Is The Bottom Almost Here?

[Dinar]

6 minutes ago, dealraker said:

You missed my point.  Skills anyone?  Or is it culture?  We are dealing with low performing isolated people here, you can't just compare ours to yours.  But they share not working.

I think it is definitely culture, and culture often changes over time.  Something tells me that the ancestors of the people you refer to were not lazy when they were farmers.  Similarly, look at Scots two hundred years ago and compare to today.    Look at Mormons in Utah or Germans or Chinese immigrants to the US.  

[DooDiligence]

2 hours ago, Cigarbutt said:

-The musical part

Thanks for the info. Tension and release, interesting. To my untrained ear, your recording reminded me of Stevie Wonder (i hope you see this as a compliment). You may enjoy some of those 'progressions':

6 Stevie Wonder Back Door progression II-7 V7 examples tutorial - YouTube

-The transition to RRP and TGA

Using inter-disciplinary knowledge may be helpful to try to grasp some aspects of complex systems. Alternative views are fine but the Fed may be seen as some kind of orchestra conductor (maestro..). Of course, musicians (private market participants) on the floor (in the real economy) are everything but some need to write (and apply) the rules of the game.

Otherwise, cacophony?

-The transition to a potentially shared investment interest (US commercial banks)

The Fed directly and indirectly funnelled a lot of money into the financial plumbing system in early 2020, relaxing liquidity rules for banks (similar in scale and scope to WW2 epoch) and then did not extend the SLR relaxation rule which diverted a lot of money away from the typical bank deposits to money markets funds which eventually turned to the RRP window in order to search for yield (2.2T still 'sitting' there, musical chair style).

As of the end of September 2022, 6-7% of commercial banks' assets were excess reserves which earn a tightening level of interest (3.15% now and soon to increase) and banks are not really increasing rates on deposits so banks did well during easing (despite tightening net interest margins) and are poised to do even better with further money tightening (assuming some kind of soft landing..).

 

 

That's friggin brilliant! I was totally unaware of the backdoor II V. You've hit on the very genre that has captured all of my recent attention, jazzy soul / R & B. It suits my abilities. I'm not a fancy right hand soloist but do have respectable ability to run right hand chord progressions in a variety of voicing's, and I've been developing my left hand for bass lines (I'm left handed so, duh).

 

Here's a cover I learned tonight. It's a pretty simple progression in C# minor and goes C#⁻7 (RH plays it in 2nd inversion) then a simple chromatic walk down to root position G°7 > F#⁻7 > F#⁻7/B and back to C#⁻7 (left hand plays all the roots). I've got to find a woman who can sing this at an open mic.

 

I'm going to watch that Stevie Wonder tutorial again in the morning.

 

I should probably stop highjacking this thread and start one in the personal category.

 

 

[mattee2264]

The truth lies probably in the middle. Inflation is PARTLY transitory and we are most likely past the peak. 

 

It will probably drop down to mid single digits reasonably quickly as the economy slows down and supply chain issues ease and price level effects drop out of the index and companies find it increasingly harder to raise prices going forward.

 

But the Fed will be unwilling to claim victory and risk easing until inflation expectations are anchored back to the inflation target (although would not surprise me if the inflation target was moved up to 3-4% within the next few years if inflation does prove stickier than expected). 

 

They've already told us that the plan was to frontload the rate increases so it shouldn't be long before we slow to a 50 bps pace of increase (which is not a pivot!) and a more cautious approach might also be justified if there are market stresses from bond market declines such as those experienced in the UK (I don't think the Fed really cares about what happens to the stock market so much) but so far in the USA at least there do not seem to be major issues.

 

And I do not see a return to ZIRP or unlimited QE because the inflation genie is out of the bottle and the neutral rate is probably back around 3-4% and that new normal is going to have an impact on valuations especially for growth stocks and we are probably only partway through that valuation adjustment process as it takes time to adjust to a new reality

 

And even if the economy does go into recession it will be difficult for the Fed to cut aggressively because it needs the recession to help bring inflation back towards target and all indications are that for the USA at least it will be a fairly mild recession so inflation will remain the main focus. And if it does so happen to be a severe recession then the fall in earnings will more than offset any benefits from the Fed pausing/pivoting in response. 

 

So I agree that either way you look at it we are probably only about halfway through the bear market and still have a little way further down to go before we bottom. At least for the index and the growth darlings in particular. 

