US Economic News

[Wildreamz]

Interesting. I thought recession already started last year (just that it was redefined). 

Either way, even if you guessed inflation/recession correctly, still need to guess interest rate correctly, even if you guess interest rate correctly, still need to guess market reaction correctly. In order for prediction to be actionable.

Seems hard.

[specuvestor]

How did you define recession last year? People's life worse off even as wage grow? Or cause tech sector got laid off?

I would think it's similar trying to guesstimate companies' earnings growth, management integrity, asset valuation, cashflow reliability, competitive environment, industry trends, etc

Key as usual is to be roughly right rather than precisely wrong. Then more importantly it's what actions to take to reflect such views. Do nothing is also an action.

“Predicting rain doesn't count. Building an ark does.” - ironically from the same Buffett that doesn't look at interest rates. I do try to look at the weather now and then

(Bloomberg) -- The White House said Thursday that data does not indicate a US recession is on the horizon, rebuffing Federal Reserve staff economists who forecast a minor contraction starting later this year.
White House Press Secretary Karine Jean-Pierre said job numbers and consumer spending are strong and chalked it up to President Joe Biden’s economic plans, waving off a recession risk.
“We’re seeing the success of his plans, and recent economic indicators are not consistent with a recession or even a pre-recession,” Jean-Pierre said Thursday when asked about the Fed forecast. 
Federal Reserve minutes published Wednesday indicated that “the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.”

[Wildreamz]

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“Predicting rain doesn't count. Building an ark does.” - ironically from the same Buffett that doesn't look at interest rates. I do try to look at the weather now and then

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Not ironic at all. Arks aren't built overnight, it's about investing in great companies with long runway and prudent management for the long haul, ideally when they were cheaper and less sought after. Rather than struggling to buy wood to build arks when everyone are anticipating of a flood.

[weijian]

How would we position or VB follows Buffett not going to second guess interest rates?

I generally subscribe to Howard Marks' "we-may-not-be-able-to-predict-but-we-should-know-where-we-are" cycle view.

Historically, interest rate changes have been demonstrated to have a big impact on stock market movements. An investor will be a fool to ignore or not have a sense of interest rates. But in terms of prediction or taking action (or no action), as Wildreamz mentioned, is too hard - not in a sense guessing the future direction but profiting from it especially when everyone (more brilliant than me) are also looking at it. Just for a moment, picture Jim Simons' Renaissance Technologies as a competitor, is good enough for me to stop.

On a personal basis, I realize the ROBD (return of brain damage) is better spent working through financial statements, understanding future trends or practising to have better temperament. The best thing - looking at small caps in emerging markets, and knowing that not a lot of brilliant folks are doing the same thing, makes me feel that a mediocre person like me has some chance

[specuvestor]

As usual I dont think it's binary yes or no

If we try to take short term view it is quite foolhardy. But to ignore a storm or train wreck it's equally head-in-the sand.

For stocks we also filter out short term noise but if there is structural change like management change or M&A or diworsification, I don't think we should keep holding either. Ditto for macro... US rates have raised from near zero to 5%. That's hardly noise nor 12 months short term

Use something more current: If US didn't bail out SVB would VBs still continue to hold stocks? In my view we could have another GFC if regulators drag their feet for another month or two as we are moving from a very leveraged position due to zero interest rate environment prior; and I would rather be spectator to the train crash. Good thing about investing is we don't need a ticket to observe and learn.

And good thing this time round the regulators learnt to backstop quickly. And pundits give too little credit except some hindside critiques

[Wildreamz]

.. But to ignore a storm or train wreck it's equally head-in-the sand.

..

Do you see a storm or train wreck that haven't been discounted by the market? Just curious.

[specuvestor]

All the time. See the yield curve when Powell declared inflation as transitory. Or how SPAC spiked and crashed all within 18 months and other euphorias. At current moment the crypto, memes, tech has /had been deflated and recovering post storm. I think PE funds in general have not discounted yet / repriced though on the ground PE activity has already felt the stretch from the tighter liquidity. You know it's hubris when not one person but people tell you PE is safer than treasuries.

You will never know when a bubble will pop; but I'm pretty sure if you are experienced enough you can identify a bubble. Greenspan said you can't identify a bubble while dot coms raise $1b just on paper dreams. SPAC is low level BS when they still need to promise to return money if nothing found

In fact I think value investor don't think the market is a perfect discounting machine; I think technical chartist believe in pseudo-perfect market more: no advantage except analyzing psychology and insiders.

.. But to ignore a storm or train wreck it's equally head-in-the sand.

..

Do you see a storm or train wreck that haven't been discounted by the market? Just curious.

[Wildreamz]

All the time. See the yield curve when Powell declared inflation as transitory. Or how SPAC spiked and crashed all within 18 months and other euphorias.

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You will never know when a bubble will pop; but I'm pretty sure if you are experienced enough you can identify a bubble.

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I see. Seeing storms and train wrecks not adequately discounted by market all the time, but don't know when bubble will pop.

Kinda reminds me of Jeremy Grantham.

It's definitely a valid opinion. But I'm not sure how to action upon that. It's also not a world view that I am accustomed to.

I generally see possibilities and a reason to be bullish all the time. It's just personally a more aspirational way to live my life and guide my decisions.

Edit: Also, as you said, tech has deflated and is recovering right? Implying that everyone that stayed invested in QQQ/SPY before 2021 (even during Covid corrections) has outperformed fearing a correction/storm/train-wreck all the time (being not invested in the market) isn't it? Seems to justify a long-term buy and hold mindset.

[weijian]

Been binary means one is ready to overweight/underweight their cash positions according to the seasons, rather than all in or all out situations.

"Buy and hold" does not mean "buy and not sell". It just means one is investing with a long term mindset. The mindset is the juice, not the action itself which is a result of the mindset.

Also, I think been a short term pessimist but a long term optimist is a great balance. There are tons of conflicting ideas and methods in my mind (and around it) but one probably needs to learn to be at peace with that.

[Wildreamz]

Been binary means one is ready to overweight/underweight their cash positions according to the seasons, rather than all in or all out situations.

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On this, personally, overweight and underweight decisions are the result of being able/not able to find interesting bargains in the market, and not macro-predictions, which I don't think I'm able to outsmart the market.