10 replies to this topic

[MikeyG]

It is a volatile data, but worth noting. Demand drying up is the path toward the prices coming down. 

 

Here are the 11 lowest reading in the last 12 years. 

 

25-Sep-14 -18.20%

28-May-20 -17.20%

24-Apr-20 -14.40%

27-Sep-12 -13.20%

26-Aug-13 -7.30%

25-Aug-17 -6.80%

24-Apr-13 -5.70%

27-Feb-13 -5.20%

28-Jan-16 -5.10%

22-Dec-16 -4.60%

27-Feb-23 -4.50%

 

[MikeyG]

7 month moving average to smooth the data out is .03%.

 

Among the 1/4th slowest pace in the past 12 years. 

[MikeyG]

IMHO at this current market juncture -demand decreasing at this point is really bullish for the stock market.

 

If the Fed causes a massive deflationary event then we could see new lows. IE demand dries up completely and earnings get cut massively. 

 

Goldilocks and Fed doesnt go too far and pivots. IE 3% 10 year and SPX earnings around 220, we push toward new highs. 

[MikeyG]

Pending home sales accelerating as prices going down.

 

Supply of homes increasing.

 

IMHO sellers are coming out because they need/want the money they have in equity and know that home prices have peaked.

 

A reverse FOMO.

Edited by MikeyG, 27 February 2023 - 10:41 AM.

[skott]

Anybody hear that goldman said machines are set to sell heavily below spx 4003?   I saw a video on it but not sure if Goldman really said that

[pdx5]

When I worked in manufacturing, we used to say, the most expensive part of  cost our products walks in through the door every day.

Labor costs is why so much of manufacturing was shipped to low labor cost countries. Chiina has 4 times number of worker than USA.

A very profitable move by corporations to ship work there. Even with added shipping costs and longer delivery times.

 

Those raises workers received this year and last year due to inflation will not come down even if we go into a recession and inflation goes down..

That is why every inflationary period tend to stubbornly last a long time. It takes time to  synchronize wage levels & demand.

It will not be any different this time. Not only wages have gone up, but there is still full employment. Demand can go down, but prices will stay high.

 

No one knows for sure how much higher FED will jack up federal funds rate. Even Chair Powell does not know where exactly rates will be at end of 2023. From experience, all I can say is  inflation is unlikely to get to FED target of 2% core inflation before end of 2024 at the earliest. Trade safely!

[MikeyG]

When I worked in manufacturing, we used to say, the most expensive part of  cost our products walks in through the door every day.

Labor costs is why so much of manufacturing was shipped to low labor cost countries. Chiina has 4 times number of worker than USA.

A very profitable move by corporations to ship work there. Even with added shipping costs and longer delivery times.

 

Those raises workers received this year and last year due to inflation will not come down even if we go into a recession and inflation goes down..

That is why every inflationary period tend to stubbornly last a long time. It takes time to  synchronize wage levels & demand.

It will not be any different this time. Not only wages have gone up, but there is still full employment. Demand can go down, but prices will stay high.

 

No one knows for sure how much higher FED will jack up federal funds rate. Even Chair Powell does not know where exactly rates will be at end of 2023. From experience, all I can say is  inflation is unlikely to get to FED target of 2% core inflation before end of 2024 at the earliest. Trade safely!

 

Yes, inflation can be stubborn, but the idea of a wage price spiral and/or inflation is entrenched is not correct thinking (not saying you are in this camp PDX).

 

The average hourly earnings are coming back more in line with the norm with a 4.4% YOY increase in the latest report. 

 

I believe your 2% core target by the end 2024 would be a bullish scenario for markets, as that would indicate some sort of soft or no landing. 

 

New lows would only be made in a deflationary scenario and/or a black swan event. 

All IMHO. 

[MikeyG]

From the Dallas Fed manufacturing survey that came out today. Signs the labor market has loosened with the first contraction in employment since 2020.


"The employment index dipped below zero to -1.0 after tracking above average for more than two years. Fifteen percent of firms noted net hiring, while 16 percent noted net layoffs"

[pdx5]

I am not adding to longs in this environment. Thinking of moving some cash into 2 year treasuries after March decision on rates by FED.

[slupert]

Pending home sales accelerating as prices going down.

 

Supply of homes increasing.

 

IMHO sellers are coming out because they need/want the money they have in equity and know that home prices have peaked.

 

A reverse FOMO.

If you have a mortagage rate at around 3% and you have equity in it, are you going to sell your house and buy another one with a mortgage of 7%?  Work until you are 90?