The Long Term Investor

So here we are on FED DAY......and the markets are positive for the open. Well all except for the NSADAQ. Reminds me of the open for the past couple of days.

I will simply wait and watch as usual.

 

We are in CRAZY times.....I am talking about the Dave Chappelle attack on stage.

I thought the reply by Chris Rock, who came on stage after the attack was hilarious......."Was that Will Smith?".

 

Ten year treasury....for what it is worth.....is at 3.005% at the moment. STILL....well BELOW the long term average yield......but no one seems to know that or care.

 

I dont see that much about investing with......the worlds most brutal communist dictator....lately. This.....WEIRD....story should give anyone considering investing in Chinese companies some real pause.

A Chinese man called 'Ma' was detained. The news wiped $26 billion off Alibaba's stock

https://www.cnn.com/2022/05/04/business/china-jack-ma-rumor-detention-intl-hnk/index.html

(BOLD is my opinion OR what I consider important content)

"Hong Kong (CNN Business) For Chinese tech tycoon Jack Ma, there's a price to freedom: $26 billion.

Alibaba, the Chinese e-commerce giant Ma co-founded, saw its Hong Kong-listed shares plunge as much as 9.4% Tuesday after Chinese state media reported that an individual surnamed "Ma" in the city of Hangzhou — where Alibaba is based — had been detained on national security grounds.

According to China's state broadcaster CCTV, the suspect was placed under "compulsory measures" on April 25 on suspicion of "colluding with overseas anti-China hostile forces" to "incite secession" and "incite subversion of state power."

The one-sentence report, which was swiftly picked up by other state media outlets and alerted across Chinese news platforms, triggered panic selling in Hong Kong, erasing an estimated $26 billion from Alibaba's market value within minutes.

Amid the frenzy, Hu Xijin, the former editor-in-chief of the state-owned nationalist tabloid the Global Times, rushed to clarify on China's Twitter-like Weibo that the report was misleading because the name of the suspect in question has three characters. Jack Ma's Chinese name, Ma Yun, has only two characters. (CCTV later quietly updated its original report to match Hu's assessment).

To further dispel concerns, the Global Times reported the accused man was born in 1985 in Wenzhou (while Jack Ma was born in 1964 in Hangzhou) and worked as the director of hardware research and development at an IT company.
The clarifications led to a rebound, with Alibaba recovering the majority of its losses by the day's end.

The market's roller coaster reaction is the latest sign of just how skittish investors are getting over China's embattled tech sector, which has been a target of the Chinese government's heavy-handed regulatory crackdown since late 2020.

Despite recent signals from the Chinese government it is preparing to rollback the campaign due to the economic impact, as first reported by the Wall Street Journal, the market frenzy on Tuesday indicates investor confidence remains shaky.

"I thought this was kind of an odd episode," said Victor Shih, a political science professor at the University of California San Diego. "Whether that was a warning of sorts to the technology sector as a whole, or perhaps Jack Ma personally. Who knows? But it's certainly demonstrated the government does not even have to arrest a senior technology executive to erase tens of billions of dollars from a company's market valuation. It just needs to release some kind of information," Shih added.

"That's quite powerful. And certainly what happened yesterday was a clear illustration of that power, whether it was delivered or not."

But the fact investors were so quick to believe Jack Ma, once China's most high-profile billionaire, would fall afoul of state security authorities reveals something of the political reality many Chinese tycoons now live in.

"It doesn't really matter anymore if it's really him. The important thing is: a lot of people think it's him, a lot of people expect it to be him, now that is interesting," said a popular comment on Weibo, which drew 57,000 likes.

The turn in public sentiment against Ma is almost as spectacular as his rags to riches story. Until about three years ago, the English teacher-turned billionaire was widely worshiped for his charisma, outspokenness and self-made success. (He was even nicknamed "Daddy Ma" by some fans).

But as tech companies like Alibaba expanded their businesses empires, they've become the target of growing frustration and resentment among young Chinese workers who are fed up with gruelingly long work hours, high pressure and stagnant pay. (Jack Ma's endorsement of China's so-called "996" work culture, meaning working from 9 a.m. to 9 p.m. six days a week, drew intense criticism in 2019.)

As tech giants fell under the crosshairs of the Chinese government, "evil capitalists" have been increasingly blamed for various social ills, from relentless competition, skyrocketing property prices to lack of social mobility.

