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QQQ is up to May 12/17 half line. QQQ might drop below 252, a lower low. TY is up. US 10Y might have peak. When wave IV will be over, TY might drop to it’s backbone : 105/95, testing 1987 low. // The $100K smile is back. If u don’t get implants and u suffer from headaches and black spots on your face.
The boomers get new hips, knees, pipelines and blood vessel to fix aneurysm. Heart attack rejuvenate XLV & the GDP. Ukraine might get few electric shock waves to shut their GPS. Whatever Russia cannot sell will stay in the ground. Bangor ME, Cherson and Kharkiv will freeze this winter.
8dots
1 year ago
TY is up. US 10Y might have peaked. TY wave from the top to Mar 2021 is about equal to wave III. Creepto sucked liquidity. M2 is down
since Apr 2022. The shticky inflation is temp. Rent is sticky. The boomers are spending 90 % of their money on XLV will not change.
Salmo Trutta
1 year ago
“Wholesale prices rose 0.2% in October, less than expected, as inflation eases”
There goes DXY.
Salmo Trutta
1 year ago
Makes sense. The Cleveland inflation, CPI, nowcast for the 4th qtr. is 5.7%.
Short-term money flows are temporarily up, forcing stocks up. Long-term money flows are down as Vt cannot possibly offset the decline in DDs.
KidHorn
1 year ago
Seems like a lot of this is due to the covid boom in certain industries. People are buying from B&M again instead of buying online. They go out for fun instead of looking at screens.
I’m not surprised Amazon is losing money on devices. I paid $99 for a ring pro system. $179 for a UHD Fire TV, and $50 for a fire HD tablet. They all must have been sold at a loss. Maybe amazon thought they would make it up with subscriptions.
8dots
1 year ago
The health care sector is about 25% of our economy. XLV is down 7% from the top. The boomers lifted XLV to a new plateau. The banks
bear market didn’t help the Fed. JP failed to muzzle the Dow. It’s only down 8% from the top. The Dow sort it’s 30 members by price. The
higher the price the higher the weight in the index. Unitedhealth at 550 is 11% of the index weight. Goldman is 8%, AAPL and CRM 3%.
Saleforce CRM replaced XOM in 2015. XOM is up, CRM is down by half. If AAPL is down to a lower low the Dow wouldn’t care. The Fed protect
the banks, but the banks misbehave. The boomers are worse than rent…
That part I didn’t get. Is rent bad? Are boomers bad? Or are you renting from a boomer and you don’t like it?
Jojo
1 year ago
AIER Leading Indicators Index Remains Well Below Neutral
Robert Hughes
November 14, 2022
Summary
AIER’s Leading Indicators Index held at 25 in October. The latest result is the fifth consecutive month below the neutral 50 threshold. The low readings are consistent with weakness in the economy and significantly elevated risks for the outlook.
The first estimate of third-quarter real gross domestic product (GDP) came in at a 2.6 percent annualized growth rate, following rates of -1.6 percent in the first quarter and -0.6 percent for the second quarter. Real final sales to private domestic purchasers, about 88 percent of real GDP and arguably a better measure of private domestic demand, has shown greater resilience, with growth having stayed positive despite declines in real GDP. However, domestic demand growth has slowed significantly, from a 2.6 percent pace in the fourth quarter of 2021 to 2.1 percent in the first quarter, 0.5 percent in the second quarter, and just 0.1 percent in the third quarter.
Consumers remain the cornerstone of the U.S. economy with real consumer spending accounting for about 70 percent of real GDP and about 80 percent of real domestic demand. For consumers, the labor market remains tight with payrolls continuing to expand (though the pace appears to be slowing), job openings at a high level, and layoffs hovering near lows. The solid labor market supports positive consumer attitudes but that is offset but high inflation and rapid interest rate increases that threaten future economic growth.
The longer elevated rates of price increases continue and the higher the Fed raises interest rates, the higher the probability that a vicious cycle of declining economic activity and contracting labor demand will begin to dominate the economy. Overall, the outlook remains highly uncertain. Caution is warranted.
Amazon is planning to lay off approximately 10,000 employees in corporate and technology roles beginning this week, according to a report from The New York Times. That’s not warehouse and delivery.
Most are tech companies. They don’t build anything. Can cut people, HR, wasteful future development (Meta). I would guess that FEDEX won’t be getting rid of delivery or warehouse. They will look at those that don’t directly add value. Not sure which one mentioned lowering head count in recruiting and HR.
My guess is that Zuckerberg saw Musk cut Twitter’s employment in half and said, “Hold my beer.” I spent 10 days on Twitter before the election and saw the pathetic whining from the ones who were fired. With 90 days’ severance, mind you. Those people somehow thought that Twitter is a charity and a “woke” NGO all rolled into one. Oops.
