Talking Stocks 2.0

[7sins]

Originally Posted by SDGT3

Fed will definitely go at least .75 this month then there's no meeting until Sept. Given the shift in commodities, I "believe" we've seen peak inflation and this will be the highest reading we will see moving forward. The question is how much lower will it go? Going from 9.1% to 8.8% isn't much of a move but if we can get to low 7's by Sept when the Fed is scheduled to meet again, then perhaps we get the anticipated .5% raise. Any higher then we could go another .75%.

Diesel is still stubbornly high which affects virtually everything being produced/shipped/trucked to market.

Agreed on commodity prices, however, only 7% of CPI is energy related. If you look under the hood of inflation, cost of goods and services is SURGING, with no end in sight. Many of these costs are causing rent/housing to further rise and housing represents ~35% of CPI. Until we get housing and rent under control you will have persistently high CPI numbers, even as commodity prices like oil and copper have dramatically fallen. I think we can all agree CPI is not the best measure of inflation as it is backwards looking but this is currently driving investor sentiment.

When you look at forward breakevens for inflation, you can see the market expects inflation in 5 years to be at ~2.3%, thus long term you should see inflation unwind. Regardless, the yield curve is already inverted, the most since 2000 and as the FED raises again, this WILL cause the economy to move from slowing to stalling to recession. Thus demising long term growth prospects and causing a safe haven bid for a flight to safety causing intermediate to long yields to sharply decline. This is why looking at the yield curve, which is the best indicator of future markets, the 1yr forward curve prices meaningfully higher short term rates 1 year from now where intermediate to long yields are pricing lower than today in a year. This is a further inverted yield curve and if you know how to position along the curve should be easy money to be made in bonds.

Just my .02 but if recession progresses there will be significant money (leveraged strategies like CEFs) to be made in mid to long term bonds as they rally - I would explicitly avoid taxable credit given OAS spreads are not much higher than historical average and I anticipate defaults to increase enabling spreads to further widen.



This to me on CDS is much more concerning, even if the consumer is less levered than 08, CDS should not be rising at this pace.

[SDGT3]

^^^ always great indepth analysis and appreciated.

[austinp]

Anybody like CCL at these levels as a trade?


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[SDGT3]

Originally Posted by 7sins

Agreed on commodity prices, however, only 7% of CPI is energy related. If you look under the hood of inflation, cost of goods and services is SURGING, with no end in sight. Many of these costs are causing rent/housing to further rise and housing represents ~35% of CPI

I've been thinking a lot about your post Bryan and wanted to mention this and perhaps I'm overlooking something and always value your insight.

As you mentioned, energy relates to only 7% of the CPI but it affects 100% of the population as everyone uses some form of energy everyday. Also, energy has a direct correlation to the price of food, which 100 % of the population consumes.

Conversely, if housing is 35% of the CPI, it affects a significantly lower percentage of the population for the following reasons: Homeownership rates in the US is at 65.5% leaving 34.5% as renters. Of those 65.5% of homeowners, only 4.7% are on an adjustable rate mortgage (see graph below) leaving the majority of homeowners on a fixed rate mortgage which are constant in nominal terms or are completely paid off so they would not be affected by housing CPI. For new home buyers, we've seen home prices stabilize in the most desireable areas and falling 10-15% in several markets. Am I thinking about this correctly?

[m j b]

Originally Posted by SDGT3

Am I thinking about this correctly?

No, you are leaving out the people who rent. Their rent typically increases when the cost of ownership (property purchase price, taxes, insurance and interest rates) go up.

And 65% seems awfully high.

[SDGT3]

Originally Posted by m j b

No, you are leaving out the people who rent. Their rent typically increases when the cost of ownership (property purchase price, taxes, insurance and interest rates) go up.

And 65% seems awfully high.

I listed the renters in the post and looked up every stat quoted.

https://www.census.gov/housing/hvs/f...nthvspress.pdf

https://www.statista.com/statistics/...us-since-2003/

[m j b]

Originally Posted by SDGT3

I listed the renters in the post and looked up every stat quoted.

