Early Retirement Extreme Forums

All eyes will be on the Fed this week, but perhaps more eyes should be on the Bank of Japan (BOJ). If the BOJ decides to modify it’s current YCC policy on Friday, it will cause global sovereign bond yields to rise, regardless of what the Fed does. That will crush risk assets further and doesn’t seem to be getting much attention. Yes, BOJ hasn’t changed its accommodative monetary policy in years, but Japan also hasn’t faced inflationary pressures and every other central bank working against it before.

Rapid and disorderly moves in fixed income markets tend to be the catalyst that breaks things. Huge institutional players and tons of leverage. The question is what and when.

For more see here (skip to 13:45 on first video):

https://youtu.be/rufZNvQn5s8

https://youtu.be/t9l2flhMSVE

Meh, the indexes are all still higher than where they were before the pandemic started, and way off the March 2020 lows.

Maybe I'm just getting old, but after riding out '87, '00, '08-09, and '20, I don't see the need for all the panic. Even the 3/20 low didn't threaten the functioning of the system like in '08 & '87.

I'd egoistically love for this to continue.
In general, I feel sorry for the people who have slim savings, but the frothiness in certain areas of the markets looked really unhealthy to me (crypto, unprofitable shitcos, some tech), and the longer unsustainable things go on, the harder the fall.
So in some way better to get back to sanity earlier rather than later

@jennypenny

Small-ish quibble, but with inflation running so hot, it won't take much more for people to be below the pre-pandemic in terms of real returns. I think Nasdaq might already be.

I respect the perspective of bigger picture optimism, though I don't share it -- I admit things keep getting patched and then held together longer than I ever could have imagined, and so I end up holding a lot of long positions because I don't have enough confidence that they can't "think of something."

I still think this one has just started, though. And my real guess is a lost decade of trading sideways at best, thus negative real returns for indexing.

candide wrote: ↑

Mon Jun 13, 2022 10:12 pm

@jennypenny

Small-ish quibble, but with inflation running so hot, it won't take much more for people to be below the pre-pandemic in terms of real returns. I think Nasdaq might already be.

https://www.bls.gov/regions/mid-atlanti ... _table.htm

Despite the URL saying "Mid-Atlantic", this looks like the nationwide CPI-U, which is what most of us mean by the "CPI"

CPI 02.2020 = 258.678
CPI 05.2022 = 292.296

292.296 / 258.678 = 1.1300 (13.00% inflation, to two decimal places)

SPX 02.19.2020 = 3386
3386 * 1.13 = 3826 05.31.2022 dollars

SPX 06.13.2022 = 3749
3749 / 3826 = .9799, so we are down exactly 2% in pre-covid dollars. That doesn't count dividends, which are roughly 1.5%/yr, so with those we're up a percent or so.

CCMP 02.19.2020 = 9817. This is the Nasdaq Composite, not the NDX or QQQ (Nasdaq 100).
9817 * 1.13 = 11093 05.31.2022 dollars

CCMP 06.13.2022 = 10809
10809 / 11093 = .9744 so the Nasdaq is down about 2.5% in pre-covid dollars. Dividends are about 0.7%/yr for the Naz, which still means it's down.

So you're right! Within the margin of error of using a monthly inflation gauge and day-to-day closes that don't correspond to month-end.

BTW, if you have a Bloomberg, this calculation takes one command, and just set the dates.

@candide -- It's cool. I wouldn't describe myself as optimistic though and didn't mention anything about inflation. My only point was that I think the current pullback is being way overhyped. Even if we're a little below pre-pandemic levels in real returns, didn't everyone think things were due for a correction then anyhow?

We had a global pandemic, shut down businesses and schools, screwed up supply chains and decimated some industries, yet in two years the market is just about where it was before the pandemic started. I find that kind of amazing.

I think there are real concerns in the economy, but headlines like 'Dow down almost 900 points!' are silly. There's a time to panic but I don't think this is it. I'd rather see headlines like 'Normalize interest rates!' because IMO that's where the real crisis is.

unemployable wrote: ↑

Tue Jun 14, 2022 12:23 am

So you're right! Within the margin of error of using a monthly inflation gauge and day-to-day closes that don't correspond to month-end.

BTW, if you have a Bloomberg, this calculation takes one command, and just set the dates.

I was eye-balling it, so I appreciate you doing the math. Alas, no access to a Bloomberg here.

jennypenny wrote: ↑

Tue Jun 14, 2022 5:15 am

I'd rather see headlines like 'Normalize interest rates!' because IMO that's where the real crisis is.

Agreed. But this means an everything bubble could be popping. And there are a lot of claims made in our society, pensions funds coming to mind, based on that not being possible. . . But I am Chicken Little. I've called seven of the last two major crises.

Or, maybe, a quick recession stops inflation, and then they can get out of a rising interest rate environment and going back to war on savers.

