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Post by Fearchar on Feb 18, 2023 0:18:24 GMT
Scott Grandis is my favorite blogger. A long time professional, now retired, he continues to monitor the economy.
Calafia Beach PunditIn his most recent post, Scott explains that inflation is under control and the economy remains strong. Inflation should fall over the next 6 months or so. notice chart #11: ...no sign here of any impending recession. Ditto for Credit Default Swap spreads and for corporate credit spreads. Liquidity conditions remain healthy, and this argues strongly for healthy economic conditions in general for the foreseeable future. |
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Post by Deleted on Feb 18, 2023 0:42:08 GMT
I like the sound of it. I have been in the camp of no/limited recession and receding inflation for more than 6 months.
This is an appealing analysis. I hope it is correct.
I cannot help but wonder if (based on your username) your first or last name is "Truman".
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Post by Fearchar on Feb 18, 2023 1:26:00 GMT
I cannot help but wonder if (based on your username) your first or last name is "Truman". Thanks @theycallmenobody , No connection with the name Truman. .... in modern English, the name is spelled Farquhar. Fearchar is Scottish Highland Gaelic circa 1200's... Fearchar |
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Post by newtecher on Feb 18, 2023 1:42:07 GMT
.... in modern English, the name is spelled Farquhar. Any relation to Lord Farquaad then? |
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Post by newtecher on Feb 18, 2023 1:43:36 GMT
Scott Grandis is my favorite blogger. A long time professional, now retired, he continues to monitor the economy.
Calafia Beach PunditIn his most recent post, Scott explains that inflation is under control and the economy remains strong. Inflation should fall over the next 6 months or so. notice chart #11: ...no sign here of any impending recession. Ditto for Credit Default Swap spreads and for corporate credit spreads. Liquidity conditions remain healthy, and this argues strongly for healthy economic conditions in general for the foreseeable future. Good graphs. I am skeptical on soft landing. The Fed achieved it in 1 out out the last 16 attempts. |
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Post by retiredat48 on Feb 18, 2023 1:44:17 GMT
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Post by Deleted on Feb 18, 2023 2:06:52 GMT
Good graphs. I am skeptical on soft landing. The Fed achieved it in 1 out out the last 16 attempts.So, it IS doable! lol Skepticism is a good thing, particularly when applied universally. |
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Post by anovice on Feb 18, 2023 12:11:13 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook.
Why did high yield municipal bond funds get crushed this past week?
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Post by Fearchar on Feb 18, 2023 12:32:12 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook. Why did high yield municipal bond funds get crushed this past week? The Muni market impresses me as it's own little universe. Not reflective of the broader economy as they are not business's per se. Federal handouts played too large of a role stabilizing muni's over the past 2 years. Highly unlikely to be repeated going forward. |
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Post by johnsmith on Feb 18, 2023 12:39:43 GMT
Lakshman Achuthan says recession still on
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Post by johnsmith on Feb 18, 2023 12:41:20 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook. Why did high yield municipal bond funds get crushed this past week? interest rates jumped. |
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Post by anovice on Feb 18, 2023 12:42:30 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook. Why did high yield municipal bond funds get crushed this past week? The Muni market impresses me as it's own little universe. Not reflective of the broader economy as they are not business's per se. Federal handouts played too large of a role stabilizing muni's over the past 2 years. Highly unlikely to be repeated going forward. I gather interest rates play a part because over the past few weeks longer duration muni's have been hit especially hard. |
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Post by fishingrod on Feb 18, 2023 13:45:54 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook. Why did high yield municipal bond funds get crushed this past week? The muni benchmarks that I follow have outperformed over past 1 and 3 year. More than twice as much when compared to the Total bond market index. It seems logical that people would take whatever profits or cut their losses sooner or later. The muni universe still has some out performance against the total bond market, even with the recent sell off. I could see that coming more in line with more losses as rates continue to rise. Of course the market is not logical. |
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Post by Capital on Feb 18, 2023 14:38:41 GMT
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Post by bobfl on Feb 18, 2023 17:05:38 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook. Why did high yield municipal bond funds get crushed this past week? The credit market said, "We (the big institutionals) were pricing in less than 5% and a pivot before year end, now you (FED) are talking about 6%. We will take money off the table and wait for things to stabilize before we get back in." So, all credit dropped. |
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Post by Deleted on Feb 18, 2023 17:36:35 GMT
Lakshman Achuthan says recession still on
No idea which analysis and corresponding forecast will end up being correct. It appears that there are more in the recession camp, than not. I continue to be cautious, but making no substantial moves at this time. Still staying away from traditional bond funds. Given 2022, I am inclined to feel that we are more than half way through this weakness/downtrend cycle. I can weather another 10 months without too much angst, if it comes to that. I hope to retire with this all behind us in approximately 18 months. But, my plans/income is not contingent of market performance. |
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Post by Chahta on Feb 18, 2023 17:53:22 GMT
Scott Grandis is my favorite blogger. A long time professional, now retired, he continues to monitor the economy.
