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Post by mozart522 on Jun 29, 2022 13:47:07 GMT
Yes- he suggested moving up the July rate hike and combining them to send the message they were serious about getting the genie back in the bottle. He has repeatedly said for months, they need to be careful and not slam on the brakes. Does this sound like be aggressive at all costs? No. I've been through the sound bytes to refute Siegel for a long time now. If you choose to look for perceived inconsistencies, I am sure you can find them. I think he has been very consistent, very correct, and continues to watch data - mainly M2 - on a weekly basis. Feel free to disregard. Just sayin' You don't see an inconsistency in saying raise 1% on the 15th and that the FED is raising too fast on the 27th, that is your choice. But I don't see how he could be correct in both cases. He may have just been using the best evidence he had at the time. Nothing wrong with that, but by his own statements, if the FED had raised interest rates by 1%, then the results of his new position that they moved too fast would be worse. What part of his input is actionable?
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Post by Deleted on Jun 29, 2022 13:59:57 GMT
But the Fed didn't raise 100 bps. So - that says something about the Fed. If they had raised 100 bps - the market - everything would have reacted differently - and caused different actions going forward. You do see that you can't say his "new position" would be the same if the "old position" had been acted on? If you don't, that is your choice. I'm not even going to argue that 2 sentences summarize an "old" and "new" position. As far as actionable - his input has been actionable for me for over a year - not buying bonds, getting rid of high p/e stocks, taking gains. He has repeatedly said the market is fair value for the long term (over a year) now - so I'm buying. And just to flesh out the soundbyte - from his commentary on Monday -
I caution the Fed against getting more aggressive than what is currently priced into the Fed Funds Futures market. Ratifying and hiking rates in line with current expectations is appropriate, but I do not think the Fed should get overly aggressive with rate hikes now. The Fed Funds Rate is very close to being above neutral and into restrictive territory, and the July meeting very likely takes them there. Hopefully the Fed does not over-react to lagged inflation data.
I am done arguing soundbytes. I suggest closely following people who are indeed SMEs before criticizing. All for constructive criticism, but soundbyte arguments are just that. Sorry.
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Inflation
Jun 29, 2022 14:12:32 GMT
via mobile
Post by Chahta on Jun 29, 2022 14:12:32 GMT
Less fiscal spending, I can agree on but we need to increase revenue as well, since the corporate tax rate has done as much harm to the debt level. I disagree. More revenue is the sickness of the government. It will never be enough as long as it is others money. I believe the ridiculous argument about debt as percentage of anything is a poor rationalization. Want no debt, then just take all their profit. The Fed is scared of their own shadow. Don’t raise too much even though we are behind. Don’t mess up the election. I know they are prayin’ for inflation to magically be 2% next month. Then what will they do with that head fake? Drop rates. LOL.
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Post by bizman on Jun 29, 2022 15:38:25 GMT
This might be a good spot to add a link to Hayek's lecture from his Nobel prize in Economics from 1974: The Pretence of Knowledge. As there is a chance we may be encountering something of a rerun of the 70's, we might as well refresh ourselves with some of the greatest hits. I wish all of the mental candle power of all the career PhDs at the Fed could enlighten us with precise knowledge by computing lots of fancy math. But they certainly seem to have done no better the last several years than the poor, benighted Arthur Burns did in the 1970's. Hayek says these brilliant guys and gals will fall short because economics is an area of "essentially complex phenomena" where "the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones." Another excerpt from the speech: "It has, of course, to be readily admitted that the kind of theory which I regard as the true explanation of unemployment is a theory of somewhat limited content because it allows us to make only very general predictions of the kind of events which we must expect in a given situation. But the effects on policy of the more ambitious constructions have not been very fortunate and I confess that I prefer true but imperfect knowledge, even if it leaves much indetermined and unpredictable, to a pretence of exact knowledge that is likely to be false. The credit which the apparent conformity with recognized scientific standards can gain for seemingly simple but false theories may, as the present instance shows, have grave consequences." This speech is a real gem. It will likely be a big disappointment and irritant for academic economists who pretend to much more faux precision. Too bad they can't hand out a dose of intellectual humility with every PhD in the social sciences. But with much more humility, the field would likely not appeal as much to those who want to think of themselves as masters of the universe.
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Post by mozart522 on Jun 29, 2022 16:31:23 GMT
@slooow ,
You do see that you can't say his "new position" would be the same if the "old position" had been acted on?"
