2.95% for 7 years, makes no sense and shows financial conditions remain too loose relative to inflation which means we have a ways to go and more than people think......see you hit (1) Money supply (2) then credit then (3) Spending/Income to fix inflation....we are only are (2)), I also look around to see the signs of an overheating economy with a labor shortages...stores with reduced opening hours vs. 2019, for hire signs....and its everywhere......low end labor is in short supply, its price is being bid up....that labor predominately works in low single digit net margins business.......the flow through rate of increased labor costs to underlying prices in those businesses is almost 100%........end of story

 

 

Edited October 5, 2022 by changegonnacome

[Cigarbutt]

13 hours ago, Xerxes said:

Can I ask why interest rate hikes seem to have a outsize impact as oppose to QT when it comes to commentator on TV. 
everyone talks about the next Fed meeting but what about the $95B rolling off the b/s every month. 
why is that the so-call pivot is firmly fixed on the idea of Fed slowing rate hikes and eventually pausing. But no one talks about the un-printing 

Interesting question.

This post is formulated with the following perspective: What would you do if you are calling the shots at the Fed and want to apply constraints on demand?

Warning: i'm not saying the following is relevant or useful; it's only interesting.

Tool #1

The above is a theoretical construct (from Keynes) but if you put short term interest rates on the y-axis and monetary base (currency + reserves deposited at the Fed) over GDP on the x-axis, you get a very strong (historically backed) relationship. The Fed has been intermittently (and to various degrees) using this correlation in order to 'control' short term rates (transformed the correlation into causation).

 

Tool #2

The blip in the early 80s is Paul Volcker's contribution to the constraints put on the economy. Now, this seems like no big deal but then monetary base to GDP was very low (steep part of the liquidity preference curve) and only a small change in monetary base had a potentially large impact on short term interest rates. 

Since the GFC, monetary base per GDP has been growing irregularly but is situated so far on the x-axis of the liquidity preference curve (flat part of the curve, even practically horizontal) that changes in balance sheet holdings would result (at this rate) in an effect on short term interest rates in only a few years (perhaps not a good public relations move if there is a perception that you've fallen behind the 8 ball). To raise short term interest rates the way they recently did would have required (using only balance sheet open market operations) an incredibly massive and accelerated pseudo-liquidation of the Fed balance sheet, a potentially destabilizing move? So, to technically 'succeed' in raising rates the way they did, they had to manage rates by increasing the interest rates they pay on excess reserves and in the reverse repo window.

Of course, the end result is the same if your aim is to put constraints on demand. At least that's what the housing markets (and a few other areas) are saying.

-----

Can i ask then, if the Fed has become so tight, why are financial conditions not really reflecting that?

 

[Gregmal]

17 minutes ago, changegonnacome said:

But you really cant ignore now the chorus of respected voices on this inflation issue being 'real', persistent and a problem....

Isn’t this exactly what happened in 2005-07? The chorus of respected voices, mainly academics and hedge funds chirping at the Fed as they put on their short positions? And yea that luminary Larry Summers getting paid $500k for speeches while writing “esteemed” essays on how deregulation of derivatives stabilized the economy…..the Fed is generally well intentioned but naive and prone to listen to academia. Academia is funded and supported by the banks and hedge funds, and the banks and hedge funds sit around talking out of both sides of their mouth until they’ve got their positions lined up? Nothing new.

 

What evidence, at all, do people have to support the claim the inflation is going to be 5% for many years? How many of these people got it wrong just last year? Probably at least half. Who determines that 2% inflation is the golden level but 4-5 will destabilize the entire country? Is there a pundit with an aggressive opinion on 3.5? Kinda golden but kinda bad? People are literally just making things up and running with them. There is a grand total of one time period, 1970s, which isn’t really all that relevant to today, and they’re using that sample size to frame and then draw wild conclusions about what the future holds. 

[Sinbius]

For the people that insist commenting that the

8 hours ago, aesophawk said:

 

Is it a relevant question if there are cheap stocks available? I'm not bullish or bearish on the economy or the market, but currently there are cheap companies in my circle of competence. Does anything else really matter?

 

The title of this thread is "Is the Bottom almost here?"

....

For this thread, that you people can find cheap stocks is the thing that really does not matter...

But of course we love to hear those names

Edited October 5, 2022 by Sinbius

[changegonnacome]

40 minutes ago, Gregmal said:

What evidence, at all, do people have to support the claim the inflation is going to be 5% for many years?

