Investing

[Deleterious]

Big week for earnings in tech.  Apple, Amazon, Microsoft, Facebook, and Google all report this week.

[oblong]

How can anyone know?  Is contraction just a rebound effect of people cramming 2 years of spending into 1?  Water finding it’s level?  A guy going 2-19 after a 14-30 hot streak?    Is it a bubble popping or just air being slowly let out?  Need more analogies?  

[1776]

2 hours ago, Deleterious said:

Well, stop paying attention to them as well.

Several high profile CEO’s are on record as saying inflation is now “engrained” into our economy for the foreseeable future. I could see this as being true. 
I’ve seen several forecasts predicting the 10 year yield to be in the 2.5%-2.75% range next year. It has pulled back the past day or two, fwiw.
 

[Screwball]

Economic calendar  - FRB of New York

That link is to July economic calendar.  If you don't like that one you can find others all over the web.  These releases are embargoed until a certain time on certain days.  They will help understand what the economy is doing.

But beware; read the actual reports, don't rely on the press to give you the straight scoop.  They usually report the "headline" numbers which many times doesn't reflect the real picture.

As far as inflation, we are seeing commodity prices go down, but those are only part of the CPI basket.  If you search for CPI basket weightings, you can see a better picture of what makes up the final numbers.

Gas and food prices are only part of it.

[gehringer_2]

38 minutes ago, 1776 said:

Several high profile CEO’s are on record as saying inflation is now “engrained” into our economy for the foreseeable future. I could see this as being true. 
I’ve seen several forecasts predicting the 10 year yield to be in the 2.5%-2.75% range next year. It has pulled back the past day or two, fwiw.
 

Inflation is too much money chasing too few goods. As long as the central bank understands that and has price stability as its mandate, inflation can be controlled. In the post Vietnam inflation, inflation got out of control longer term because the central back still understood its role as controlling interest rates as an end in themselves, instead of using interest rates to control the money supply and thus prices. The Fed has the tools to control inflation, the issue how close they can stay to the goldilocks point of not moving too slowly on one hand and too fast on the other. Clearly they were way too slow coming out of the pandemic. Their difficulty is that when they act, it's typically about 18 months before the effects reach equilibrium in the economy so when market behavior swing fast - like in a pandemic, they can't read the signals very well. So they do miss and sometimes pretty badly.

But that said, the idea that an inflation is going to become a long term issue given the current understanding of monetary theory at central backs seems far fetched to me. This kind of view is probably why long term rates have resisted much rise. 

OTOH, I suppose the world could just keep getting crazier to where any kind of management becomes impossible. 

Edited July 24, 2022 by gehringer_2

[Screwball]

If central banks had a fucking clue they would never have blown the bubbles to begin with.  They are shysters only to make the rich richer, which is why they printed trillions of dollars to begin with.

[1984Echoes]

5 minutes ago, gehringer_2 said:

Inflation is too much money chasing too few goods. As long as the central bank understands that and has price stability as its mandate, inflation can be controlled. In the post Vietnam inflation, inflation got out of control longer term because ....

Nixon also put in a 90-day wage and price freeze in place in 1971, during a time of stagflation, as well as a devalue of the US Dollar (taking it off the gold standard), and a demand that the Fed LOWER interest rates in 1972 (which would help him get reelected), which the Fed dimwittingly complied with. IN a period of stagflation. Those were all... really, really... helpful.

I know OPEC started up and their shenanigans from their starting point and up until now have also been... helpful.

But Nixon is one of many "definitions" of what NOT to do during an economic crisis... such as stagflation.

[gehringer_2]

31 minutes ago, 1984Echoes said:

Nixon also put in a 90-day wage and price freeze in place in 1971, during a time of stagflation, as well as a devalue of the US Dollar (taking it off the gold standard), and a demand that the Fed LOWER interest rates in 1972 (which would help him get reelected), which the Fed dimwittingly complied with. IN a period of stagflation. Those were all... really, really... helpful.

I know OPEC started up and their shenanigans from their starting point and up until now have also been... helpful.

But Nixon is one of many "definitions" of what NOT to do during an economic crisis... such as stagflation.

Yeah, for a guy willing to give as much thought to foreign policy and politics as he was, his economics chops were woeful. He was clueless. The monetarists at UChicago were still just voices in the wilderness to the Nixon admin. 

[Deleterious]

The Fed Watch Tool has a 75bps hike at 77.5% and 100bps at 22.5%

https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

[Screwball]

 

[gehringer_2]

46 minutes ago, Screwball said:

 

the ~5-6 yrs from ~2015 up to the pandemic were really wasted. The economy was doing fine by then and they could have put things on a firmer basis but they had to keep trying to over rev the engine. If there hadn't been so much money sloshing around beforehand I doubt the exit from the pandemic would have been half this out of control.

[Screwball]

Ouch WMT!

[1776]

Long term, not a bad buy. Yield is still below 2% at current after hours quote though. 

