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(30-08-2022, 01:56 PM)specuvestor Wrote: Interest rate is the cost of money and the boom bust cycle follows it. Buffett doesn't really care about it because the basic assumption is that the business and management will adjust accordingly to the changing circumstances in the next decade or so.
I am not a believer of buy and hold forever so the boom bust cycle will affect Asset Allocation decisions. If the market look forward 9-12 months then it has already discounted a mild recession and in my view this bubble is not as precarious as previous ones with little systemic risks. But if the Fed policy mistakes enabled a serious recession then all bets are off and Asset Allocation and risk budgeting will have to adjust accordingly.
If Fed rate hike is coming off then another obvious trade is short USD and long SGD, JPY etc but that's out of VB's context. So personally I don't see it as semantics.
It's clearer to see how these (1. whether interest rates are coming down, or 2. whether current equity price have adequately discounted an impending, further economic slowdown, 3. how deep the impending slow down is going to be) are actionable; but these are different discussions altogether.
The current debate (not just in this forum, but on financial media) on whether we are currently already in a recession, the definitions of recession etc. seems more like semantics to me.
And that's fine. Just wanted to clarify.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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(04-09-2022, 01:36 AM)Wildreamz Wrote: (30-08-2022, 01:56 PM)specuvestor Wrote: Interest rate is the cost of money and the boom bust cycle follows it. Buffett doesn't really care about it because the basic assumption is that the business and management will adjust accordingly to the changing circumstances in the next decade or so.
I am not a believer of buy and hold forever so the boom bust cycle will affect Asset Allocation decisions. If the market look forward 9-12 months then it has already discounted a mild recession and in my view this bubble is not as precarious as previous ones with little systemic risks. But if the Fed policy mistakes enabled a serious recession then all bets are off and Asset Allocation and risk budgeting will have to adjust accordingly.
If Fed rate hike is coming off then another obvious trade is short USD and long SGD, JPY etc but that's out of VB's context. So personally I don't see it as semantics.
It's clearer to see how these (1. whether interest rates are coming down, or 2. whether current equity price have adequately discounted an impending, further economic slowdown, 3. how deep the impending slow down is going to be) are actionable; but these are different discussions altogether.
The current debate (not just in this forum, but on financial media) on whether we are currently already in a recession, the definitions of recession etc. seems more like semantics to me.
And that's fine. Just wanted to clarify.
1) "High 6%+inflation = Transitory inflation" (coz of supply chain, not excessive money printing)
2) "2x Q negative GDP = slowdown" (coz lagging indicator employment is GOOD!)
These are called "shifting the goalposts" , thats why FED losing a lot of credibility.
Anyone who has followed or involved in financial market stuff knows its just FED speaking nonsense, all politically motivated to cater for coming elections.
IMO years of MMT has finally caught up with the FED. It will require a form of monetary reset to get things under control again I reckon. Either that or a big recession/depression from Paul Volcker style interest rates. (N.B. IMO global inflation is running more around 15-20% level and not sub 10% CPI as per most reporting from CBs.
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The fact that the crypto market has about 0.9 trillion in funds trading/slushing around, and the fed has 2.1 trillion in reverse repos that banks have deposited with them instead of lending out; shows how much excess liquidity is swimming around in the market.
It will take the Fed years to clear off this liquidity at the slow rate they are draining the cash (0.95 trillion/month). Inflation will likely persist for another full year until 2024. The fed has to either be more aggressive in tightening or raises rates dramatically, otherwise things will not be resolved. I recall there was a market observer or banker who remarked every 100 billion in cash injected is equivalent to a 25 basis points reduction. The fact that US has pumped in 8 trillion and of these '8', about 3 trillion are funds not put for productive use signifies there may be a need for interest rate to be raised to the 8% mark to balance.
Raising to 8% will kill off the housing sector and worsen the US federal deficit because the government has to service a higher interest. Similarly doing QT means the tech industry will be devoid of easy capital with many companies forced to close down due to their loss making ways and paying employees high salary. It will be a repeat of the 2000 Tech bubble which resulted in job losses.
Both ways are unpalatable, but the US Fed Policymakers and Congress Leaders do have to decide on one. They cant have their cake and eat it
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08-09-2022, 10:10 PM
(This post was last modified: 08-09-2022, 10:12 PM by BlueKelah.)
(05-09-2022, 11:33 PM)CY09 Wrote: The fact that the crypto market has about 0.9 trillion in funds trading/slushing around, and the fed has 2.1 trillion in reverse repos that banks have deposited with them instead of lending out; shows how much excess liquidity is swimming around in the market.
It will take the Fed years to clear off this liquidity at the slow rate they are draining the cash (0.95 trillion/month). Inflation will likely persist for another full year until 2024. The fed has to either be more aggressive in tightening or raises rates dramatically, otherwise things will not be resolved. I recall there was a market observer or banker who remarked every 100 billion in cash injected is equivalent to a 25 basis points reduction. The fact that US has pumped in 8 trillion and of these '8', about 3 trillion are funds not put for productive use signifies there may be a need for interest rate to be raised to the 8% mark to balance.