"Within just a few years, 'Daddy Ma' has been labeled as a 'rotten capitalist' in public opinion, and many people are looking forward to Ma's downfall," Xiang Dongliang, a blogger, wrote on WeChat.

"But the question is, will bringing down capitalists and driving out (so-called) foreign forces really make everyone's life better?"

Jack Ma has mostly faded from public life and kept a low profile since Ant Group's IPO in the US was halted by regulators in late 2020. Once among the most outspoken figures in China, he hasn't posted anything on Weibo, where he has nearly 25 million followers, since October 2020.

His last Weibo post, about a meeting with some 100 school principals to discuss the future of China's education, was flooded with critical comments.

"I won't be surprised if old Ma is jailed one day," the top comment said. "You're just a capitalist! Don't pretend to be a good person!" another comment screamed.

Jack Ma remained silent throughout Tuesday, as rumors against him swirled on the Chinese internet. Hashtags about the detention of the suspect surnamed Ma were among the top trending topics on Weibo, drawing hundreds of millions of views.

"He has only silence, which is a 'special way of existing'," Zhang Feng, a columnist, wrote in a widely shared WeChat article following the incident.

"This kind of silence is of profound significance. For a public figure, his speech itself is an 'extension' of his existence. When a person no longer speaks up, although he is still alive, still doing things, at least part of him has 'vanished'.""

MY COMMENT

Ma is keeping quiet.....not that he has any choice. He knows full well that he will simply disappear if he does not comply. In my opinion anyone investing in any Chinese company......and......any USA business doing manufacturing in China is very foolish.

 

Investors just LOVE all the little market superstitions and myths.

This May, Tell Seasonal Myths to Go Away
Seasonality still isn’t real.

https://www.fisherinvestments.com/en-us/marketminder/this-may-tell-seasonal-myths-to-go-away

(BOLD is my opinion OR what I consider important content)

"What next? Stocks have spent most of this year in a correction, with the S&P 500 testing a new low on April’s final trading day. Now it is May, kicking off what many argue is a seasonally weak stretch of the year. The Sell in May and Go Away chorus isn’t as loud as usual this year, in part because some argue the correction is upsetting the normal pattern. In our view, that is a rather strange twist on seasonality that isn’t any more valid than the normal version. We are bullish, but this isn’t why—and whatever your expectations for stocks, we don’t think seasonality should be a factor. It just isn’t real.

For the (blessedly) uninitiated, Sell in May and Go Away stems from old beliefs about how markets work in the summer. In olden days, before computers and cell phones and the internet, liquidity would typically drop when brokers took their summer holidays. They would usually come back around the St. Leger Stakes—a mid-September British horserace—hence the original maxim: Sell and May and go away, and come back at St. Leger Day. These days, brokers have connectivity and backups, and liquidity tends to be flush during the summer, so it has morphed into a statement about seasonal stock returns. The six-month stretch from April 30 through Halloween, on average, is weaker than its opposite six months, so the popular iteration of that seasonal saw would now have people sit on the sidelines from now until October ends.

But the data supporting this proverb fall flat. It rests on one—just one—data point: The six-month stretch ending on Halloween is the S&P 500’s weakest half-year span. Meaning, the average 4.5% total return in these six months since 1925 is the lowest of all. Now, eagle-eyed readers may have noticed there was no negative sign: That average return is still positive. It just isn’t as snazzy as the average 7.2% return between Halloween and April 30, which happens to be the best six-month span.[ii] Call us crazy, but sitting out 4.5% average returns year in, year out seems like a lot of compound growth to leave on the table.

There isn’t a materially higher likelihood of negative returns during this stretch, either. Only 26 of the 97 full April 30 – October 31 stretches since good data begin were negative. From Halloween through April 30, there were merely two fewer negative instances—24. As Exhibit 1 shows, the frequency of positivity doesn’t vary much across all 12 six-month iterations.

Exhibit 1: Seasonality Falls Apart


Source: Global Financial Data, Inc., as of 5/3/2022. S&P 500 Total Return Index trailing 6-month returns, July 1925 – April 2022.

