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Post by mozart522 on Jul 6, 2022 20:37:14 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 Possible, of course. But the parts that are broken won't get fixed in a couple of months. We may see a rally, but as long as inflation is well over the FED rate, we will have problems. IMHO
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Post by Deleted on Jul 6, 2022 21:10:58 GMT
Money supply has declined remarkably due to Fed actions and expected actions so far. Softer economic data coming in. Inflation shows signs of having peaked, but will still be working through the system for some time. Maybe the Fed will not hike as much as expected if data stays soft.
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Post by mozart522 on Jul 6, 2022 22:02:38 GMT
@slooow,Actually, the growth of money supply has slowed a lot but was still 8%+ in April. Much less than last year and points to a possible impending recession. The spread between inflation and the FED rate is too wide. If they pause or cut now, inflation would likely rise. If they continue to hike aggressively, it could trigger a recession. So they have to be perfect for a soft landing. But a lot of issues causing inflation are out of their control. And let's not forget they haven't really even begun to dump their huge balance sheet on the market yet. No one really knows how it will work out. If I have one strong belief at this point it is that we will not be back to "normal" until after 2023. Opportunities and rallies along the way, however, may well be in the cards.
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Post by Fearchar on Jul 6, 2022 23:06:19 GMT
I recall hearing that there are something like 5 million more job openings than there are people looking for work in the US.
That's a big gap.
Suspect US inflation won't get back near normal until the gap is more reasonable.
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Post by Deleted on Jul 7, 2022 0:02:05 GMT
mozart522, So these are the stats I have - total money supply growth in 2022 is 1%, 25% money supply growth in 2020; nearly 15% in 2021. That is dramatic. GDP revisions are also dramatic - from 1% to -1.5% in 3 weeks. Not my observations - Siegel's. Interesting thought of his is that real GDP will average 2% versus higher historical averages due to declining population and productivity - so a negative number is not to be taken as so unusual. I think normal after 2023 sounds reasonable.
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Post by mozart522 on Jul 7, 2022 0:50:01 GMT
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Post by gman57 on Jul 7, 2022 1:53:35 GMT
I recall hearing that there are something like 5 million more job openings than there are people looking for work in the US. That's a big gap. Suspect US inflation won't get back near normal until the gap is more reasonable. Yup... not sure what it is now. We have to remember 1 million+ people died from covid. Yes, many were old but if 50% had jobs that's 500,000+ less workers. The strict immigration rules/laws also reduced new entrants into the work force. Many women who started to work from home because they had to watch/home school the kids also said heck with it, I'm not going back to work. Data lately is starting to say most inflation causes are starting to roll over. Supply chain, commodity prices, shipping costs etc... We don't know how long the tight labor market will continue but there has been some recent layoff announcement which might ease the labor crunch. Hopefully it all leads to a soft landing/normalization rather than recession but time will tell. I can say this, on the fourth of July in my hometown ALL the restaurants and business downtown had big HELP WANTED signs... almost every single business had signs.
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Post by Fearchar on Jul 7, 2022 2:28:14 GMT
Here is a pertinent chart from the US Bureau of Labor Statistics: only about 50% of the people looking for work that are needed to fill all the job openings. it's never been this bad!
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Post by mozart522 on Jul 7, 2022 12:30:15 GMT
@slooow, Not sure which figures are correct, but I suspect yours may be the % drop in growth relative to the last month of M2. In any event, it has dropped a lot since 2020, no doubt.
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Post by Deleted on Jul 7, 2022 12:45:15 GMT
Hi M - I didn't look at the seekingalpha article, but suspect there is a reasonable explanation. The stats from Siegel are total money supply. I know the total actually declined in April which was very unusual and an indication the brakes were being slammed on as opposed to being gently applied. As you note - the main idea is that it is declining. And if one believes money supply growth is the main driver of inflation in this instance, then it may be that only what is left in the system from the growth in the last 2 years needs to work its way through. CPI is backward looking, so even if inflation is declining, the CPI might not seem to reflect that. Of course, that is this month!