Raising to 8% will kill off the housing sector and worsen the US federal deficit because the government has to service a higher interest. Similarly doing QT means the tech industry will be devoid of easy capital with many companies forced to close down due to their loss making ways and paying employees high salary. It will be a repeat of the 2000 Tech bubble which resulted in job losses.
Both ways are unpalatable, but the US Fed Policymakers and Congress Leaders do have to decide on one. They cant have their cake and eat it
Currently Powell wants to be like his mentor/hero volcker and raise rates till something breaks. Possibly we will see something break this or next month (3rd q GDP should be negative again and jobs numbers start to get worse signifying a confirmed recession.) Dont think Powell can raise rates to 8% without breaking something on the way. Something has broken badly in the past decades whenever rates went up.
All eyes on europe now, the inflation there is getting out of control, I dont think the poorer nations have adequate winter stockpiles of energy and food.
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Europe will suffer from prolonged inflation because the bill for staying warm through winter is going to be expensive. This is the price Europe has to pay in order to protect Ukraine and prevent Poland, Czech and Slovakia from being the next to disappear.'
This means Europeans will have less disposable income for other goods. Investors should start to consider the second order effect of a smaller discretionary income. What will Europeans cut from their household budgets? One I suspect will be travels and two, will be on food delivery and Netflix.
ECB has just delivered a 75 basis points hike. However, i think this is going to continue further. Similar to US Fed, they are worried of doing QT as it will impact the PnL of its companies especially the tech giants and large data centre industry there. Again, this is not a good strategy. In fact, curtailing the tech companies from their money is more benefical- reduces both inflation as companies close down and wages are surpressed as well as less tech companies means less energy consumption
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The silliness is back as market rally and shorts are squeezed. The continued rise in 10 year bond yield kinda confirmed the silliness. Probably after this silliness, it will then try to take this year new low. Investors should take this opportunity to further relook and adjust one's portfolio.
苦日子正要開始！亞洲貨幣競貶潮無阻止態勢！通膨壓力加大！【Yahoo TV #風向龍鳳配】
https://m.youtube.com/watch?v=p6ioKMr-gTw
“It’s our currency, but it’s your problem" - Richard Nixon’s treasury secretary John Connally
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(10-09-2022, 10:57 AM)Behappyalways Wrote: The silliness is back as market rally and shorts are squeezed. The continued rise in 10 year bond yield kinda confirmed the silliness. Probably after this silliness, it will then try to take this year new low. Investors should take this opportunity to further relook and adjust one's portfolio.
苦日子正要開始！亞洲貨幣競貶潮無阻止態勢！通膨壓力加大！【Yahoo TV #風向龍鳳配】
https://m.youtube.com/watch?v=p6ioKMr-gTw
“It’s our currency, but it’s your problem" - Richard Nixon’s treasury secretary John Connally
Big fund traders have come back from holidays and are now pumping the market to try and do the last release of stocks for retails to "hold the baby" before the next leg down.
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(23-06-2021, 10:36 PM)Wildreamz Wrote: Will there be a big crash in the near future? Maybe, maybe not. I maintain, no one, not Michael Burry, Jeremy Grantham, Ray Dalio, Warren Buffett, or even Jerome Powell himself, knows the short-term future with absolute certainty.
Make your own decisions base on objective information, and be responsible for your own results.
Peace.
Reminder to keep everyone down to earth.
Personally, I have never stopped buying opportunistically.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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11-09-2022, 01:32 PM
(This post was last modified: 11-09-2022, 01:32 PM by weijian.)
What will happen, will never be clear. But what we want to happen, is never been clearer.
So when we tend to gravitate towards strong views on "what will happen", then we may actually be mixing it up with what we want to happen.
We have to differentiate between what we want to happen, VS what will happen.
Personally, I know I can't know what will happen. Also I can't really differentiate well between what will happen with what I want to happen.
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(11-09-2022, 01:32 PM)weijian Wrote: What will happen, will never be clear. But what we want to happen, is never been clearer.
So when we tend to gravitate towards strong views on "what will happen", then we may actually be mixing it up with what we want to happen.
We have to differentiate between what we want to happen, VS what will happen.
Personally, I know I can't know what will happen. Also I can't really differentiate well between what will happen with what I want to happen.
However if you are a student of history you will find that whenever the FED goes into sustained proper hiking cycle like now, rate sensitive markets like stocks/preciousmetals/property will go down, its a no brainer.
Just like massive direct money printing and stimulution during 2020 and 2021 ==> sky high inflation globally now.
Of course we will be unable to predict when these will end or the exact impact to financial markets but generally speaking the trend will be there.
Passive investor doesnt really care what happens I reckon, only shorter term traders would be concerned.
I know what I want, is that my stocks continue to pay dividends and my precious metals to continue to hold its value and purchasing power.
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