 

 

Edited October 31, 2022 by mattee2264

[SharperDingaan]

Keep in mind that 75bp vs 50bp today, also leaves the Fed with 25bp for a 'cut' later, and moves the 'pivot' bump to the December fixing. Impacting the Xmas sales that typically make/break the year of many a small business, and the year-end Wall Street bonuses based on December-31 values. Today's talking head are ripping me off! fry those bastards !! 

 

We have some fine vodka and caviar looking for a good home 

 

SD

 

[changegonnacome]

3 hours ago, mattee2264 said:

And even if the economy does go into recession it will be difficult for the Fed to cut aggressively because it needs the recession to help bring inflation back towards target and all indications are that for the USA at least it will be a fairly mild recession so inflation will remain the main focus.

 

Recession & job losses is a feature not a bug.......if they do this right......they will sit patiently with higher rates at their terminal rate of say 5%.........at the exact same time that the economy is printing recession numbers & unemployment is rising MoM towards 5-6%......this is how you actually kill inflation......now I know everybody is used to weakening numbers leading to cuts.....that is not how this cycle will work. 

 

 

Edited October 31, 2022 by changegonnacome

[CorpRaider]

Something different/new this time to keep in mind is the QT.  They can stop hiking and just chill and let that QT run.

Edited October 31, 2022 by CorpRaider

[Ulti]

https://www.msn.com/en-us/money/markets/us-workers-have-gotten-way-less-productive-no-one-is-sure-why/ar-AA13zbIT

 

 

[Spekulatius]

26 minutes ago, Ulti said:

https://www.msn.com/en-us/money/markets/us-workers-have-gotten-way-less-productive-no-one-is-sure-why/ar-AA13zbIT

 

 

I have been wounding about the lousy productivity number shown in FRED since 2021 as well.

The fact that productivity is up in the manufacturing sector and down in the service sector suggest that WFH may be a culprit.

[Ulti]

34 minutes ago, Spekulatius said:

I have been wounding about the lousy productivity number shown in FRED since 2021 as well.

The fact that productivity is up in the manufacturing sector and down in the service sector suggest that WFH may be a culprit.

I blame it on technology social media TikTok …..also us immigration policy….. whatever the cause to me it looks like the Fed has a loooong road to 2% inflation 

[Ulti]

Just now, Ulti said:

I blame it on technology social media TikTok …..also us immigration policy….. whatever the cause to me it looks like the Fed has a loooong road to 2% inflation 

And I also think you can add Covid societal changes like working at home 

[Spekulatius]

37 minutes ago, Ulti said:

And I also think you can add Covid societal changes like working at home 

There are likely multiple causes, but lousy productivity is a real drag on economy. Think about this, it means that less goods and services get produced per unit labor hour and more cost per unit labor hour. That's one reason for inflation right there. Fixing this would go a long way to reduce inflation.

[changegonnacome]

Yep to fix inflation you ideally increase productivity & temper nominal income/spending growth at the same time.......eventually you bring things back into equilibrium (or for a time more precisely slightly below equilibrium (slack))......this restores price stability.........I've seen almost no attention to the productivity trap the US is in right now (this is a job for the fiscal authorities & they are too busy fighting with each other)............therefore to 'fix' inflation all the heavy lifting needs to be done by the monetary authorities.........who through tightening financial conditions eventually effect nominal spending/income to create the desired slack in the economy to bring it into better alignment with aggregate productive capacity.....the unfortunate thing is it generally actually requires a period of negative dis-alignment to get the desired result........you and I might call it a recession.

 

 

Edited November 1, 2022 by changegonnacome

[Castanza]

 

[changegonnacome]

JOLTS data not good - thought best case end of 2023 we could see some rate cuts........suspect its easily 2024 now......American consumers ability to access credit once savings have been exhausted is quite something to behold......ironically stuffing the banks with so much capital post-GFC, while also training bank customers for a decade plus not to expect any interest at all on checking/savings accounts, means the problem the Fed has is that much harder.....the banks have the balance sheets & little pressure to raise deposit rates.

[changegonnacome]

13 minutes ago, Castanza said:

 

 

Ironically Liz is not helping here, not that she'd know........the Fed only effects the short end of the curve........politicians like Liz & expectations around fiscal discipline or lack thereof effect the long end.....ask the other Liz, the one they kicked out of the UK about that one.

 

Congrats in your own modest way Elizabeth Warren you've probably contributed to a tightening of financial conditions.....the opposite of what you intended.

