Macro thread - Why is the market up/down?

[flesh]

A simpler way is just look at the deficit, 985b 2019, 1.85t+now. If there wasn’t significant fed employee growth, how many other employees were created resulting from an additional 1t spend that would disappear if the 1t was cut? I’m not saying it’s dollar for dollar, even if it’s 25% or 250b/year, it’s a lot of employees. 
 

its looking real good?

 

”

For the year, the deficit totaled $1.15 trillion through the first five months of fiscal 2025. The total is about $318 billion more than the same span in 2024, or roughly 38% higher, and set a record for the period.

Net costs to finance the $36.2 trillion national debt edged lower to $74 billion for the month. However, the total net interest payments year to date rose to $396 billion, just behind national defense and health. Social Security and Medicare are the largest costs in the U.S. budget.

The deficit swelled in the final three years of former President Joe Biden’s term, growing from $1.38 trillion to $1.83 trillion.

Edited March 12, 2025 by flesh

[changegonnacome]

On 3/11/2025 at 3:18 PM, Spooky said:

Isn't the solution to tax these people more rather than destroy the system?

 

Yes and No.......Yes in that you should probably have a more progressive tax system at the extreme higher end......a good start might be to remove the immediate expense deductibility for say private jets that was in Trump's first TCJA for example....these UHNW breaks do nothing for social solidarity.

 

No - because there's simply not quite enough rich people and too many poor people for it to make a real difference. You should still do it from an equity and fairness point of view. In the same way that I firmly believe DOGE is not going to meaningfully change the budgetary math but thats not to say that it still shouldn't be done.

 

The reality always of fiscal budgetary math for most countries....is if you want meaningful amounts of revenues raised......you need to shoot for the middle class.....cause like Jesse James said before re:banks and why he robbed them......"thats where the money is"

[dwy000]

38 minutes ago, changegonnacome said:

 

Yes and No.......Yes in that you should probably have a more progressive tax system at the extreme higher end......a good start might be to remove the immediate expense deductibility for say private jets that was in Trump's first TCJA for example....these UHNW breaks do nothing for social solidarity.

 

No - because there's simply not quite enough rich people and too many poor people for it to make a real difference. You should still do it from an equity and fairness point of view. In the same way that I firmly believe DOGE is not going to meaningfully change the budgetary math but thats not to say that it still shouldn't be done.

 

The reality always of fiscal budgetary math for most countries....is if you want meaningful amounts of revenues raised......you need to shoot for the middle class.....cause like Jesse James said before re:banks and why he robbed them......"thats where the money is"

Not to nitpick but it was Willie Sutton who said that not Jesse James. 

[realassetsvalue]

21 hours ago, treasurehunt said:

 

The government being responsible for 85% of job growth in 2024 does not pass the smell test. Just to verify, I posed the question to both Grok 3.0 and Gemini Deep Research. Grok came back with 25-30%; Gemini said 23%. Any idea what the original source is for the 85% (what this RIC report is based on, that is)?

 

FWIW, the 85% appears to be based on government + "education and health" employment as a share of total. While definitely an attention grabbing number it looks like historically it has been this high or higher leading up to economic downturns as these more stable sectors of the economy become a larger share as more volatile sectors cut their job growth?

 

I assume the flat bars, which are during recessions, are to account for when total job growth was negative...

[Sweet]

20 hours ago, flesh said:

A simpler way is just look at the deficit, 985b 2019, 1.85t+now. If there wasn’t significant fed employee growth, how many other employees were created resulting from an additional 1t spend that would disappear if the 1t was cut? I’m not saying it’s dollar for dollar, even if it’s 25% or 250b/year, it’s a lot of employees. 
 

its looking real good?

 

”

For the year, the deficit totaled $1.15 trillion through the first five months of fiscal 2025. The total is about $318 billion more than the same span in 2024, or roughly 38% higher, and set a record for the period.

