The FTSE

[CPPSC]

Not quite Volker, but he needs to see corporate earnings GROWTH reined in, which is starting to happen, so he isn’t forced to overshoot (too far).

I’d think more MAX 3.5-4% than 17%!!!

We will be at 1.75-2% by the end of summer, so we will have another quarter of earnings to digest by then.

My personal opinion is that they telegraph a drive to 2.5% in 50bp increments by year end and then hold.

Even if supply chain issues persist, demand destruction needs time to bring some balance.

There are a lot of people tied to low, but adjustable, rates that will start to feel the pain and the consumer should flow. That demand destruction, coupled with an easing supply chain issues, SHOULD induce inflation REDUCTIONS.

Persistently higher oil prices will hurt that somewhat, given America’s penchant for 20mpg trucks & SUVs, but the Fed has to stop chasing its tail by ramping up on trailing edge data points.

Move, hold & consolidate, wait for reaction, act further only if absolutely necessary.

How many trillions has the fed expanded its balance sheet the last 5 years. If that starts to reverse liquidity will be drained and the extreme valuations will be decimated. Its not just rate rises but they won’t help as they tighten into a recession. Good luck for investors long tech/growth .

 

[ChicagoBlue]

How many trillions has the fed expanded its balance sheet the last 5 years. If that starts to reverse liquidity will be drained and the extreme valuations will be decimated. Its not just rate rises but they won’t help as they tighten into a recession. Good luck for investors long tech/growth .

The trajectory of the paring of the balance sheet has already been discussed and digested.

Will it cause a reduction in the sloshing of liquidity through free money? Of course.
To suggest that unraveling their balance sheet will cause “decimation” strikes me as slightly hysterical.

In effect, it’s a known known and not a surprise.

There are clearly a lot of moving parts starting to move in opposition to, and in concert with, each other, which will always create an occasional surprise reaction. That said, the bond market seems to be responding in a fairly ordered fashion at present.

Full disclosure: I’m a long term investor in mega cap tech, most of which is cash rich, doesn’t require borrowing to grow and whose growth greatly offsets and short term re-ratings of DCFs.
AAPL, AMZN, GOOG, FB, BABA, IONQ.
I am down 17.89% since the highs and am starting to look at investing my current 30% cash position, which was higher before an investment in energy.*

The NASDAQ has seen a 50% retracement of the highs. Whether that’s a bottom (I don’t think it is!), I won’t know until the future, but if I liked these stocks when they were 20-25% higher, then they MUST be starting to look attractive today, right?

Any of those NOT going to be around in 5 yrs? 10? 50? Feels like they’re all going to be around forever, even if that’s realistically too long to even contemplate!

*I also own a not insignificant, albeit more tactical, investment in energy (DVN, XLE).

Good luck to us all.

 

[CPPSC]

The trajectory of the paring of the balance sheet has already been discussed and digested.

Will it cause a reduction in the sloshing of liquidity through free money? Of course.
To suggest that unraveling their balance sheet will cause “decimation” strikes me as slightly hysterical.

In effect, it’s a known known and not a surprise.

There are clearly a lot of moving parts starting to move in opposition to, and in concert with, each other, which will always create an occasional surprise reaction. That said, the bond market seems to be responding in a fairly ordered fashion at present.

Well if ordered in bonds is the worst year ever you have a point. Most investors believed he would pivot as he did in Q4 2018 but now he is unable to because of inflation. S&P down to 2500 would not surprise me when this is over. Sell any rallies and forget buying dips the regime has changed. Ps that’s not the hysterical version.

 

[ChicagoBlue]

Well if ordered in bonds is the worst year ever you have a point. Most investors believed he would pivot as he did in Q4 2018 but now he is unable to because of inflation. S&P down to 2500 would not surprise me when this is over. Sell any rallies and forget buying dips the regime has changed. Ps that’s not the hysterical version.

After a 40 year bull market in stocks, and the lowest interest rates in the history of the republic, it was hard to imagine how rates could go anywhere BUT up, wasn’t it?

As for a Fed pivot, the problem is that so much (pandemic, supply chain, war in Europe) is, was, and will remain, out of his hands.

