Is The Bottom Almost Here?

[Gregmal]

You know, cuz it’s about the people making $30k a year they got 5% raises when inflation was 8% and couldn’t handle $900 a year extra in expenses when their stimulus checks ran out….

[changegonnacome]

Its about that ....but its about way more than that @Gregmal....

 

Inflation is a mental tax on an economy that impairs long term planning & business investment - it destroys long run economic prosperity for everybody

 

Inflation has history of destabilizing societies/democracies....you look around recently?.....the USA is pretty polarized already politically......would you like to see Jan 6th v2.0?

 

I could go on and on.....

 

[UK]

5 hours ago, Gregmal said:

We must stop inflation! 
 

middle class dude 55 years old

annual salary $130k

Expenses yearly $60k

401k $550k

 

5% inflation 

Costs $3000 in added living expenses

 

solving 5% inflation? 
costs his retirement account $150k 

 

more genius 
 

 

 

US saving rate is 3 per cent (and average 401k perhaps much lower)

[Gregmal]

15 minutes ago, UK said:

 

US saving rate is 3 per cent (and average 401k perhaps much lower)

Math is the same. We have one and a half years of whacky stuff going on from COVID. And the response has been to so far, wipe our years of savings. Someone with $60k annual income and a $200k 401 has lost $50k over what? $800 in annual expenses? 

[Gregmal]

27 minutes ago, changegonnacome said:

Its about that ....but its about way more than that @Gregmal....

 

Inflation is a mental tax on an economy that impairs long term planning & business investment - it destroys long run economic prosperity for everybody

 

Inflation has history of destabilizing societies/democracies....you look around recently?.....the USA is pretty polarized already politically......would you like to see Jan 6th v2.0?

 

I could go on and on.....

 

Except not coincidentally? The whole world handled COVID the same way and not surprisingly the whole world is dealing with the same temporary side effects. 
 

Unfortunately, the middle class people getting fucked are too civilized to riot. They’ll just spend another decade or two working. 

[UK]

46 minutes ago, Gregmal said:

Math is the same. We have one and a half years of whacky stuff going on from COVID. And the response has been to so far, wipe our years of savings. Someone with $60k annual income and a $200k 401 has lost $50k over what? $800 in annual expenses? 

 

How it could be the same if you earn 100, spend 97 and currently the first increases by 5%, while the later by 8%? But at the end who cares if FED is making mistake again or not. It just more opportunities I think. This "morelike 2008" environment with all that fear, higher yields and lower valuations, isnt it better for active investor?

 

For some people it just happened to be very unfortunate, especially because of bonds this year e.g.in our country, pension funds put you automatically into fixed income, almost like 80 per cent, when you just to about to retire, so they have not earned anything like for 3 year now to begin and this year are about to know what "conservative fund" really means while yields go like that. 

 

 

Edited October 12, 2022 by UK

[UK]

I think this GB case evolving in real time is really interesting and could provide some ques of what to expect:

 

https://www.wsj.com/articles/the-bank-of-englands-dilemma-easing-and-tightening-at-the-same-time-11665501588

 

 

[Gregmal]

15 minutes ago, UK said:

It just more opportunities I think. This "morelike 2008" environment with all that fear, higher yields and lower valuations, isnt it better for active investor?

Oh it’s great for longer term investors and sophisticated folks. I think I said here in maybe January or February that after the last few years I’ve gotten to the point where I want nothing more than a huge market crash where I can just buy great stuff and just do absolutely nothing for the rest of my life vs the past decade of actively trading to generate 30%+ returns. The brain drain of active investing is tough. It’s happening. But it’s happening at the expense of who? And who’s profiting off it? The same weasels and scoundrels who did in 2008 which was largely something they created. I don’t care if my personal stuff declines because it’s money I don’t need and I can just buy more. I’ve worked for maybe 10 years in my life in the traditional sense. But you see all around the regular folks who did what they were told and now it’s their burden. Cuz hedge funds are greedy and see an opportunity and folks who can never seem to get their shit together can’t handle $800 a year increase in expenses once stimmies stop.

[Gregmal]

I should just tell my father in law and my tenants…hey you shoulda just bought preferred apartments and Pershing tontine you dumb fucks, right? If we re really concerned about “the most vulnerable” wouldn’t it be the ones who actually put effort in vs the ones who just always seem to fuck  up? It’s pretty much impossible to be making $30k a year in the current job market. I went to pay my utility bill for my rentals at town hall the other day…help wanted signs up. $47k a year plus gold plated benefits to do 9:30-4 with an hour lunch and two half hour breaks and $88k a year to drive a truck at the DPW while on call 24/7 for snow plow. Like come the fuck on.

