OT: Stock and Investment Thread
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No need to wait that long. Keep adding up those MoM data points. Soon to be 3 months and counting.....
I think this narrative is getting a little ahead of itself.
i think it is true the fed should take their foot of the gas but I don’t think their moves thus far, while aggressive, have been overly aggressive.
How lagging of an indicator is cpi? When should we expect it to show the sharp decrease in commodity prices?
It's amazing that in a country as sophisticated as ours, economic decisions are being made using data collected by 475 part time workers hand checking prices on the shelves across the country.
Overall, CPI lags at least 4-6 month. However, the different components of CPI lags to varying degrees. The worst is home prices and rent, which lags a HUGE 9-12 months. And this component makes up almost half of the CPI calculation. Bottom line.....CPI lags big time. PPI is a little better, but still lags as well.
However, the biggest BS is using year over year calculations to gauge what is going on today. That's stupid people not understanding simple math. YoY is essentially a rolling-12 month average. What happened 12 months ago carries the same value/importance as the current month. WTF?
YoY (or in my business we say MAT.....moving annual total) should not be used for real-time decisions or adjustments. It blinds the current trend and doesn't give a realistic view of what is going on today. Gotta stick with MoM instead.
Using YoY is why Powell missed all the inflation in 2021 and is now missing that fact that inflation has been essentially flat for 2 months and counting.
Why not though? Getting out there and checking actual prices of items on the shelves seems like a very accurate way of going about it.
Druckenmiller says sees 'hard landing' in 2023 with a possible deep recession
https://www.cnbc.com/2022/09/28/stanley-druckenmiller-sees-hard-landing-in-2023-with-a-possible-deeper-recession-than-many-expect.html?__source=iosappshare|com.apple.UIKit.activity.CopyToPasteboard
I agree most likely a hard landing but the Feds cutting rates sharply to help Main Street and upward turn in the stock market.
https://www.cnbc.com/2022/09/28/stanley-druckenmiller-sees-hard-landing-in-2023-with-a-possible-deeper-recession-than-many-expect.html?__source=iosappshare|com.apple.UIKit.activity.CopyToPasteboard
I agree most likely a hard landing but the Feds cutting rates sharply to help Main Street and upward turn in the stock market.
I wouldn’t totally discount yoy. But your point is a good one, especially in the past 1.5 year timeframe where inflation accelerated very quickly and, at least in commodities prices are coming down quickly as well.
I do think the fed needs to be wary of inflation ripping off again. If the fed eases here oil and other commodities could reverse their downward trend and then along with wages and rents we see prices ticking up across the board again. In which case we could see both yoy and mom increasing.
If you are trying to make decisions on future trends/events, then using YoY is complete and utter BS. You need to use something more current. This is just common sense.
I didn’t follow the markets in 2018 but was this(as well as Siegel) the type of pressure which swayed the fed?
If it were 10k employees, maybe it would be an accurate sample. 475 part time gov't workers doesn't seem to be a great sample size
Political pressure got Powell to wake up. Even Yellen told Powell to cut the crap. This is going to happen again.
The Fed uses Year Over Year CPI to account for seasonality and sequential Month versus prior Month to monitor trend direction.
Instead of having auditors visiting stores to monitor changes in price, it should be using syndicated companies like IRI or Nielsen whenever possible to evaluate like for like item change or some type of consumer price per volume (ounce, pound, etc.) since we are seeing downsizing in packages.
The Fed's only mandate is inflation and employment. As long as inflation remains high and employment strong, they are going to keep raising. I don't think we see any pause or cut until the second half of 2023.
Instead of having auditors visiting stores to monitor changes in price, it should be using syndicated companies like IRI or Nielsen whenever possible to evaluate like for like item change or some type of consumer price per volume (ounce, pound, etc.) since we are seeing downsizing in packages.
The Fed's only mandate is inflation and employment. As long as inflation remains high and employment strong, they are going to keep raising. I don't think we see any pause or cut until the second half of 2023.
Members of the Fed need to push a shopping cart thru a supermarket twice a month, purchase a set list of staple items, checkout, and then report their findings with the group each month.
I work retail and we continue to raise prices. Big list every week.
At the grocery store my favorite salsa just went up again. But my favorite soups have come down a little.
A note on my grocery store: Probably the most expensive in the area. I can(and have been more often) go to a local whole foods and find much better deals.
The Fed's target inflation rate is 2% but I would expect to see prices eventually come down and unemployment start to go up. Hopefully, this will pause the rate increases.
Not to sound like the Fed, but the future increases will be data dependent, meaning how will inflation and employment fare over the next few months. Really hard to say but I would think at least another 100 BPS before they are done.