Past performance isn’t predictive, but nothing here implies the next six months are likely to be bad. Historically, returns were positive much more often than not. So the question for investors is, how likely are these next six months to be one of those minority negative instances? This question is always a matter of opinion, not provable science, but we see many reasons to think the answer is, not very likely. We still think the S&P 500’s setback is a sentiment-fueled correction (typically a -10% to -20% drop), not a bear market (usually longer and deeper than -20% with a fundamental cause). Corrections usually feature widely discussed scare stories—this time, we have inflation (see our views here), energy prices (here), the war in Ukraine (here) and China’s latest lockdowns (here). If markets are at all efficient, and we think they are, then these stories likely don’t have much material surprise power, barring some material escalation above and beyond today’s dreary expectations. Moreover, all of these—together with midterm elections—present opportunities for uncertainty to fall.

Stocks don’t like high uncertainty, but they love high-and-falling uncertainty. We should get a good dose of that as more data confirm how the global economy is weathering all of today’s alleged headwinds. Then November’s midterms will reduce political uncertainty in the US, adding to the global clarity emerging from local and national elections in France, Australia, Korea, the Philippines and the UK. We see very, very few (if any) people preaching the benefits of political clarity, never mind the gridlock these contests have already brought and are likely to bring—a bullish sign that there is plenty of positive surprise power.

Seasonality is fun trivia, we guess, if you are into that sort of thing. But it has no sway over stock returns, and we don’t think it is a good basis for an investment strategy. Fundamental forces, not widely known calendars, move stocks."

MY COMMENT

I am surprised that it is now May and we are not being flooded with comments about selling in May and going away. We usually see this media BS every year at this time of the year.

I dont believe any of this mythical stuff. It is nothing more than an extreme side of Technical Analysis. Since I dont believe there is any validity to Technical Analysis or proof that Technical analysis works.....I dont sell in May and go away.

 

Here is the economic data today.....that no one will care about......as usual.

Private payrolls rose by 247,000 in April, missing expectations

https://finance.yahoo.com/news/adp-jobs-report-april-2022-labor-work-121615339.html

(BOLD is my opinion OR what I consider important content)

"Payrolls rose less-than-expected in the U.S. private sector last month, as employers worked to fill persistent vacancies to help meet demand.

Private-sector payrolls grew by 247,000 in April,ADP said in its closely watched monthly report on Wednesday. This came following an increase of 479,000 private payrolls in March, according to ADP's revised monthly print. Consensus economists were looking for private payrolls to rise by 383,000, according to Bloomberg data.

The U.S. services sector saw the largest gains in private payrolls last month, with nearly every industry group adding back jobs. However, job growth slowed compared to March, contributing to the headline deceleration in total private payroll gains.

Leisure and hospitality employers added back 77,000 jobs in April, which while still the most of any industry group, was less than half the gain in payrolls from March. This was followed by professional and business services, with payrolls rising by 50,000 in April, and education and health services with gains of 48,000. In the goods-producing sector, payrolls grew on net in each of the manufacturing, construction and mining industries.

Plus, by company size, small business saw a marked downturn in employment last month. Small businesses, or those with 49 employees or fewer, shed a total of 120,000 payrolls last month, while medium and large businesses gained 46,000 and 321,000, respectively.

ADP's monthly private jobs report comes, as usual, two days before the Labor Department releases its official jobs report. While ADP's report typically does not serve as a perfect indicator of what to expect in the government-issued data due to differences in survey methodology, the print has often helped give a direction sense of job growth that took place during a given period.

Despite these discrepancies, the underlying trend amid the plethora of recent labor market data has been clear: the U.S. labor market remains extremely tight, with demand for workers far outstripping supply. In March, job openings raced to a record high of more than 11.5 million, while new hires were little changed at 6.7 million. And these vacancies have persisted even after months of payroll growth coming in well above pre-pandemic trends.

"For households, the trend in job growth is important," Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a note. "Recent labor market data suggest conditions are tight and showing no signs of deterioration. Layoffs are close to 50-year lows."

"Rising nominal wages are supporting demand, enabling businesses to successfully pass on higher input and labor costs, without much pushback from consumers," she added. "But we are watching for signs of a pullback, as rates move higher and prices remain elevated, or even continue rising. Not only will this affect the trajectory for growth, it will also limit companies' ability to maintain margins and profitability, which in turn will impact investment and hiring decisions."