[UK]

FED and treasury to the rest of the world: drop dead.

 

The dollar has been virtually unstoppable this year, and Janet Yellen just said it’s in the US interest for the currency to be driven by markets. Central banks from Japan to Chile have stepped in to try shield their currencies from the worst of the dollar’s onslaught, but the efforts have yielded limited results. Yellen, who said a “market determined value of the dollar is in America’s interest,” is giving investors little reason to bet against the greenback for now.

 

“I don’t see any imbalances yet that would cause a pivot from the Fed,” Citigroup Inc. economist Veronica Clark said on Bloomberg Television. “The Fed will pay attention to global financial stability concerns, a strong dollar is part of that, but it’s ultimately going to be domestic conditions and what the Fed is seeing on inflation.” 

 

Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”

[changegonnacome]

9 minutes ago, UK said:

FED and treasury to the rest of the world: drop dead

 

Well the FED has the power to effectively slow down the rest of the world too via dollar strength (its nice to be the reserve currency), which is deflationary over time and which is also the point and added bonus for Jay-P............so sending the rest of the world into a recession is kind of the point and hell its working.

[UK]

https://www.bloomberg.com/news/articles/2022-10-11/jerome-powell-s-inflation-fight-recalls-paul-volcker-s

 

Today, with its tough talk and a series of supersize interest rate hikes, Powell’s Fed seems to be trying to show that it, too, is prepared to do whatever is necessary to bring down inflation. But the legend of Volcker, the superhero inflation fighter, often overlooks just how costly that battle was. Years later, in his conversations with me as I helped him write his memoir, Volcker still wrestled with the question of whether he could have done anything differently and caused less harm to American workers and the economy. “Did I realize at the time how high interest rates might go before we could claim success? No,” Volcker wrote in his memoir. “From today’s vantage point, was there a better path? Not to my knowledge—not then or now.” The real test for Powell and his colleagues will be whether they can also persist if the economy and the financial system start to show serious signs of strain. Volcker told me he supported Powell’s nomination as Fed chairman because he liked that his background was in the financial industry and the Treasury Department—experience that Volcker believed would help him better understand the practical effects of monetary policies.

[thowed]

We are getting to the stage, when I would recommend people re-read some of the posts on here from February and March 2009, just to remind themselves on what it's like near a really epic bottom.

 

Obviously each bottom is caused by something different, but things rhyme.

 

One of my takeaways was how some stuff was UNBELIEVABLY cheap, and so people kept buying, and then... it would go down again.  While the cracks are starting to show (especially in the UK), it doesn't feel that there is that level of madness yet.  Of course, I hope there won't be (partly for the general state of things, partly because I'm fully invested).

 

Good luck to all!

[mattee2264]

Not sure how we can be considered close to an "epic bottom" when the S&P 500 is above 2019 levels and trading at around 17-18x earnings and is only down 25% or so from what was clearly a speculative peak. 

 

There is more fear in the markets that is for sure and a few canaries in the coalmine starting to sing. But I think a large segment of the market still believes we are close to the bottom and a pivot is coming and do not want to miss the turn. There is also still the "bad news is good news" mentality whereby bad economic data or signs of stress in the financial system increase the chances of a pivot or a bailout/resumption of QE so are seen as bullish which gives the Fed an omnipotence it really does not deserve. There is also the feeling that the Fed is pushing the global economy into recession so as soon as the Fed backs off all will be well. 

 

Also memories are short and markets haven't experienced a proper bear market in a long time. They are used to the quick crashes that end with a Fed bailout and a swift recovery to new highs. But so far this is playing out in textbook style with a long and prolonged grind downwards with impressive but brief bear market rallies and we probably have another 6-12 months to go before we finally bottom. 

 

We still haven't really seen the earnings story play out. Markets are still trading on inflation prints and Fed minutes/decisions. We are still in an earnings revision cycle and we've seen how markets punish disappointment and that process will continue until consensus estimates are more realistic.

 

Also the S&P 500 is still 25% technology stocks and I think there is still a lot of vulnerability there as they are global companies that will suffer during a global recession and also there was a lot of technology investment during the pandemic that inflated earnings and that will stop as companies try to make cuts to weather a recession and they are also most vulnerable to further rises in interest rates. The technology giants are also now mature companies that have saturated their markets and are therefore more affected by the economy and will struggle to grow. Companies like Apple, Google, Microsoft used to trade for like 15x earnings when they had far far far more room to grow earnings and revenues. So in some ways it is a Nifty Fifty scenario and even for the good companies in that bunch the declines were far more brutal than the 30% or so decline the better FAANG companies have experienced. 