His new position WOULD have been the same if his old position was acted on. The reason I know this is because his new position is based on a condition (money supply drop in MAY) that already existed, but he didn't know it because it hadn't been released. So if his old position had been acted on, it would have made little difference in his new one. One could ask if money supply is so important then why would he not wait for the May numbers before making a recommendation.
I believe the FED is doing what the data tells them to do and they will incorporate this MS data and inflation data into their next move. The talking heads' recommendations are just noise.
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Post by Deleted on Jun 29, 2022 17:52:55 GMT
@slooow , You do see that you can't say his "new position" would be the same if the "old position" had been acted on?" His new position WOULD have been the same if his old position was acted on. The reason I know this is because his new position is based on a condition (money supply drop in MAY) that already existed, but he didn't know it because it hadn't been released. So if his old position had been acted on, it would have made little difference in his new one. One could ask if money supply is so important then why would he not wait for the May numbers before making a recommendation. I believe the FED is doing what the data tells them to do and they will incorporate this MS data and inflation data into their next move. The talking heads' recommendations are just noise. Mozart - so.....what are you saying? You think if the Fed had raised 100 bps, that Siegel would have still said what he's been saying for months? Asking the Fed to consider the money supply growth in their decision making? Instead of making the ungodly mess they've made? Again - on 6/24 and 6/27 - he said - "I caution the Fed against getting more aggressive than what is currently priced into the Fed Funds Futures market." Is that inconsistent with asking for 100 bps raise on 6/15 - bringing what was the expected .5 July raise forward to June? No, it is not. He's cautioning against throwing the market into a tailspin by doing more than the market expects! Money supply M2 figures - which rose a tiny amount - was announced yesterday. Talking head? You better believe I'm looking to him over the Fed on this topic.
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Post by mozart522 on Jun 29, 2022 19:33:47 GMT
@slooow,
I guess what I'm saying is you can listen to whoever you want, and believe they are right, and follow their advice, but the FED will continue to "make the ungodly mess they have made" with or without his comments. The FED's job is not to keep the market from a tailspin. It is to follow its Congressional mandate of maximum employment and stable prices. Right now, employment is not an issue but stable prices are. They will attack inflation by killing demand through rate increases as long as the data shows it is necessary regardless of what happens with the stock or bond markets in the interim. Most everyone believes this will result in a recession. A lot of commentators have advice to prevent that. History will show if any of them were correct.
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Post by fishingrod on Jun 29, 2022 20:35:12 GMT
@slooow , I guess what I'm saying is you can listen to whoever you want, and believe they are right, and follow their advice, but the FED will continue to "make the ungodly mess they have made" with or without his comments. The FED's job is not to keep the market from a tailspin. It is to follow its Congressional mandate of maximum employment and stable prices. Right now, employment is not an issue but stable prices are. They will attack inflation by killing demand through rate increases as long as the data shows it is necessary regardless of what happens with the stock or bond markets in the interim. Most everyone believes this will result in a recession. A lot of commentators have advice to prevent that. History will show if any of them were correct. And since that unemployment is so low, the FED is willing to forego the mandate of employment and is trying to stifle jobs. If that happens then things will be in reverse. Then maybe inflation will abate.
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Post by mozart522 on Jun 29, 2022 20:52:05 GMT
@slooow , I guess what I'm saying is you can listen to whoever you want, and believe they are right, and follow their advice, but the FED will continue to "make the ungodly mess they have made" with or without his comments. The FED's job is not to keep the market from a tailspin. It is to follow its Congressional mandate of maximum employment and stable prices. Right now, employment is not an issue but stable prices are. They will attack inflation by killing demand through rate increases as long as the data shows it is necessary regardless of what happens with the stock or bond markets in the interim. Most everyone believes this will result in a recession. A lot of commentators have advice to prevent that. History will show if any of them were correct. And since that unemployment is so low, the FED is willing to forego the mandate of employment and is trying to stifle jobs. If that happens then things will be in reverse. Then maybe inflation will abate. They have to balance between the two. Right now the balance is acutely out of whack.
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Post by Deleted on Jun 29, 2022 22:01:22 GMT
It already is abating - look at the money supply growth trend now. But what is already in the pipeline is in the pipeline. Actual inflation has been higher than the prints. Even with abating inflation, the prints will likely be high. Not my idea.
