Dancing on the edge of a live volcano:
it really is amazing how many words M can write without saying anything.
Maserati wrote:coach d wrote:Lots in this post, even if coach d doesn't realize it.
What matters in the end is the FED, and they seem to be on the way to triggering another recession/collapse, and once again, without rational reason. You can have various fundamental houses of cards in fundamentals like we had in 2000 or idiotic lack of regulation like we had in 2008 (I'm talking about derivatives here), but the FED hiking, not valuation, is what sets the whole process in motion.
The "two steps and a stumble" rule is what to pay attention to. If the FED hikes again this year, I will sell stocks within 6 months.
The Fed, through its actions, can contribute to the precise TIMING of a particular event that could be construed as "the beginning of a recession", but in the current environment they cannot "trigger a recession".
A "recession" is defined as something that happens on a long enough time-frame that it reflects structural qualities of the economy, rather than more ephemeral events. Yes it is a continuum, but somewhere there is a qualitative difference between the two.
The markets are all about margin, and that's why rates matter. There are essentially only a very few large-scale indicators that anybody cares about: 1) the bogus "jobs/employment" numbers; 2) the housing market; 3) the equity/bond markets. All other indicators--factory orders, durable goods orders, PPI, inflation, dollar index, etc.--should be reflected in those, especially (1) and (3). It's what is happening in these 3 areas that matters.
Here's the essence as I see it:
(1) is mediocre
(2) is widely disparate and ranges from great to terrible
(3) is mediocre
If we didn't have asset inflation courtesy of cheap money, would (1) and (3) improve? That's hard to say. Sure, businesses borrow to do buybacks, and municipalities bond for everything, and those are all affected by rates, but those realities should be affected in (1) and (3).
The FED has ALREADY "set everything in motion" by lowering rates to the point that they have. You can't have it both ways--accepting the first setting in motion, and rejecting the second (the raising of rates).
I suspect that coach d is essentially lazy, and naturally wants to do what comes easiest to him, and wants conditions to be suitable. Continuation of essentially ZIRP, and more QE, currently make things very easy for him.
Personally I resist that temptation. The pendulum ALWAYS swings.
I don't know if I've related this story before, but 25-30 years ago a high-flying friend told me that "it doesn't matter if you own or owe a million dollars, you're still a millionaire, because you're in control of a million dollars."
I responded by saying that "I would rather be collecting the interest on a million dollars than paying it"
Here we are 30 years later, and it doesn't seem to matter. Interest is nothing. Yes, the amount you pay is still greater than the amount you collect, but the discussion has lost much of its vitality, relative to the 1980's, when rates were something that really mattered.
I shudder to think how society is today, with guys like my friend having yet greater reason to believe as they do. That guy, BTW, ended up declaring personal bankruptcy, while I never did. Today, we are both very well-off. In the end (and I know it's not "the end" yet and that there is lots of living left to do), between the two of us, differences in philosophy don't seem to have mattered one bit.
But we will see.
And coach d, what do you care about anything, you are merely following patterns and momentum, and will continue to do so. As long as you're never in too deeply, you won't have anything to worry about.
it seems to me the main question is what effect low and negative interest rates are having on the world economy. Certainly low rates area factor, but is it 25%? 50% 75%?
Why don't we switch the discussion to one focusing on economic assumptions? Economics still matters in the central bank era, right? Why don't we get together and fry Krugman, instead of each other?
well the market thinks not. And the dollar has been falling, which will help the multinationals.
Ghost of Igloi wrote:
But will the gains in energy and materials be offset by financials and discretionary?
I went 10 miles in the foothills Saturday and I am planning another seven miles today.