Oops.

Sorry.

mjb: master of reading comprehension

[JWillard]

CPI should be called CPLIE

[austinp]

Been a nice few weeks. Hopefully everyone got in there and made some dough.


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[huncho]

days like today are just becoming comical at this point. job data comes out and the nasdaq drops 150 points within minutes, opens at -200 just to go green within the first 30 mins and then back to -200

i guess this is the new normal, algos will forever be 10 steps ahead of everyone else and retail has barely any impact on stock prices and movement anymore which was the whole point of the market to begin with. i also just wonder what the actual benefit to premarket trading is besides screwing over retail investors

[CoveWatch]

Originally Posted by huncho

days like today are just becoming comical at this point. job data comes out and the nasdaq drops 150 points within minutes, opens at -200 just to go green within the first 30 mins and then back to -200

i guess this is the new normal, algos will forever be 10 steps ahead of everyone else and retail has barely any impact on stock prices and movement anymore which was the whole point of the market to begin with. i also just wonder what the actual benefit to premarket trading is besides screwing over retail investors

tell that to HKD and MEGL

Kidding aside, I agree... volatility rules and its been tougher to see any trends forming. But I guess its good news for any day traders. Been staying pretty passive recently and just riding the roller coaster... anticipation on the way up and hands up screaming on the way down

[HorologyK]

Everyone is confident there will be no recession. Inverted yield curve… its different this time. I’m staying in cash until we at least retest the lows which we will. And hopefully more.

[huncho]

Originally Posted by HorologyK

Everyone is confident there will be no recession. Inverted yield curve… its different this time. I’m staying in cash until we at least retest the lows which we will. And hopefully more.

who is confident there will be no recession? it's only the media saying that, everyone else knows times are definitely bad and have been almost all year

[Doc Savage]

Originally Posted by huncho

who is confident there will be no recession? it's only the media saying that, everyone else knows times are definitely bad and have been almost all year

I consume a lot of varied news media, and I haven't heard anybody say we aren't going to have a recession. Where are you getting this?

[EEpro]

Originally Posted by Doc Savage

I consume a lot of varied news media, and I haven't heard anybody say we aren't going to have a recession. Where are you getting this?

White House press briefings. Any time Doocy brings it up. Yellen has also said it.

[HorologyK]

Originally Posted by EEpro

White House press briefings. Any time Doocy brings it up. Yellen has also said it.

Don’t forget Kramer … seriously, market running on fumes it feels like. Retail investors now chasing everything again.


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[superdog]

I personally think we are going to test new bottoms.

However, and this is just my gut, which appears as good as most of the talking heads these days, I do not think it will be too far from what we have seen so far.

S&P at 3000, which has been predicted, I think, is unrealistic. But I do think we will see 3500 to 3600.

I, along with many of us, have had some nice gains recently. Still no regrets that I built up my cash reserves. I am right about where I started selling, so feel pretty good about how it has all turned out. Still waiting for my time to begin a slow re-entry.

In fact, I have debated selling off more. I will not, don't get me wrong. I am very comfortable with my current portfolio. And while I love seeing the markets going north, I think it is only a matter of time before the slide begins anew.

[Doc Savage]

Originally Posted by EEpro

White House press briefings. Any time Doocy brings it up. Yellen has also said it.

Ahhh, politicians. I don't pay attention to them regarding economic status.

Originally Posted by HorologyK

Don’t forget Kramer … seriously, market running on fumes it feels like. Retail investors now chasing everything again.

LOL Kramer's a sad permabull. I can't believe he's still on the air somewhere.

[superdog]

btw, I lost my butt on GRWG. was actually pretty good to get the tax benefits from the big loss.

but at circa 4.80 I bought back in for a fair amount. just in my personal play account, not my FA managed stuff. And I am up pretty good right now.

It was once $60. I genuinely believe it will someday be $160. Not today, not tomorrow...but someday. Cannabis is not going anywhere. And these guys are selling the shovels...