Calafia Beach PunditIn his most recent post, Scott explains that inflation is under control and the economy remains strong.Inflation should fall over the next 6 months or so. notice chart #11: ...no sign here of any impending recession. Ditto for Credit Default Swap spreads and for corporate credit spreads. Liquidity conditions remain healthy, and this argues strongly for healthy economic conditions in general for the foreseeable future. The jobs report last month freaked some people out. If it happens for this next report we may be looking at 50 BP increase. Some are just sayin'...... Funny how we are all experts until we are not. |
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Post by roi2020 on Feb 18, 2023 23:27:53 GMT
Scott Grandis is my favorite blogger. A long time professional, now retired, he continues to monitor the economy.
Calafia Beach PunditIn his most recent post, Scott explains that inflation is under control and the economy remains strong.Inflation should fall over the next 6 months or so. notice chart #11: ...no sign here of any impending recession. Ditto for Credit Default Swap spreads and for corporate credit spreads. Liquidity conditions remain healthy, and this argues strongly for healthy economic conditions in general for the foreseeable future. The jobs report last month freaked some people out. If it happens for this next report we may be looking at 50 BP increase. Some are just sayin'...... Funny how we are all experts until we are not.
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Post by steadyeddy on Feb 19, 2023 0:46:20 GMT
Fearchar, thanks for the link. This market is going up & down the wall of worry - which is good. For most on this forum, higher interest rates are a welcome change as that helps establish good cash flows from fixed income instruments. I think the bond market is reacting properly to the likely trajectory of higher rates for longer; and unfortunately the stock market is NOT. Having said this, it doesn't take a whole lot for the consumer to pull back on spending and the Fed *may* be forced to reduce interest rates even if the inflation is stubborn. Stagflation anyone?
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Post by steadyeddy on Feb 19, 2023 0:53:41 GMT
I noticed he said that the bond market continues to price in low inflation and positive economic outlook. Why did high yield municipal bond funds get crushed this past week? The Muni market impresses me as it's own little universe. Not reflective of the broader economy as they are not business's per se. Federal handouts played too large of a role stabilizing muni's over the past 2 years. Highly unlikely to be repeated going forward. Munis in general have a safety net that NO ONE wants to see them fail. If the municipalities fail on their bonds, their ability to raise future money is impacted - and no one wants that. Somehow, something, will come and save the munis. Have some faith. |
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Post by steadyeddy on Feb 19, 2023 0:54:50 GMT
The jobs report last month freaked some people out. If it happens for this next report we may be looking at 50 BP increase. Some are just sayin'...... Funny how we are all experts until we are not.
, every bear market produces many commentators - not just the ones on TV or blogs 😁 |
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Post by catdog on Feb 19, 2023 18:56:49 GMT
My actions say I am part of the bear market group. I was sitting on a 55/45 portfolio until November 9. That day I sold all stocks/stock funds. Take a look at what happened on November 10th. I guess I am no genius!!! My only consolation is 4.2% - 4.75% fixed income. Am I being romanced by high money market/CD rates? I will have to be ready to get back in at some point. At almost 69 years old I will be happy with 40% equity going forward. Probably index funds and some SCHD. Really enjoyed this thread.
Catdog
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Post by Fearchar on Feb 26, 2023 18:21:00 GMT
Another Blog from Scott Grannis: scottgrannis.blogspot.com/In this Feb 24, 2023 blog, Mark points out why he believes inflation fears are overblown. #1: Existing family home sales have fallen 36% over the past year #2: 30 year fixed mortgages are 7%. Which has increased cost of home buying by about a third. #3: Applications for new mortgages have fallen 58% in the past year #4: Spread between 30yr Fixed Mortgage and 10yr Treasury has expanded and near 13 year high with brief exception during height of the pandemic. He attributes this to collapse in market demand for mortgages. #5: Natural gas prices have collapsed. Oil prices down 35%. He says NG is down due to warm weather. However, I'll add that rig capacity has risen dramatically over past year. #6: Bond market 5yr inflation expectation is now 2.5%. He says that is good enough. However, I recall the FEDs target is 2%. So, I disagree that it's enough already #7: Prices for both durable and non-durable goods have been flat for the past 5-6 months. #8: Personnel consumption inflation peaked months ago. Running near 5%, but trending mostly lower. |
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Post by newtecher on Feb 26, 2023 18:45:21 GMT
#6: Bond market 5yr inflation expectation is now 2.5%. He says that is good enough. However, I recall the FEDs target is 2%. So, I disagree that it's enough already Take a look at the inflation and FED rates in the 21st century. There were multiple periods of inflation between 2-3%. It was never considered an emergency to get it down to 2% ASAP. |
