‘Diamond Hands And Buybacks’ To Drive Stock Demand: Goldman

‘Diamond Hands And Buybacks’ To Drive Stock Demand: Goldman

One of the many "mysteries" of recent US equity strength is the solid performance of speculative, long duration stocks in the face of the ongoing bond selloff and attendant rise in real yields. Nominal yields are the highest in years, the Fed will be in "full-hawk mode" for the foreseeable future and yet, rate-sensitive equities are a semblance of buoyant. A Goldman basket of non-profitable tech is up more than 30% since mid-month, and a sector-neutral long duration basket more than 20%, for i
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3 thoughts on “‘Diamond Hands And Buybacks’ To Drive Stock Demand: Goldman

  1. Re: “full-hawk mode” for the foreseeable future and yet …”

    The pandemic can be viewed as a war or tsunami wave or hurricane that was a shock to global economies.

    About mid March, I thought a depression was possible, primarily because of crashing markets and uncertainty, but, in hindsight, that early period was more like an early warning alarm alerting everyone to prepare.

    In terms of economic shocks, this was different than 911 at least in regard to how the Fed was very early in taking drastic actions, before any systemic damage “really” took place.

    That’s what I find interesting in retrospect, because with the housing crisis, there were years of fraudulent activity building in layer upon layer of systemic deception. As the housing bubble grew, people were in denial, but after the tsunami hit, it was easy to see the damage. It was understandable that the guy across the street that didn’t have an education or decent job might go into foreclosure. That mess was tangible.

    The trump economy and his GDP promises didn’t pan out well, but overall, even though things were oddly managed, the economy wasn’t strong but it wasn’t entirely struggling. A lot of low wage jobs were created and taxes cut…

    Thus, I think the problem, somewhat related to this Mr H story, is the irrational hyperactive way the Fed engages itself, to the point of usurping control of free markets.

    With the Fed at the wheels of a vehicle, they reacted to the pandemic as if they were propelled by a rocket, versus being somewhat cautious and curious. Politically, there was some foot dragging, but the general theme was to go big. However, all that thinking was somewhat based on the framework of the GFC, and I think that’s why we’re in this mess today.

    I think there was an expectation that the GFC recipe could fix the pandemic, and thinking that no matter how much money was fed to the pandemic, everything could go exactly as planned, like GFC.

    Obviously, the pandemic was structurally and systemically different. To make a long story very short, the Fed is back at the wheel, going from rocket mode to slamming on the brakes as hard as humanly possible. The whiplash effect of too fast to the current abrupt stop is probably why some financial instruments seem fine while others are broken. Metaphorically, in this Fed ride we’ve taken, a lot of good things happened really fast and then a lot of things were broken.

    The Fed seems to have done all they could do to prevent a depression, but ultimately I think there was a lot of pressure to prevent a recession and force a V recovery, which caused longer term instability today and paved the way for a delayed reckoning. I think the Fed being hyperactive added to pandemic chaos.

    It still bugs me, that in a way, stocks and wall street sorta sidestepped the reality of a major global shock, it’s as if economically a massive amount of debt was swept under the rug and the good times rolled, while millions died. It’s hard to reconcile, so just wanted to think about that.

  2. I wonder how debt servicing could derail the repurchase goals.

    Also, pension plans will become stock sellers and bond buyers as bonds continue to sell off. Could private hands absorb what the pension plans are selling?

  3. Many many years ago i (from the privacy of my arm chair decried to the thin air my pension fund managers increasing equity allocations and reducing fixed income holdings. Well I mentioned it to my my wife too. But, hell the whole point of my end of that employment contract was based on a pension that was different more conservative from most other govt pensions out there. I do not know what the future holds, but boy was i sure wrong in that lonely declaration into the nicely textured wilderness.

    When i research a potential investment that voices the mere squeak of a social/retail variable. I is probably out.

    On the other hand people (memer’s) should know that diamonds can be shattered, all it takes is a hammer.

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