The best people left Twitter when it went ex-growth and moved to greener pastures. Those who stayed stayed because they didn’t have to work hard and could play around. Ambitious people don’t stay in a stagnant company long.
Investing in future development is NOT always wasteful, and is generally the source of most future value. If so, what is Amazon signaling by such drastic measures? Impending economic crisis? Overleveraged? A strategic refocusing of the company before legislation is passed? Just being cautious?
If the long-haul trucks are taking a beating, the neighborhood trucks will too. Will Christmas ’22 flop? Is it too late to short retailers?
PapaDave
1 year ago
The economy will be in slow growth for a while, possibly falling into recession at some point. I agree that job losses will not be significant, in spite of recent headlines, because of the continuing shortage of workers.
High inflation for basic needs (food, shelter, energy) will reduce discretionary spending. But spending will stay strong on basic needs.
I still think that oil stocks are the place to be over the next several years. Whereas stocks that rely on discretionary spending will do poorly.
OPEC just lowered its demand projections for oil in 2023 because of slow global growth, particularly in China. So oil demand will “only grow” by 2.2 Mbpd next year.
To offset this, OPEC lowered its production quotas in October by 0.1 Mbpd. Whereas OPEC production actually dropped 0.2 Mbpd in October.
Then in November they lowered quotas by a further 2.0 Mbpd. Though this is expected to result in actual production dropping by just 0.8 Mbpd.
Which is an interesting response when they think demand will grow by 2.2 Mbpd. Where will that extra 2.2 Mbpd come from?
Not from OPEC.
Not from the US either.
SPR releases of 1.0 Mbpd are about to end. And US production is already peaking. All the tier 1 sites have been drilled and are already in decline. Tier 2 and 3 sites are being being nibbled at, but are not economically lucrative enough to attract much capex.
Offshore is still worth it but the capex is substantial and the timelines are long. So most US companies are simply maintaining their reserves with minimal capex and enjoying the high prices. Same for all the Canadian oil companies.
MarkraD
1 year ago
At a glance it seems Mish is discussing maybe 100K job cuts.
This is THE most important chart to keep an eye on. While people blamed Covid or other nonsense like “free money” from the government for labor shortages, the decline in the labor force had been happening since 2001. While rivers, lakes and other water reservoirs are getting dumped with trash, people get sick and then they stop working. Throw in retirements and you have the perfect storm.
True, which is why I noted the approximated 100K jobs.
An inadvertent goal of current Fed policy is to reverse wage inflation by cooling demand, ironically that means Mish’s report is bad, not because of jobs lost, but because not enough jobs lost.
Mind, the JOLTs report had us adding to job openings this month,
Yes, we live in strange times.
.
worleyeoe
1 year ago
Great! Keep them coming. The only way inflation, in general, and more importantly housing inflation gets solved is via a BIG recession. A soft-landing recession isn’t going to cut it.
8dots
1 year ago
On the way up to Dec 1979, in the seventies there was only one recession : 11/73 – 3/75 (-) 3.2%. In the eighties two recessions. In the nineties
one. In 2000’s two : 3/2001 – 11/2001 and 12/7 – 6/2009, (-) 5.1%, the deepest since the 40’s. Pain is back. We might get recessions/depressions in pulse modulation. If so, the tight labor force is bs.
I remember 2003 as weak economically. I lost my job then and it took over a year to set up another. Bush extended unemployment benefits in 2003, which he wouldn’t have done if the economy were doing well.
The ’08 recession was truncated by the Fed flushing money down the Wall Street drain. Now, we are playing catch up, globally, and in much worse shape. Last week’s rally should be a warning–erratic euphoria from the Soy generations.
Salmo Trutta
1 year ago
Neither Volcker, nor Greenspan, nor Bernanke, nor Yellen, nor Powell understands monetarism. Monetarism is the control of total legal reserves, not nonborrowed reserves.
Why did Volcker fail? For two main reasons. The first was the failure to recognize
monetary lags. Contrary to Nobel
Prize–winning economist Milton Friedman and Anna J. Schwartz’s “A Monetary
History of the United States, 1867–1960 “monetary lags are not “long and
variable”. The distributed lag effects
for both real output and inflation have been mathematical constants for over
100 years. Thus, we can precisely calculate any “output gap”, any “sweet spot”.
