'Big Short' investor Michael Burry warns of a massive bubble and epic market crash

[Behappyalways]

Unemployment hits a certain % of the population and their family but inflation affects all.....so sacrifice the minority to please the majority....


As for USD appreciation. Remember the only aim now for Feds is to curb inflation. Appreciating USD will help in lowering inflation. A side plus is that it may take down China ( who ask your businesses to borrow in USD)

We are kinda on the verge of a crash....maybe a sharp rebound soon as the market is very oversold and too many put calls follow by a sharp crash...

Take care.....

https://mobile.twitter.com/TimmerFidelit...4589131776

https://mobile.twitter.com/Ludnica544/st...4102344704

[BlueKelah]

If his government agency task is only one goal -  ensuring reasonable inflation at 2%. The answer is yes that is his intent.

However, the Fed has a second policy goal it has to achieve: ensure full employment. He is running a real risk of failing to meet it and causing a castrophic global recession with massive job cuts

Currently he hasnt even raised rates that much yet and has been late to the inflation game having called it TRANSITORY all of last year and some of this year.

now FED rates only 3%plus and real rates are still NEGATIVE!!! Thats still accomodative!!!

But the global and USA economy cannot take it as its been easy money for far too long since GFC. 

With coming election, Powell has no choice, DEMs also have no choice. High inflation wont wont sort itself out as history has proven without super high rates and tax cuts for business to increase production and supply of goods. With high inflation you will lose the election that is a fact. 

SO basically FED doesnt really care now, just let it be recession first, get inflation under control and then can print again to prop things up and get the recover to help unemployment. 

THE CYCLE HAS TO PLAY OUT. 

MMT is proven to be useless.

[Wildreamz]

Caveat: I don't think long term investors should based their investment decisions on forecasts on rates and inflation etc. 

But we have seen Crude price corrected 35%+ since peak (now lower than pre-invasion), commodity price correction (e.g., copper now down more than 20% from a year ago), housing market weakness (https://www.reuters.com/markets/us/us-ex...022-09-21/). Doesn't seem like we are facing a raging inflation issue anymore.

[BlueKelah]

Caveat: I don't think long term investors should based their investment decisions on forecasts on rates and inflation etc. 

But we have seen Crude price corrected 35%+ since peak (now lower than pre-invasion), commodity price correction (e.g., copper now down more than 20% from a year ago), housing market weakness (https://www.reuters.com/markets/us/us-ex...022-09-21/). Doesn't seem like we are facing a raging inflation issue anymore.

Oil has been artifically depressed by draining of USA SPR reserves. GAS/Thermal Coal prices have come down but are still pretty high compared to a year ago.

Housing market wise home prices can fall but rents is another issue and forms the stickier part of the inflation items in addition to consumer services like medical services/education/personal care services.

I believe in the Money supply causing inflation theory which is supposed to moderate to around 6% next year as money supply growth is now flat.

U can still have big inflation during recessionary periods, they call that STAFLATION and its not a myth.

If you study the 1970s, I believe we are going to end up in a similar situation to back then as everyone is still expecting FED to pivot soon. IN addition FED is not really that tight yet, if inflation is still going at 8%, current 3%+ rates is still negative real rates. So the moment FED is forced to loosen again to rescue from recession, inflation will jump up again.

[weijian]

It is obvious to me now that high valuations are a good predictor of future returns, hence it is drilled in my head that I need to maintain price discipline no matter how sexy the potential purchase appeal to me.

But on the other hand, It is also obvious to me that good things don't come cheap. I learnt it the hard way been a cheapskate and buying cheap things (that became cheaper over time). These days, I simply strive for "high return on brain damage".

All of us, our small brains, are looking for certainty - some grand answer to address the uncertainty. But of course, it doesn't work this way.

Have Stocks Become Cheap?

United States equities have dropped 22.8% for the year to date, as measured by the Morningstar US Market Index. (Other broad stock market benchmarks show similar results.) Their troubles could well continue. Three times during the past 25 years, U.S. equities have lost more than 30%, first from 2000 through 2002, then in 2008, and finally (albeit fleetingly) in spring 2020. Nevertheless, the decline raises the question: Have stocks fallen far enough to become bargains?

https://www.morningstar.com/articles/111...come-cheap

[CY09]

Weijian's article provides some insight to why for long term investors, rate forecasting is applicable.

Reproduced below " All things being equal, stocks are worth more when U.S. Treasuries yield 2% than when they yield 5%. In the first case, a slow-growing company that trades at 25 times earnings is acceptably priced. In the second, it is not."

If you are into investing in dividend stocks, one might think the above dosent hold true. But if the dividend company has leverage, a higher rates means a higher interest expense; in turn affecting earnings and dividends.

So I do feel long term investors care about rate forecasting

[Wildreamz]

..

So I do feel long term investors care about rate forecasting

By forecasting, do you mean forecasting rates for the next 10 years or the next 12 months? Neither will be easy, or I would argue, possible, to give investors a significant advantage.

[Wildreamz]

Oil has been artifically depressed by draining of USA SPR reserves. GAS/Thermal Coal prices have come down but are still pretty high compared to a year ago.

..

Could it also be due to demand destruction? https://www.reuters.com/markets/europe/g...022-09-27/

Other interesting data points:
Aluminum price:
https://tradingeconomics.com/commodity/aluminum
Iron price:
https://tradingeconomics.com/commodity/iron-ore
Nickel price:
http://www.kitcometals.com/charts/nickel...large.html

For wages increase that you alluded to, could it be that it's only just catching up with inflation?

Are there similar headwinds to inflation (like we have seen in the last 6-7 months since the war) in the next 12-24 months?

Points to consider.

[CY09]

..

So I do feel long term investors care about rate forecasting

By forecasting, do you mean forecasting rates for the next 10 years or the next 12 months? Neither will be easy, or I would argue, possible, to give investors a significant advantage.

This can be long term. For example in the last decade, interest rates were 0-2% which was below the average of Fed rates, a long term investor may have factored this and say the low 0-2% can't last forever and a 4% avergae interest rate will occur

[Wildreamz]

This can be long term. For example in the last decade, interest rates were 0-2% which was below the average of Fed rates, a long term investor may have factored this and say the low 0-2% can't last forever and a 4% avergae interest rate will occur

You could also make the case where, the same hypothetical investor, in the previous 10 years (since 2012), was forecasting a reversion to 4+% (of the previous decade) and missed out on the historic bull run.

Not sure how would forecasting long term rates give consistent edge beyond a simple buy-and-hold/DCA strategy?