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  • ​ ​
    Originally posted by seanD View Post
    Btw, good economic news is now bad news to the markets. Because the recent jobs report wasn't as bad as some people anticipated, the markets took a dive today. The reason that good economic news is bad news and bad economic news is good news is because traders think that bad economic news is sign of a recession and will increase the chances that the Fed will capitulate and reverse tightening. This is how upside down everything is.

    The only bad economic news I expect to rattle the markets downward is if the CPI number comes out hotter than expected. If the CPI is lower, this will (or at least seem to) bolster the experts claiming inflation has peaked and thus give more reason for the Fed to back off tightening.

    ​​


    So the market has had a rally (a peak) in the last few days. The market never goes up or down in a linear fashion so peaks and dips are certainly expected.

    The reason for the misguided optimism, as I said earlier, is that bad economic news has become good news to the markets. Because we're (technically) in a recession, stock traders think the Fed will "pivot" (The Fed Put) -- reverse course and start QE again, or at least stop tightening. Thus, a recession is actually good news to stock investors and traders.

    There are a few problems with that mindset.

    Context matters. Yes, the Fed has capitulated for various reasons in the past, especially when the market began to drop, but those reasons are sometimes political. For example, the reason I believe Powell capitulated his tightening in 2018-19 is mainly because he was berated, even threatened, by Trump to stop. And so he stopped and then reversed with more QE in the fall of 2019, which made Trump very happy.

    In this case, Powell has been directed by the WH to fight inflation. And though political peons like Elizabeth Warren have leveled some of the same indictments against Powell for tightening, she's just a blip when it comes to economic decisions on a federal level. As far as I know, the Biden admin has made no public indication they want the Fed to reverse course.

    Another thing to consider is that, as we all know, the WH (along with their Keynesian sycophant economists) is now redefining what recession is, which means they're denying recession is happening. So it really makes no sense for traders to think the Fed will pivot to fight a problem that the WH (and even Powell himself) is denying exists.

    Sure, the Fed could pivot at any time, but there is nothing readily indicating the Fed will do this anytime soon. And so that just means when the market dip comes, it will likely be worse, since the temporary peak was driven by false optimism.​​
    Last edited by seanD; 08-02-2022, 04:26 PM.
    "What am I doing here?" -- Joe Biden 2021

    Comment


    • Not sure what to make of what's going on. As a news person said this morning, there are a lot of cross currents going on in the economy and it's no wonder people aren't sure what to do. I'm not sure if we're going to have a big crash or a slow decline over the next year or two.

      I know the Biden administration is making a big deal of the low unemployment rate. (Personally, I've come to believe the unemployment rate is one of the most deceptive metrics out there, but I digress.) On the other hand, I've start to hear mention in news stories about layoffs at major US corporations. I think I've heard Wal-Mart and Ford. This means there are also layoffs at smaller companies that don't make the news. Plus, it looks like companies like Bed, Bath, and Beyond that have been circling the drain may finally being going down the drain. Unfortunately, unemployment has to start coming up over the next few months. Not sure how high it will go or how much it will impact the economy.
      "For I desire mercy, not sacrifice, and acknowledgment of God rather than burnt offerings." Hosea 6:6

      "Theology can be an intellectual entertainment." Metropolitan Anthony Bloom

      Comment


      • Originally posted by Thoughtful Monk View Post
        Not sure what to make of what's going on. As a news person said this morning, there are a lot of cross currents going on in the economy and it's no wonder people aren't sure what to do. I'm not sure if we're going to have a big crash or a slow decline over the next year or two.

        I know the Biden administration is making a big deal of the low unemployment rate. (Personally, I've come to believe the unemployment rate is one of the most deceptive metrics out there, but I digress.) On the other hand, I've start to hear mention in news stories about layoffs at major US corporations. I think I've heard Wal-Mart and Ford. This means there are also layoffs at smaller companies that don't make the news. Plus, it looks like companies like Bed, Bath, and Beyond that have been circling the drain may finally being going down the drain. Unfortunately, unemployment has to start coming up over the next few months. Not sure how high it will go or how much it will impact the economy.
        I think what is going on is that the Biden administration is desperate to turn the economy around in the short term because of the midterms coming up. So they are doing things that tend to get the market to go up in the short term. Like lowering gas prices, putting out job reports, etc. But that only works on the gullible and as soon as the market goes up a bit, the more savvy traders take advantage of them and sell off their stocks, which drops the market again. So the market is going like a seesaw on crack. And as you said, the economy still sucks and people are getting laid off and companies closing.

