Market Sentiment - Recession Length

[MichaelB]

Quote:

Originally Posted by FLJim Policy measures come from politicians, not economists, unfortunately. The real question is what does our current gubmint want, not what the people want.

Yes, policy is in the hands of the policymakers. I was referring to people in this thread who believe we are in a recession. If we are in a recession, tightening will only exacerbate it, yet that is what the Fed is doing.

[corn18]

Quote:

Originally Posted by MichaelB Yes, policy is in the hands of the policymakers. I was referring to people in this thread who believe we are in a recession. If we are in a recession, tightening will only exacerbate it, yet that is what the Fed is doing.

The Fed has two mandates: full employment and controlled inflation. A recession with 8% inflation should not impact their rates if inflation is still high.

[target2019]

Quote:

Originally Posted by FLJim Policy measures come from politicians, not economists, unfortunately. The real question is what does our current gubmint want, not what the people want.

And here I am thinking that elected officials work with government, economists and departments to create policy.

[copyright1997reloaded]

July 1st update of GPDNow, just one day from yesterday:
Latest estimate: -2.1 percent — July 1, 2022

link: https://www.atlantafed.org/cqer/research/gdpnow

[24601NoMore]

Quote:

Originally Posted by copyright1997reloaded Man, I sound like an optimist compared to 24691NoMore. I don't know when the negatives become "priced in" the market - maybe a sign of that will be when big layoffs or other bad news doesn't cause a companies stock to crater. (One of my concerns at the moment is that while PE ratio's have been reduced, the "E" estimates of that have for the most part not been reduced.) I think it is also "good" news if/when the BTFD mentality gets wiped out. (Perhaps it already has?)

Thanks, I'll take that as a compliment! Although I'm not necessarily bearish per se..I prefer to think I'm realistic as I study economics and markets closely, day in and day out. And I spend a good chunk of the day following financial experts far smarter than I claim to be..I learned recently NOT to put my head in the sand and chant "just buy and hold..just buy and hold..." over and over and over again...

You're spot on with regard to your expectation that Earnings estimates HAVE to come down. They are way too high at the moment, and pretty much every credible analyst is saying so.

That's a big part of where I get my SPX 3,000 - 3,400 estimate, which many others (including many pros) are forecasting. Again, I HOPE I'm wrong..but once Earnings estimates start to come down, equity valuations will likely follow.

Then, throw in the hordes of options gamblers buying PUTS on the SPY. We've never seen anything like the current level of outright gambling with options. It's out of control..almost GameStop-like crazy. Our markets are for the most part no longer run by investors..they're run by options gamblers to a large extent.

I admittedly haven't had time to do the math, but I suspect if we DO hit SPX 3K that it will take 5+ years to get back to 4,800+. It'd be an interesting and quick exercise to do something like..start at 3K..assume 6-8% a year from there. How long till we get back to 4,800? A long time.

Dang, wish I had sold more in December when I was pretty much all but positive that things were bound to go "splat" shortly. Valuations were just way too high and inflation had already been climbing. Can't believe I didn't pull the trigger then..

[Koolau]

Quote:

Originally Posted by MichaelB That’s a straw man. I don’t see anyone in this thread making the case that “the economy is fine”.

I never mentioned anyone in this thread nor did I mean to imply anyone in this thread.

[NW-Bound]

Quote:

Originally Posted by copyright1997reloaded July 1st update of GPDNow, just one day from yesterday: Latest estimate: -2.1 percent — July 1, 2022 link: https://www.atlantafed.org/cqer/research/gdpnow

Alright!

The silver lining is that inflation should ease, and the crowd at the airport will dissipate. We get something in return for the portfolio shrinking. It's not for naught.

[Koolau]

Quote:

Originally Posted by NW-Bound Alright! The silver lining is that inflation should ease, and the crowd at the airport will dissipate. We get something in return for the portfolio shrinking. It's not for naught.

Inside every silver lining - there's a dark cloud. Al Sleet

[milford]

Quote:

Originally Posted by copyright1997reloaded This. I need to be careful here with my wording, but I believe this same kind of thing holds true with other aspects of society. When excesses/shifts that should have been corrected earlier keep getting ignored, the eventual reaction/shift becomes larger. Does this make me happy even though I haven't liked what's been going on? No, it scares the **** out of me in terms of what I think might happen. Our systems, institutions and society are built on a veneer - a veneer of trust, of overall truth and "fairness". If that is lost, watch out below not only in terms of economic well being but across all aspects of our lives.

Sadly this is norm... whether its politicians or in the corporate world everyone just tries to kick the can down the road until the can runs into a brick wall and can't be kicked further. Thus whoever is in charge at the moment has to "put out the fire" with the least amount of damage as possible. Its just the way our system is setup where you aren't graded or rewarded for future success or failure.

[madatrub]

Quote:

Originally Posted by 24601NoMore Then, throw in the hordes of options gamblers buying PUTS on the SPY. We've never seen anything like the current level of outright gambling with options. It's out of control..almost GameStop-like crazy. Our markets are for the most part no longer run by investors..they're run by options gamblers to a large extent.

Do you have any data on this? Im looking at Options action on QQQ, which is one of the bigger tickers with options action, and Im curious what you mean by this.

[Magus]

Quote:

Originally Posted by copyright1997reloaded July 1st update of GPDNow, just one day from yesterday: Latest estimate: -2.1 percent — July 1, 2022 link: https://www.atlantafed.org/cqer/research/gdpnow

If we print a -2.1% combined with the negative Q1, I think its likely its declared a recession later this year that started probably in March. I think the UK is already definitely in recession and US likely so. A narrow recession would be a good thing. The question is if it'll be narrow or not.