 

 

[Castanza]

10 minutes ago, changegonnacome said:

 

Ironically Liz is not helping here, not that she'd know........the Fed only effects the short end of the curve........politicians like Liz & expectations around fiscal discipline or lack thereof effect the long end.....ask the other Liz, the one they kicked out of the UK about that one.

 

Congrats in your own modest way Elizabeth Warren you've probably contributed to a tightening of financial conditions.....the opposite of what you intended.

 

 

Shes only worried about mid-terms and other elections 

[changegonnacome]

Just now, Castanza said:

Shes only worried about mid-terms and other elections 

 

True

[Gregmal]

The Fed is trying to solve an issue that isn’t solvable at their level. We keep hearing about how shelter is like 1/3 of the CPI. All they’ve done is make that situation worlds worse.
 

Energy? LOL. Put a sock in Big Guys mouth to start. 

 

And the solution otherwise?? is to hurt the economy and take peoples jobs so the record levels of put options and cash held by Wall Street guys egging them on can benefit. Ooooh boy. I wish them luck. Gonna be fun either way. 

[Cigarbutt]

13 hours ago, Spekulatius said:

I have been wounding about the lousy productivity number shown in FRED since 2021 as well.

The fact that productivity is up in the manufacturing sector and down in the service sector suggest that WFH may be a culprit.

If interested in productivity (long term trend, recent noisy numbers etc), you may find the following interesting:

Productivity Growth before and during the Pandemic | NBER

Follow the link...

-----

30-second summary:

-Productivity numbers have been generally trending down

-The authors come up with a concept that explains prior productivity trends around previous recessions and more recent trends around the 2008 recession and especially around the last 'recession'. Employers have been reacting much faster with layoffs resulting paradoxically in higher productivity during recessions and lower productivity later on. For example, in 2020, there was a large number of people (mostly lower productivity workers and lower productivity industries) laid off and when the same people went back to work, output increase was lowish versus the increased number of workers. In Q1 and Q2 of 2022, this resulted (leisure, hospitality etc) in basically no growth in output during strong employment growth numbers.

-The article suggests that, recently, WFH was a positive contributor and contact services, a negative one.

---

Potential weak spots:

The main author has high credibility in the productivity domain but is known to be tied (and maybe endowed) to the low productivity paradox school of thought of the current period.

-reliable WFH data is difficult to collect, may vary across industries and often reflect 'surveys' which may be inflated?

-----

To add insult to the injury, the numbers reported for 'goods' and manufacturing may be inflated also because (secular trend) the fraction of workers in manufacturing coming from staffing services (an industry i have a personal interest in and which i follow) has been increasing significantly over time. Workers hired through staffing agencies often count as payment for 'business services' and do not end up in the typical employment cost found in the denominator below output. And typically, even if staffing agency workers add to output, because of various friction costs, they are typically more costly (versus permanent workers).

-----

Recently, there have been various anecdotal reports describing "labor hoarding" which should contribute to the continuation of lower levels of productivity going forward (until people are laid off).

[Gregmal]

It’s almost like, in a way, all this ridiculous hard ass talk backfired. Shouda just raised and kept his mouth shut.
 

But this is what happens when academics get spoon fed self serving bullshit from Wall Street scumbags. They get hypnotized and drunk and actually go publicly say things like “there’s gonna be pain for American families and millions need to lose their jobs even though it probably won’t work”…my god what a fool.

[UK]

5 hours ago, changegonnacome said:

JOLTS data not good - thought best case end of 2023 we could see some rate cuts........suspect its easily 2024 now......American consumers ability to access credit once savings have been exhausted is quite something to behold......ironically stuffing the banks with so much capital post-GFC, while also training bank customers for a decade plus not to expect any interest at all on checking/savings accounts, means the problem the Fed has is that much harder.....the banks have the balance sheets & little pressure to raise deposit rates.

 

Do you have any opinion on Japan with regards on infliation, rates or growth? They are still keeping rates at 0, currency is in freefall, yet inflation is still not a problem? How could it be so? Why all their printing and spending did not increased infliation? Too much debt? Demography? Is it temporary, or is it something what awaits, if not US, then Europe (how is Italy different from Japan?) in the future, at least to some extend?

 

https://www.reuters.com/markets/asia/weak-yen-prodded-japan-central-bank-debate-inflation-pressure-minutes-2022-11-02/

[changegonnacome]

4 hours ago, UK said:

Do you have any opinion on Japan with regards on infliation, rates or growth?

 

Not a clue - Japan is a mystery to me in terms of what they've done and for how long. 