In Friday's government-issued jobs report, consensus economists are looking for non-farm payrolls to increase by 385,000 on net for April, with private payrolls rising by a slightly more robust 390,000 in total. This would follow non-farm payrolls growth of 431,000 in March. And the unemployment rate is expected to improve further to reach 3.5%, matching February 2020's level for the lowest since 1969."

MY COMMENT

Here is what I believe is the big issue right now......small business.

"small business saw a marked downturn in employment last month. Small businesses, or those with 49 employees or fewer, shed a total of 120,000 payrolls last month, while medium and large businesses gained 46,000 and 321,000, respectively."

This data shows that the consumer is kicking ass with spending.....but.....the jobs markets are totally screwed up. The question is......by the time we come out of this recovery from the shut-down.......what will the small business environment in the USA look like? How many small businesses will we lose?

 

Unfortunately the markets....except for the DOW being slightly up.....are now negative. Not that it means much this early in the day......or for that matter when you look at the markets in terms of YEARS rather than hours and days.

 

So....I was thinking about this ten year treasury yield.....BULL SH*T......that you constantly hear regarding the BIG TECH companies.

SO......

Google started in 1998 and has been growing for over 25 years.

Microsoft started in 1975 and was becoming mainstream by the late 1980's or so......over 30 years.

Apple started in the mid 1970's and from the time they became a dominant company has been around over......30 years.

Amazon has been around since 1997.....over 25 years.

Until lately.....over most of the time of the life of these companies........I have NEVER heard comments like you do now about how interest rate sensitive they are. So I looked at a Ten Year Treasury chart. Guess what?

Over just about the ENTIRETY of the early to middle life of these companies.......their initial 10-20 years.......the rate on the Ten year Treasury was......drum roll please.....7% to 5% till about year 2007. Starting about 2007 to today the Ten Year Rates have steadily gone down to 100 year lows. It is amazing that these companies in their earlier years had no problem growing to what they are today with Ten Year Rates in the 7-5% range.

In other words this interest rate CRAP we constantly hear today is just that.....CARP.

 

EVERYONE knew that the 0.50% hike today would be the greatest NON-EVENT in world history. I dont think there was anyone anywhere in the world that did not expect this.

Stock market news live updates: Stocks jump after Powell pushes back on bigger rate hikes after half-point increase

https://finance.yahoo.com/news/stock-market-news-live-updates-may-4-2022-221335159.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks turned higher Wednesday afternoon, with investors considering the Federal Reserve's latest monetary policy decision against the backdrop of elevated inflation and a still-tight U.S. labor market.

The S&P 500, Dow and Nasdaq each rose and extended gains Wednesday afternoon, after Fed Chair Jerome Powell suggested future 75 basis point interest rate hikes were not currently in discussion among central bank officials. The benchmark 10-year Treasury yield rose to just below 3%, or near its highest level since late 2018.

Investors mulled the Federal Reserve's monetary policy statement, in which the central bank announced its decision to raise interest rates by 50 basis points for the first time since 2000. This increase was double the 25 basis-point increase the Fed unleashed in mid-March, which itself had been the first rate hike since 2018. The latest hike brought the target range for the federal funds rate between 0.75% and 1.00%, compared to the current range of between 0.25% and 0.50%.

Expectations for this supersized rate hike had been building amid market participants, especially given commentary from key Federal Reserve officials appearing to support such a move. Powell said during a public appearance with the International Monetary Fund earlier this month that he believed it would be "appropriate ... to be moving a little more quickly" on raising rates, and that 50 basis points were "on the table" for May. And in his post-FOMC meeting press conference Wednesday afternoon, Powell also suggested additional half-point rate hikes were also possible over the next couple of meetings.

The Fed also announced Wednesday that on June 1, it would begin quantitative tightening, or rolling assets off the central bank's $9 trillion balance sheet. With this, the Fed will first allow up to $47.5 billion per month in combined U.S. Treasuries and mortgage-backed securities to run off the balance sheet. This pace will increase to $95 billion after three months.

Heading into the Fed decision, prospects of higher interest rates have stirred up volatility in equity markets, which had grown accustomed over the past two years to ultra-low interest rates and generally easy-money monetary policies. At the same time, however, many pundits have suggested the Fed allowed its pandemic-era supportive policies to run too long, allowing inflation to soar to the fastest rates since the 1980s. And after GDP growth turned negative in the U.S. in the first three months of the year, a lingering question remains whether the Fed will now be able to tighten policies without tipping the economy into a deep downturn.

