Is The Bottom Almost Here?

[SharperDingaan]

It is pretty clear that from now through the end of May, Canadian CPI is going to drop to around 4.7% from the current 6.8%. Simply because the cumulative Feb-May 22 change of 2.1% drops off, and is replaced with Feb-May 23 change, where the average monthly change has trended at near zero for the last six months. Similar story in the US. https://www.bankofcanada.ca/rates/price-indexes/cpi/

 

The yield curve drops 200bp+, millions of people instantly have lower mortgage payments, and all just in time for the nice weather of summer. Getting below 4.7% doesn't happen unless we have successive monthly deflation ... so keep firing those tech bro's in the hundreds of thousands, and speed it up!

 

It would be pretty surprising if we didn't have a nice summer rally, but that's not the 'story' being sold.  

Opportunity is knocking 

 

SD

 

[Spekulatius]

2 hours ago, james22 said:

 

Sure, I did as well.

 

But I also had factor, International, and sector funds available.

 

Maybe I was just lucky.

I have small cap, international funds as well as some more tech funds available as well (as have most plans) but most of these seem worse options than a good old Sp500 low cost fund, due to higher cost or worse LT performance.

I spread things a bit around but mostly find that going with the index fund is the best risk reward overall and i suspect many do the same.

Edited February 24, 2023 by Spekulatius

[Luca]

1 hour ago, Spooky said:

Fuck the short term noise. Invest in good companies with pricing power and a margin of safety.

Yeah, its so exhausting whenever i read J P Morgan expect -20% by end of year or Goldmann sees upside there. Dont overpay for a great moaty business with a long runway and let it sit, end. 

[Sweet]

9 minutes ago, SharperDingaan said:

It is pretty clear that from now through the end of May, Canadian CPI is going to drop to around 4.7% from the current 6.8%. Simply because the cumulative Feb-May 22 change of 2.1% drops off, and is replaced with Feb-May 23 change, where the average monthly change has trended at near zero for the last six months. Similar story in the US. https://www.bankofcanada.ca/rates/price-indexes/cpi/

 

The yield curve drops 200bp+, millions of people instantly have lower mortgage payments, and all just in time for the nice weather of summer. Getting below 4.7% doesn't happen unless we have successive monthly deflation ... so keep firing those tech bro's in the hundreds of thousands, and speed it up!

 

It would be pretty surprising if we didn't have a nice summer rally, but that's not the 'story' being sold.  

Opportunity is knocking 

 

SD

 

Yeh, I’m not seeing rampant inflation anymore.  I could see it a year ago, but where has it been in recent months?  

[Dinar]

4 hours ago, changegonnacome said:

 

Dude - i didnt acuse you of lying....your being hyper-senstive.....I said even if true....exactly cause I couldnt be bothered to check.......because if thats the case in NY or anywhere else.....it isnt changing the productivity/output/wages math in any timeline that matters....maybe over 5-10 year period we get a federal/state fiscal crisis or something thats get you the cathartic cleansing of lay-abouts your dreaming about.....but it aint fixing inflation this side of Christmas! Like think we can agree on that? Anyway did not mean to be offensive to your point it was simply I dont think its gonna help with this inflationary bout we are dealing with, thats all.

You are right.  In terms of productivity by the way, look up a NYT article from a few years back about 2nd avenue subway.  Not only twice as many workers were used than needed, but for instance a machine that in France is operated by two people was operated by fifteen or twenty in NY.  There is insane amount of low hanging fruit, the question is when it will be harvested.

[Gregmal]

Elon Musk showed everyone what productivity is at Twitter. Imagine what’s possible at the government level?

[SharperDingaan]

2 hours ago, Sweet said:

Yeh, I’m not seeing rampant inflation anymore.  I could see it a year ago, but where has it been in recent months?  

 

250bp rate rise over 4-months sucked the spending power into mortgage service.

Can't get as much inflation if you no longer have the money to chase goods.

 

SD

Edited February 24, 2023 by SharperDingaan

[changegonnacome]

1 hour ago, Gregmal said:

Elon Musk showed everyone what productivity is at Twitter. Imagine what’s possible at the government level?

 

Maybe he can take private the Federal government......once FSD beta is released next year 

 

From now & until then Norma will be sending invoice reports by fax to Jean..who works for Brad......who's assistant Thomas's job is to scan them faxes into an email report.......so that they can get sent to both Bill & Brad to review and sign off on  

[nafregnum]

It looks like starting in March, lower income US consumers will have around $2.5B less per month to spend:

 

12% of the US population depends on SNAP (food buying assistance for low income households), and as of beginning of March, the COVID emergency allotment payments will end for the 35 states which were still paying them.  Losses will vary across households but an average 3 person household will see a $197 decrease in SNAP assistance.  By my napkin math, the total impact size seems like around $2.5B per month.  Not sure how that compares to the size of all the layoffs in big tech, but it feels like it must be quite a lot more than those?  Is it big enough to be a disinflationary factor?  I wish I knew.  Is that big enough that we might be able to detect an increase in crime rates?