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Post by Chahta on Jul 7, 2022 13:43:55 GMT
Here we go. Another clue to the coming recession or more likely the one we are in now. link
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Post by uncleharley on Jul 7, 2022 13:59:09 GMT
Here we go. Another clue to the coming recession or more likely the one we are in now. linkMaybe so, maybe no. One week in a row does not make a trend. The 4 wk moving anerage is still running hot.
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Post by johntaylor on Jul 7, 2022 14:18:54 GMT
Another wage-lowering labor market factor = 1.9 million illegal aliens in 2021. Not all remained or had skill/fluency to fill slots, but another 1/2 million illegals this yr.
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Post by uncleharley on Jul 7, 2022 17:35:42 GMT
I just read Tom McClellons weekly report. This week he is focusing on the price of oil and the fact that it is going down while supplies are decreasing and demand is at a high level. He alludes to the idea that the strength of the USD is a factor however his primary point is that the oil futures contracts are in a condition referred to as backwardation. IOW the farther out the futures contract is, the lower the price thus predicting lower prices for crude oil in future months. There was an article published this past weekend, I believe by Reuters, that talked about the price of WTIC dropping to 65$ per brl. I am not ready to make a call for $65 but I could easily see WTIC dropping to $85. This would be consistant with a flight to safety in the global markets and a stronger USD.
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Post by mozart522 on Jul 7, 2022 18:09:40 GMT
uncleharley, I'll see your backwardation and raise you a contango
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Post by uncleharley on Jul 7, 2022 18:14:23 GMT
It doesn't work that way.
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Post by mozart522 on Jul 7, 2022 20:12:28 GMT
uncleharley, In March oil was in record contango, now backwardation. At some point, it will go back to contango. Seems like a good point to short oil prices now.
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Post by win1177 on Jul 7, 2022 20:28:31 GMT
I just read Tom McClellons weekly report. This week he is focusing on the price of oil and the fact that it is going down while supplies are decreasing and demand is at a high level. He alludes to the idea that the strength of the USD is a factor however his primary point is that the oil futures contracts are in a condition referred to as backwardation. IOW the farther out the futures contract is, the lower the price thus predicting lower prices for crude oil in future months. There was an article published this past weekend, I believe by Reuters, that talked about the price of WTIC dropping to 65$ per brl. I am not ready to make a call for $65 but I could easily see WTIC dropping to $85. This would be consistant with a flight to safety in the global markets and a stronger USD. I’ve been hearing that the drop in oil markets is also related to recessionary fears and the eventual drop in demand that will come if we have a recession. Keep hearing this on various market podcasts, news shows, etc. But I haven’t heard people saying $65 a barrel. Win
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Post by Deleted on Jul 7, 2022 21:26:49 GMT
A Citibank analyst said that - $65. He's respected. But, this was his thought this week. Guessing at commodities is just that. Too many variables.
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Post by mozart522 on Jul 7, 2022 22:24:46 GMT
@slooow,
And cyclone season is right around the corner.
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Post by Deleted on Jul 7, 2022 23:38:51 GMT
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Post by gman57 on Jul 8, 2022 1:52:50 GMT
I just read Tom McClellons weekly report. This week he is focusing on the price of oil and the fact that it is going down while supplies are decreasing and demand is at a high level. He alludes to the idea that the strength of the USD is a factor however his primary point is that the oil futures contracts are in a condition referred to as backwardation. IOW the farther out the futures contract is, the lower the price thus predicting lower prices for crude oil in future months. There was an article published this past weekend, I believe by Reuters, that talked about the price of WTIC dropping to 65$ per brl. I am not ready to make a call for $65 but I could easily see WTIC dropping to $85. This would be consistant with a flight to safety in the global markets and a stronger USD. I’ve been hearing that the drop in oil markets is also related to recessionary fears and the eventual drop in demand that will come if we have a recession. Keep hearing this on various market podcasts, news shows, etc. But I haven’t heard people saying $65 a barrel. Win I've heard $65 but that was always the very low end of their guesstimates. If the s**^&^T hits the fan maybe we'll get to $65 otherwise we probably won't see $65.