While the Fed may be a year or more behind in raiding rates and lowering their balance sheet, I think their communication has been reasonably transparent.

I can’t see the future, but S&P 2,500 is an aggressively low call…lower than I have seen or heard elsewhere. Where does your call come from?

I am hearing about levels such as 3,750, even NDQ100 down as low as 10,800, but nothing of the magnitude of the drop you suggest.

 

[metalblue]

Not quite Volker, but he needs to see corporate earnings GROWTH reined in, which is starting to happen, so he isn’t forced to overshoot (too far).

I’d think more MAX 3.5-4% than 17%!!!

We will be at 1.75-2% by the end of summer, so we will have another quarter of earnings to digest by then.

My personal opinion is that they telegraph a drive to 2.5% in 50bp increments by year end and then hold.

Even if supply chain issues persist, demand destruction needs time to bring some balance.

There are a lot of people tied to low, but adjustable, rates that will start to feel the pain and the consumer should flow. That demand destruction, coupled with an easing supply chain issues, SHOULD induce inflation REDUCTIONS.

Persistently higher oil prices will hurt that somewhat, given America’s penchant for 20mpg trucks & SUVs, but the Fed has to stop chasing its tail by ramping up on trailing edge data points.

Move, hold & consolidate, wait for reaction, act further only if absolutely necessary.

Like you I’m fairly dovish to fed rates, don’t see them as hawkish as priced in especially given the comments about people putting necessities on credit cards. You have to think the fed are prioritising inflation over equity markets - at least for now. Any signal they are easing will bring us back without seeing inflation on a downward trajectory. Their only real interest (forgive the pun) is they do not perform so poorly as to create an “accident” in the financial system either domestically or internationally. I agree we see 75bps higher by the summer, another 25bps hike towards end of year and terminal rate of 3.25% by mid 2023.

 

[Gareth Barry Conlon]

The NASDAQ has seen a 50% retracement of the highs. Whether that’s a bottom (I don’t think it is!), I won’t know until the future, but if I liked these stocks when they were 20-25% higher, then they MUST be starting to look attractive today, right?

As an armchair economist I thought we were on the brink of a big recession about 4 years ago. Prices had gone out of line with any kind of sensible assessment parameters on many stocks. In the years that have followed this position has just persisted but with some very strange dynamics. You get the vibe some sectors were just wildly popular and within that some companies were just held up as the failure proof just on the basis of sector/tech/good PR. On that basis alone their stock price was blown out of all proportion. Tesla being the poster boy for massive overvaluation of a 'popular' stock.

Tesla has lost 37% of its value in the last 6 months. Would I buy now - nope.

 

[west didsblue]

As an armchair economist I thought we were on the brink of a big recession about 4 years ago. Prices had gone out of line with any kind of sensible assessment parameters on many stocks. In the years that have followed this position has just persisted but with some very strange dynamics. You get the vibe some sectors were just wildly popular and within that some companies were just held up as the failure proof just on the basis of sector/tech/good PR. On that basis alone their stock price was blown out of all proportion. Tesla being the poster boy for massive overvaluation of a 'popular' stock.

Tesla has lost 37% of its value in the last 6 months. Would I buy now - nope.

Yep, it doesn't take an economist to work out that Tesla was and still is a bandwagon. At some point it will settle down to a valuation based on data not sentiment and we're way off that.

 

[zerox]

telsa sure to be double sometime in the next 18 month.
They have a waiting list over a year for some models, and can literally charge what they want without it affecting production. Once this twitter baloney involving Elon dies down all will be well

 

[Gareth Barry Conlon]

telsa sure to be double sometime in the next 18 month.
They have a waiting list over a year for some models, and can literally charge what they want without it affecting production. Once this twitter baloney involving Elon dies down all will be well

Selling lots of cars does not always equate to making a profit.

At some point Tesla needs to make massive profits to justify its valuation and so far it has only just about made a profit.

 

[Homar]

telsa sure to be double sometime in the next 18 month.
They have a waiting list over a year for some models, and can literally charge what they want without it affecting production. Once this twitter baloney involving Elon dies down all will be well

Lol. Last I looked (about a month ago), Tesla needed to grow at a compounding rate of something like 40-50% over the next decade to justify its valuation at that time.