Per Bloomberg this morning, JPMorgan Chase & Co. strategists are now saying 'the S&P 500’s 6.5% rout since the Federal Reserve turned extremely hawkish last week implies a 92% probability of US recession, up from 51% in August. Other assets are also flashing a similar warning. Pricing of base metals now carries a recession probability of 96%, up from 84% in August."
"Median projections show Fed officials forecast rates of 4.4% by the end of this year, rising to 4.6% in 2023. This implies another 125 basis points this year, a sign that the Fed is continuing their aggressive tightening campaign."
"Median projections show Fed officials forecast rates of 4.4% by the end of this year, rising to 4.6% in 2023. This implies another 125 basis points this year, a sign that the Fed is continuing their aggressive tightening campaign."
Not to make this political, but by historical definition, we're already in a recession with two consecutive declines in GDP. Maybe, this will change tomorrow when the revised Q2 GDP comes out.
I agree with the overall sentiment though that regardless of the definition of recession, that the economy will worsen and this will slow down the Fed. Of course, then we have to deal with a weakened economy. The challenge has always been to find that sweet spot of economic growth and moderate inflation levels.
Inflation rate has been at an annualized rate of 0.6% for the past 2 months. That's below 2%, right? LOL!
Fed = stupid
Inflation is up +8.3% in August 2022 versus August 2021 while August 2022 is up +0.1% versus July 2022.
July and August inflation is up at an annualized rate of 0.6%.....i.e., 0.1% over 2 months. With the Sept data point, we will have an entire quarter of essentially no inflation. That's what is happening right now, not 6-12 months ago. LOL at citing YoY!
I would really to see inflation start coming in flat to negative. If we don't see this, I think we see a mass outflow unlike what we've seen. S&P options 2 weeks ago were 3-1 put/call ratio and that's not been seen since 08 timeframe. Housing needs to come down considerably and the mass migration will change the income dynamic as more of the bigger paying jobs are now requiring in office more and that people that were remote and moved, thinking this was the new norm, are going to be sol or have return or take pay cuts. I think the next decade will be like the 90s for white collar workers
I’m hearing more and more layoffs and retirement incentives. I’ve also heard companies are now tracking WFH employees VPN usage and badge-swipes for those that are supposed to come in certain number of days. The WFH party will come to an end sooner than folks think, although it will never be like it was pre-COVID.
For the past 2 months, it has come in close to flat. 0.0% in July and 0.1% in August. CPI is wonky, but all leading Sept inflation indicators show prices went down this month. So essentially, an entire quarter with no inflation.
As for housing:
Anecdotal but:
My brothers fiance was laid off in January. I believe they outsourced the job thinking if it could be done from home in the US it can be done from home in Mexico. Long story short, she was just hired back, will work from home and got a pay raise.
The "problem" is that the core inflation rate (CPE) in August vs July was HOT at 0.6% or 7.2% annualized. The lower figure you cited was headline (CPI) inflation impacted heavily by falling energy prices (gasoline). Economists want to see core coming in much lower before feeling like we have cracked the issue of sticky inflation.
https://www.brookings.edu/blog/up-f...ways-on-inflation-from-the-august-cpi-report/
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that can happen sure but there are many jobs where outsourcing will not work. It depends on type, industry, sector etc.
I'd tax the **** out of outsourced labor and goods but that's me
Just to revisit. Another 100 bps by mid 2023 would require a pause (unless they resort to .10 increments).
I know you said “at least”but if its just another 100 bps, say a .50 followed by a couple .25 and then pause how do we think the market would react?
KABOOM! Max fear is priced into the market, so any good news will lead to a meaningful rally.
Interesting article on retail traders. A survey showed that 49% of millennial retail traders bailed on the market starting August 2021. Not clear if they took losses or split before things really got ugly. But goes to show you why Tesla’s PE has never seemed to matter.
I think we would need to have a fairly strong earnings season but if we get that and the fed takes their foot off the gas I think we could be in a good spot.
Brought a small quantity AAPL this morning but expect it to continue downward to close to $129. That’s when I add substantially.
Yeah, if they pulled their money and avoided big losses my always long strategy doesn’t feel too good right now, although I’m glad I left a lot of cash on sidelines.
Can confirm I fall in this boat. Pretty much sold everything in December 2021 to put towards a home purchase and haven’t meaningfully reentered the market yet.
Like I said, 100 BPS is probably underestimating the increase but I do think we may encounter a hard landing that will force the Fed to pause. Keep in mind, that the Fed only meets eight times per year as well.
I think the market will go higher at some point in anticipation of the Fed pausing and that will occur before any Fed announcement. Likely off of a CPI, PPI or PCE report.
Weekly employment was strong again today, so let's hope that prices come down soon. With the 30 year mortgage sitting at 6.86%, there's no doubt that housing prices will come down despite the high demand.