Net costs to finance the $36.2 trillion national debt edged lower to $74 billion for the month. However, the total net interest payments year to date rose to $396 billion, just behind national defense and health. Social Security and Medicare are the largest costs in the U.S. budget.

The deficit swelled in the final three years of former President Joe Biden’s term, growing from $1.38 trillion to $1.83 trillion.

Governments should set a rule.  The deficit must be below GDP growth except during a national emergency.  That way the national debt should be shrinking as a % of GDP.  Getting the deficit under control does not mean getting the deficit to 0.

[rogermunibond]

Buffett's solution is better.  If the deficit is above 3% of GDP all sitting members of Congress cannot run for re-election.

[Spooky]

2 hours ago, changegonnacome said:

The reality always of fiscal budgetary math for most countries....is if you want meaningful amounts of revenues raised......you need to shoot for the middle class.....cause like Jesse James said before re:banks and why he robbed them......"thats where the money is"

 

Sadly there is no longer a middle class. There is the top 10% that own assets and the bottom 90%.

 

https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-02-24-2025/card/america-s-richest-10-now-account-for-nearly-half-of-all-consumer-spending-ShGXpvc48BvPigHjkKyu

 

Top 10% now account for almost half of consumer spending.

Edited March 13, 2025 by Spooky

[Jaygo]

23 minutes ago, Spooky said:

Top 10% now account for almost half of consumer spending.

That is a horrendous stat. Something is deeply wrong in our economy. I hate to say it but it kind of seems like we are sliding towards a modern version of feudalism. 

[changegonnacome]

19 minutes ago, Spooky said:

Sadly there is no longer a middle class. There is the top 10% that own assets and the bottom 90%.

 

https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-02-24-2025/card/america-s-richest-10-now-account-for-nearly-half-of-all-consumer-spending-ShGXpvc48BvPigHjkKyu

 

Top 10% now account for almost half of consumer spending.

 

Fully aware of that - which is what makes this tariff experiment which is impacting the stock market creating a potential negative wealth effect - so self defeating.......if the Top 10% reduce their consumption cause they feel a little poorer, while at the same time the Federal government is implementing austerity.....well we know what that is.

 

But in regard to your middle class comments...wealth inequality has certainly blown out.....but I still think you'll find as regards earned INCOME tax.....that marginal increases in income tax aimed at the middle class drive the highest quantum of tax revenue.

 

I do think however that based on budgetary math in the first place....the US will likely need to put a federal consumption/sales tax in place in time.....Donald is already driving towards that with his Tariff's - its just the federal sales tax wont show up on your receipt and it will fall on foreign produced goods.

[Spekulatius]

1 hour ago, Sweet said:

Governments should set a rule.  The deficit must be below GDP growth except during a national emergency.  That way the national debt should be shrinking as a % of GDP.  Getting the deficit under control does not mean getting the deficit to 0.

Trump has declared more national emergencies than I can count. That would be a touthless rule.

Edited March 13, 2025 by Spekulatius

[Spekulatius]

1 hour ago, Jaygo said:

That is a horrendous stat. Something is deeply wrong in our economy. I hate to say it but it kind of seems like we are sliding towards a modern version of feudalism. 

If pyramids get too heavy enough, heads will roll. Maybe not in a literal sense any more, but the US in the late 19th century almost became an Oligarchy with the Rockefeller, Morgans, Carnegies. The backslash from this was regulation and Antitrust to take three empires apart. I think we are getting close enough for. second helping of this. It’s been more than a hundred years.

 

 

 

Edited March 13, 2025 by Spekulatius

[Gregmal]

1 minute ago, Spekulatius said:

If pyramids get too heavy enough, heads will roll. Maybe not in a literal sense any more, but the US in the late 19th century almost became an Oligarchy with the Rockefeller, Morgans, Carnegies. The backslash from this was regulation and Antitrust to take three empires apart. I think we are getting close enough for. second helping of this. It’s been more than a hundred years.

