Is The Bottom Almost Here?

[Sweet]

1 hour ago, Gregmal said:

I am not sure it’s one way or another but can not fathom that all of a sudden 90% of the banks suck and even BofA is a bad bank. It’s hard to imagine no one there with their fancy degrees and 3 letter designations saw this coming, but it’s also on the regulators who more or less made them hold these things and then chose to rapidly devalue them. Patience is all that was required…it’s still the answer. No one says you cant hike to 20% in due time. But going from a 5 mph school zone to a 70 mph highway in 1/4 mile just doesn’t work. No one has patience or the ability to look more than a few months down the road anymore, and that in and of itself is somewhat troubling as well.

Complacency I think is the best reason for banks not managing their interest rate risk well.

 

There are some examples of managers of JPM and IB managing that risk very well.

 

Part of this is messaging too, these banks got complacent because low rates is what they were used to.  The Fed should have been warning against such complacency but telegraphing they rates will inevitably rise at some point.

 

 

[Gregmal]

The issue with Powell is straight forward; he was totally duped. He regulates the banks. He would have still followed "the mandate" doing a more gradual set of hikes, given HE KNEW they take awhile to work. He had the stress tests designed. He devalued the same stuff he knew, and largely made, most of these banks hold. Again, nothing to do with "oh well this one or two exceptionally managed banks managed to get it right"...no, BS....the majority would have the same issues if Twitterers and CNBC crew gets a bank run going like they did at SVB or FRC. Got nothing to do with performance of anything or peoples idea of this or that. He was hypnotized and against much warning, became reckless, and effected the one area he should have known best and been privy to. 

Edited March 21, 2023 by Gregmal

[changegonnacome]

Home prices fell in February for the first time in 11 years:
 

https://www.wsj.com/articles/home-prices-fell-in-february-for-first-time-in-11-years-73df0107

 

Bottom in in housing?

Edited March 21, 2023 by changegonnacome

[dealraker]

4 hours ago, changegonnacome said:

Home prices fell in February for the first time in 11 years:
 

https://www.wsj.com/articles/home-prices-fell-in-february-for-first-time-in-11-years-73df0107

 

Bottom in in housing?

Crap.  There was so much screaming at me online and on TV to sell my stocks that finally I caved in and followed the madated money "manager" (read "risk management"= the risk of lower quotes) cult mandate.  But D-A-M-N I forgot to sell the house!  

 

Remind me next time please.   Getting lower bids means that maybe my neighbors who sold are beating the market...and me!   This is absoluely u-n-a-c-c-e-p-t-a-b-l-e performance.

 

Well, not exactly.  While I should be walking the street with multi-millions in cash in a duffle bag also stuffed with pillow and blanket......foolishly instead I live in a h-o-u-s-e and own shares of Berkshire, Markel, Mondelez, Coke, Pepsi, Brookfield, AJ Gallagher, Brown and Brown, Aon, Marsh McLennan, Hershey, Tootsie Roll, Old Dominion, Ice, CME, Abbvie, Blackstone, Blackrock, Alphabet, Meta, Microsoft, Lowe's, Willis Towers Watson, Sun Power, First Solar, ABB, General Dynamics, Lockheed Martin, Duke Power, Illinois Tool Works, Nestle, Canadian National, Canadian Pacific, Kraft, Norfolk Southern, CSX, Union Pacific, St Joe, Honeywell, Federal Realty, Cisco, Amerisourcebergen, Archer Daniels Midland, Pfizer, Merck, Siemens, GSK, PSX, Hubbell, Republic Services, Enbridge, Omnicom, Plymouth Industrial, Bud, LHX, Exxon, Masco, Marriott, Target, Sanofi, General MIlls, Schlumberger, Becton Dickinson, Smucker, Weyerhaeuser, Excelon, Wesco Intl, Interpublic, T Rowe Price, Stag, Constellation, Avalon Bay, Atlas, Starbucks, Raytheon, Ambev, Constellation Energy, Teva, Bellring, RXO, XPO, Accelleron, Embecta, Entergy, Enphase Energy, Bank of America, International Flavor, East West, Cathay, Wells Fargo, Medtronic, Boeing, GE, GE Healthcare, LHX, Dominion Resources, Baxter, Crown Castle, Reckitt, Atco Ltd, Dover, Kellog, Advanced Auto, Costco, Molson, Sysco, Novartis, Danone, Alliance Bernstein, Archer Daniels, BCE, CocaCola Europacific, Enbridge, Lamar, Prudential, TC Energy, UPS, Unilever, Mastercard, Roche, Visa, Home Depot, Proctor and Gamble, Kellog, Johnson and Johnson, Walmart, Tractor Supply, Altria, Gilead, Realty Income, Danaher, Parker-Hannifin, Erie Insurance, BRP Insurance, CVS, Chevron, Oxy, Nasdaq, Wendy's, Domino's, Nike...

