Is The Bottom Almost Here?

[CorpRaider]

Time for WSJ leak.

[LC]

1 hour ago, Gregmal said:

BREAKING: HE SAID WHAT HE SAID HE WAS GOING TO SAY

 

Hope everyone analyzes this closely for clues to the next move....

 

The fun part was reading this post prior to looking at the news/market reaction.

 

I was thinking - "Ok, JPow says what we thought he was gonna say, SPY must be dipping into the 3800s?"

 

Then I look and its RALLYTIME GOGO. 

 

This is why guessing at macroeconomics and the market reaction is right up there with "pin-the-tail-on-the-donkey" as a top tier game.

[changegonnacome]

One thing thats consistent with my thoughts is Jay-P is very focused on is Services (ex-home services) which is 50% of core PCE.....this is exactly what I speak about and where the problem is....everything else is coming down as we know everything that comes on shipping containers and tanker......these are haircuts, educations services for example & lots of other things but things that are domestically produced in nature and ultimately constrained by labor availability......and as he said today the scale of wages increases today are not consistent with inflation moderating back to 2% by itself.

 

"Finally, we come to core services other than housing. This spending category covers a wide range of services from health care and education to haircuts and hospitality. This is the largest of our three categories, constituting more than half of the core PCE index. Thus, this may be the most important category for understanding the future evolution of core inflation. Because wages make up the largest cost in delivering these services, the labor market holds the key to understanding inflation in this category.

In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time.³ Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market.

Signs of elevated labor market tightness emerged suddenly in mid-2021. The unemployment rate at the time was much higher than the 3.5 percent that had prevailed without major signs of tightness before the pandemic. Employment was still millions below its level on the eve of the pandemic. Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic—a shortfall that appears unlikely to fully close anytime soon."

[changegonnacome]

24 minutes ago, LC said:

This is why guessing at macroeconomics and the market reaction is right up there with "pin-the-tail-on-the-donkey" as a top tier game.

 

Short term intra-day macro is a fool game.....I agree...but a little longer term view lets call a view which sits 6-12 months out there is an opportunity in marco.....an opportunity to hedge, an opportunity to build dry powder....in truth I dont think its that long away H1 2023 is really going to be so interesting....what this move shows, relative to what J-P said today, is how Pavlovian the 'Fed put' psyche has permeated the markets......which also tells you how badly the markets might/will break when that assumption evaporates in face of actual evidence........the last couple of months have been characterized by, without almost any evidence, that somehow the Fed pivot was coming soon..........IMO a 2023 Fed pivot is priced in........whats not priced in is that there will be no pivot by the Fed in 2023 as the economy + unemployment rolls over & folks begin to squeal in pain. Let's see.

 

I was glad to see him speak about the where the problem is moving forward which is services (ex-home)......or as I've been banging on about domestically produced goods and services sector.........every other category will come down with predictability & is a mathematical certainty.....this important sub-catergory (50% of core PCE)....speaks to an economy operating at the pin of its collar to produce what it currently can....and all increased wages will do is move the quoted prices of these finite goods and services upwards, it wont change the actual amount of goods/services being produced one iota (beyond measly productivity gains)

[Parsad]

6 hours ago, Gregmal said:

There are a lot of false and first level assumptions made to support some fo these notions. Where was everyone last year when it was obvious? Now all signs point south but people love a good story. 

 

Wait a minute!  When I was 60% cash after November of 2021, you were the one pushing back that cash was for morons.  When I was talking about Fairfax being dirt cheap even earlier, you were saying that it was fool's gold.  So, everyone makes assumptions and we are all wrong from time to time.  Cheers!

[Parsad]

6 hours ago, Gregmal said:

 

 

 

Kuppy has been wrong about stuff as much as he's been right...just like all of us.  Cheers!

[Parsad]

3 hours ago, Gregmal said:

Dont know if I'd concur about $300, but the oil trade has and should continue to be a good one. That hasn't changed since two summers ago. I dont think it'll have much impact on forward inflation. We had massive oil spikes in 08 and 2013 or so and little inflation. Folks are just so conditioned bc of the PTSD of the past year that they've concluded anything going up ====== inflation. Thats just not true. 

 

Agree!  Oil at $200 would stifle the global economy into a massive recession.  It's like Jeff Rubin 15 years ago touting $200 per barrel oil back then.  Never happened! 