2:45 p.m. ET: Powell pushes back on 75 basis point interest rate hikes

Federal Reserve Chair Jerome Powell, during his press conference Wednesday afternoon, pushed back against the notion that the Fed might raise interest rates by more than 50 basis points in the coming meetings.

“A 75 basis point increase is not something the committee is actively considering … there’s a broad sense among the committee that additional 50 basis point increases should be on the table at the next couple of meetings," Powell said during the question and answer portion of his press conference.

With regard to future policy-setting and what would inform the Fed's decisions, Powell added, “The test is really just economic and financial conditions evolving broadly in line with expectations. And expectations are that we’ll start to see inflation flattening out — not necessarily declining yet.""

MY COMMENT

You have to love the media. I have been seeing headlines all day along the lines of:

"Investor hunker down while awaiting rate hike"

I like the line in this little article that this was a......SUPERSIZE.......rate hike. No.....not at all.

I am glad that the markets seem to be reacting exactly as I expected.......they simply dont care because this event was totally anticipated ahead of time. What the markets care about is CERTAINTY. That is why they reacted positively when Powell squelched the talk of a 0.75% hike.

Now if he can just get through his entire press conference without tanking the markets we will be doing ok today.

 

Perhaps some good news for the Real Estate markets.....especially buyers. In my area of 4200 homes we now have a.........HIGH.......of 22 active listings. I think that is the most we have seen this year, so far. Although....normally this time of the year we would have between 90 to 120.

BUT....at least we have a fair number of listings now for buyers to pick from ranging from about the mid $650,000 range up to about $5MILLION.

The market is STILL extremely HOT.....but....at least there is a range of prices and homes for AGGRESSIVE buyers to choose from.

 

You know today was a good example of what the FED should be doing as the raise rates. In ALL their various commentary they should be adopting a uniform tone........and.....being very transparent about the coming rate increases for the rest of the year.

If they would simply do this simple little bit of.......LEADERSHIP.......the markets would probably be stable. The markets dont really care that much about the path that we are on for rate increases. BUT......they absolutely do want some certainty.

 

What a nice....BIG GAIN DAY......today. I am sure everyone on here participated....we all needed it. I am still down by (-14.70%) year to date. but....I dont care.....I am just happy for the nice gains today. My portfolio will take care of this loss and itself at some point in the near future. I suspect that is is.....PROBABLE......that the gains today and the FED actions today will carry through for the rest of the week and give us a nice weekly gain. After that we are back into EARNINGS.

Poor earnings.....they have taken a back seat for the last week or so.

 

Oh yes......I was green today and I got in a beat on the SP500 by 0.32% today.

 

I like the tone and style of this little article.

Too Many Bears

https://ritholtz.com/2022/05/too-many-bears/

(BOLD is my opinion OR what I consider important content)






I just put the finishing touches on the quarterly conference call for RWM clients. The chart you see above shows how much negativity is out there – it’s an AAII measure of bears, annotated by BofA Merrill Lynch – and it is one of my favorites from the deck.

Bears at 59.4% is a surprisingly high reading — it’s worse than the Flash Crash, worse than Taper Tantrum, worse than the 2020 COVID Crash. But it’s nowhere near as bad as the Great Financial Crisis, where the bear readings were 70.3%.

I say “surprisingly high reading” only relative to the drawdowns we have seen. When we look at the markets, they are “only” off modestly: S&P 500 off 14% is a very average drawdown; NASDAQ down 22% is not especially terrible. But despite (or because?) of those readings, sentiment remains very poor.

Perhaps the timing helps to explain why:


-It’s the worst start to a year (Jan 1 to May 1) for equities;


-It’s the worst start to a year (Jan 1 to May 1) for bonds;


-It’s the worst April for equities since 2002;


-And, this move lower was pretty much straight down.

I’m sure you can think of other reasons why sentiment is so negative: the Russian invasion of Ukraine, persistently high inflation for six months, expectations of increased FOMC rate hikes, fears of recession, lots of people believe the country is on the wrong track, etc.

Of course, the high fliers have gotten shellacked: FANMAG is down 35%; Many high-flyers are 60%, 70%, even 80% off highs. If you were heavily weighted towards Tech/Growth/WFH, you are probably more bearish now than the typical 60/40 investor is.

