patrick.net

High probability the Fed WILL cut rates this year. Their dot plot suggests 3 cuts. Wall Street is twisting the Fed’s arm by suggesting 5 to 6 cuts. Let’s see how this will play out.

Looks like inflation expectations went a little higher today. Not just in the US, but across the globe. 10 year government bond yields are up everywhere.

This makes it less likely for a rate cut.

Inflation has already entrenched in our economy. The Fed’s method of calculating inflation is f’ed up.

Previous max S&P was almost exactly 2 years ago. So the S&P is not quite there now if adjusted for 12% to 15% cumulative inflation. One of the interesting proposals of the Trump tax changes was that the basis for long term investments would be adjusted for inflation when calculating gains/losses. Calculating the modified basis would be easy enough (you already have to write down the date of purchase), and would remind people constantly how much the currency is being debased. I'd have liked to see that change go into effect and simultaneously harmonize long-term, short-term, and W2 taxes. The change would affect things like houses; you could probably drop the $250k/$500k deduction from house proceeds to simplify things.

UkraineIsFucked says

And won't. This is gaslighting by the folks feeling the pain on Wall Street from the higher interest rates. Who are trying to pressure the Fed to do just what they 'predict'.

If they don't they lose the overnight repo market battle. Either way the economy is fucked. Kind of the point of central banks.

https://www.barrons.com/articles/fast-food-wins-inflation-4233f728

https://apnews.com/article/inflation-rate-cuts-federal-reserve-economy-017e2a5938bd09db69a706b70a863943

ad says

https://www.barrons.com/articles/fast-food-wins-inflation-4233f728

https://apnews.com/article/inflation-rate-cuts-federal-reserve-economy-017e2a5938bd09db69a706b70a863943

Waller’s remarks follow recent comments from other senior Fed officials that suggest that the central bank remains on track to begin cutting its benchmark short-term interest rate, likely by mid-year. In December, the policymakers collectively forecast that they would cut their rate three times this year. Wall Street investors and many economists expect the first cut in March.

Eman says

Waller’s remarks follow recent comments from other senior Fed officials that suggest that the central bank remains on track to begin cutting its benchmark short-term interest rate, likely by mid-year.

I don't see this happening if annual CPI and PCE are not below 2.5% for at least 3 consecutive months and/or the labor market is still at least good.

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NuttBoxer says

You haven't seen anything yet..

"2024, YEAR OF MASSIVE MONEY PRINTING. "Bottom line: after several years of tightening, 2024 is when the liquidity floodgate reopen and not only does the Fed start to cut rates aggressively, but with Q(uantitative) T(ightening) tapering, we fully expect the next Q(uantative) E(asing) to be launched in the near future, sending the dollar into its next, and possibly final, reserve currency death spiral as printer goes BRRRR."

https://www.zerohedge.com/markets/its-all-over-now-powells-wsj-mouthpiece-jpmorgan-confirm-qt-almost-over

What's the best bet for a $50K account that I have laying around?

Vanguard Tax Managed Capital Appreciation Fund if you don't need the money too soon.

Eman says

Inflation has already entrenched in our economy. The Fed’s method of calculating inflation is f’ed up.

This is by design all along!

Holy crap!


https://x.com/mcclellanosc/status/1747724059016855734?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

Eman says

Holy crap!

The only reason is because the Democrats are demanding this behind the scenes. They rather do whatever it takes including with gas prices. They don't give a shit what happens after the election as long as they win.

Look at how Biden tapped the strategic oil reserves months before the midterm election, and how gas prices went back up right after.

From what I recall, the Fed Funds rate is usually at least 1.5% above annual CPI or PCE.

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Price-fixing of interest rates should be illegal. First, no one is smart enough to really know what to do, and second, it opens a massive hole for corruption, as people favored by the Fed get tipped off on the direction of rates.

The Fed should not exist. Let the market set interest rates.

And all money should be silver by weight and not dollars or anything else. If it's not real silver in hand, it can be promises of silver, discounted for default risk. That allows internet commerce to continue.

GNL says

What's the best bet for a $50K account that I have laying around?

I don't like to gamble, so my advise is always invest in a small business, land way out from any cities, more guns, ammo, chickens, goats, seeds, water filters, or set your pump up for a manual back up system. And of course real money, gold and silver.

NuttBoxer says

And of course real money, gold and silver.

Not sure if it gets that bad like Mad Max-bad if gold and silver would be accepted as a medium of exchange such as one ounce silver coin for 5 loafs of bread, 2 cans of peanut butter and 24 eggs.

Localities such as in American Redoubt with its homesteaders and survivalists will barter goods and services.