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Post by Capital on Jun 29, 2022 22:17:45 GMT
It still all goes back to elementary economics. Inflation is caused by too many dollars (demand) chasing too few goods (supply). There are two solutions. One is to increase supply - the FED can't do this it has to be done by industry - ergo the supply chain issue is creating an artificial shortage of supply. The other solution the FED does have a hand in - reduction of demand. They do this by (1) reducing the number of dollars in the system to chase goods (reducing their balance sheet and not creating cash for consumers to spend) or (2) by making the cost on money more expensive (interest rate increases).
What the FED does is based on a lot of historical data, thus they are doing now what should have been done in the past. In addition, it takes months for their demand contraction schemes to work. Since they are looking in the past for answers and their actions affect a distant future they always overshoot due to this lag of data and effect' and cause a bit or more than a bit of recession. IMHO unfortunately the current system is just backwards. Controlling supply is easier to do than demand in normal times. Of course, the FED does not have the ability to touch supply, they can only work on demand. Actually I would not want the FED to control supply, that IMHO would turn our economy into a real mess. I think that they live in a world farther behind than accountants. I'm an accountant myself - we know where the money was; but, is going to be a while until we know where it is today - LOL.
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Post by Fearchar on Jun 29, 2022 23:19:22 GMT
The FED just released May M2 numbers.
It grew 0.1% over last month and only 0.4% since January.
In contrast between Jan 2021 to Jan 2022, M2 grew 12%.
So, the printing presses have stopped!
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Post by uncleharley on Jun 30, 2022 0:07:09 GMT
"So, the printing presses have stopped!"
That is a revelation we can use. I would add that the USD is showing some strength against other major currencies. More on that next week.
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Post by bizman on Jun 30, 2022 0:48:57 GMT
The FED just released May M2 numbers. It grew 0.1% over last month and only 0.4% since January. In contrast between Jan 2021 to Jan 2022, M2 grew 12%. So, the printing presses have stopped! Along these lines, Scott Grannis has a new post on his blog talking about these developments with lots of good charts. The money-printing press has all but shut down. He sees some turbulence with brightening skies possible by next year. From his lips to God's ears. If we could actually slay the inflation dragon fairly soon without huge costs, that would sure be good news for all. Here's hoping. One opinion of many. Excerpt: "On a final note, I would remind readers that I have been worrying about high and rising inflation for most of the past two years, and I think I was correct in doing so. But with the impressive slowdown in M2 growth and the strong likelihood that the banking system will no longer monetize federal deficits, the outlook has definitely improved. Regardless, inflation is likely to continue at an elevated pace for most of this year. Wages are being bid up, rents are soaring (playing catch-up to housing prices), higher energy costs are being passed through to many areas of the economy, and some supply chains (Ukraine in particular, a huge source of global food production) are still strained. And, last but not least, money demand is likely going to continue to decline as households attempt to spend down their outsized money balances. It's going to be a bumpy road for awhile. Markets are good at looking across the valley of despair and seeing hope on the other side, and that is not unreasonable in the present situation."
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Post by Deleted on Jun 30, 2022 1:08:25 GMT
I follow Grannis too. He is lock step with Siegel. Has some very good macro explanations of what has been going on in his blog. The impressive slow down in M2 in April was evidently scary and historical. In fact it wasn't just a slow down - but an actual decline. Another month of so so growth and the trend is looking good so far. But as Grannis also notes, inflation is likely to continue because the M2 behind it is already circulating. Bumpy sounds pretty reasonable.
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Post by Deleted on Jun 30, 2022 2:57:58 GMT
I have heard two well known investors say in Sohn Conference that to control inflation of 8%, Fed will have to raise rate above 8%.
It has happened in past Volcker and Greenspan both did something like this. Will this Fed have courage to do so is an open question.
Let us say there is a high possibility of feds rates rising to 5%+, would the way you position your current investments change? What would you do differently?
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Post by Deleted on Jun 30, 2022 12:36:14 GMT
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Post by uncleharley on Jun 30, 2022 12:43:56 GMT
I love the statement,but I doubt it will happen. More likely they will find a way to manage QE forever and the populace will learn to hedge against inflation.
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Post by Norbert on Jun 30, 2022 13:18:32 GMT
QE Forever has had nasty unintended consequences in terms of RE and stock price inflation, with effect on social equality. It's property owners and investors who have benefited most from these policies.