        Volatile markets are great for professional traders, they just surf the waves and make money on the way up and down. But amateurs like me would lose our shirts in such a market. So I am just sitting it out, keeping most of my money where it is and waiting till things calm down.


        Comment


        • Originally posted by Sparko View Post

          I think what is going on is that the Biden administration is desperate to turn the economy around in the short term because of the midterms coming up. So they are doing things that tend to get the market to go up in the short term. Like lowering gas prices, putting out job reports, etc. But that only works on the gullible and as soon as the market goes up a bit, the more savvy traders take advantage of them and sell off their stocks, which drops the market again. So the market is going like a seesaw on crack. And as you said, the economy still sucks and people are getting laid off and companies closing.

          Volatile markets are great for professional traders, they just surf the waves and make money on the way up and down. But amateurs like me would lose our shirts in such a market. So I am just sitting it out, keeping most of my money where it is and waiting till things calm down.
          I agree with you. I'll admit I am thinking about investing right now for the long term. I'm using the principal of JP Morgan's the best time to invest is when there is blood in the water. But I am going to wait awhile (at least till after the midterms) to get a better sense of where things are going.
          "For I desire mercy, not sacrifice, and acknowledgment of God rather than burnt offerings." Hosea 6:6

          "Theology can be an intellectual entertainment." Metropolitan Anthony Bloom

          Comment


          • Originally posted by Thoughtful Monk View Post

            I agree with you. I'll admit I am thinking about investing right now for the long term. I'm using the principal of JP Morgan's the best time to invest is when there is blood in the water. But I am going to wait awhile (at least till after the midterms) to get a better sense of where things are going.
            If you are in it for the long term, the market is lower than it will be once things straighten back up, so even if it goes down further in the short term, it could still be thought of as a "bargain" right now. Trying to predict the bottom is impossible. But then if there is a complete crash like 100 years ago, companies that you invest in could go out of business and you would still lose. I tend to invest most of my money in ETFs that follow the entire market. I do have a few individual companies like Apple, VISA and Johnson & Johnson. But right now I have about half of my money in money market.

            Comment


            • Originally posted by Thoughtful Monk View Post
              Not sure what to make of what's going on. As a news person said this morning, there are a lot of cross currents going on in the economy and it's no wonder people aren't sure what to do. I'm not sure if we're going to have a big crash or a slow decline over the next year or two.

              I know the Biden administration is making a big deal of the low unemployment rate. (Personally, I've come to believe the unemployment rate is one of the most deceptive metrics out there, but I digress.) On the other hand, I've start to hear mention in news stories about layoffs at major US corporations. I think I've heard Wal-Mart and Ford. This means there are also layoffs at smaller companies that don't make the news. Plus, it looks like companies like Bed, Bath, and Beyond that have been circling the drain may finally being going down the drain. Unfortunately, unemployment has to start coming up over the next few months. Not sure how high it will go or how much it will impact the economy.
              As far as the market, to put it in it's simplest form: it's a tug-of-war between smart money (institutional investors and hedge funds) and dumb money (phone app retailers). The dumb money thinks the Fed is going to "pivot" (reverse course) any minute because of the bad economic data coming out, so they keep buying every market dip, which is causing these market rallies, and is also triggering "short squeezes" (but it's not important to know the detail of that). The dumb money looks for "signs" and "clues" from Powell during his meetings they believe is indication he's about the pivot. The whole thing is asinine, but that's what our markets have become. What I can't figure out is where the these retailers are getting all this money to invest, since we're obviously in an economic slump. Perhaps they're using credit?
              "What am I doing here?" -- Joe Biden 2021

              Comment


              • I guess they're doing it...





                From a high of 8.96 trillion assets down to 8.83 trillion in five months.
                For the sarcastically impaired the following is said in jest

                They're really moving aren't they?

                Just another 4 trillion to get it back to pre-pandemic levels.
                "What am I doing here?" -- Joe Biden 2021

                Comment


                • Originally posted by seanD View Post
                  I guess they're doing it...





                  From a high of 8.96 trillion assets down to 8.83 trillion in five months.
                  For the sarcastically impaired the following is said in jest

                  They're really moving aren't they?

                  Just another 4 trillion to get it back to pre-pandemic levels.
                  For the economics chart impaired of us (me) - um, what?

                  We want the Fed to have less in assets because? Are they calling debt assets?