If anything, store food with very, very long shelf life, and have source of potable water and energy (for heating and boiling of water).

In times like that which there is unrest and chaos, silver and gold won't have any utilitarian value like bullets, cans of soup, first aid kit, water purification systems, etc.

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Let the Fed cut - for every 50 bps, gold will gain $50. I'll be a millionaire who buys $100 loaves of bread at WalMart.

NuttBoxer says

we fully expect the next Q(uantative) E(asing) to be launched in the near future

Sending the price of stonks up.

ad says

Not sure if it gets that bad like Mad Max-bad if gold and silver would be accepted as a medium of exchange such as one ounce silver coin for 5 loafs of bread, 2 cans of peanut butter and 24 eggs.

Mad Max is a movie, so a bit theatrical(more than a bit). I never understand people who think about the future now, but somehow if society collapses, the future no longer matters to them. Such a defeatist all-or-nothing mentality. Things will get bad, but when I come out on the other side with wealth stored in assets that maintained their value, and you come out with nothing, who's future looks brighter?

If previous SHTF situations taught us anythig, they were extremely re-distributive in nature.

Did Russian Empire's elites get to keep their RE, gold and precious art objects? Nope. Only these who managed to flee early and carried some jewelry or maybe already had some money stashed in foreign banks. That's why a taxi driver with a noble Russian name was a common occurence in Paris in the 1920-30s.

Fast forward 15 years, did Ukrainian farmers get to keep the wealth they accumulated after getting the land taken from emperial landowners and working on it for 10 years during basically free market known as "New Economic Policy"? Nope, after collectivization, confiscation of their land and food stockpiles they were forced to exchange their gold for very little bread in government stores and still starved to death in millions.

Fast forward another 8-10 years: did European Jews get to keep their gold? Rhetorical question.

I can go on and on, but the pattern is pretty clear.

So it seems like stockpiling gold maybe helps in some pretty mild scenarios, like some bout of hyperinflation, but for true socieatal collapse the best bet is to join the winning team early and not only survive, but take all these juicy assets from the losers. (Jews didn't have that option, obviously).

And whatever these MadMax movies show is just silly and bears no resemblance to anything happening IRL.

NuttBoxer says

Things will get bad, but when I come out on the other side with wealth stored in assets that maintained their value, and you come out with nothing, who's future looks brighter?

Yes Mad Max was just some rhetorical reference as far as societal collapse.

I will give you the benefit of the doubt as far as society eventually recovering.

What makes you think society will recover fast enough for you to acquire the wealth of gold and silver ?

At best you may be 90 years old and in frail health when that would happen.

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RWSGFY says

If previous SHTF situations taught us anythig, they were extremely re-distributive in nature.

Many Jews knew well enough to escape Germany by the mid 1930's.

There were still established governments like the Kremlin and Nazi's in your SHTF examples. They established order and control and there was not complete societal collapse. If there was, then the Nazi party would disintegrate and there would never have been the Holocaust as far as death camps.

I bring up Mad Max as far as not having established and effective governments. Yes Barter Town in the 3rd Mad Max movie was dystopian and ineffective.

Yes the Mad Max movie reference is just a rhetorical example of societal collapse, and of course we have not seen this completely IN REAL LIFE (IRL).

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ad says

What makes you think society will recover fast enough for you to acquire the wealth of gold and silver ?

At best you may be 90 years old and in frail health when that would happen.

Because it's happened, many many times. Nothing lasts forever, and nothing stays the same. It's only our arrogance that's makes us think that. But history tells a different tale, albeit the same version.

It's just what's fake that will disappear. Fake money, fake wealth, fake rulers. What's real isn't going anywhere, and what's more, we're already moving back towards it. The crash will just speed up that process of decentralization, return to local communities, and building real wealth.

"Since Q1-2003 when the debt was $6.46 trillion it has added $27.54 trillion or 5.26 times (up 426%) to $34 trillion."

- Franklin Sanders

NuttBoxer says

It's only our arrogance that's makes us think that.

And its naivety to think that society will quickly recover from a collapse.

It may take at least 100 years for it to recover for gold and silver to be considered valuable, especially if the supply chains and resources availability are that ruined or dire.

But yes, I will not discount or marginalize the human spirit as far as recovering eventually and the proliferation of prosperous local communities.

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The real compound annual growth rate is only around 4.4% for the S&P 500 since January 2000 :-/

The S&P 500 reached an all time high today at 4839. At least its PE is at 26 compared to the all time high of 46 back in 2001.