The second was due to Volcker’s operating procedure. Volcker targeted non-borrowed reserves (@$18.174b
4/1/1980) when at times over 200 percent of total reserves (@$44.88b) were
borrowed (i.e., absolutely no change from what Paul Meek, FRB-NY assistant V.P.
of OMOs and Treasury issues, described in his 3rd edition of “Open Market
Operations” published in 1974). That was
back when the money multiplier was 8.6 (m1/required reserves).
Volcker advised the congressmen to watch the non-borrowed
reserves—“What we do on our own initiative.” The Chairman further added — “Relatively large borrowing (by the banks
form the Fed) exerts a lot of restraint.”
That, of course, is economic nonsense. One dollar of borrowed reserves provides the same legal-economic base
for the expansion of money as one dollar of non-borrowed reserves. The fact that advances had to be repaid in 15
days is immaterial. A new advance could
be obtained, or the borrowing bank replaced by other borrowing banks. The importance of controlling borrowed
reserves is indicated by the fact that at times nearly 200% of all legal
reserves were borrowed (used for profit).
Greenspan telling the senate committee: “the relationship [between money growth and economic growth] has completely broken down”
But then Greenspan eliminated 40% of required reserves. That is what caused the GFC.
John Connally and Paul Volcker told Nixon to divorce gold. LBJ trashed the dollar to create a smoke screen, to hide his blood trails.
Salmo Trutta
1 year ago
I don’t expect that this time is different. Long-term money flows are decelerating. And that won’t be offset by an increase in Vt.
The Federal Open Market Committee (FMOC)
controlled the money supply through legal reserve management—the only method
available in a free capitalistic society. If the Manager of the Open Market
Account who operates from an office in the Federal Reserve Bank of New York,
and who is in charge of all open market purchases and sales for all 12 Federal
Reserve Banks, decides to tighten monetary policy (sale securities), the impact
(contrary to the experts) is immediate, i.e., without a lag. As noted
above, the initial and immediate market response to a decline in reserves is
deflationary.
Why
Money Matters and Interest Rates Don’t”
Thornton:
“the interest rate is the price of credit, not the price of money”
Thornton: “However, on March 26, 2020, the Board of Governors reduced the
reserve requirement on checkable deposits to zero. This action ended the Fed’s
ability to control M1. In February 2021 the Board redefined M1 so that M1 and
M2 are very nearly identical. Consequently, it makes little sense to
distinguish between them. In any event, the checkable deposit portion of M2
cannot be controlled now because there are no longer reserve requirements on
these deposits. Here is the reason the Fed cannot control these deposits.”
You are smarter and more deeply experienced than I am, so correct me if I’m wrong: I think V (you call it Vt — I mean the velocity of money, the turnover) explodes with hyperinflation, rises with inflation, declines with disinflation, and craters with deflation. So I look at what’s happening and what’s to come in ’23, and would expect V to decline. Tell me if you think that’s wrong, preferably in language I can understand. Thanks.
Same issue with sending gift baskets to my parents.
I have no idea how Amazon prime can still offer free shipping on items that I buy that are under $10. Gotta cost more in gas than what I paid never mind the cost of the item itself or the time of the guy driving the truck.
They can do it because they deliver a lot of stuff everywhere. I get several amazon trucks a day on my street. Delivering to me costs about 30 seconds of driver time.
I shipped a 35lb amp a few weeks ago from Maryland to Tennessee. Cost me $39. You must have a shipped a lot farther than I.
There are no Amazon trucks here. My packages arrive by way of the post office or UPS. Some other places use Fed Ex. The marginal cost of delivery for a truck that is going down the street anyway is pretty low.
MPO45
1 year ago
According to yahoo finance. Amazon: Full Time Employees: 1,544,000. So laying off 10,000 is 0.006 of their labor force. But that’s not even my point..
My point is on any given work day, 10,000 boomers retire and leave the work force. We’re two weeks into November so somewhere across America 100,000 people theoretically retired and by the end of November another 100,000 will have retired. This will continue day after day until 2030 when all 60 million boomers retire or die, depleting the labor force yet still demanding goods and services. If companies are going to lay off 10,000 per day and boomers retire 10,000 per day then the labor force will be totally depleted in a couple of years but we all know that isn’t going to happen. Meanwhile, the global population hit 8 billion. The distortion would be comical were it not so serious.
Everyone is cheering the end of inflation and the slowing of Fed hikes but mark these words and save this post, it will be temporary. It will hit like a ton of bricks in 2025 when boomer critical mass retirement hits.
Does it matter? Generally a company lists employees not contractors but if you want to know you can probably read through the 10K or 10Q and get down to the numbers. The fact that there have been many union drives suggests that they are employees not contractors because contractors can be terminated far more easily than employees.
I didn’t know that Amazon had that many employees. Wow. Do you have information about the segmentation, both geographic and by business line? How about the layoffs?
