Powell Or Pozsar?
Jerome Powell is going to "keep pushing" until US inflation abates in "a clear and convincing way."
"If that involves moving past [neutral] we won’t hesitate at all to do that," he added, while discussing policy during a Wall Street Journal event on Tuesday.
Powell didn't offer anything new, per se, but he did acknowledge that the Fed "probably" should've raised rates sooner. On Monday, Ben Bernanke called the Powell Fed's hesitation "a mistake," in hindsight.
There's a sense in which the
I was chuckling the other day when remembering back to all of those “The Business Cycle Is Dead” articles in 2019.
Through the narrow lens of my perspective, I continue to imagine – for now at least – that money is continuing to slosh around in the economy and be spent. Having been through more than my share of recessions, I have a natural aversion, of course. Perhaps my view is inspired by wishful thinking. But this is a different time. There is inflation, but I don’t yet see a clear view of recession – in which an abundance of people “throw in the towel” and retreat. I really hope I’m at least partially correct. I’d much rather not go there. For the sake of us all, we have enough problems.
Chicago Dave, I share the same hopes as you. But once the job cuts start, the music seems to stop VERY abruptly thereafter (…in terms of real spending, that is). My radar went up when AMZN and now WMT both hinted at being a bit overstaffed, in their most recent earnings calls. I see MSFT is doling out pay raises, but those aren’t the folks I’m most worried about.
Thanks, Prestwick, for chiming in. I appreciate your reply.
It’s a bit of a strange economy. What’s odd to me is the large number of unfilled jobs still open and unfilled, despite the inflation. Recession is still an open question, not a certainty. And if the economy goes into recession, it may not be severe. Recessions vary in impact.
Responding to your point, businesses like AMZN and WMT do not necessarily do badly in a recession. In fact, WMT may even see increased business from people motivated by price. I believe WMT has seen this before during times of inflation.
Chin up. There’s always blue sky above the clouds. Hope you can stay positive. This too shall pass.
Another thought about AMZN … they face challenges in regard to unionization. I imagine they may be viewing staff with the thought that unionization may become part of their business planning, whether they like it or not.
Wayfair announced a hiring freeze. The hot labor market is going to cool off. I am trying to sell a very large 1br apartment in Manhattan for the last 10 days and so far crickets. As far as I can tell we are hitting an inflection point. The Fed may have another 100 bps to go, but don’t be surprised to see cuts after that in 2023. Things can change quickly.
The Toronto market is down 6% from it’s high.
H-Man, this is like landing the plane by the guy when the pilot passed out going to Florida, yes it happened but the odds are not good.
S&P500 at 2500 sounds reasonable. Taxes as a friction for the economy are historically very low, so the tightening by the Fed will need to be more intense than usual.
We’ll reach the bottom when the thinned-out Reddit crowd change the BTFD mantra to STFR (sell the rip).
As much as things change they still stay the same. Sell when everyone else is saying buy and buy when everyone else is saying sell still holds true.
In his column for the WSJ yesterday, Jason Zweig included a quote from a reader who said, “No gain is real until you sell.” This, of course, true, as is the fact that neither is any loss real unless you sell. A little known fact about the math of returns is that the average, annual, compound rate of return is determined entirely by the beginning price of an investment when you buy it and the ending figure when you sell. The return is completely independent from the changes in price in between the beginning and the end. Buy a stock, say WMT at 45 (my basis) and watch it rise to 150, before dropping to 120 over say, 22 years and the average annual return is 4.55% (it stinks) if you sell at 120. However, assume the same starting time and basis and say the price drops to 40 before rising back to 120. Same average return. Intermediate price changes make no difference, only the beginning and the end do. Now if I had sold on Monday my average return would have been 5.65%~. If I keep holding and it goes to 200, what happened before won’t have mattered. This is why buy and hold works. If the market goes to 3500, I won’t feel as wealthy, but if my firms keep their dividends steady and pay their interest on time my actual realized returns won’t have changed. I buy my steaks with dividends, not daily prices.