All this negativity and this spike in bearish sentiment makes me wanna buy equities with both hands. But alas, prudence requires a more thoughtful approach. Regardless of your desires, any one indicator by itself is rarely sufficient to drive a substantial change in portfolio allocations. There simply are too many moving parts to rely on a single variable.

That said, we are getting close to the point where a substantial countertrend rally takes place. In the long run, these are just noisy ways to work off excesses in one direction or another.

I believe we remain in a secular bull market, one that has enjoyed a decade of above-average performance, including two years of substantially excessive returns.

If we finish 2022 anywhere between flat to down 10%, it would be a case of healthy mean reversion, and a good set-up for 2023. Maybe that’s a bit of my wishful thinking creeping in, but that is how I have been seeing these markets for quite a while. YMMV."

MY COMMENT

How we end this year is far away and totally OPAQUE. No one knows. In fact it is impossible to know. BUT.....today was a good day and brought me back from a loss of over (17%) for the year.

I also know that my loss that I have right now can easily disappear and become positive with one good sustained market rally. It will come....sooner or later......it always does.

 

Well there go my gains from yesterday......LOL.

The stories of the day......the usual big tech and interest rate BALONEY......and......the comming recession. We are in a great short term market for the big traders and AI quant traders. In reality.......they are creating the short term action themselves rather than trading the conditions in the market. Meantime the HUGE silent majority of investors....sits and watches.

The LEMMINGS are running today........and....it is funny to watch.

 

I like this little......twisted.....article.

Those Who Gave Us the 'Post-Stupid Age' Want To Manage the Economy

https://www.realclearmarkets.com/ar...id_age_want_to_manage_the_economy_830753.html

(BOLD is my opinion OR what I consider important content)

"We are living in the “Post-Stupid Age,” feeling the effects of the stupidest public policy the United States and the world has ever seen; shutting down the world economy without comprehending the long lasting effects of such idiocy. (Dear future historians, I want credit for coining the term “Post Stupid”). In recent articles, I have described how associations of experts are inherently wrong about most everything and pointed the finger at the Federal Reserve. I’ve stated that the Federal Reserve puts too much emphasis on government compiled statistics and formulas, and using these data points gives it an unrealistic impression of our economic vitality. On April 21, Fed Chairman Powell blathered about the need to raise Fed Fund rates at a more accelerated pace due to our “over-heated” economy. Since these remarks, the S&P has dropped 7 %. Now it turns out that government produced statistics state the economy is not growing at all; it is contracting! SEE GDP CONTRACTS 1.4%. GDP reports consist of government compiled formulas, their only meaningful function is to illustrate how conceited and hopelessly inept the economics profession is. Nevertheless, the Fed relies on “GDP” and uses it as a measurement for what actions it needs to take to manage the economy for all us plebes who lack their wisdom. So what does this tell you? One week the Fed says the economy is over-heating, the next week it is twisted in knots as the numbers it relies on state the economy is contracting. Mmmm. Perplexing. Qui est veritas? No problem can ever be solved without acknowledging “truth.” So let’s acknowledge it. The truth is the Fed doesn’t have a clue, and it is a complete joke to think 7 members of the Fed Open Market Committee can magically orchestrate the entire American economy.

I will repeat my mantra over my last two articles in this space, and then I will move on to more important topics, like Kim Kardashian and Pete Davidson’s budding romance. But for now, I want all of y’all to acknowledge my wisdom. I am conceited, what can I say? I am also mean as a snake, and no one likes me. I work for myself and don’t have to lick anyone’s boot, so I am free to say what others won’t. Making me even more outspoken, I enjoy pissing people off, especially those hyper-sensitive types who walk into Starbucks in their pajamas and order $9 drinks with foreign sounding names. So here goes. The Fed sucks. It doesn’t work as advertised. Its intervention policies insult historical fact and common sense. Only in Washington DC can policy makers be consistently wrong and everyone bows down and sings hosannas in slavish obsequiousness. Once again: We don’t need the Fed to set rates, that’s what markets do. When it intervenes and disrupts markets, it causes damage. We don’t need the Fed to “slow down” the economy to protect us by making us all poorer!