They have 1.5 million world wide, not US employees.
So presumably the 10K layoffs are world wide as well but they haven’t announced where yet.
8dots
1 year ago
Buy the dogs for fun and entertainment only. Will FDX close Sept 15/16 gap : great question, excellent question. Will QQQ make a lower low : great question, excellent question. Warren Buffet kept his AAPL (until Sept 30). AAPL lost $600B in market cap. Will Warren lose $1T : great question, excellent question : AAPL weekly. AAPL might soon fall < 128, a lower low. Today AAPL closed under June high. If AAPL reach/ breach BB#3 : Aug 24/25 2020 129/123 Warren might buy more. China is doing Warren a favor….
Warren hasn’t lost anything, ,he is a long term investor and quite frankly, as old as he is it won’t matter anyway. The investment fund he holds will probably hold apple for 100 years, get back to me in 100 years and tell me how Apple is doing. I suspect it will be up $1 trillion by the end of the century.
Berkshire Hathaway’s median annual portfolio turnover rate was 2% between 1977 and 2000, implying a 50-year holding period. That’s long-term investing, alright. The only criticism I’d have is that 40% of the portfolio is in one stock. I am not even going to mention the company because in this context I don’t care what the company is.
I am familiar with the arguments about diversification, and obviously Buffett is on the side of those who think diversification gets in the way of superior returns. This is certainly true, so long as the portfolio holds the right assets — which in BK’s case has definitely been true. Even so, there’s plenty of risk embedded in having 40% of your eggs in one basket.
Plenty of inventory. Double speak for no one’s buying. Remember when Christmas used to account for 65% of our GDP? That’s been a minute. Don’t forget that it took a government to do this kind of damage to the people.
xbizo
1 year ago
Funny to hear on the same day I learned that our local U-Haul rents half its inventory to either Fed-Ex or UPS for the holiday rush. They were there picking up rental trucks this morning….
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monetary lags. Contrary to Nobel
Prize–winning economist Milton Friedman and Anna J. Schwartz’s “A Monetary
History of the United States, 1867–1960 “monetary lags are not “long and
variable”. The distributed lag effects
for both real output and inflation have been mathematical constants for over
100 years. Thus, we can precisely calculate any “output gap”, any “sweet spot”.
The second was due to Volcker’s operating procedure. Volcker targeted non-borrowed reserves (@$18.174b
4/1/1980) when at times over 200 percent of total reserves (@$44.88b) were
borrowed (i.e., absolutely no change from what Paul Meek, FRB-NY assistant V.P.
of OMOs and Treasury issues, described in his 3rd edition of “Open Market
Operations” published in 1974). That was
back when the money multiplier was 8.6 (m1/required reserves).
Volcker advised the congressmen to watch the non-borrowed
reserves—“What we do on our own initiative.” The Chairman further added — “Relatively large borrowing (by the banks
form the Fed) exerts a lot of restraint.”
for the expansion of money as one dollar of non-borrowed reserves. The fact that advances had to be repaid in 15
days is immaterial. A new advance could
be obtained, or the borrowing bank replaced by other borrowing banks. The importance of controlling borrowed
reserves is indicated by the fact that at times nearly 200% of all legal
reserves were borrowed (used for profit).
The Federal Open Market Committee (FMOC)
controlled the money supply through legal reserve management—the only method
available in a free capitalistic society. If the Manager of the Open Market
Account who operates from an office in the Federal Reserve Bank of New York,
and who is in charge of all open market purchases and sales for all 12 Federal
Reserve Banks, decides to tighten monetary policy (sale securities), the impact
(contrary to the experts) is immediate, i.e., without a lag. As noted
above, the initial and immediate market response to a decline in reserves is
deflationary.
Why
Money Matters and Interest Rates Don’t”
Thornton:
“the interest rate is the price of credit, not the price of money”
Thornton: “However, on March 26, 2020, the Board of Governors reduced the
reserve requirement on checkable deposits to zero. This action ended the Fed’s
ability to control M1. In February 2021 the Board redefined M1 so that M1 and
M2 are very nearly identical. Consequently, it makes little sense to
distinguish between them. In any event, the checkable deposit portion of M2
cannot be controlled now because there are no longer reserve requirements on
these deposits. Here is the reason the Fed cannot control these deposits.”
Interest Rates Matter?
I am familiar with the arguments about diversification, and obviously Buffett is on the side of those who think diversification gets in the way of superior returns. This is certainly true, so long as the portfolio holds the right assets — which in BK’s case has definitely been true. Even so, there’s plenty of risk embedded in having 40% of your eggs in one basket.