 

 

[Gregmal]

4 hours ago, thowed said:

We are getting to the stage, when I would recommend people re-read some of the posts on here from February and March 2009, just to remind themselves on what it's like near a really epic bottom.

 

Obviously each bottom is caused by something different, but things rhyme.

 

One of my takeaways was how some stuff was UNBELIEVABLY cheap, and so people kept buying, and then... it would go down again.  While the cracks are starting to show (especially in the UK), it doesn't feel that there is that level of madness yet.  Of course, I hope there won't be (partly for the general state of things, partly because I'm fully invested).

 

Good luck to all!

The thing is, why does it have to be equivalent to the 2009 system wide blow up. Raising rates to 3-4% isn’t really a big deal and 5% would probably be uncomfortable but pretty much in line with historic levels. 
 

There is so much revisionist bs the floating around. For instance, in March 2020 the Fed cut rates to 0 and said they’d buy more bonds. For weeks following this the market plummeted. None of the Fed cryers were screaming “buy!” Because of how obvious it was rates were going to be low or because of “all the liquidity in the system”. Even months later they were silent. Only significantly after the fact, did all this obvious jargon become apparent. So Im not sure why they’re given such wizard like forecasting credibility because in reality it’s been the same tune sung for a long time. 

[Parsad]

14 hours ago, Spekulatius said:

How do you explain that the USD is so high if they are selling treasuries. Do you think they keep it in cash? They sure aren’t buying stocks or real estate.

 

USD is high because its the primary reserve currency and investors have fled to cash from equities and longer term bonds with USD providing the best interest rates.  As soon as markets start to settle, it is possible that U.S. debt will have to pay up in interest rates to roll over maturing bonds.  The demand is there presently...the concern is what happens when demand dwindles.  Cheers!

[Parsad]

55 minutes ago, Gregmal said:

The thing is, why does it have to be equivalent to the 2009 system wide blow up. Raising rates to 3-4% isn’t really a big deal and 5% would probably be uncomfortable but pretty much in line with historic levels. 
 

There is so much revisionist bs the floating around. For instance, in March 2020 the Fed cut rates to 0 and said they’d buy more bonds. For weeks following this the market plummeted. None of the Fed cryers were screaming “buy!” Because of how obvious it was rates were going to be low or because of “all the liquidity in the system”. Even months later they were silent. Only significantly after the fact, did all this obvious jargon become apparent. So Im not sure why they’re given such wizard like forecasting credibility because in reality it’s been the same tune sung for a long time. 

 

Doesn't have to be equivalent to 2009, but it can be a more prolonged painful correction.  In 2009, and I remember that period clearly, you had systemic failure of global financial institutions.  We are not facing that.  So I can't imagine it being anywhere near as bad as what we witnessed then, or even March 2020 when you had essentially the whole world (other than essential businesses) shut down.  But you knew that with the intervention at every level during both periods, the rebound would be quick.

 

This time, the firepower just isn't there.  So while the overall situation is not nearly as bad as those two periods above, the consequences may be longer and more painful simply based on the duration.  What if we had a sideways market for 3-4 years...10 years?  That is the situation that we are facing depending on how deep the contagion becomes.

 

I think it is 50/50 we get some relief into 2023, but depending where the dominoes are and how they fall, it may be short-lived relief, and we incur bouts of despair and optimism for some time.  Think the late 70's to early 80's.  Ugly, ugly period where the pain was drawn out over many years to the point where most people had given up on equities by 1981/1982, and the valuations were extremely cheap.  

 

Personally, I can't guess what is going to happen.  I can only say to myself..."hey, that sucker is cheap, I think I can do well over time, and I would rather own that than sit on cash or own fixed income instruments."  That's it!  That's the only cognitive advantage I truly have when it comes to investing in the market, and it is a valuable one if I stick to it.  Look at all these brilliant investors out there proselyting about what will happen...they have no fucking clue!  Average in, average out, and you'll do better than the index over time. 

 

Cheers! 

