This is an interesting survey on many levels. 72% of Muse Survey Respondents Say They’ve Experienced “Shift Shock” https://www.themuse.com/advice/shift-shock-muse-survey-2022?id=1275017 (BOLD is my opinion OR what I consider important content) "The COVID-19 pandemic changed nearly everything about the way we live and work. But amid the Great Resignation, workers are coming face to face with another, less-talked-about phenomenon. Kathryn Minshew, The Muse’s cofounder and CEO, is calling it “Shift Shock”: that feeling when you start a new job and realize, with either surprise or regret, that the position or company is very different from what you were led to believe. In early 2022, we surveyed The Muse audience, and, out of more than 2,500 respondents, 72% said they’ve experienced Shift Shock. “This is a generational shift, driven by Gen Z and millennial candidates who are more likely to believe the employer-employee relationship should be a two-way street,” Minshew says. “On top of this, the pandemic has emphasized for many that ‘life is short,’ which means candidates are less likely to stick around in unfulfilling jobs.” Additional findings from The Muse’s Shift Shock survey are as follows: 29% said their Shift Shock encompassed the job and the company 41% would give a new job two to six months if they felt Shift Shock as a new hire 48% would try to get their old job back if they felt Shift Shock at a new company 80% said it’s acceptable to leave a new job before six months if it doesn’t live up to your expectations In the coming days, The Muse will offer guidance for both job seekers and employers on how to tackle Shift Shock head on—or better yet, avoid Shift Shock altogether." MY COMMENT YEAH......job jumping......from the frying pan right into the fire. Not sure how they come to any sort of......empirical conclusion.....that the ACTUAL job or company was ACTUALLY different than they were led to believe. I think it is probably just as likely that the employee had unrealistic expectations of the job or company. Or....The company being desperate to hire ended up with a number of people that were not as competent or experienced as they said they were. The conclusions drawn on this data are just plain unsupported, one-sided, opinion. I do think this data reflects an issue that workers and employers are going to have to deal with. That issue being the total lack of LOYALTY on the part of employers and employees in the work world. The solution is going to come over the next 10-20 years.....in a very BAD way for employees. That solution for the employers will be.....embracing remote work and outsourcing MOST jobs in the USA to cheap foreign tech and white collar workers. If work is going to be remote.....there is absolutely no need for employers to have expensive and high maintenance workers in the USA when they can hire remote workers anywhere in the world. This is the corporate model of the near future......a small core group of executives and managers in the USA with a mostly foreign contract work force. After all if going to an actual office, corporate culture, mentoring, etc, etc, etc, are no longer concerns.....the country where your work force is living is irrelevant. All that will matter is the cost......and.....we know how that works out for USA employees....they are much more expensive. In fact this is already the model at many companies that are staffed by Indian workers being brought to the USA by employment companies. The next......logical...... step will be to just leave the workers in their own country.
I have been siting and watching the markets move up today. Looks like we may already be seeing the benefit of the rate increases ACTUALLY starting. The markets will be dealing with fact and reality rather than unsupported and rampant speculation. This week will take all the rate increase fear mongering and opinion off the table. For better or worse the markets will be dealing with actual reality. that is a very good thing and has the potential to take one very big issue off the table.....at least for a while.
This is an interesting story.......on the subject of how to piss off your customers with useless tech that makes the shopping experience more complex and more irritating. Walgreens replaced some fridge doors with screens. And some shoppers absolutely hate it https://www.cnn.com/2022/03/12/business/walgreens-freezer-screens/index.html (BOLD is my opinion OR what I consider important content) "New York (CNN Business) Walgreens and other retailers have swapped out the clear fridge and freezer doors at thousands of stores, instead adding opaque doors with iPad-like screens showing what's inside. Some customers really, really aren't into it. The screens, which were developed by the startup Cooler Screens, use a system of motion sensors and cameras to display what's inside the doors — as well as product information, prices, deals and, most appealing to brands, paid advertisements. The tech provides stores with an additional revenue stream and a way to modernize the shopping experience. But for customers who just want to peek into the freezer and grab their ice cream, Walgreens (WBA) risks angering them by solving a problem that shoppers didn't know existed. The company wants to engage more people with advertising, but the reaction, so far, is annoyance and confusion. "Why would Walgreens do this?" one befuddled shopper who encountered the screens posted on TikTok. "Who on God's green earth thought this was a good idea?" "The digital cooler screens at Walgreens made me watch an ad before it allowed me to know which door held the frozen pizzas," said someone on Twitter. Another echoed: "@Walgreens NOBODY needs TV screen replacing doors in your cooler aisles.... Stop." Retailers are eager to add new experiences to their physical stores. But many consumers aren't eager to change their habits — and they certainly aren't used to watching freezer-display ads. "People really appreciate their routines. They're not always seeking excitement," said Julio Sevilla, an associate professor of marketing at the University of Georgia who studies consumer behavior. Digital screens, he said, can add uncertainty and physical barriers to a simple and literally transparent process: reaching into a glass fridge. Sevilla doesn't believe consumers are looking for novelty when they visit a grocery store: "We all love to get into a supermarket and know exactly what we're getting. I know also exactly where things are. For this type of utilitarian-related setting, people like their certainty and simplicity." Big-name stores Still, Walgreens and Cooler Screens are pushing forward. Walgreens (WBA) began testing the screens in 2018 and has since expanded the pilot to