 

That's just the ones I can name right now without looking.  LOL.   Exercising the mind today as you can tell.  

 

 

[changegonnacome]

1 minute ago, dealraker said:

That's just the ones I can name right now without looking.  LOL.   Exercising the mind today as you can tell.  

 

Thats some workout  ! And I agree with the sentiment btw

[TwoCitiesCapital]

8 hours ago, Gregmal said:

He would have still followed "the mandate" doing a more gradual set of hikes, given HE KNEW they take awhile to work. 

 

When inflation is at 7-9%, do you want to take your time with gradual hikes? Or get to get to some target rate very quickly so that In 6-12 months that rate can take it's effect as opposed to having to wait an additional 6-12? 

[Gregmal]

Yea we ve been through this before though. They didn’t need to do anything and those numbers would have fallen off a cliff. Same song and dance and ultimately chart as everything else that went through the COVID phase. CPI chart in 3 years will match ZM chart with an 18 month lag. Shutting the economy and sending checks created inflation. Took 12-18 months to flare up and will flare out 12-18 months from when those two things stopped which were Jan(checks) and March(stupid NY/Ca type state restrictions) 2022.
 

So again, the problem is Jay was lost and got hypnotized by people spewing stories for profit. Same anti “free money for a decade” people asking for “free money” in the form of more interest. It also woulda been helpful if Jay understood what he was doing to the banks he is tasked with regulating. Hanging at 4-4.5% woulda done the job, and voila in a couple months that’ll be “heavily” restrictive anyway….

Edited March 21, 2023 by Gregmal

[Sweet]

10 hours ago, Gregmal said:

The issue with Powell is straight forward; he was totally duped. He regulates the banks. He would have still followed "the mandate" doing a more gradual set of hikes, given HE KNEW they take awhile to work. He had the stress tests designed. He devalued the same stuff he knew, and largely made, most of these banks hold. Again, nothing to do with "oh well this one or two exceptionally managed banks managed to get it right"...no, BS....the majority would have the same issues if Twitterers and CNBC crew gets a bank run going like they did at SVB or FRC. Got nothing to do with performance of anything or peoples idea of this or that. He was hypnotized and against much warning, became reckless, and effected the one area he should have known best and been privy to. 

Yeh, I straight up disagree with that take.

 

I don’t think I have anything useful to add that basically hasn’t been covered.

 

I don’t see a duped or gormless Powell that you do.

[dealraker]

Being silly.  Processing all that is happening today is a vast maze of complexity.  We will look back and say the typical "should have figured that out".  But we can't.

[Parsad]

4 hours ago, dealraker said:

Crap.  There was so much screaming at me online and on TV to sell my stocks that finally I caved in and followed the madated money "manager" (read "risk management"= the risk of lower quotes) cult mandate.  But D-A-M-N I forgot to sell the house!  

 

Remind me next time please.   Getting lower bids means that maybe my neighbors who sold are beating the market...and me!   This is absoluely u-n-a-c-c-e-p-t-a-b-l-e performance.