[changegonnacome]

2 hours ago, Parsad said:

Look at all these brilliant investors out there proselyting about what will happen...they have no fucking clue! 

id argue the macro guys - in particular Bridgewater - Dalio/Prince - have a pretty good clue of what’s happening & likely to happen….you’ve got inflation…you’ve printed too much money…..now policymakers in the US aren’t dumb enough like the UK to add fuel on the fiscal or monetary side…..so a slowdown/recession is coming and it isn’t a choice anyone has I’m afraid some people are acting like it is…..you can do nothing and have a stagflationary grind lower where inflation itself without any intervention from Fed destroys incomes & spending over time and returns price stability. This is the miserable and uncontrolled and untargeted  and longer timeline methodology to return price stability. It has outrageous unintended consequences for your society & political system and in aggregate creates way MORE misery and for a longer period of time. Not a good option.
 

The second option is what the Fed is professing a plan to do…..a controlled & targeted return to price stability….where the REAL collateral damage (the unemployed, not asset prices) can be supported with EXISTING government programs and we get through this in 12-18 months. Asset prices will come back in a return to price stability...it's a temporary mark-to-market phenomenon.

 

The third option is a somewhere in between the first two.......history says that this is the most likely path....the Fed will get scared and back off rates too early.....fiscal authorities might get voted in to print more money.
 

I guess the fourth option is just pretend inflation doesn’t exist, that everybody is doing great because ONE data point - unemployment - remains low.

As I’ve said many times here before, one should think about inflation as the phenomenon of EVERYBODY (or certainly a great % of the population) losing their jobs slowly and over time via diminished purchasing power...it's a recipe for misery & instability.

Edited October 12, 2022 by changegonnacome

[Red Lion]

8 hours ago, thowed said:

We are getting to the stage, when I would recommend people re-read some of the posts on here from February and March 2009, just to remind themselves on what it's like near a really epic bottom.

 

Obviously each bottom is caused by something different, but things rhyme.

 

One of my takeaways was how some stuff was UNBELIEVABLY cheap, and so people kept buying, and then... it would go down again.  While the cracks are starting to show (especially in the UK), it doesn't feel that there is that level of madness yet.  Of course, I hope there won't be (partly for the general state of things, partly because I'm fully invested).

 

Good luck to all!

 

I remember those days, and I remember seeing huge forced selling as people were liquidated from their positions with margin calls. I haven't begun to see the forced selling yet this time around, at least not nearly to the same degree.

 

I have forced myself to allocate a significant amount of dry powder over the last 30 days because I want to be disciplined about buying on the way down, but I wouldn't be surprised if there's quite a bit further (percentage wise) until the bottom. 

[Spekulatius]

14 hours ago, Gregmal said:

 

This particularly hits close to home for me because my father in law, a great normal middle class guy, is losing sleep because he’s lost a decade of savings this year. He isn’t financially sophisticated and spent 20 years busting his ass. He got lucky when Carl Icahn got his company, Forest Labs sold for a small fortune and that finally propelled him from two decades of paycheck to paycheck into some comfort. And now it’s gone to hell because…”the economy was too good”??? In other words, normal people were doing well and finally had job leverage?

 

 

I am curious, how do you lose a decade worth of savings in a 21% decline? Assuming, he had his money in index funds, he would be back to where his account was in November 2020, which does not seem like a big deal to me.

 

Checking back to a decade ago (2012), he would still have 3x his money.

[adesigar]

I don't get the complaints about the drop in the S&P. The only reason the S&P rose to 4800 was because the fed had low interest rates. The fed giveth and the fed taketh away. Market is not even back to pre Covid levels. 

[CorpRaider]

CAPE is below 27. Yay!

Edited October 12, 2022 by CorpRaider

[changegonnacome]

Just now, CorpRaider said:

CAPE is below 27. Yay!

 

Historical bargain....get in there, you brown bear 

[Gregmal]

9 minutes ago, Spekulatius said:

 

I am curious, how do you lose a decade worth of savings in a 21% decline? Assuming, he had his money in index funds, he would be back to where his account was in November 2020, which does not seem like a big deal to me.

 

Checking back to a decade ago (2012), he would still have 3x his money.

As earnings increase so does contributions. Money you put into a retirement account largely doesn’t matter in your 20s and 30s. Same type of stuff you’ve mentioned before about stage of the game being different for everyone. Outside of basically everyone who owned a house in 2008, who got set back the most? People on the back end of their work career(or so they thought I guess)

[CorpRaider]

2 minutes ago, changegonnacome said:

 

Historical bargain....get in there, you brown bear 

Slightly below the bargains seen at the peak in 1929.  They didn't even have magic internet money ponzis back then.  Hooray!

Edited October 12, 2022 by CorpRaider