 

Cheers!

[Gregmal]

8 minutes ago, Parsad said:

 

Wait a minute!  When I was 60% cash after November of 2021, you were the one pushing back that cash was for morons.  When I was talking about Fairfax being dirt cheap even earlier, you were saying that it was fool's gold.  So, everyone makes assumptions and we are all wrong from time to time.  Cheers!

When you were taking about Fairfax at $300 or whatever I was buying preferred apartment for $7-9. When you were touting cash it was on its way to being bought out 70% higher, ignoring the calls. What’s the point. I’ve been between 1.4-2.2x levered most of the year and much wealthier for it. 
 

But we ve been over this before and you know it. If the only security you coulda bought was straight Fairfax common coming out of COVID you’ve got like a double over what? 2.5 years? That’s neither terrible nor great…but also as we ve mentioned, completely ignores the other opportunity sets. 

Edited November 30, 2022 by Gregmal

[Parsad]

1 hour ago, Spooky said:

Time to close this thread? Lol

 

Yeah, I called it then when I started this thread and I would say the rebound runs through into January or so.  So we can close this thread.  

 

The naysayers are going to say it's a fool's rebound and the yeasayers are going to say we're going to the moon!

 

Never in the middle.  As the rebound continues, I'm going to start building some cash again for the next crisis or opportunity!

 

Cheers!

[Gregmal]

Actually correct that, I was buying preferred apartment at $7-9 when you banned me for 2 months cuz I called pre scandal Cuomo a lying scumbag in the COVID thread. That aged well too!

[Parsad]

3 minutes ago, Gregmal said:

When you were taking about Fairfax at $300 or whatever I was buying preferred apartment for $7-9. When you were touting cash it was on its way to being bought out 70% higher, ignoring the calls. What’s the point. I’ve been between 1.4-2.2x levered most of the year and much wealthier for it. 
 

But we ve been over this before and you know it. If the only security you coulda bought was straight Fairfax common coming out of COVID you’ve got like a double over what? 2.5 years? That’s neither terrible nor great…but also as we ve mentioned, completely ignores the other opportunity sets. 

 

 

I didn't just buy Fairfax common...I had bought Overstock at $2.99, BH at $49, M at $4.99...so I was up about 250% with no leverage.  Then I went to 60% cash in November 2021 and started buying again in March, June and September.  

 

My point was that it's neither here nor there.  You've been right and wrong about stuff as much as anyone else.  So maybe the crowing should be kept to a minimum.  Cheers!

[Dinar]

38 minutes ago, changegonnacome said:

One thing thats consistent with my thoughts is Jay-P is very focused on is Services (ex-home services) which is 50% of core PCE.....this is exactly what I speak about and where the problem is....everything else is coming down as we know everything that comes on shipping containers and tanker......these are haircuts, educations services for example & lots of other things but things that are domestically produced in nature and ultimately constrained by labor availability......and as he said today the scale of wages increases today are not consistent with inflation moderating back to 2% by itself.

 

"Finally, we come to core services other than housing. This spending category covers a wide range of services from health care and education to haircuts and hospitality. This is the largest of our three categories, constituting more than half of the core PCE index. Thus, this may be the most important category for understanding the future evolution of core inflation. Because wages make up the largest cost in delivering these services, the labor market holds the key to understanding inflation in this category.

In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time.³ Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market.

Signs of elevated labor market tightness emerged suddenly in mid-2021. The unemployment rate at the time was much higher than the 3.5 percent that had prevailed without major signs of tightness before the pandemic. Employment was still millions below its level on the eve of the pandemic. Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic—a shortfall that appears unlikely to fully close anytime soon."

What has been educational inflation?  I hear that private schools in NYC and Ivy League are raising tuition 4%, in line with historical averages, if not less than historical averages.  

[Parsad]

5 minutes ago, Gregmal said:

Actually correct that, I was buying preferred apartment at $7-9 when you banned me for 2 months cuz I called pre scandal Cuomo a lying scumbag in the COVID thread. That aged well too!

 

I didn't ban you because you said anything about Cuomo...you were just being an ass!  And often!  Cheers!

[Gregmal]

Lol my general point, missed I guess, was just go look. Roll back the clock 12-15 months. Investor psychology and sentiment are huge complements of the market. Last year most people were dead convinced inflation was transitory. Now after hearing about it all year they think it’s here to stay. Those are indicators I find hugely enlightening. I don’t like crowds.