I see no reason to think Fed will stop holding up assets trying to generate inflation

CLearly too much inflation right now. But it's hangover from covid. Is there going to be another covid this year?

Mister Imperceptible wrote: ↑

Wed May 25, 2022 2:42 pm

If you like to watch the world burn, you may enjoy beholding the sight of the Fed trying to demand destruct their way out of supply side inflation.

https://m.youtube.com/watch?v=Gq4ZvZOoPfI

After the 0.75% hike, Powell when asked if higher unemployment was needed to move down inflation:

“We need to have a labor market that allows for price stability.”

https://en.m.wikipedia.org/wiki/Iron_law_of_wages

Also Powell: “We do not want to trigger a recession and we do not see signs of there being one. The US economy is in a strong position. There is no sign of a broader slowdown in the economy that I can see.”

lol

These guys remind me of a girlfriend I had once who was perhaps on the verge of going off the rails. She learned from her therapist to tell herself and say outloud that things will be fine or are fine. She'd repeat it - sort of like a mantra, sort of like a tic - and say the word 'fine' 5-10 times within 30 seconds.

Everything is fine. Fine. It's FINE!!... fine...

There's this beautiful comedy clip on "EVERYTHING IS FINE", https://www.youtube.com/watch?v=C7sE0agEVNg

Comes to mind a lot these days watching CB pressers...

Adding to BNDW
Adding to SOFI

I would like to inform the members of the ERE community that the dollar has topped I am feeling a very strong urge to purchase dollars

ertyu wrote: ↑

Mon Jul 11, 2022 8:52 pm

I would like to inform the members of the ERE community that the dollar has topped I am feeling a very strong urge to purchase dollars

At least one more 0.75% hike in July.

Not enough pain yet. The plebes have not been fully broken. They still have “too much money.”

TSLA and AAPL puts were not profitable. Either I was early or these companies are fairly valued in the eyes of market participants. I'm staying away from micro for awhile and just sticking to macro trends.

I'm holding a lot of cash (40%) at the moment. I've also been selling VTI and buying RWM and PSQ during market rips. I'm also still long commodity producers with 20% of my portfolio. So I guess you can say I'm positioned for stagflation. According to Macrovoices, there is a divergence in the oil markets between what macro traders think (recession means reduced demand) and what commodities traders think (lack of supply will continue to drive prices up). We'll see who ends up being right over the coming months.

I can't quite figure out why SPX and QQQ have held up this well, but holding the inverse index ETF's gives me more flexibility on timing compared to buying options outright.

I’ve been slowly selling more of my long VTI position over the past few weeks during these rallies, so now I’m down below 5% for my portfolio allocation to any stock indexes. I’ve been slowly accumulating larger positions in PSQ and RWM as well. Maybe I’m wrong and this is the start of a raging bull market, but I really don’t think so. And even if it is, my 25% allocation to commodity producers will also rip if/when the Fed pivots or we enter into some kind of new bull market that increases consumption via the wealth effect. Either way, I also have a lot of cash on hand so I can stay flexible and wait for opportunities.

We’re in this topsy-turvy world where bad economic data and bad earnings are good for major indexes. But then if the wealth effect keeps spending high and the economy hot, the Fed will see that as justification that they have to keep tightening…and the cycle continues. The Fed will tighten until something breaks, but I don’t think that something is SPX over 4000 (maybe SPX at 3000).

We’re also at the end of the month and typically see rallies due to allocations from the giant institutional players, so that could be contributing to the rip as well. I’ve also heard that if Biden announces a lifting of Chinese tariffs after his meeting with Xi, we could see another tailwind.

Mister Imperceptible wrote: ↑

Tue May 10, 2022 4:40 pm

“shadow inventory”

https://wolfstreet.com/2022/08/23/sales ... ng-bust-1/





It would seem that higher rates, among other things, have coaxed inventory out of the shadows.

It's going to be interesting to see how the market prices in student loan forgiveness:

https://www.whitehouse.gov/briefing-roo ... d-it-most/

Is this a non-event, since there's been a moratorium on federal payments anyways?

On the whole if we see anything, it should be an upward move. If we don't, imo it would be one of those things that in and of themselves are telling, strengthening the conclusion that there's an overall downward trend on the spx.

Nothing much has changed lately for me. I'm still auto-saving towards index funds in my work TSP and using after-tax money to buy either BNDW or SOFI (if price is under $7.00). My cost-basis per share is down to $12.90...and I started my first purchases at $20 . Speaking of SOFI, SoftBank recently sold their stake in the company which is driving down the stock price. But there has been recent clarify on the student loan moratorium. So with SOFI basically trading at its book value or close to it, not a bad time for LONGs to add.

I hold an outsize portion of my active portfolio in MU as well previously mentioned. That one is also done a lot but they've recently made a $15 billion investment into a plant in Idaho. PE Ratio at 6.44.