 

Every latin American country you never heard of + the 1970's in the good old USA....inflation once it gets going has a reputation for sticking around that Im sure you've heard about  

 

Like its not only accepted orthodoxy backed up numerous case studies in lots and lots of economies......but on the face & logically you can totally understand the mechanics.........inflation is now in the psyche and forms the basis of every comp discussion I've had in the last 6 months. Those discussions, FOR NOW, are mainly about folks retrospectively restoring their purchasing power for inflation that has ALREADY happened. The danger occurs when folks prospectively begin to incorporate higher inflation expectations that part hasnt really happened yet from my experience. Which is a miracle.

 

Inflation psychology is very real........inflation expectation, for now, do remain anchored....this is amazing news.....people believe it will go away and bit like you @Gregmal they believe, for now that ALL the inflation they see & feel is just supply chain/COVID related and the inflation is short term and should go away once things get 'sorted out' & COVID is finally "gone".....they are wrong, but i hope they keep thinking that, its good for inflation expectations & makes it easier to fix this.......a real problem would emerge if COVID/supply chains thinking were firmly in the rearview mirror and folks began to realize that a good chunk of inflation is ACTUALLY monetary & domestically led inflation & not going away. Thats when the real shit would hit the fan and inflation expectations 2, 3 years out would blow out and every medium/long term labor agreement would start incorporating 4% inflation annualized in it.

 

As I've said for months Jay has window of time here to really get the genie back in the bottle while inflation expectations remain low......the Fed fucked up in 2021 and should have been ahead of this instead of buying MBS's & keeping rates low as COVID morphed into a bad flu via vaccines.....it was madness aided and abetted by Congress.......the fuck up now would be to move too slowly or to move quickly and back off at the first sign of progress on inflation or at the first sign of weakening economy. The Fed seems sensitive to both and for now I think they'll get this problem solved but its not good for the short term mark to market value of financial assets. Longer term it is - as asset accumulators we all should be cheering Jay....he aint gonna help your 12/24 months returns look good....but he's making sure your prospective 10yr returns are gonna be awesome....2032 @Gregmal will thank him, 2022 @Gregmal not so much 

Edited October 5, 2022 by changegonnacome

[Gregmal]

6 minutes ago, changegonnacome said:

Every latin American country you never heard of + the 1970's in the good old USA....inflation once it gets going has a reputation for sticking around that Im sure you've heard about  

You think Latin American countries are economically comparable to the US??

[SharperDingaan]

People are talking their book. - the 'advice' to 'slow down' the interest rate hikes is just evidence that the hikes are working. People are teaming up to sell the collective 'we're too big to fail' argument, that justified the long standing fed 'put' - and the addicts are telling everyone that it's madness to discontinue it !!!

 

It would seem that the economy is indeed slowing, liquidity is drying up, asset bubbles are deflating as rates rise - and that it is becoming harder to move the dog sh1te. CB actions are working.

 

Thing is - this ain't the GFC anymore, and times have changed. There are far too many financial intermediaries for the coming financial innovations, we need a market driven cull, the most efficient way of doing that is by pulling the 'put' and letting the distressed go. We started the decade+ of CB intervention with the Lehman Brothers collapse, we end it with a repeat, restoration of moral hazard, and new financial rails.

 

The collateral damage reducing the gap between the rich and the poor, and facilitating a social 'reset'. 

 

SD

[Gregmal]

16 minutes ago, changegonnacome said:

Inflation psychology is very real........inflation expectation, for now, do remain anchored....this is amazing news.....people believe it will go away and bit like you @Gregmal they believe, for now that ALL the inflation they see & feel is just supply chain/COVID related and the inflation is short term and should go away once things get 'sorted out' & COVID is finally "gone".....they are wrong, but i hope they keep thinking that,

They said the exact same thing about COVID too and a whole two years later people are shopping at brick and mortar stores again. So much of this is just rhetoric that fits the same patterns of past market hysterias 

[DooDiligence]

54 minutes ago, SharperDingaan said:

People are talking their book. - the 'advice' to 'slow down' the interest rate hikes is just evidence that the hikes are working. People are teaming up to sell the collective 'we're too big to fail' argument, that justified the long standing fed 'put' - and the addicts are telling everyone that it's madness to discontinue it !!!

 

It would seem that the economy is indeed slowing, liquidity is drying up, asset bubbles are deflating as rates rise - and that it is becoming harder to move the dog sh1te. CB actions are working.