[dealraker]

Fantastic thread.  I just read and enjoy.  

[Parsad]

40 minutes ago, Gregmal said:

Lol my general point, missed I guess, was just go look. Roll back the clock 12-15 months. Investor psychology and sentiment are huge complements of the market. Last year most people were dead convinced inflation was transitory. Now after hearing about it all year they think it’s here to stay. Those are indicators I find hugely enlightening. I don’t like crowds.

 

Totally agree with you.  I don't like crowds either...except at the COBF!  Cheers!

[changegonnacome]

1 hour ago, Dinar said:

What has been educational inflation?

 

Didn't have any comment on educational inflation figures....I have no idea, havent looked - i was simply pointing out the various misc. things that fall in this services (ex-home services) inflation bucket.....and how these items are the next leg of inflation.....the category that, ya know, isn't mathematically guaranteed to come down like energy/supply chain is. 

[changegonnacome]

1 hour ago, Gregmal said:

Now after hearing about it all year they think it’s here to stay. Those are indicators I find hugely enlightening. I don’t like crowds.

 

But isnt the market indices (the crowd), at its current multiple of earnings, assuming inflation is effectively fixed and is coming down in a kind of predictable slope in the next 6-12 months with rate cuts in there too and it will ALL happen without a recession in between effecting SPY earnings? Isn't that what the crowd is saying and what the current market multiple suggests? The much fabled soft landing? I'm just curious.

 

On days like today I certainly dont feel like part of the crowd as QQQ rallies 6%......and SPY rallies 3%......I feel quite contrarian with lots of red ink to prove it! I thought its meant to feel comfortable in the crowd at least

 

Edited November 30, 2022 by changegonnacome

[Gregmal]

15 minutes ago, changegonnacome said:

 

But isnt the market indices (the crowd), at its current multiple of earnings, assuming inflation is effectively fixed and is coming down in a kind of predictable slope in the next 6-12 months with rate cuts in there too and it will ALL happen without a recession in between effecting SPY earnings? Isn't that what the crowd is saying and what the current market multiple suggests? The much fabled soft landing? I'm just curious.

 

On days like today I certainly dont feel like part of the crowd as QQQ rallies 6%......and SPY rallies 3%......I feel quite contrarian with lots of red ink to prove it! I thought its meant to feel comfortable in the crowd at least

 

Eh its always a work in progress but 1) I think folks who are negative are still too attached to "their" idea of what valuations should be, rather than maybe what the reality is. The reality is, plain and simple, the market is and was off quite a good amount and specific companies have in many cases gotten it even worse. Lots of folks have in their head that an entire index should trade at some preconceived multiple. I dont really pretend to know what that multiple is, just rather that I dont have to buy stuff I dont like and that rates still, historically speaking are and will be lower than folks expect longer term. Also, valuation shorts are always a bad idea. 

 

On the 2)...IDK, again, 15-25% down on the year for the index. Did you overstay your welcome? One good day, one bad day, or week/month whatever shouldn't really influence any of that.

 

Bigger picture theres only so many times in a many decade stretch where you get such calamity and volatility. Markets look forward. Maybe the next 6 months are rough optically...then what? I think its clear we are at the point where the worst of the inflation is behind us and largely...the inflation/rate story is closer to the end than the beginning in the US. Its reminded me a bit of COVD. Remember in April, May, June, July 2020? Folk sat there in awe, yes, many of the same folks who have gotten wrapped up in the inflation story, and just COULDNT BELIEVE what the market was doing. How TF could we only be 10% off the highs? Risks are EVERYWHERE! they shouted. They got too caught up in the story. Missed it. Then just continued to stare at what was immediately in front of them even though the vaccine was said all along to be a 6-9 month project. Markets started getting comfortable with the situation and then it just became a matter of time until the story and narrative changed to something else. If you waited for the all clear or the vaccine news you missed most of it. Thats just how it works. When/if we get to 2% CPI inflation will be long forgotten about. 

Edited November 30, 2022 by Gregmal

[Gregmal]

Like how bad where things in 2009? And the forward multiple was 70x! Or Q2 2020 when the covid infatuation had people screaming Great Depression! and GDP is going to be awful! Of course, the market doesnt give a shit about what everybody already knows. Todays headlines are worthless. Its about seeing whats ahead. CPI will roll into nothing next few Qs. Things may not be over forever, but this story IMO is for now. 