 

 

For avoidance of doubt about my intent: I wholeheartedly support the SNAP program.  I grew up just a poor boy from a poor family, and food stamps made it possible to eat and survive on what little income my mom could make.  My heart goes out to all these people who will surely be feeling much more financial pain than I would over the loss of $200/month.

 

[Gregmal]

Dont even get me started. Every year I come back from my winter exodus to Florida and you start entering certain states and its glaring. A few miles of highway work shouldn't take half a decade. Meanwhile every 3-6 months I visit down South and new roads and buildings are up and running. Funded by 0% state income taxes as well. 

[Castanza]

1 hour ago, Gregmal said:

Elon Musk showed everyone what productivity is at Twitter. Imagine what’s possible at the government level?

 

Freeze the pensions, transition to a 401k, get rid of the Public Sector Unions and watch the roaches scurry. 

[changegonnacome]

 

What did we say before about profits?........something about them getting whacked I think? To standstill at this ~4000 level the only option is to keep paying higher and higher multiples for lower and lower earnings.........expanding multiples you say, we've done that before? Yeah I agree....but this aint the 2010's with ZIRP stretching out as far as the eye could see....we are now in IIRP (inflation interest rate policy!)....the old time math says that with interest rates rising on risk free or less risky fixed income alternatives....one should, all things being equal, be paying less of a multiple for earnings on equities. Maybe Buffet got confused with all that gravity talk before

[mattee2264]

Worth pointing out that these estimates are still ABOVE 2021 peak earnings which were juiced by stimulus 

 

 

[Dinar]

31 minutes ago, nafregnum said:

It looks like starting in March, lower income US consumers will have around $2.5B less per month to spend:

 

12% of the US population depends on SNAP (food buying assistance for low income households), and as of beginning of March, the COVID emergency allotment payments will end for the 35 states which were still paying them.  Losses will vary across households but an average 3 person household will see a $197 decrease in SNAP assistance.  By my napkin math, the total impact size seems like around $2.5B per month.  Not sure how that compares to the size of all the layoffs in big tech, but it feels like it must be quite a lot more than those?  Is it big enough to be a disinflationary factor?  I wish I knew.  Is that big enough that we might be able to detect an increase in crime rates?

 

 

For avoidance of doubt about my intent: I wholeheartedly support the SNAP program.  I grew up just a poor boy from a poor family, and food stamps made it possible to eat and survive on what little income my mom could make.  My heart goes out to all these people who will surely be feeling much more financial pain than I would over the loss of $200/month.

 

Why is 12% of the country on food stamps  when everyone who wants  a job can find one?  May be too many people on food stamps who can work but do not want to?  May be food stamps should be cut so that people actually get a job rather than live on the dole?

[Sweet]

19 minutes ago, changegonnacome said:

 

What did we say before about profits?........something about them getting whacked I think? To standstill at this ~4000 level the only option is to keep paying higher and higher multiples for lower and lower earnings.........expanding multiples you say, we've done that before? Yeah I agree....but this aint the 2010's with ZIRP stretching out as far as the eye could see....we are now in IIRP (inflation interest rate policy!)....the old time math says that with interest rates rising on risk free or less risky fixed income alternatives....one should, all things being equal, be paying less of a multiple for earnings on equities. Maybe Buffet got confused with all that gravity talk before

 

This is the same type of argument I’ve seen again and again from 2009 on as the market just ripped higher.

 

We always associate the ‘this time it is different’ phrase with irrational exuberance and market tops.  However I see it far more often from those always so negative on the markets.  This time there is no ZIRP.

Interest rates are gravity for stocks but it doesn’t following that the ass is going to fall out of markets.  If in the long term the economy is growing and companies are making more money, stocks are likely to go up.

 

[vinod1]

55 minutes ago, changegonnacome said:

 

What did we say before about profits?........something about them getting whacked I think? To standstill at this ~4000 level the only option is to keep paying higher and higher multiples for lower and lower earnings.........expanding multiples you say, we've done that before? Yeah I agree....but this aint the 2010's with ZIRP stretching out as far as the eye could see....we are now in IIRP (inflation interest rate policy!)....the old time math says that with interest rates rising on risk free or less risky fixed income alternatives....one should, all things being equal, be paying less of a multiple for earnings on equities. Maybe Buffet got confused with all that gravity talk before

 

Perhaps Buffett is confused about these too...

 

Don't pass up something that's attractive today because you think you will find something way more attractive tomorrow.  

 

or

 

Charlie and I don’t pay any attention to macroeconomic predictions. We don’t  know the future of the “macro” and I can’t remember a single investment decision that hinged on the macro. We have a little conceit, that if we don't know, who would? But people do it all the time: talking about the macroeconomic future—but this isn’t productive. They don’t really know what they’re talking about. To ignore what you know to listen to what someone else who doesn't know, doesn't make sense. People will do well if they own solid businesses (if  they didn’t overpay). If they attempt to time their  purchases, they will do well for their broker but not for themselves.

 

or

 

Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.

