Inflation

[over9k]

This is one of those classic "how long can the market remain irrational before I become insolvent" moments.
Bonds behaving differently to equities...

Might be a good point to time a bet against actually. Hmm. My degen 3LNI is going to/has already run hard, might be a rotation point coming up soon.

 

[over9k]

3/6 headlines saying not to get ahead of ourselves

 

[waterbottle]

View attachment 151494

3/6 headlines saying not to get ahead of ourselves

I think you can make a case for either direction - at least in the short term.
Bullish = China open, CPI dropping, jobs numbers, no meeting until feb
Bearish = 2/10 yield inversion deepens, unemployment is too low, fed warns on market euphoria.

Long-term depends on what the Fed does but historically, markets don't bottom until the Fed has finished cutting - they haven't even finished hiking yet.

 

[waterbottle]

Sachs sacks. 3200 to be exact.

Bloomberg - Are you a robot?

 

[Dona Ferentes]

I think you can make a case for either direction - at least in the short term.
Bullish = China open, CPI dropping, jobs numbers, no meeting until feb
Bearish = 2/10 yield inversion deepens, unemployment is too low, fed warns on market euphoria.

Long-term depends on what the Fed does but historically, markets don't bottom until the Fed has finished cutting - they haven't even finished hiking yet.

As Yogi Berra said " It's tough to make predictions, especially about the future. "

Inflation is what inflation is. Backward looking, forward looking; lots of variables. I tend to like this guy (Jared Dillian)

Everyone thinks we will go into a recession. We probably will. Lots of people think this will result in the bear market getting worse. I don’t—it is already priced in. Stocks going down 25% in 2022 were priced in the recession. This has happened countless times throughout history—the stock market drops, and then we get the recession. By the time we get the recession, stocks are going up again.

What really interests me is the yield curve, which is massively inverted at the moment. One of the easiest and most obvious trades seems to be the yield curve steepener, which would result in short-term rates going down relative to long-term rates.

The bull steepener, as it is known, is one of the easiest trades in finance. ....And everyone knows that it’s not the yield curve inversion that coincides with the recession—it’s actually the steepening that follows.

 

[over9k]

Sachs sacks. 3200 to be exact.

Bloomberg - Are you a robot?

Almost as if it's much harder to make money in a bear market hey?

They're trimming the fat, nothing more (though there's a lot of fat).

 

[waterbottle]

JPowell speaking about unpopular decisions required to tame inflation. I wonder if he was talking in the past or future tense?

Meanwhile 2x fed speeches stating that rates >5% will be necessary.

 

[waterbottle]

Australian CPI increases to 7.3%.... Time to hike?

 

[Craton]

Just one of many reasons that I've a negative outlook for 2023.

World Bank: Recession a looming threat for global economy​

 

[mullokintyre]

Australian CPI increases to 7.3%.... Time to hike?

The graph from ABS says it all
Probably the most benign spin one could put on it is that it has stabilised, but not yet coming down.
How will the RBA interpret it is the big question.

Mick

 

[waterbottle]

The graph from ABS says it all
Probably the most benign spin one could put on it is that it has stabilised, but not yet coming down.
How will the RBA interpret it is the big question.
View attachment 151529
Mick

CPI up and retail sales up.
I don't think you can justify any other move except to hike.

 

[againsthegrain]

CPI up and retail sales up.
I don't think you can justify any other move except to hike.

That is a general observation from the street level economy thread. People spending living the good life, unaffected by the current rates as it seems. Perhaps a soft start in Feb with .25 to warm up the table for next .50 raise after? Or perhaps hard and sweet with 2 x .50 to start the year we will see

 

[wayneL]

That is a general observation from the street level economy thread. People spending living the good life, unaffected by the current rates as it seems. Perhaps a soft start in Feb with .25 to warm up the table for next .50 raise after? Or perhaps hard and sweet with 2 x .50 to start the year we will see

It seems to me that without any overseas influences that Australia can probably truck along quite nicely through this period, with the damage pretty much confined to the fringes ( though it must be said that prices are set at the fringe).

Question in my mind is what sort of sh*tshow are the major economies going to endure... US, China, EU.... And how will that will eventually affect us.

Our economy does not exist in a vacuum.

 

[waterbottle]

Short end US bonds continuing their rise despite whilst longer term bonds have been dumping. Inversion deepening.
Meanwhile equities continuing to rise...

 

[over9k]

Australian CPI increases to 7.3%.... Time to hike?

Fixed income has already priced another 50 in by june

 

[over9k]

Zeihan's latest two cents on europe/winter/energy

 

[moXJO]

Zeihan's latest two cents on europe/winter/energy

This guy is great on a lot of things and also terrible on a lot of things (but sounds great).

 

[waterbottle]

This guy is great on a lot of things and also terrible on a lot of things (but sounds great).

Can't really blame him for not being able to predict a hot European winter...

I think periods like 2022 tend to attract alot of bearish insight that feeds into an echo chamber. It's very easy to get wrapped up into it - I've caught myself doing this too. Zeihan produces some great bear soma, that although is logical, is not able to predict the unpredictable, which tends to undo many a bear thesis...

 

[waterbottle]

Biggest "news" today will be CPI. I say "news" because almost everyone expects inflation to continue downwards, so anything but will be a surprise.

The bullish argument is clear:

1. China is reopening
2. CPI is heading downwards
3. We are fast approaching the Fed's terminal rate
4. Markets (particularly the NDX) have already had a substantial loss. COVID is behind us
5. Europe is managing to survive its winter
6. Crude has fallen substantially (almost 50% compared to its peak)

The bearish argument is also worryingly clear:

1. The full impact of rates won't be felt until 3-12 months after the final hike (I can't find any evidence, it just seems to be based on anecdotes)
2. 5% may not be the terminal rate as mentioned by several Fed speakers
3. The West is now planning additional sanctions on refined crude products from Russia I. E. Petrol and diesel
4. The yield curve is inverted. Massively. Historically, this has meant a recession will follow, although there was a recent article that quoted the 'inventor' it not applying this time due to unusual economic circumstances
5. Employment is still extremely tight, although lay-offs are now starting to increase
6. Historically, markets don't bottom until the Fed is done cutting, meanwhile we aren't done hiking.

This rally is reminiscent of June 2022. Everything was screaming recession inbound. The Fed message was clear that additional hikes would be coming, but the market rallied on hopium for 2-3 months before getting smacked down by a reality check at Jackson Hole.

My gut tells me we're close to the bottom but not there yet. So the next question I have is how long is this rally going to run?
Unless we see a surprise upward CPI (we did in Oz...), I could see this running until the next Fed meeting.

Anyone else keen to share their thoughts?

 

[moXJO]

Can't really blame him for not being able to predict a hot European winter...

I think periods like 2022 tend to attract alot of bearish insight that feeds into an echo chamber. It's very easy to get wrapped up into it - I've caught myself doing this too. Zeihan produces some great bear soma, that although is logical, is not able to predict the unpredictable, which tends to undo many a bear thesis...

No he quotes figures in other videos that are wrong. Is off with what's actually going on in certain areas.
It's not the predictions, it's multiple other things that probably aren't his forte.