Financial topics

[richard5za]

Thank you Vince, much appreciated. I suspect that Phong is right about FOMC directing 100 bp today if they are serious about dealing with inflation

Short squeeze timing was off a bit, thought it'd be before the FOMC meeting, but looks like their 75 bp was the cause for the short squeeze and gap close. Guess we'll see how the next two weeks play out prior to the next CPI print, but that should do it for the bear market rally corrective wave, we should be in 3 of 3 now (though technically we could go as high as 4080 on the tape and nothing would have changed).

Thanks for this Phong. If you have a look at the 1 hour US 500 chart it looks like a market in nervous indecision losing momentum by the hour. Yesterday's party is over and now is "did I do the right thing buying at higher prices?"

[Tom Mazanec]

Oh Goody! Now We Get To Have Rampant Inflation And A Housing Collapse At The Same Time!
July 27, 2022
http://themostimportantnews.com/archive ... -same-time

[richard5za]

Oh Goody! Now We Get To Have Rampant Inflation And A Housing Collapse At The Same Time!
July 27, 2022
http://themostimportantnews.com/archive ... -same-time

You have more than that Tom. The USA is now technically in recession; decline of two consequetive quarters

[Phong Tran]

https://tradingeconomics.com/united-states/gdp-growth

-0.9 Q2 GDP

Could have sworn Powell just said not 24 hours ago that he doesn't see the US in a recession. Futures seeming to love the news as they believe it means the Fed pivots earlier then expected.

[richard5za]

Phong, do you think the market may react to the minus 0.9 GDP QoQ?
Maybe that leg down you predicted starts to happen? Matbe takes a while?

So now we have:
High inflation
Higher but not high enough interest rates to address inflation
Recession that will depress earnings
P/E ratios will reduce to accomodate higher yields from bonds
Earnings forecasts that cannot possibly materialise

AND in respect of the above a stock market that is much too high.

So who is holding it up? Possibly boomers who think that a decline / recession doesn't matter because all will come right again? I'm a boomer so I can say that boomers can be very delusional

[richard5za]

https://tradingeconomics.com/united-states/gdp-growth

-0.9 Q2 GDP

Could have sworn Powell just said not 24 hours ago that he doesn't see the US in a recession. Futures seeming to love the news as they believe it means the Fed pivots earlier then expected.

Your note explains mine.

[Phong Tran]

I was expecting this last pull back and rally, and it's painting the chart beautifully. Don't really want to call 4055 the top as I mentioned before, we could go up to 4080, but if it is the top then I would expect a gradual decline that looks like just profit taking and a normal correction after a decent run up, before the oh s%#t waterfall moment. It could take a while, commodities do kind of look like they need another week or two to bounce around some before their next drop lower.

Just a disclaimer, I think I'm better at seeing the larger pattern trends, and daily, weekly forecasting isn't really my thing (yet). Hopefully it will be one day, but just wanted to throw that out there as I'm no expert or professional.

[Higgenbotham]

One workplace I'm aware of locally just hired someone in payroll who was "fired" for cheating employees at her previous job. Her mistake was getting caught. Now I hear she is telling some employees that she wants them to be "comfortable" as she cheats them out of 10-20 hours per pay period of overtime. I saw the pay stubs.

After hearing more complaints about this from multiple people in this workplace, I was asked by one of these employees to look at some recent time records and pay stubs. The time records showed that this employee was consistently being overpaid one hour per week, as not all lunch breaks were being subtracted from total hours. For example, if the employee worked 8 shifts in a week, only 3 hours were being subtracted out for lunch breaks rather than 4. Also, the employee was consistently being paid a higher wage for some hours. The employee's base rate is $19 per hour with a $1/$2 premium for off shifts during the week/on the weekend. Yet, for 2 pay periods of 2 weeks there were 32 hours paid at $22 per hour. However, time and one half for hours over 80 per 2 week pay period consistently started at 97 hours. Netting all this out, I figured the employee was only being cheated out of about $80 per pay period rather than the hundreds that were being claimed. This really puzzled me. Why would a company do this? It couldn't be to save money. The only reason I could come up with is that the local facility was trying to hide how many hours of overtime were being worked from corporate. When I finished looking everything over and talked to the employee, this was verified to be the likely reason for the underpayment of overtime. I had characterized this cheating as "desperation" over cost of wages but that does not appear to be what is going on in this case. In fact, I saw that the company is paying a rather generous gas allowance of $50 per employee per pay period as well as some generous bonuses. I think what this really shows is that there's a shortage of workers, corporate is doing all it can to provide incentives to attract workers so as to get their overtime costs down, and the local facility is getting a lot of pressure from corporate to get the facility adequately staffed.

[Higgenbotham]

This is the 11th trading day since the May 27 close and there were recently 3 gap down days. The bears will press their luck but I am not short. That's not to say the market won't fall further. I have no idea. But the easy part of the down move by my reckoning is over.

I started to go short today near 4100 before and after the cash close (the market exploded higher after the cash close). That may be the final burst higher but I kind of doubt it. I will add some if the market gets near 4200 and 4300.

[vincecate]

The negative real rates have given us an all time low in the Financial Stress Index:

https://fred.stlouisfed.org/graph/?graph_id=1004739

I really don't think they are effectively fighting inflation yet. They rush to drop rates and are so slow to increase them. Inflation is going up faster than rates are. The CPI at 9.1% and they just moved rates from 1.75% to 2.5%. In the past to fix inflation interest rates had to get higher than the inflation rate. At the pace they are going they will never get there.