                  Just when I thought I kinda sorta understood this stuff a little...
                  "He is no fool who gives what he cannot keep to gain that which he cannot lose." - Jim Elliot

                  "Forgiveness is the way of love." Gary Chapman

                  My Personal Blog

                  My Novella blog (Current Novella Begins on 7/25/14)

                  Quill Sword

                  Comment


                  • Originally posted by Teallaura View Post

                    For the economics chart impaired of us (me) - um, what?

                    We want the Fed to have less in assets because? Are they calling debt assets?

                    ​ Just when I thought I kinda sorta understood this stuff a little...
                    Most of the 8.8 trillion assets on the Fed's balance sheet are bonds/securities (IOUs). About two thirds are US treasuries, the rest are corporate.

                    We want them to have less of these assets for two reasons (well, what we want is for them to NOT have them in the first place, but that ship has obviously sailed):

                    - They're essentially debt liabilities, which is a huge risk.

                    - Less liabilities we as tax payers are on the hook for if the corporate debt goes bad (not to mention the absurdity of corporate welfare -- a central bank giving free money to select corporations in exchange for their liabilities, which is NOT at all fair or free market capitalism, but that's another subject).

                    - It gives government less incentive and reason to keep spending money they don't have.

                    As far as the latter point, the US treasuries (IOUs) are when the government wants to borrow money, they exchange treasury bonds/securities they print in exchange for cash (credit really) to the lender. If government knows it has a central bank that can print the money out of thin air to buy the security, which means they always have cover for their borrowing, this obviously won't stop government from spending what they don't have regardless of their debt and deficits. Aside from the moral hazard of this out-of-control government spending apparatus, the obvious problem is that the printing money out of thin air part is the very definition of inflation. The more money printing, the more inflation.

                    The Fed, which accumulated almost 9 trillion of this type of debt in 2020 (which is unprecedented), is now wanting to offload it back into the financial system.

                    The problem with that is:

                    - Who's going to want all these government bonds floating around on the market in addition to any new government bonds that fund our spending, especially considering we're essentially at war with BRIC countries, china being one of our biggest foreign lenders?

                    - This is going to cause the interest on those securities to skyrocket to make them attractive to other buyers. Rising interest rates is naturally going to be bad for the debtors that have to pay that interest (this also has a rate effect on other loans like repo loans, mortgages and credit cards, which further negatively affects the financial system and markets)?

                    - How is the government going to keep spending on all these big government projects without the Fed backing their spending sprees with more printed money?

                    The latter three points we've yet to see the full outcomes. ​​
                    "What am I doing here?" -- Joe Biden 2021

                    Comment


                    • Originally posted by seanD View Post


                      Most of the 8.8 trillion assets on the Fed's balance sheet are bonds/securities (IOUs). About two thirds are US treasuries, the rest are corporate.

                      We want them to have less of these assets for two reasons (well, what we want is for them to NOT have them in the first place, but that ship has obviously sailed):

                      - They're essentially debt liabilities, which is a huge risk.

                      - Less liabilities we as tax payers are on the hook for if the corporate debt goes bad (not to mention the absurdity of corporate welfare -- a central bank giving free money to select corporations in exchange for their liabilities, which is NOT at all fair or free market capitalism, but that's another subject).

                      - It gives government less incentive and reason to keep spending money they don't have.

                      As far as the latter point, the US treasuries (IOUs) are when the government wants to borrow money, they exchange treasury bonds/securities they print in exchange for cash (credit really) to the lender. If government knows it has a central bank that can print the money out of thin air to buy the security, which means they always have cover for their borrowing, this obviously won't stop government from spending what they don't have regardless of their debt and deficits. Aside from the moral hazard of this out-of-control government spending apparatus, the obvious problem is that the printing money out of thin air part is the very definition of inflation. The more money printing, the more inflation.

                      The Fed, which accumulated almost 9 trillion of this type of debt in 2020 (which is unprecedented), is now wanting to offload it back into the financial system.

                      The problem with that is:

                      - Who's going to want all these government bonds floating around on the market in addition to any new government bonds that fund our spending, especially considering we're essentially at war with BRIC countries, china being one of our biggest foreign lenders?

                      - This is going to cause the interest on those securities to skyrocket to make them attractive to other buyers. Rising interest rates is naturally going to be bad for the debtors that have to pay that interest (this also has a rate effect on other loans like repo loans, mortgages and credit cards, which further negatively affects the financial system and markets)?

                      - How is the government going to keep spending on all these big government projects without the Fed backing their spending sprees with more printed money?