I remember back around 2003 when all the news outlets including financial reporting like CNBC, Kiplinger, and Money stated that the S&P 500 should average long term about 7% after inflation every year.
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NuttBoxer says

"Since Q1-2003 when the debt was $6.46 trillion it has added $27.54 trillion or 5.26 times (up 426%) to $34 trillion."

- Franklin Sanders

911 and War on Terrorism added at least $7 trillion let alone the ballooning of government such as all those intel jobs (contractor and civil servant).

I guess the Great Recession spending added about $2 trillion and COVID spending added about $5 trillion.

Track federal government interest payments as a percentage of the federal budget and percentage of GDP over the last 50 years.

I think now annual interest payment is equal to the Pentagon's annual budget.

They need some austerity such as increase annual spending of government at a rate less than annual inflation.

And they need to encourage work and productivity especially in regards to services inflation.

This would hopefully help to lower inflation and consequently the US Treasury interest rates.

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Eman says

Holy crap!


https://x.com/mcclellanosc/status/1747724059016855734?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

Who's ever in charge seems retarded but, I doubt that's it. No, the fed is a captured entity of the elite. Prove me wrong.

GNL says

Who's ever in charge seems retarded but, I doubt that's it. No, the fed is a captured entity of the elite. Prove me wrong.

Even with the Fed Funds rate at 5.5% and at a ~23 year high, the S&P 500 is an all time high and back to where it was in December 2021.

Unless the Democrat establishment twists the Federal Reserve's arm going into this November's election cycle (to have another stock market rally), then I don't see the Federal Reserve measly lowering rates if PCE remains above 2.5% for at least 4 consecutive months and/or unemployment remains below 5%.

If PCE remains around 3.25% then the Federal Reserve would keep the Fed Funds rate around 5%, so it would mean only a cut of 0.5% to the rate.

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The S&P 500 was up about 24% in 2023 (not including dividends) and is up 22% for last 12 months.

Some sectors and stocks within S&P 500 that have been beaten down in last 12 months and may be value buys are Raytheon, Nike, Disney, Schwab, Pfizer, Bristol Myers, Bank of America, electric utilities, oil/gas, and regional banks. I'm not sure as far as real estate.
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ad says

I'm not sure as far as real estate.

Would Redfin or Zillow be a good long term buy when they report earnings in the next few weeks?

gabbar says

Zillow

Zillow still has not had positive net income since going public around 2012. I am leery about it.

And the only real estate related investments I would consider would be such as iShares US Home Construction and Vanguard's real estate fund.

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The Buffett Indicator, also known as Market Cap to GDP, has gained prominence as a long-term valuation indicator for stocks, largely due to Warren Buffett's endorsement. In a Fortune Magazine interview back in 2001, Buffett referred to it as "probably the best single measure of where valuations stand at any given moment." This statement has drawn attention to the indicator's potential significance in assessing market conditions. The calculation of the Buffett Indicator involves dividing the total market value of all publicly-traded stocks within a country by the country's Gross Domestic Product (GDP). By comparing the stock market's size to the overall economic output, this ratio provides insights into the relative valuation of the market.

EBGuy says

The Buffett Indicator

The Buffett trend shows over valuation compared to the year 2000. Same as far as the below indicators.

https://www.currentmarketvaluation.com/models/s&p500-mean-reversion.php

https://www.currentmarketvaluation.com/models/price-earnings.php

Looks like earnings have to increase and catch up with price of stocks, just like income has to catch up with housing costs.

The silver lining is that there is plenty of space or margin to decrease the Fed Funds rate.

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About 40% of the sales of S&P companies are from overseas operations. While the Buffet Indicator may have been useful at one point, it is woefully out of date with respect to current global trade.

Misc says

About 40% of the sales of S&P companies are from overseas operations. While the Buffet Indicator may have been useful at one point, it is woefully out of date with respect to current global trade.

Good point as the valuation is based on foreign sales but obviously GDP is not.

GDP would need to be adjusted to account for this in order to improve the Buffett indicator's accuracy.

Here's the only Buffet indicator one needs to see:



The guy is not beating the market.

Misc says

About 40% of the sales of S&P companies are from overseas operations.

Incidentally, this is why "diversifying" into foreign equities is unnecessary - you get all diversification you'll ever need from the US stocks while avoiding shit sandwiches like GAZP.

RWSGFY says

Here's the only Buffet indicator one needs to see:

I agree as BRK-B has made a few mistakes recently but BRK-B is up 903% compared to 230% for the S&P 500 since 1 January 2000.

https://www.cnbc.com/2021/01/08/how-warren-buffetts-uphill-battle-against-the-sp-500-is-changing.html