 

or

 

A different set of major shocks is sure to occur in the next 30 years.  We will neither try to predict these nor profit from them.

 

or

 

Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important.

 

 

 

[Gregmal]

I also recall hearing, I think here, in June or July…about how “the estimates” were way too high at 250 EPS. Then I thought, what kind of jabroni gives two hoots about what some pindick in a cubicle writing book reports thinks? Or predicates investment decisions on them? Now I’m thinking…what a prescient call about declining analyst forecast back in June/July…what was SPY trading at then? Looks like that whole approach paid off…not.

Edited February 25, 2023 by Gregmal

[vinod1]

Buffett has never let his macro views influence how much of his portfolio would be in stocks versus cash. Even when he went out of the way to warn about high valuations in the broad market, possibility of sustained high inflation, and large dollar devaluation, he did not let these concerns influence his portfolio. In retrospect, it is clear that he would not have had his record if he sold out of stocks every time he thought the market or even his holdings were fully priced.

 

The perfect example is in 2009:

 

We’re certain, for example, that the economy will be in shambles throughout 2009 – and, for that matter, probably well beyond – but that conclusion does not tell us whether the stock market will rise or fall.  -Buffett

 

[Simba]

There is a lot of talk about recession.. believe this will result in a bit of volatility for the foreseeable future.

 

Suggest to make use of this volatility - i.e. trader's market.

 

I also think inflation is going to be overblown in the long-run, and like all bear markets, this one shall end.. eventually. 

[dealraker]

20 hours ago, Gregmal said:

Totally. It’s nuanced and divided much like the blue collar vs white collar dynamic in the labor market. At the same time, there’s the noise. Todays spending was another indicator of consumer strength. What do they do? Scream for more destructive hikes or blame credit cards endlessly. The South is too robust…wage price spiral! Ignore the deflation elsewhere. Oh but energy will be a problem! Energy falls…back to touting used car prices. The only way to win this game is just to ignore the noise and focus on individual fundamentals. The ironic part in all of this…like 90% of my friends and contacts who are vividly in the bear camp…didn’t even make money last year and got ripped in q1 so far. Sometime just sticking to your preferred knitting is best. The inflation/recession/economy too strong game is just a self serving shit show for the people selling it.

A couple of weeks ago I wrote Warren Buffett a letter telling him to sell all his stocks, including Berkshire, and sit in cash and shorter term bonds for a while waiting on the inflation and recession to end.

 

I got a letter back, Warren wrote, "Charlie, you've lost your shit dude.  Man-up, business is business and I don't sell then stand outside the door and watch during downturns hoping to buy back later."

 

I just wrote back, "This guy...his online name is change...well, he's got me so shook-up I'm shakkin in my boots!"  

 

Can't wait for Warren's reply!

 

LOL, being silly.  Life is great if you can stand it!  A tad too much coffee and Berkshire's annual report this a.m.  

Edited February 25, 2023 by dealraker

[Santayana]

15 hours ago, Dinar said:

Why is 12% of the country on food stamps  when everyone who wants  a job can find one?  May be too many people on food stamps who can work but do not want to?  May be food stamps should be cut so that people actually get a job rather than live on the dole?

The majority of people on food stamps do have jobs.  If you haven't been there it can be really hard to understand how challenging it is to make ends meet on $15k/year.

[Gregmal]

Yea I personally think the tax rate on income under $50k should be 0. Then cut some of the social welfare stuff. What benefit is there to making people earning so little worry about taxes? 

[TwoCitiesCapital]

1 hour ago, Gregmal said:

Yea I personally think the tax rate on income under $50k should be 0. Then cut some of the social welfare stuff. What benefit is there to making people earning so little worry about taxes? 

 

It basically is from a federal income tax perspective. Most people under 70k pay 0 federal income tax after considering deductions, credits, and refunds. 

 

Romney wasn't making it up when he said half the country didn't pay income tax. 

[Dinar]

3 hours ago, Santayana said:

The majority of people on food stamps do have jobs.  If you haven't been there it can be really hard to understand how challenging it is to make ends meet on $15k/year.

What do you base this assertion on?  In NY state for instance, 15% of the population is on food stamps.  Mimimum wage is $15 per hour, and plenty of jobs in NYC at $20 per hour + benefits (health insurance, 401(k), etc...)  At $15 per hour, 40 hour workweek, that is $30K per year.   At $20 per hour, that's $40K per annum.  

Oh, and spare me if you haven't been there!  I moved to this country with no money in my pocket, worked as a garbage man in college, and worked 50+ hours per week in my business while attending grad school full time.

@Gregmal, I agree.  I would say: if you are single, no federal income tax on first 50K, if you are single with kids, first $100K is not taxable, for a couple without kids first $100K non-taxable, for a couple with kids, first $200K not taxable.  Most people (there are always exceptions) need a hand up not a hand out.  

[Santayana]

https://www.census.gov/library/stories/2020/07/most-families-that-received-snap-benefits-in-2018-had-at-least-one-person-working.html

 

The Federal minimum wage is still only $7.25.  Having a job doesn't necessarily mean it's full-time.