[MichaelB]

I just drove from South Florida to the upper midwest, something we’ve done regularly for over a decade and a half. The traffic is about as heavy as I recall ever, lots of cars on the road, the hotels we normally use fully booked. Also lots of trucks hauling stuff, and also lots of auto trucks hauling new cars, suvs, pick-up trucks, etc.

The only thing unusual was an absence of big RVs. We saw fewer on the road this trip than any time since ‘09.

There is far too much activity to think there is currently a recession underway, or even just beginning.

[Koolau]

Quote:

Originally Posted by MichaelB I just drove from South Florida to the upper midwest, something we’ve done regularly for over a decade and a half. The traffic is about as heavy as I recall ever, lots of cars on the road, the hotels we normally use fully booked. Also lots of trucks hauling stuff, and also lots of auto trucks hauling new cars, suvs, pick-up trucks, etc. The only thing unusual was an absence of big RVs. We saw fewer on the road this trip than any time since ‘09. There is far too much activity to think there is currently a recession underway, or even just beginning.

Same impression driving to the closest airport last Friday. Cars, trucks and big rigs, about normal But way down on RVs. No idea how predictive that is, but probably a check on RV parks would be definitive. YMMV

[corn18]

The 10 year break even inflation rate certainly hasn't priced in a recession.






And unemployment has just flattened out but isn't rising.

[copyright1997reloaded]

Quote:

Originally Posted by MichaelB I just drove from South Florida to the upper midwest, something we’ve done regularly for over a decade and a half. The traffic is about as heavy as I recall ever, lots of cars on the road, the hotels we normally use fully booked. Also lots of trucks hauling stuff, and also lots of auto trucks hauling new cars, suvs, pick-up trucks, etc. The only thing unusual was an absence of big RVs. We saw fewer on the road this trip than any time since ‘09. There is far too much activity to think there is currently a recession underway, or even just beginning.

One of the more interesting sections of "The Big Short" by Michael Lewis is his description of September18, 2008. This was three days after the Lehman Brothers bankruptcy filing:

Quote:

...Eisman ambled towards his partners on the steps of St. Patrick's Cathedral. ... The weather was gorgeous -- one of those rare days where the blue sky reaches down through the forest of tall buildings and warms the soul. "We just sat there," says Danny, "watching the people pass." ... The monster was exploding. Yet on the streets of Manhattan there was no sign anything important had just happened. The force that would affect all of their lives was hidden from their view. That was the problem with money: What people did with it had consequences, but they were so remote from the original action that the mind never connected the one with the other. The teaser-rate loans you make to people who will never be able to repay them will go bad not immediately, but in two years, when their interest rates rise. The various bonds you make from those loans will go bad not as the loans go bad but months later, after a lot of tedious foreclosures and bankruptcies and forced sales. The various CDOs you make from the bonds will go bad not right then but after some trustee sorts out whether there will ever be enough cash to pay them off. Whereupon the end owner of the CDO receives a little note, Dear Sir, We regret to inform you that your bond no longer exists...But the biggest lag of all was right here, on the streets. How long would it take before the people walking back and forth in front of St. Patrick's Cathedral figured out what had just happened to them?

The point of the above isn't to suggest that it is the same as what was happening in 2008. What I am saying is that it takes time for things to cycle up or up, and we are cycling down.

The roads are busy because we've spent TWO YEARS where vacations have been postponed and cancelled. People are travelling even though they know things are getting worse. Some are traveling BY CAR because of the absolute mess in terms of flying. Many are taking driving trips vs. exotic travel because it is cheaper (even with the high cost of gasoline).

I don't know what the next big negative surprise will be - perhaps it will be a bunch of companies whose earnings are impacted due to the strong dollar and weak demand from Europe. Perhaps it will be some sort of bleed over from the crazy crypto lending companies bankruptcy into other financial markets. Regardless, I don't think we've seen all the bodies that take time to float to the surface.

[skyking1]

I'm not an investor like most of you, but I would surmise that those observations of traffic and activity on the highways and such are going to lag far behind, more than the seasons do with respect to the solstices etc.

[corn18]

Quote:

Originally Posted by skyking1 I'm not an investor like most of you, but I would surmise that those observations of traffic and activity on the highways and such are going to lag far behind, more than the seasons do with respect to the solstices etc.

I agree. Seems we are just spending the money we couldn't spend during the pandemic. No red flags in consumer debt. Yet.

[harllee]

Quote:

Originally Posted by MichaelB I just drove from South Florida to the upper midwest, something we’ve done regularly for over a decade and a half. The traffic is about as heavy as I recall ever, lots of cars on the road, the hotels we normally use fully booked. Also lots of trucks hauling stuff, and also lots of auto trucks hauling new cars, suvs, pick-up trucks, etc. The only thing unusual was an absence of big RVs. We saw fewer on the road this trip than any time since ‘09. There is far too much activity to think there is currently a recession underway, or even just beginning.

Totally different where I am in the resort area of NC mountains. Tourism is way off. About half the normal vehicle traffic, the rental agencies say bookings off by at least 25%. Many airbnbs empty. Not crowded in stores and restaurants. Many price reductions on houses for sale. Looks like here we are already in a full blown recession. I guess time will tell.

[Chuckanut]

It's catch up time when it comes to travel.

As far as predicting the future goes.... Does anybody here know of any person who in December of 2019 predicted a pandemic that would lock down cities around the world and greatly limit economic activity? Or somebody in in October of 2021 who predicted a prolonged war of attrition in Ukraine would drive up energy prices?

The question to ask ask every candidate for elected office is this: What totally unexpected event could come out of nowhere and knock your plans into the toilet? It is unanswerable, but if they are thinking about it that's a good sign.

[copyright1997reloaded]

So I guess inflation didn't peak w/the previous CPI print?