[UK]

I know that he is not like universally loved here:), but I think it is really good discussion on this whole situation we are in, rates, possible risks etc, especially from ~20 min: 

 

[dealraker]

Old dealraker is chatty this a.m.; don't take me too seriously.

 

Some amount of look-back as to macro posts during all the previous era's would probably produce some amount of lessening of intense worry.  Years ago in the 1990's I simply loved Bill Fleckenstein's posts about the dot com and subsequent profitable tech severe over-valuations, he was perfectly right.  Then Hussman comes along, he's a terriffic read too, his stuff at one time literally made more sense than anything to me.

 

Still, I just read and held stocks and such.  March 9, 2009 was also entertaining for me...you say "that's sick Charlie" but remember I'm hardened from the 1980-82 period when prime was 20 and I had a $500,000 personal baloon loan out that I was not able to make bank delivery on.  But anyway...

 

We have leaders...elderly supposed billionaires who literally, and I mean literally, are out scaming and begging the poor for money every day --- along with elderly, extremely elderly who can barely read the teleprompter, in office leadership.  They are elderly for so many reasons...they are all out-of-it via age and their completely separated from reality life.  Day-traders...very old leaders of the USA are insider trading and my guess is that's more their focus than you think.  

 

Ain't it awful?

 

Kennedy, in my growin' up era was 3.5 decades younger.  Clinton, comparatively young, in my view was simply brilliant.  No, I do not align with a political party!  I like the quick thinkers who are scheming enough to force others to compromise.

 

In any event I picked a few things out of the blue.  One of the posts changegonnacom made included "I woke up and..."  All I will add is that all kinds of "stuff" is in your guys future and more so on average than me because I'm older than most of you.  You have absolutely no clue whatsoever what this "sfuff" is.

 

Again, I always state that what you are obsessed with now is missing what is far more relevant and important...that you aren't even aware of.  I assure you it is there and waiting to (as changegonnacom would say) wake you up.  My guess is that it is so significant that the macro you write about today will be lost from your memory.

 

In any event I processed all that was "awaken" in this discussion years ago, you should have too.  We quote hedge fund runners, they'll be new ones and we'll quote them too.  Jim Chanos will be out and shout; Hussman's still looking for "he was right high five's" (that's called fees no matter the performance) from his bunch.  My guess is we'll have difficulty going forward with having free elections and some of you will initially like that, but then most will eventually engage to stop such and it will be very ugly trying to stop what "we" allowed.

 

My guess too is that if you don't go nuts one side or the other and get yourself killed or imprisoned you'll live a lot longer.  And investments, not cash, will be the way to go.  Along with that I'll further say that avoiding the current euphoricly supported winners will enhance your investment outcome.

 

We seem to be obsessed with Meta and Google.  Old dealraker will simply say one thing: Bet cha the bargains are elsewhere...'cause that's almost always the case.

 

Don't take me too seriously, just chantin' and chatting up some of my biased and slanted stuff.  Wife and I are headed out for a few days of NC hiking in the mountains.  

 

 

 

 

 

Was just yesterday, October 2021, ARK was supreme...SAAS stock raging and 

 

 

[Spooky]

6 hours ago, UK said:

 

Do you have any opinion on Japan with regards on infliation, rates or growth? They are still keeping rates at 0, currency is in freefall, yet inflation is still not a problem? How could it be so? Why all their printing and spending did not increased infliation? Too much debt? Demography? Is it temporary, or is it something what awaits, if not US, then Europe (how is Italy different from Japan?) in the future, at least to some extend?

 

https://www.reuters.com/markets/asia/weak-yen-prodded-japan-central-bank-debate-inflation-pressure-minutes-2022-11-02/

 

 

This Odd Lots podcast was pretty interesting on the topic - if I'm remembering correctly, a lot of Japanese banks / companies needed to rebuild their balance sheets so the bailout funds / increase in the money supply didn't make it into general circulation: https://podcasts.apple.com/us/podcast/richard-koo-explains-why-the-recovery-will-be-so-difficult/id1056200096?i=1000474211676

 

The concept also helps to explain why the bailouts in 2008 didn't result in widespread inflation but the helicopter money delivered from central banks and fiscal authorities directly to individuals during the pandemic led to the current inflation.

 

I also think that Milton Friedman's theory of monetary inflation has also been shown not to be completely accurate - there is not necessarily a direct relationship between an increase in the money supply and inflation. I read a paper on this once but would have to dig it up.

Edited November 2, 2022 by Spooky