 

Thing is - this ain't the GFC anymore, and times have changed. There are far too many financial intermediaries for the coming financial innovations, we need a market driven cull, the most efficient way of doing that is by pulling the 'put' and letting the distressed go. We started the decade+ of CB intervention with the Lehman Brothers collapse, we end it with a repeat, restoration of moral hazard, and new financial rails.

 

The collateral damage reducing the gap between the rich and the poor, and facilitating a social 'reset'. 

 

SD

Word. What worked before will not any more.

[changegonnacome]

2 hours ago, Gregmal said:

COVID too and a whole two years later people are shopping at brick and mortar stores again. So much of this is just rhetoric that fits the same patterns of past market hysterias 

I’m afraid this one isn’t - I was right there with you @Gregmal in 2020/21 betting COVID was getting to be a nothing burger….made lots of $$….not everything you read in the paper is nonsense…..and ironically while you think your a contrarian on this, your right smack bang in the middle of the consensus when you look at US index valuations….they display an expectation around BS inflation, a pivot and a return to ZIRP world very soon….but they are Im afraid very wrong.

 

Be careful I get the sense you think your not part of the herd this time but you really are.

[Guest]

2 minutes ago, changegonnacome said:

I’m afraid this one isn’t - I was right there with you @Gregmal in 2020/21 betting COVID was getting to be a nothing burger….made lots of $$….not everything you read in the paper is nonsense…..and ironically while you think your a contrarian on this, your right smack bang in the middle of the consensus when you look at US index valuations….they display an expectation around BS inflation, a pivot and a return to ZIRP world very soon….but they are Im afraid very wrong.

 

Be careful I get the sense you think your not part of the herd this time but you really are.

 

what "herd" is Greg in?

[Viking]

We have:

1.) spiking interest rates - thank you Fed

2.) spiking US$

3.) rising oil prices - thank you OPEC

4.) persistently high inflation - increasingly driven by persistently strong labour market (check out the multi-year increase rail workers just got…).

 

What do you think happens to corporate profits with this set up? Drukenmiller is not a dummy. 

Edited October 5, 2022 by Viking

[Gregmal]

7 minutes ago, stahleyp said:

 

what "herd" is Greg in?

The sweatpants and natty light retiree club lol. 
 

What is funny is I don’t even think I’m positioned that much differently than @changegonnacome. Still pretty much own the same type of stuff I have for a while minus a few tweaks this year due to buyouts and liquidations. The majority of what I own has massive net cash positions, little debt outside mortgage, and high probability of generating north of 10-20% of EV in cash for at least the next several years. My caution and even skepticism comes from the fact that we re sitting here touting this inflation thing except the inflation trade has gotten completely smoked and at some point it makes sense to question whether the market is betting on something else.

 

If the Fed thinks they’re fighting inflation and they’re being sucker Fed garbage academic theory into an economic collapse, you’re gonna wanna have a totally different hedge setup than one just banking on the “12-18 month recession and then 10 years of prosperity”. 

Edited October 5, 2022 by Gregmal

[Guest]

7 minutes ago, Viking said:

We have:

1.) spiking interest rates - thank you Fed

2.) spiking US$

3.) rising oil prices - thank you OPEC

4.) persistently high inflation, now driven by persistently strong labour market (check out the multi-year increase rail workers just got…).

 

What do you think happens to corporate profits with this set up? Drukenmiller is not a dummy. 

 

https://www.pionline.com/investing/druckenmiller-says-risk-reward-stocks-worst-hes-seen

 

He's not dumb...but he's not right a lot of the time either. In fact, I'd guess he's been more wrong than right the past 10 years (maybe even 15). 

 

That was from May of 2020! 

Edited October 5, 2022 by stahleyp

[Guest]

I guess my one concern is a lack of bankruptcies and general hopelessness. I would be even more bullish if that was around. 

[Gregmal]

1 minute ago, stahleyp said:

I guess my one concern is a lack of bankruptcies and general hopelessness. I would be even more bullish if that was around. 

Who hasn’t had time to setup for this though? We had a full year last year of record earnings, low rate refi, and companies being told to prep for higher rates. Even the darkest of downturns within reasonable probability, 1-3 years? Sure there will be some, but many?

Where? O&G is gushing and already had their reset 5 years ago. Banks are better capitalized than ever outside of CS and DB but what’s new there. REITs same deal, balance sheets insanely robust. Where? Brick and mortar clothing companies?