 

Well, not exactly.  While I should be walking the street with multi-millions in cash in a duffle bag also stuffed with pillow and blanket......foolishly instead I live in a h-o-u-s-e and own shares of Berkshire, Markel, Mondelez, Coke, Pepsi, Brookfield, AJ Gallagher, Brown and Brown, Aon, Marsh McLennan, Hershey, Tootsie Roll, Old Dominion, Ice, CME, Abbvie, Blackstone, Blackrock, Alphabet, Meta, Microsoft, Lowe's, Willis Towers Watson, Sun Power, First Solar, ABB, General Dynamics, Lockheed Martin, Duke Power, Illinois Tool Works, Nestle, Canadian National, Canadian Pacific, Kraft, Norfolk Southern, CSX, Union Pacific, St Joe, Honeywell, Federal Realty, Cisco, Amerisourcebergen, Archer Daniels Midland, Pfizer, Merck, Siemens, GSK, PSX, Hubbell, Republic Services, Enbridge, Omnicom, Plymouth Industrial, Bud, LHX, Exxon, Masco, Marriott, Target, Sanofi, General MIlls, Schlumberger, Becton Dickinson, Smucker, Weyerhaeuser, Excelon, Wesco Intl, Interpublic, T Rowe Price, Stag, Constellation, Avalon Bay, Atlas, Starbucks, Raytheon, Ambev, Constellation Energy, Teva, Bellring, RXO, XPO, Accelleron, Embecta, Entergy, Enphase Energy, Bank of America, International Flavor, East West, Cathay, Wells Fargo, Medtronic, Boeing, GE, GE Healthcare, LHX, Dominion Resources, Baxter, Crown Castle, Reckitt, Atco Ltd, Dover, Kellog, Advanced Auto, Costco, Molson, Sysco, Novartis, Danone, Alliance Bernstein, Archer Daniels, BCE, CocaCola Europacific, Enbridge, Lamar, Prudential, TC Energy, UPS, Unilever, Mastercard, Roche, Visa, Home Depot, Proctor and Gamble, Kellog, Johnson and Johnson, Walmart, Tractor Supply, Altria, Gilead, Realty Income, Danaher, Parker-Hannifin, Erie Insurance, BRP Insurance, CVS, Chevron, Oxy, Nasdaq, Wendy's, Domino's, Nike...

 

That's just the ones I can name right now without looking.  LOL.   Exercising the mind today as you can tell.  

 

 

 

Shit that's a lot of stocks!  I would lose my mind managing that portfolio.    Cheers!

[dealraker]

14 minutes ago, Parsad said:

 

Shit that's a lot of stocks!  I would lose my mind managing that portfolio.    Cheers!

Keep in mind Parsad that over 40 percent is Berkshire and 40 percent is AJ Gallagher and I do not "manage" as I am a passive owner.  I completely respect that you do manage, but both manage and no manage models work exceptionally well over time.  Berkshire and several others owned since Jan 10, 1975.  

Edited March 22, 2023 by dealraker

[learner]

1 hour ago, dealraker said:

Keep in mind Parsad that over 40 percent is Berkshire and 40 percent is AJ Gallagher and I do not "manage" as I am a passive owner.  I completely respect that you do manage, but both manage and no manage models work exceptionally well over time.  Berkshire and several others owned since Jan 10, 1975.  

Hi, if I may ask, how did you manage to pick BRK in 1975 and hold onto it over the years?

[dealraker]

8 hours ago, learner said:

Hi, if I may ask, how did you manage to pick BRK in 1975 and hold onto it over the years?

I inherited 1/4 of dad's Berkshire stock.  It was in a trust that I could not access and "sell" for years.  By then?  Well, by then selling just wasn't something I thought about because I was busy in life.  

Edited March 22, 2023 by dealraker

[Gregmal]

Does anyone else get a kick out of some of the tweet responses to Elon? Saw something where Musk and Teary Eyed Bill were engaging. And I could not help but find amusement in the comments. Typical comment was from some internet piker who’s holding lots of cash and short positions, openly talking up all the destruction that’s gonna happen as a result of rate hikes….saying why would we listen to Musk as if Musk is the one with an agenda. And in my head I just see the diagram….in this corner we have a guy who doesn’t seem to care at all about money, who runs an auto company employing tens of thousands of people, with what is probably tremendous visibility into the economy…and on the other side…some piker who’s rooting for and betting on bad outcomes and talking it up on the internet …yea. Who should we trust lol 

[Spooky]

What's the gist of Elon's position? Seems like overall the US economy itself is still very robust despite all the noise.

[Gregmal]

3 minutes ago, Spooky said:

What's the gist of Elon's position? Seems like overall the US economy itself is still very robust despite all the noise.