[HorologyK]

Originally Posted by superdog

I personally think we are going to test new bottoms.

However, and this is just my gut, which appears as good as most of the talking heads these days, I do not think it will be too far from what we have seen so far.

S&P at 3000, which has been predicted, I think, is unrealistic. But I do think we will see 3500 to 3600.

I, along with many of us, have had some nice gains recently. Still no regrets that I built up my cash reserves. I am right about where I started selling, so feel pretty good about how it has all turned out. Still waiting for my time to begin a slow re-entry.

In fact, I have debated selling off more. I will not, don't get me wrong. I am very comfortable with my current portfolio. And while I love seeing the markets going north, I think it is only a matter of time before the slide begins anew.

I think we see sub 3000 before it’s all done.

[Doc Savage]

Originally Posted by HorologyK

I think we see sub 3000 before it’s all done.

Agreed.

Originally Posted by superdog

btw, I lost my butt on GRWG. was actually pretty good to get the tax benefits from the big loss.

but at circa 4.80 I bought back in for a fair amount. just in my personal play account, not my FA managed stuff. And I am up pretty good right now.

It was once $60. I genuinely believe it will someday be $160. Not today, not tomorrow...but someday. Cannabis is not going anywhere. And these guys are selling the shovels...

It's up 10% today so far. I think it's a good long term call right now.

[superdog]

Originally Posted by HorologyK

I think we see sub 3000 before it’s all done.

That would be crazy. And a%% puckering.

But I admit I almost hope that happens. If I’m buying at those levels, when it all comes back I’ll be in a good spot.

For the greater good, I hope it doesn’t happen.

[superdog]

Wow, so there are a few that think we go sub 3000. Dang. That’s scary. Big picture, that’s scary.

Any others in this camp?

[HorologyK]

Originally Posted by superdog

That would be crazy. And a%% puckering.

But I admit I almost hope that happens. If I’m buying at those levels, when it all comes back I’ll be in a good spot.

For the greater good, I hope it doesn’t happen.

That’s usually what it takes to flush everyone out. The market usually overcorrects in one direction or another.

[Baco Noir]

Originally Posted by superdog

Wow, so there are a few that think we go sub 3000. Dang. That’s scary. Big picture, that’s scary.

Any others in this camp?

I'm not an investment pro, but no, I don't see us heading to 3000 or even below 3500. All of the guidance I am seeing from Fidelity says more ups and downs, but not any doom and gloom notes.

[huncho]

Originally Posted by HorologyK

I think we see sub 3000 before it’s all done.

what would be the catalyst for sub 3000? big tech still crushing earnings and they have too much weight in the s&p

[scarlet knight]

Semiconductor stocks getting crushed lately. They are very cyclical. Heaven or hell.

[macrowatch]

Originally Posted by huncho

what would be the catalyst for sub 3000? big tech still crushing earnings and they have too much weight in the s&p

A 'fat finger'.

[Doc Savage]

Originally Posted by huncho

what would be the catalyst for sub 3000? big tech still crushing earnings and they have too much weight in the s&p

The US economy is based on consumption. Inflation is impacting that hard. This will continue to be reflected in corporate earnings as they slash their estimates and lay off employees (as Walmart just did). Analysts will downgrade their stocks, further worsening the selloff, and this bear market will continue downward.

If you are a long term investor, don't be fooled by dead cat bounces!

[huncho]

Originally Posted by Doc Savage

The US economy is based on consumption. Inflation is impacting that hard. This will continue to be reflected in corporate earnings as they slash their estimates and lay off employees (as Walmart just did). Analysts will downgrade their stocks, further worsening the selloff, and this bear market will continue downward.

If you are a long term investor, don't be fooled by dead cat bounces!

yeah but inflation is a very lagging indicator in terms of company profits. we will see big tech have reduced earnings due to full effects of inflation for q3/4 but at the same time inflation should be much reduced when those earnings reports come out since they're 3 months behind. this is assuming it continues coming down though