[Screwball]

They were not suppose to report earnings until August 16th, so this is an "early" warning. Not saying they are a buy or sell. But down 10% after hours is a sign of bigger things IMO.  WMT being the bellwether stock it is.

It would be an interesting conference call.  If anyone has never listened to a conference call, they should.  They can be wild.  It starts with the number guys spewing verbal sleeping pills, then on to corporate bullshit they planned to fool the Wall Street analysts.

Once the WS guys start asking the questions, they are exposed for what they are.  The WS guys know more about their company than they do - that's why they work on WS.

One of the things that helped bring down Enron was Jeff Skilling calling some analyst an asshole.  Too funny.  I remember listening to my companies conference one time and the WS guy says "when the hell are you going to make any money."  Crickets.

You can also go to what they call EDGAR, which is via the SEC.  Here is a link to today's WMT filing.

Walmart Inc.

This is the kind of fun stuff we used to do, but don't need to anymore.  When all they do is print money it doesn't matter.

<picture of easy button> 🙂

[Deleterious]

Is this WMT trying to soften the blow for a bad quarter?  Or possibly a shot across the JPow bow to only do 50 bps?

[gehringer_2]

I wonder if the Fed is going to find the discount rate is going to be less effective than hoped anyway because of present psychology. Long term rates are staying stubbornly low, so longer term investment money is still available at a pretty reasonable 5% prime rate. The more the Fed pushes the discount rate, the greater the boost to the psychology that inflation won't last and the less pressure on long term rates. If businesses are looking at slowing down more because of inventory overrun than because of capital costs the discount rate 'hammer' isn't doing much outside, at least outside the banking biz. The other exception is in the housing market, which has slowed big time. But if prices start falling, 6% mortgages might not look so bad either.

Given that, maybe the end doesn't come until the consumer runs out of gas after their post pandemic spree (which may be happening apart from anything the Fed is doing) and all the Sturm and Drang about the discount rate ends up an exercise in wagging the dog....

Or maybe not. 

Edited July 26, 2022 by gehringer_2

[Tiger337]

The only thing good about WalMart is low prices, so if they are unable to keep prices low, they could be in real trouble.  

[Deleterious]

Long term rates remain low because the Fed doesn't have a sack.  Inflation has been red hot for over a year now and we need a 75bps hike tomorrow just to hit 2.5%.  That is insane. 

Look at this chart.  With double digit inflation we need a 75bps hike to hit a level that will still be below historical rates by quite a bit.  Of course long term rates are still low.  The Fed refuses to do its job.

[Deleterious]

I thought The Fed was unwinding its asset sheet?  Why are they buying more MBS?

https://www.newyorkfed.org/markets/ambs_operation_schedule

[gehringer_2]

22 minutes ago, Deleterious said:

Long term rates remain low because the Fed doesn't have a sack.  Inflation has been red hot for over a year now and we need a 75bps hike tomorrow just to hit 2.5%.  That is insane. 

Look at this chart.  With double digit inflation we need a 75bps hike to hit a level that will still be below historical rates by quite a bit.  Of course long term rates are still low.  The Fed refuses to do its job.

Yup. When you’ve gotten to zero it’s a long way to where rates actually have any behavioral traction. 

[1776]

MCD and KO reported positive results. I probably own some MCD in a fund but I wish I had bought this stock back in the day. It seems like MCD never disappoints. 

[Deleterious]

My grandma owned MCD and Coke for decades.  My grandma is pretty much responsible for obesity in this country.

[Deleterious]

General Motors’ Income Tumbles 40% on China Loss, Parts Shortages

Quote

General Motors Co.’s GM -3.51%▼ second-quarter net income fell 40% over the prior year, hurt by a loss in China and supply-chain troubles that left the auto maker with tens of thousands of partially built vehicles it couldn’t sell during the period.

The Detroit-based car company on Tuesday said net income for the April-to-June period totaled $1.69 billion, down from $2.84 billion a year earlier.

GM said second-quarter revenue rose about 5%, to $35.76 billion. It posted pretax earnings per share of $1.14, below the average analyst estimate of $1.23, according to FactSet.

GM warned earlier this month that a drop in vehicle output in North America would hit second-quarter results. A shortage of computer chips and other parts prevented the company from shipping 95,000 vehicles to dealers, GM said, though it expects to clear the backlog during the second half of the year.

 

[gehringer_2]

1 hour ago, Deleterious said:

I thought The Fed was unwinding its asset sheet?  Why are they buying more MBS?

https://www.newyorkfed.org/markets/ambs_operation_schedule

I would guess they have an idea it will reduce the spread between the 10yr Tbill and mortgage rates on the theory that housing is being disproportionately hammered. But probably a windmill tilt.

[Screwball]

11 hours ago, Deleterious said:

Is this WMT trying to soften the blow for a bad quarter?  Or possibly a shot across the JPow bow to only do 50 bps?

I wondered this myself.