Often, the Fed Chairman will appear before Congress to report on the state of the economy. Good Lord. The liars and thieves who confiscate our wealth and spend it like drunken sailors get their cues from the institution that is always wrong. I have some suggestions on how the Fed can give better advice to Congress.

Get out of the Beltway Bubble. I think Jerome Powell should go hang sheetrock for a year. My friend Jose runs a couple crews that are always pretty busy. By being on the jobsite all the time, Jay can see firsthand the supply line disruptions created during the “Stupid Age.” He can observe how a builder can’t finish houses because he simply can’t get materials. Materials are in short supply because our government shut the economy down for the first time in world history! Jose’s wife Sofia often brings lunch to crew members. Her bean and egg tacos are a veritable delicacy. Over lunch, Jose could explain to Jay why prices are rising. Houses are built in phases; clearing, footings, foundation, framing, roofing, plumbing, wiring, sheetrock, floors, trim, etc. If one phase is held up, all the subsequent phases are too. Carrying costs and rising prices are eating builders alive. Take windows, they are hard to get. If your local building supply house usually stocks hundreds of windows, but now only has 10, the price of windows goes up. Moreover, they are also more expensive on the wholesale level. If the glass, frames, enamel, and latches are also in short supply, it costs more to produce them. Being a small businessman, Jose can also explain to Jay how real world people think. After being arbitrarily shut down by the government, most businesses can’t ramp up production but so fast, and no business is going to go out on a limb and get over extended for fear of getting shut down again. Jose could explain the difference between economic theory and reality.

Perhaps Vice-Chair, John Williams of the New York Fed could go to work for Governor Ron DeSantis of Florida. The Guv could tell him why so many people have left New York and moved to Florida. I am sure the Guv would tell him that what moves an economy towards continued prosperity are low taxes, reduced government spending, a sensible regulatory environment, low crime and the protection of property rights.

As for the other the other 5 members of the Federal Open Market Committee, I suggest that they too get regular gigs. I can line them up right here in Richmond, Virginia."

MY COMMENT

I like this little article. It tells the TRUTH. We know EXACTLY what makes the economy healthy.......low taxes, low government spending, less regulation, business freedom, crime under control, etc, etc, etc. Once in a while we actually do these things and the economy booms. The rest of the time......we do the opposite and flail around making excuses for what is happening in the markets and the economy.

What works is very simple. Of course.....the government bureaucrats and politicians have their own agenda and dont care about the private economy. They are totally disconnected from the private world......and those of us that live and work in the private world pay the price.

 

To continue the same theme.

Our Take on the Fed’s Half-Point Hike
People are still too obsessed with the Fed, in our view.

https://www.fisherinvestments.com/en-us/marketminder/our-take-on-the-feds-halfpoint-hike

(BOLD is my opinion OR what I consider important content)

"Wednesday, as widely expected, the Fed raised the fed-funds target range by half a percentage point to 0.75% – 1.0%, its first rate hike larger than a quarter point since 2000. It also confirmed it will start letting assets roll off its balance sheet in June, starting at a cap of $47.5 billion per month and jumping to $95 billion in September—basically following the blueprint unveiled in March’s meeting minutes. And for the first half hour or so, stocks did about what you would expect when there is no big news: a whole lot of nothing, waffling between small gains and small declines. But then the S&P 500 jumped—apparently as Fed head Jerome Powell said the Federal Open Market Committee isn’t “actively considering” a 0.75-point hike. Never mind that he also said “additional [half-point] increases should be on the table at the next couple of meetings”—evidently, what everyone really cares about is a three-quarter-point move. It is all quite arbitrary, yet it is also hard to complain, considering the late surge put the S&P 500 up 2.99% on the day. But also, if this doesn’t prove investors are irrationally obsessed with the Fed, we aren’t sure what would.