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Post by bb2 on Feb 26, 2023 19:09:26 GMT
From Calafia: "Stock market bears are fixated on the belief that inflation is not only "running hot" but also "accelerating." Nothing could be further from the truth. " Is it just me or does this premise seem off. Not sure who's saying inflation is accelerating. Or even running hot. Some other stuff in there too: "VERY expensive to borrow at fixed rates". Most of new fixed rate issues I see are mid 5% maybe 6% tops. Not sure that rate suggests ALL CAPS VERY. It's not what he thinks anyway - its what the fed thinks. www.federalreserve.gov/newsevents/pressreleases/monetary20230201a.htm |
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Post by retiredat48 on Feb 26, 2023 19:38:34 GMT
My actions say I am part of the bear market group. I was sitting on a 55/45 portfolio until November 9. That day I sold all stocks/stock funds. Take a look at what happened on November 10th. I guess I am no genius!!! My only consolation is 4.2% - 4.75% fixed income. Am I being romanced by high money market/CD rates? I will have to be ready to get back in at some point. At almost 69 years old I will be happy with 40% equity going forward. Probably index funds and some SCHD. Really enjoyed this thread. Catdog
R48 |
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Post by Deleted on Feb 26, 2023 20:18:39 GMT
From Calafia: "Stock market bears are fixated on the belief that inflation is not only "running hot" but also "accelerating." Nothing could be further from the truth. " Is it just me or does this premise seem off. Not sure who's saying inflation is accelerating. Or even running hot. Some other stuff in there too: "VERY expensive to borrow at fixed rates". Most of new fixed rate issues I see are mid 5% maybe 6% tops. Not sure that rate suggests ALL CAPS VERY. It's not what he thinks anyway - its what the fed thinks. www.federalreserve.gov/newsevents/pressreleases/monetary20230201a.htmMaybe what Scott Grandis was referring to. From the Fed link provided - "In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments." It appears that they are very aware that patience is required. Which is a good thing. A quick review of 30-year fixed rate mortgages indicates that they are around 6.5%, with a national average of 6.95%. This is about double what they were just a couple years ago. Assuming a $300,000 mortgage, that is an additional $9000 annually in interest. $300,000 is about what would need to be borrowed for an average home after 20% down. No doubt it will have some impact on calming the housing market. Also, a good thing, given where we are right now. I think it is now a waiting game. It appears that the Fed does too. |
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Post by Fearchar on Mar 3, 2023 4:21:46 GMT
An analysis from Scott Grannis of the latest M2 money supply report: scottgrannis.blogspot.com/- The Flood of funny money continues to clearly recede (in the USA)
- Today M2 is only $3.4 trillion above where it might have been in the absence of the Fed's "helicopter drop."
- 6-mo. annualized growth rate of M2, which is now -3.4%, down sharply from a high of over 40% in August of 2020
- $6 trillion of federal deficit-financed spending over a two-year period that was effectively monetized, showing up in the form of bank saving and deposit accounts (the major component of M2)
- Notice how money growth leads inflation by about one year
- About half-way back, on the money demand scale, to where we were pre-Covid
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Post by Fearchar on Mar 11, 2023 13:25:01 GMT
Another update from Scott Grannis on his blog spot. "Will the SIVB collapse mark the beginning of another financial crisis which in turn triggers the long-awaited recession? Or is the economy so healthy that the Fed will need to raise rates even more? Inquiring minds would like to know how these two fears can coexist." Scott does not answer his question, but his points paint a fairly clear answer: - 2 year swap spreads are only moderately elevated in the US (that's good)
- While high, 2 year swap spreads in Europe are declining
- Corporate Credit Spreads (in the US) are declining both High Yield and Investment Grade
- 5 Year Credit Default Swap Spreads are declining (no sign of distress)
- Mortgage rates are elevated and yes the Real Estate market is hurting
- US Real Household Net worth has declined 9% from last year, but is in line with the long term trend of 3.6%/year
- Huge gap between people looking for work and the number of job openings
- This is not typical of a recession (just the opposite)
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Post by Fearchar on Apr 6, 2023 0:07:42 GMT
Another update from Scott Grannis: - 2yr, 5yr and 10y rates have fallen dramatically over the past month
- This is markets way of telling the FED what to do.
- So, FED needs to cut rates right now before it's too late!
- Commercial Bank deposits have plunged (could be close to $1T YTD)
- Last time something similar happened was late 2007
- FED tends to follow ST rates rather than lead
- Bank crisis has only tightened monetary conditions
- ISM service sector prices paid is plunging (inflation fight has been won!)
- Best time to ease is before economy shows serious weakness
- Mortgage rates are too high; should be 150bps over 10Y T yield
- 30y Mortgages should be 4.8% vs 6.7% (it's actually 6.3% right now)
Notice that the CME FedWatch Tool is currently showing 0% probability of a cut at the May 3rd meeting. This is a really bad situation! |
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