                      The latter three points we've yet to see the full outcomes. ​​
                      Thank you!

                      I'm old fashioned - 'debt' was always considered a liability, not an asset.

                      I miss the good old days when words usually held their meanings for more than a week.

                      Thanks again, it really helped!
                      "He is no fool who gives what he cannot keep to gain that which he cannot lose." - Jim Elliot

                      "Forgiveness is the way of love." Gary Chapman

                      My Personal Blog

                      My Novella blog (Current Novella Begins on 7/25/14)

                      Quill Sword

                      Comment


                      • Originally posted by Teallaura View Post

                        Thank you!

                        I'm old fashioned - 'debt' was always considered a liability, not an asset.

                        I miss the good old days when words usually held their meanings for more than a week.

                        Thanks again, it really helped!
                        Well, in theory it's an asset when you're holding someone else's debt (depending on how reliable the debtor is) and you're supposedly earning a interest yield on that debt. But, yeah, we found out how that works in 2008 when folks were going wild investing in other people's mortgage debt. Supposedly US debt is the most "secure," but that's because we have a central bank that will readily print money to cover that debt if we can't get outside investors, and because we have the global reserve currency we didn't have to worry about the consequences of inflation, but now that idea ain't working out so well either.
                        Last edited by seanD; 09-23-2022, 12:59 PM.
                        "What am I doing here?" -- Joe Biden 2021

                        Comment


                        • Originally posted by seanD View Post

                          Well, in theory it's an asset when you're holding someone else's debt (depending on how reliable the debtor is) and you're supposedly earning a interest yield on that debt. But, yeah, we found out how that works in 2008 when folks were going wild investing in other people's mortgage debt. Supposedly US debt is the most "secure," but that's because we have a central bank that will readily print money to cover that debt if we can't get outside investors, but now that idea ain't so hot either.
                          What's crazy is if I purchase something today with a one-year obligation (especially a "same-as-cash" loan) and pay it off at the end, I will pay less for it than making the purchase a year from now. And since it appears Dementia Joe will still be running the show next year and burning through funds, inflation will likely still be rampant. I suspect a lot of merchants are going to be dropping the "same-as-cash" offers, though.
                          "You should just assume going forward that if I am ever wrong it is a typo" - Backup
                          "
                          Reality simply does not change based upon consensus or desire." - rogue

                          Comment


                          • Originally posted by Ronson View Post

                            What's crazy is if I purchase something today with a one-year obligation (especially a "same-as-cash" loan) and pay it off at the end, I will pay less for it than making the purchase a year from now. And since it appears Dementia Joe will still be running the show next year and burning through funds, inflation will likely still be rampant. I suspect a lot of merchants are going to be dropping the "same-as-cash" offers, though.
                            I just bought a sleep number bed on a 3 years no interest loan. They make their money on people who slip up and miss a payment. Then they hit you with 30% interest on the total amount. I have the cash to pay it off now, but I am leaving it in savings and just paying slightly more each month than needed to keep it interest free.

                            Comment


                            • Originally posted by Ronson View Post

                              What's crazy is if I purchase something today with a one-year obligation (especially a "same-as-cash" loan) and pay it off at the end, I will pay less for it than making the purchase a year from now. And since it appears Dementia Joe will still be running the show next year and burning through funds, inflation will likely still be rampant. I suspect a lot of merchants are going to be dropping the "same-as-cash" offers, though.
                              Yeah, I pay off monthly instead but pretty much the same idea - I'm thinking of pushing up planned purchases so the prices won't be as high as next year.



                              "He is no fool who gives what he cannot keep to gain that which he cannot lose." - Jim Elliot

                              "Forgiveness is the way of love." Gary Chapman

                              My Personal Blog

                              My Novella blog (Current Novella Begins on 7/25/14)

                              Quill Sword

                              Comment


                              • Originally posted by Sparko View Post

                                I just bought a sleep number bed on a 3 years no interest loan. They make their money on people who slip up and miss a payment. Then they hit you with 30% interest on the total amount. I have the cash to pay it off now, but I am leaving it in savings and just paying slightly more each month than needed to keep it interest free.
                                Yeah. Paying it off now with a relatively strong dollar would cost more than paying it off down the road with a weaker dollar, since the actual amount won't change. We're getting some hardwood flooring done now that we had initially planned for next year, but the first payments aren't due till January.
                                "You should just assume going forward that if I am ever wrong it is a typo" - Backup
                                "
                                Reality simply does not change based upon consensus or desire." - rogue

                                Comment

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