 

 

 

Do we need any more evidence of this? Like some iteration of FANG or MAG7 has existed now for almost a decade and the top heavy valuations highlight it clear as day. Break em up 

[changegonnacome]

34 minutes ago, Gregmal said:

Do we need any more evidence of this? Like some iteration of FANG or MAG7 has existed now for almost a decade and the top heavy valuations highlight it clear as day. Break em up 

 

To add to the evidence pile one need only look at record high corporate margins......there was a time when margins reverting to trend was like the surest data set in all of finance...they'd rise and fallback as each wave of competition came in to erode them...the fact they've been this elevated for this long with no mean reversion tells you that there are large monopolists and oligopolists in the economy extracting excess profits that otherwise would have historically, in a competitive market, resulted in a consumer surplus.....instead of a consumer surplus.....we got American oligarchs.

 

I mean look at the data set - and you realize how unusual it is for the corporate sector to achieve a margin above 10% over time....then you come to the GFC followed by C19....and first 10%+ becomes the norm.....and now 14% margins appear to be the new floor. The concertation in the S&P and the concentration of wealth in the US should come as no surprise when you realize what an unusual period we are living through.

 

https://fred.stlouisfed.org/graph/?g=1p35Y

 

 

[Castanza]

6 minutes ago, changegonnacome said:

.the fact they've been this elevated for this long with no mean reversion tells you that there are large monopolists and oligopolists in the economy extracting excess profits that otherwise would have historically, in a competitive market, resulted in a consumer surplus.....instead of a consumer surplus.....we got American oligarchs.

 

What makes it different this time? We've always had new tech advancements. Are these guys really different due to the nature of their business (asset light etc.)? And where does it end? Tech is just getting started imo. 

[changegonnacome]

Well I guess the argument goes that software businesses have winner takes most dynamics...asset light as you said....zero marginal cost products get to be near impossible to compete against.......folks like microsoft, salesforces and various other enterprise providers end up with entrenched positions where they face basically no or limited competitive threats (or they organize into two or three player oligopolies. I guess the internet businesses of Web 2.0 where the product was 'free' and companies won through ads, scale and network effects exacerbated that in the B2C space....the product has close to  a zero marginal cost and the network effect is near impossible re-replicate.......

 

The argument against all this is that AI is likely to make creating new software trivial....and agenic AI is likely to upend the ad supported web 2.0 paradigm that gave us Facebook, Google etc.....but I'm way out of my wheelhouse in this space to know how true that might be.....but as my graph shows there's something like 5% of excess profit margins being captured by the corporate sector today versus the past when the mean was closer to ~9%

[Sweet]

1 hour ago, Spekulatius said:

Trump has declared more national emergencies than I can count. That would be a touthless rule.

Lol

[Eldad]

5 hours ago, Spooky said:

 

Sadly there is no longer a middle class. There is the top 10% that own assets and the bottom 90%.

 

https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-02-24-2025/card/america-s-richest-10-now-account-for-nearly-half-of-all-consumer-spending-ShGXpvc48BvPigHjkKyu

 

Top 10% now account for almost half of consumer spending.

That’s not true.

 

https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/

 

Bottom 90% have 52.2% of all wealth. That percentage should go up quite a bit this year as the rich get crushed in the market. 
 

I have seen many studies that there is still tremendous social mobility up and down in America. Today’s rich are tomorrow’s middle class and so on besides at the tip top.  

[WayWardCloud]

No idea if the bottom is in but typically when a market correction is due to general macro economic and political concerns rather than to a specific unforseen event it's been a good idea to buy the dip because the storytelling eventually reverses and a few years down the road we won't even remember this. Feels like fall 2018.

Edited March 14, 2025 by WayWardCloud

[Gregmal]

5 minutes ago, WayWardCloud said:

No idea if the bottom is in but typically when a market correction is due to general macro economic and political concerns rather than to a specific unforseen event it's been a good idea to buy the dip because the storytelling eventually reverses and a few years down the road we won't even remember this. Feels like fall 2018.