We still think stocks are likely to do well this year despite the early correction (sharp, sentiment-fueled drop of -10% to -20%), so we would love to tell you that Powell’s remarks helped reduce uncertainty and the clarity created some massive bullish tailwind. But, dear readers, experience tells us that would be a load of codswallop. If we were to jump on that bandwagon, we would implicitly argue Fed forward guidance actually predicts Fed moves. (It doesn’t.) And that Fed people always do what they say they will do. (They don’t.) We would also be making an argument that the speed and magnitude of rate hikes in this context matters, as if there is some meaningful distinction between, say, raising rates half a point at each of the next few meetings and sneaking a 0.75-point hike in there at some point. Or, if the Fed hiked half a point each in June, August and September and, say, an additional quarter point in October, that is mathematically the same as hiking half a point in June and August and 0.75 point in September. The Fed doesn’t have some big cartoon lever with a bright red “danger zone” warning at the 0.75 percentage point marker. As we write, the gap between 3-month and 10-year yields is still a mite over 2 percentage points.[ii] What matters is whether the Fed inverts the yield curve, not the path they might take en route to that error. Whether they do it with a handful of major hikes or with 17 straight quarter-point hikes, as they did in the mid-2000s, the result would be the same.

Some observers argue it isn’t the rate hike plans themselves that soothed sentiment, but rather the implication that inflation won’t be bad enough for long enough to warrant the first 0.75-point hike since 1994 (after which, we would add, the S&P 500 soared 31.2% over the next 12 months).[iii] Well, ok, but that is tantamount to arguing the Fed is a brilliant economic forecaster that manages inflation perfectly. But these are the same folks who thought deliberately flattening the yield curve with quantitative easing would stimulate the economy after 2008’s financial crisis, and couldn’t fathom why their GDP forecasts proved too optimistic. The same folks who were dead sure the right choice in 2008 was to mystify investors and markets by forcing Lehman to fail.[iv] The same folks who are now trying to control supply and energy shock-induced inflation by slowing money supply growth. Newsflash: If inflation isn’t caused by monetary factors, then monetary measures aren’t likely to fix it.

We have long thought people are just too obsessed with the Fed, as if the crew at 20th and Constitution has massive amounts of control over the economy. Some in the financial press have a penchant for invoking metaphors of Fed officials steering the US economy or manning its helm. To call this overstated is, in our view, being generous. The US economy is far too big and decentralized for the Fed to have much influence outside of making an egregious error that causes a credit crunch. That is a risk you must watch for regardless of policymakers’ forward guidance.

But beyond that? At best, the Fed can influence money supply growth and velocity at the margins by the way their moves impact market-set rates. These days, because banks have a deposit glut, short-term rate moves have seemingly little means to impact lending, which is how most money gets created in our fractional reserve banking system. As you are no doubt painfully aware, banks didn’t pass the Fed’s first rate hike on to customers. Hence, they aren’t paying more to borrow. About all the Fed can do if it wants to tighten is hope its interest rate on excess reserves is enough to entice banks to park cash instead of lend enthusiastically. But considering their balance sheet runoff plans also promote a steeper yield curve—which means wider profits on new loans—we doubt that happens. Note that loan growth has accelerated sharply this year despite the Fed’s hikes.[v]

The Fed is nothing to ignore. But, in our view, far too many investors imbue it with much more power to sway stocks and the economy over meaningful periods than it has. Yes, announcements can stoke the occasional short-term swing, including today’s pleasant rise. But overthinking them is an all-too-common error."

MY COMMENT

YES......this little article has one small line that is so true:

"Newsflash: If inflation isn’t caused by monetary factors, then monetary measures aren’t likely to fix it."

DUH. This is exactly why all the turmoil the economy is going to be subjected to by the FED over the next year is for NOTHING. Well nothing but......the real danger of causing a recession.

The current inflation is caused by supply/demand issues and the total destruction of the USA and world economy caused by.......yes, you guessed it......government policy in closing down the economy for a virus. The one area where we continue to see massive growth is in.......yes, right again.....government. Agencies, bureaucrats, the massive growth of the NGO's, etc, etc, etc. At some point some time in the future......we are going to be living in a world where the majority of people work for government directly or indirectly. When we reach that point......where workers for private business are the minority......we are done for as a capitalistic society.

Gov't. Employment Ranges From 38% in D.C. to 12% in Ohio

https://news.gallup.com/poll/141785/Gov-Employment-Ranges-Ohio.aspx#:~:text=WASHINGTON, D.C. -- Seventeen percent of U.S. workers,of 15% in the vast majority of states.

"Seventeen percent of U.S. workers say they work for federal, state, or local government, ranging from 38% in Washington, D.C., to 12% in Ohio. More than a quarter of workers in Washington, D.C., Alaska, Virginia, and Maryland work for government, as do upwards of 15% in the vast majority of states."

Lots of good data on government workers in the above article.