On the fiscal side, there's been an emerging bipartisan consensus that debts don't matter.
Politically, inflation is very unwelcome. It hits the bottom half hardest.
So, I think the war on inflation is real.
(Having said that, inflation is a nice way to discount the huge national debt.)
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Post by uncleharley on Jun 30, 2022 13:54:32 GMT
Recessions and high interest rates hit the bottom half the hardest also. I am not sure it is a matter of choice but more a matter of will or a matter of which is least difficult. We do live in interesting times.
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Post by Deleted on Jun 30, 2022 14:43:37 GMT
Recessions and high interest rates hit the bottom half the hardest also. I am not sure it is a matter of choice but more a matter of will or a matter of which is least difficult. We do live in interesting times. Biden can always do another 2T package to help the poor.
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Post by johntaylor on Jun 30, 2022 15:26:23 GMT
And "...will provide $600 billion in infrastructure investments by 2027. The U.S. will contribute $200 billion over the next five years, President Joe Biden announced at the G7 meeting."
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Post by Norbert on Jun 30, 2022 19:03:31 GMT
"Debts don't matter!"
Finally something both parties can agree on.
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Post by uncleharley on Jun 30, 2022 19:21:01 GMT
I would say that "Manageable debts don't matter!"
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Post by alvinthechipmunk on Jun 30, 2022 22:08:41 GMT
Yes, well... I keep hearing and seeing and reading about infrastructure improvements. Green or otherwise. The work just never seems to get done. Roads are a bunch of holes connected by a bit of pavement in eastern Canada and the USA Northeast. Even in Polynesia, the roads through Honolulu are a VERY bad joke. Someone in charge is PRETENDING, and hoping I'm too stupid to notice. But I notice. I ride the bus. There are no seasonal frost heaves HERE.
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Post by Chahta on Jun 30, 2022 23:58:39 GMT
Recessions and high interest rates hit the bottom half the hardest also. I am not sure it is a matter of choice but more a matter of will or a matter of which is least difficult. We do live in interesting times. Seems inflation is much harder on the bottom half and everyone.
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Post by chang on Jul 1, 2022 9:32:25 GMT
Chahta Bezos made that observation a few days ago. Apparently some luxury goods asset classes (wine, art) are actually up 10-20% YTD, while consumer goods are actually down more than the S&P 500. A Google search ought to turn up his remarks easily. Edit: Back at my PC now ..... link
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Post by mozart522 on Jul 6, 2022 12:43:16 GMT
Most experts are suggesting that the FED target rate is around 3.25-3.50. At this point, they believe that will curb demand on the things they have some control over. However, inflation will not be down to 3.5% by then in all likelihood because the war in Ukraine, commodity prices, and supply chain issues with China are not in their control.
If we assume at 3.5% the economy is in or near a recession, and the international community is likely already in recession, they will have to make a very tough decision; cut rates and see inflation go even higher, or raise rates further and push us into a much deeper recession. Lowering rates with high inflation could also lead to stagflation.
My opinion is that they may pause at 3.5 for a while and see what happens. The war could end, China could open up, and commodity prices could come down. If inflation keeps dropping by a little they may stop hikes or cut, if inflation goes up even more, they will have to hike even if it means recession.
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Post by uncleharley on Jul 6, 2022 17:53:21 GMT
Commoditiy prices sold off yesterday and are continuing to sell off today. The rumor is that Russia controls as much of Eukraine as it wants and Eukraine has made them pay as high a price as they can. Additionaly a Marshall plan to rebuild Eukraine is on the table. Consequently I believe the rumor that peace in Eastern Europe is at hand. Those things take the pressure off inflation and may imply that the market has over corrected, given the changing circumstances. Fed target of 3 or less appears possible to me. jmho
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Post by alvinthechipmunk on Jul 6, 2022 18:48:40 GMT
If the war ends, there will be a rally. But it won't fix inflation. I do believe we are nowhere near the end of that war. It will be a years-long slog. I am just old enough to have MISSED rationing during THE War: gas, meat, tires, cars, nylon, butter, sugar, shoes. I'm told the margarine came separately from the fake color to make it look like butter. The coloring was in a pouch. You had to mix it.
No such stuff is going on here during the Ukraine War. They need to reclaim the Donbas, but also the Crimea.
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