Since November he’s been saying they’re overdoing it. Now 50 bps cut he s saying. Basically better safe than sorry and it would immediately solve the bank issue. 
 

I don’t know if we need to be cutting here, but we definitely don’t need to keep going higher “just cuz”. 

[mattee2264]

1. S&P 500 forward earnings are declining relative to three months ago;

2. The yield curve is inverted (or has been over the last 12 months);

3. Unemployment is below average;

4. US Manufacturing PMIs are below 50; and

5. More than 40% of US banks, on net, are tightening lending standards

Some commentary from Morgan Stanley showing that having all these five conditions in place at once is rare and never good for stock markets. 

 

But markets are still high on the idea that the more stuff breaks the more stealth QE will be unleashed and the closer we are to a pivot. 

 

 

 

 

[Gregmal]

8 minutes ago, mattee2264 said:

But markets are still high on the idea that the more stuff breaks the more stealth QE will be unleashed and the closer we are to a pivot. 

Is that really the reason the overall market trades where it does? How do you know?

[CorpRaider]

So, if Fed is projecting terminal rate of 5.1 they're pretty much done based on data they've ingested to date?

[Spekulatius]

1 hour ago, mattee2264 said:

1. S&P 500 forward earnings are declining relative to three months ago;

2. The yield curve is inverted (or has been over the last 12 months);

3. Unemployment is below average;

4. US Manufacturing PMIs are below 50; and

5. More than 40% of US banks, on net, are tightening lending standards

Some commentary from Morgan Stanley showing that having all these five conditions in place at once is rare and never good for stock markets. 

 

But markets are still high on the idea that the more stuff breaks the more stealth QE will be unleashed and the closer we are to a pivot. 

 

 

 

 

What stealth QE? A banking crisis is pretty much equivalent to quantitative tightening. The Fed does not lend to business or individuals , banks do. If they hold back on credit, "main street" will feel it.

 

There is some fuzzy logic being repeated by many that a banking crisis will lead to money printing. This is false, imo and we only need to look at the GFC and it's aftermath to check that the "money printing" went nowhere.

 

It's quite simple actually - what do you care of the fed opens the discount window and lends to banks to improve their liquidity or similar measures.  You can't use any of this and as long as the banks don't lend to you, this will do nada other than preventing a crash in the financial system.

 

This is very different than the checks sent to most people in the pandemic.

Edited March 22, 2023 by Spekulatius

[Gregmal]

6 minutes ago, Spekulatius said:

It's quite simple actually - what do you care of the fed opens the discount window and lends to banks to improve their liquidity or similar measures.  You can't use any of this and as long as the banks don't lend to you, this will do nada other than preventing a crash in the financial system.

 

This is very different than the checks sent to most people in the pandemic.

It’s amazed me how much ignorance there is around this in the markets and amongst participants. It’s probably the easiest to understand aspect of the whole thing and night and day clear why there wasn’t inflation pre COVID and there was post COVID. 

[mattee2264]

Fed has pretty much confirmed they are pretty much done and from now on it will just be a bit of additional firming as required. So the rates story is over. Focus is now on earnings and what kind of impact tightening lending standards has on consumer and business spending. 

 

And increased liquidity is clearly a positive for risk assets as we discovered during the post GFC era even if it isn't inflationary. The banking sector issues will create tighter credit conditions which will have a negative impact on consumer and business spending. But if the Fed expands its balance sheet and increases liquidity in the financial system it is generally supportive to stock prices. 

[Gregmal]

On 3/21/2023 at 11:17 AM, changegonnacome said:

Home prices fell in February for the first time in 11 years:
 

https://www.wsj.com/articles/home-prices-fell-in-february-for-first-time-in-11-years-73df0107

 

Bottom in in housing?

Yup. This is the turn. 

[changegonnacome]

10 minutes ago, Gregmal said:

Yup. This is the turn. 

 

Good I'm buying a house right now (seriously)....not because I think its gonna go up or down in the next 12 months......its because I need a house right now......which is usually, I find, the best time to buy one  

[Dinar]

17 minutes ago, Gregmal said:

Yup. This is the turn. 

Greg, why do you think that prices will go up from here or am I misinterpreting your comment?  Thank you.