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Post by mnfish on Jul 8, 2022 12:08:46 GMT
From Wells Advisors - Existing home sales decreased from 6.5mil in Jan to 5.4mil in May. Fed survey of businesses shows forward Cap Ex is being reduced.
Scot Wren writes - "Housing and business capital spending are important pieces to the US economy and the momentum in both has deteriorated as 2022 has progressed and both segments are likely to decline further as the year progresses. We expect both components to be major contributors to the coming recession we are projecting. We think investors can be patient during this expected recessionary period and those with longer-term horizons can take advantage of potential big down days and weeks to put sidelined funds to work"
On oil prices - In a letter dated June 24 they are still projecting WTI to be $90-110 at the end of 2022.
As far as money supply declining, people spent 30-50% more for houses in 2020-21 and now with gas prices doubled and CPI at 8+% the excess should be dwindling.
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Post by Norbert on Jul 8, 2022 14:49:39 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 Very interesting post. Yes, there's some reason to think that it's logical for the adversaries in this conflict to now seek peace. A ceasefire or peace deal would definitely be good for the markets; one cause of inflation would be removed and Europe would no longer face an energy crisis. Can you tell us more about the "rumors" you have heard and why you think they're credible? TIA, N.
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Post by uncleharley on Jul 8, 2022 16:58:38 GMT
"The ambassador's remarks give an insight into the potential Russian endgame in Ukraine: essentially a forced partition that would leave Russia's former Soviet neighbour shorn of more than one fifth of its post-Soviet territory."
The above is a quote from Reuters Daily Briefing which I subscribe to. They are talking about remarks the Russian Ambasador has made. There have been other reports that the Russian goals have been to control Donbas region and Luhansk [spelling may be incorrect] The report that Ukraine has exacted about as high a price as it thinks it can was also in Reuters daily briefing about a week ago or more, but I cannot locate it now. I consider Reuters to be a credable source of news.
<dailybriefing@thomsonreuters.com>
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Post by retiredat48 on Jul 8, 2022 21:43:26 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 Why would/should Russia stop at current boundary/land holdings?? Why not advance until stopped...until you secure the land divided by that river/waterway running north/south at KYEV. Makes a new, definable Eastern Ukraine boundary. Gives Russia more wheat assurance for its people, as well as oil/gas...and a better permanent military defense posture. R48
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Post by Deleted on Jul 8, 2022 21:48:09 GMT
Let's circle back to the topic please!
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Inflation
Jul 8, 2022 22:05:18 GMT
via mobile
Post by Norbert on Jul 8, 2022 22:05:18 GMT
@slooow
With all due respect, I can think of little more important than predicting the endgame in Ukraine. The impact on commodity prices is self evident, in my opinion.
I'm looking for viable theories like those expressed by Uh and R48; if the technicals then support a persuasive narrative, I'll be using a good piece of my large cash allocation.
Yes, the war is a controversial and politicized topic, but we're staying clear of that stuff so far (in this thread).
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Post by uncleharley on Jul 8, 2022 22:15:10 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 Why would/should Russia stop at current boundary/land holdings?? Why not advance until stopped...until you secure the land divided by that river/waterway running north/south at KYEV. Makes a new, definable Eastern Ukraine boundary. Gives Russia more wheat assurance for its people, as well as oil/gas...and a better permanent military defense posture. R48 They may want to rebuild their Army and their economy. Finding a way to end the conflict would enable them to accomplish other goals.
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Post by Deleted on Jul 8, 2022 22:24:35 GMT
I don't think the impact on commodity prices is self-evident. Can disruption to supply of commodities be quantified. I'm not waiting in line to get gas or being limited in getting any commodity. Prices were increasing well before the war, and Ukraine produces 3% of the world's wheat and Russia 11%. Has production and distribution ceased? Yes, the war is a contributing factor. I doubt it is the main factor. Increased demand after a pandemic and lack of capex is more of a reason. And the money supply - the main one.
But more to the point - it seemed to me we were taking a turn from discussing inflation toward military strategizing/gaming. A fascinating subject, but maybe not here. If I was wrong, as always, my apologies!
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