Ah remember late 2018? When the hucksters scared everyone out of stocks talking about a couple rate hikes? An entire generation of folks stayed out of the market after that short lived correction....

[Spekulatius]

We are just down ~20% from the peak, straight in middle of the 52w trading range, it’s not much of a correction. I think correction is >20% down from peak isn’t it?

A 10% decline happens about every year. I think we might see a technical bounce but I don’t think this is exactly a great buying opportunity quite expensive.

 

You can alway find cheap stocks so if there is an indiscriminate selloff.

[WayWardCloud]

On which index? I'm seeing only -10.13% on the sp500.

Usually -10% is called a "correction" and -20% a "bear market".

 

I totally agree so far it's just a mild dip, but then again what is the big freak out? A guy who enthusiastically refers to himself as "tariff man" gets elected and... imposes tariffs? My hunch is if we want to see -20% or more something tangible has to break / create a surprise. Could happen. But in the mean time it's just a typical media narrative spin creating a mood swing over the exact same data points that made everyone feel so rosy about the future one month ago

Edited March 14, 2025 by WayWardCloud

[Eldad]

Fink says as he talks to CEOs what they tell him is the economy is slowing as we speak.
 

If you think we need an unforeseen shock for it to get really bad, if we are normally playing Russian roulette with one bullet, we are now probably playing with 2 or 3. 

[WayWardCloud]

This article is from 2017:

 

https://www.vanityfair.com/news/2017/04/larry-fink-donald-trump

 

Wall Street Giant Larry Fink Says C.E.O.s Are Secretly Worried About Trump

The BlackRock founder reveals there are “weaknesses” in the economy nobody wants to admit.

 

“There are weaknesses in this economy that are surprising people,” Fink said [...] “Leaders of companies that I talk to are stepping back and watching and they’re not willing put a lot of money on the line right now until they start to see real economic growth.” Fink said that there is increasing skepticism that Trump’s ambitious agenda [...] “There’s this greater worry that these proposed changes are going to be harder and harder to execute”

[treasurehunt]

On 3/12/2025 at 10:51 PM, flesh said:

More hatchet please. On another note… I can’t find it but maybe deep research can.. I read a few months ago an article that included growth in jobs that result from govt spending.. contractors and the like, the growth was massive last four years.. 

 

So I tried Deep Research on this a couple of different ways, and did not get a very good answer. But Deep Research listed five industries where government influence is high - Defense, Healthcare, Infrastructure, Education and R&D - and estimated that around 60% of the job growth in these industries can be attributed to govt spending. From this I infer that 50% or so of total job growth last year can be attributed to the government.

 

But I'm not really debating the need to reduce government spending. The question is whether firing a bunch of government employees so quickly is a good way to do it. I guess you could argue that the mass firing is a necessary prelude to cutting spending, but I'm not convinced; like I pointed out before, govt employment has gone down as a fraction of total employment over the last 20 years. I think this mass firing will lead to unnecessary casualties.

 

Anyway, the point is mostly moot, since the firings have already happened. Now let's wait and see what happens with government spending. It will be very unfortunate if all these people lost their jobs and there is no significant impact on spending.

[Sweet]

55 minutes ago, treasurehunt said:

But I'm not really debating the need to reduce government spending. The question is whether firing a bunch of government employees so quickly is a good way to do it. I guess you could argue that the mass firing is a necessary prelude to cutting spending, but I'm not convinced; like I pointed out before, govt employment has gone down as a fraction of total employment over the last 20 years. I think this mass firing will lead to unnecessary casualties.

It some ways it’s bad.  It would be better to be clear and say X department will get a X% cut in staff budget over the next years.  Implement a hiring freeze, offer redundancy.  Allows sections to focus their work and reduce headcount in workable way.  Although I think you need all these sections audited to measure what they claim they need vs what they actually need too.

 

In other ways firing everyone quickly is good, as you said it cuts the bill sooner, and importantly it doesn’t risk someone else coming in a reversing the plans you set out.