[changegonnacome]

Fair enough.....but it sure doesn't feel like this market is priced as if everyone is bear-ish and convinced inflation is a problem and were heading for a recession to fix it.......it feels like the opposite and IMO is priced, at indices level at least, feels like the Fed has pulled off the unimaginable........a soft landing.....inflation is definitely transitory THIS time for SURE  

 

27 minutes ago, Gregmal said:

CPI will roll into nothing next few Qs.

 

Yep the market agrees with you.

[Gregmal]

Whats double cool, if you really step back from the whole thing...there is an angle that makes sense. I always like to imagine "what will the history books say?". So again, IDK anything with certainty, but from 1000 ft, you could say all of this perfectly marked the transition of the low interest rate bubble into a new economy(led by the old economy) where new leaders will be born and they'll be banks, energy, housing, and insurance companies or stuff that earns real money and lots of it vs the asset lite technology theme of the past decade. What are the hallmarks? Blow off top...covid. Shit and Ponzi blew up first. Then the mediocre but ok tech. Then the fringe quality. Then, like we've seen the last 6-9 months or so....everything. Hit all the hallmarks of a cycle turn.

 

So I lean toward being in or close to being in, a new cycle. Fed seems to be getting what it needs on the inflation front and the economy is still decent. So they could have engineered the soft landing. But whats more stunning to me...all along the big bear thesis of the Roubini variety have claimed the Fed is trapped. Well, over the past 6 months it seems they've given themselves a whole lotta room for 25 bps cuts if things deteriorate. In a roundabout way these jackasses kinda pulled it off. 

 

So if nothing else, its interesting and a theory I'm paying attention to. That said, I still aint super duper bullish and like half my shit is in MSG, AIV and JOE which hardly scream balls to the wall long but I do think theres plenty now available that has real earnings and will do well and as we'll touched upon...if that is the case, do the indexes matter? 

Edited December 1, 2022 by Gregmal

[UK]

https://www.bloomberg.com/opinion/articles/2022-11-30/federal-reserve-s-chief-jawboner-powell-slows-down-to-let-data-do-the-talking?srnd=premium-europe&leadSource=uverify wall

 

Speaking at a Brookings Institution event on Wednesday, Powell checked the shock and awe at the door and instead offered one of his most candid assessments yet of how little he knew about the path forward. Responding to a question about why the Fed hadn’t chosen a more aggressive path, he said: We’re in a position where the right thing to do is to move really quickly, as we have, and now slow down and get to that place where we think we need to be. And by the way, there’s high uncertainty around that. You know we have a broad set of thoughts about where that destination might be, but we could be wrong. It could be higher than that, it could even be lower than that. We’ll have to see. 

 

Seems like suggestion from Powell himself not to be so sure about either scenario anymore:)

[thowed]

16 hours ago, Gregmal said:

Last year most people were dead convinced inflation was transitory. Now after hearing about it all year they think it’s here to stay. Those are indicators I find hugely enlightening. I don’t like crowds.

 

I attended a presentation by a Macro fund last week, and they were talking about 'Inflation Volatility' i.e. they said it'll go away, and then come back, and that will catch people out.  I find this a more believable narrative.

[changegonnacome]

13 hours ago, Gregmal said:

I do think theres plenty now available that has real earnings and will do well and as we'll touched upon...if that is the case, do the indexes matter? 

 

 

Yep I agree - my bearish-ness isnt some cassandra complex.....its I want these same things that you and I agree on at even lower prices than today......I'm greedy, very greedy........and just feel there is a one more leg down left before inflation is truly 'fixed' and the moment of maximum opportunity is when genuine weakness shows up in the economy, in unemployment numbers and the Fed sits on its hands and doesnt stimulate as it has done for the last 40yrs....I kind of call it the....."somebody should do something" moment.....it'll be around the time when the folks on CNBC are screaming that the Fed needs to step in to help the markets/economy, that this is crazy.....& the Fed doesnt step in....because their job right now is to actually stand back and allow weakness to permeate the economy such that inflation gets dead and buried.

 

Like you have to admit the madness right now out there in the media - around a Fed pivot with CPE at 6%+ and the economy with historically unprecedented low unemployment number & job openings. Its delusional.

Edited December 1, 2022 by changegonnacome