a couple thousand locations nationwide. Several other major retailers are launching their own tests with Cooler Screens, including Kroger (KR), CVS (CVS), GetGo convenience stores and Chevron (CVX) gas stations. "I hope that we will one day be able to expand across all parts of the store," said Cooler Screens co-founder and CEO Arsen Avakian in an interview with CNN Business. Currently the startup has about 10,000 screens in stores, which are viewed by approximately 90 million consumers monthly, according to the company. Avakian said the company aims to bring its digital displays to a broad range of retailers including those in beauty, consumer electronics and home improvement. A Walgreens spokesperson said in an email that Walgreens is "committed to exploring digital innovation in [an] effort to deliver new and different experiences for our customers." The spokesperson said the screens add value because they give customers relevant product information to help them decide what to buy, and that Walgreens is evaluating the pilot to decide whether to expand further. 'Moment of truth' Though not all of Walgreens' customers are fans, Cooler Screens' concept has attracted prominent brands like Coke (KO), Pepsi (PEP), Nestle (NSRGF), Kraft Heinz (KHC) and Monster (MNST). It's raised more than $100 million from backers including Microsoft (MSFT) and Verizon (VZ). Cooler Screens CEO Avakian said he developed the concept after watching in-store customers whip out their phones to find product information and reviews. Traditionally, in-store advertising has been limited to options like signs, promotions and prominent placement on shelves. But Cooler Screens' targeted digital ads deliver at the "moment of truth," Avakian said, right as consumers decide which product to pull out of the fridge. Brands can place ads spread over multiple freezers, ones that display products' nutritional labels, or ads triggered by weather or time of day. An ice cream company might want to run ads when it's hot outside, while a coffee brand could hit the morning rush. The setup aims to help stores add high-margin advertising revenue to offset their core low-margin retail business. Companies pay Cooler Screens to run screen ads and retailers get a cut. "There's a big movement in retail right now to create what's called a 'retail media network,' which taps into all the ways brands can interact with that retailer digitally," said Chris Walton, a former vice president at Target who runs the retail blog Omni Talk. 'This wasn't a problem' Cooler Screens says 90% of consumers it has surveyed prefer its digital screens to traditional fridges, and that the displays provide sales lifts for stores. (Walgreens did not comment on that.) But beyond the confused social media posts, the tech has also attracted misinformation and conspiracy theories. Politifact last month debunked a viral Facebook video that claimed "Walgreens refrigerators are scanning shoppers' hands and foreheads for 'the mark of the beast.'" Avakian insists the tech is "identity-blind" and protects consumers' privacy. The freezers have front-facing sensors used to anonymously track shoppers interacting with the platform, while internally facing cameras track product inventory. Some customers have expressed frustration with the experience. People aren't sure whether to tap the screens or talk to them. The items on display don't always match up with what's inside because products are out of stock. Henry Brewer, who recently encountered one of the digital screens at a Walgreens in Chicago, said the technology felt "very in-your-face" and "intrusive." "We see advertisements literally everywhere and now I have to go see it on the cooler?" he said. "It doesn't just seem necessary, and I think it's a turnoff to the consumer when this wasn't a problem." To Avakian, it's simply an expected growing pain. Cooler Screens plans to educate customers about the digital displays and launch features like voice recognition, so shoppers can ask about prices or item locations. "This is the future of retail and shopping," Avakian said." MY COMMENT The future of on-site retail? I dont think so....especially in a grocery store. When I go to the store for our big monthly shop.....I want to get in and out. I dont want to have to deal with a bunch of FORCED advertising before I can see what is in a cooler or on a shelf. Enhancing the customer experience......what a JOKE. This is simply stores pushing unwanted advertising on their poor customers in yet another way to make money from them....outside of selling them something. This WILL have one big impact on business......it will discourage people from going into the store in person. It should be a goldmine for remote shopping, online shopping, and use of various grocery store shoppers that deliver your groceries to you in your car. A perfect example of out of control useless tech being forced on people to solve a problem that does not exist.
Talking about the rate increases and other issues in the news that impact investors. What to Make of Today’s Dour Surveys Surveys reveal sentiment’s recent plunge—and what stocks have likely priced in. https://www.fisherinvestments.com/en-us/marketminder/what-to-make-of-todays-dour-surveys (BOLD is my opinion OR what I consider important content) "You don’t need us to tell you moods are down right now. Inflation is elevated, oil prices are up and all eyes remain on Ukraine. As ever, though, a key challenge for investors is to tune that down long enough to look forward and ask, “How much of this dour news do markets already reflect?” In our view, stocks’ drop since January largely reflects these factors. There is no silver bullet that will give you a perfect view of the extent to which prices reflect sentiment. But looking to what people have said in recent surveys can help reveal the magnitude of sentiment’s plunge following Russia’s invasion—helping illustrate what markets have pre-priced. Even before Russia’s invasion of Ukraine on February 24, polls found consumers and businesses feeling dour. The main reason: inflation. In the US, both The Conference Board and the University of Michigan’s sentiment surveys of American consumers dipped in February. The former reported fewer consumers plan to make big-ticket purchases (e.g., cars or vacations) in the next six months, while the latter fell to its lowest level in 10 years. Per a February Gallup poll, 42% of Americans described the economy as “poor” and “getting worse,” up from January. Interestingly, only 2% called the “situation with Russia” an important problem facing the country—likely a reflection of the pre-war survey period, as responses were taken from February 1 – 17. Similar themes emerged overseas before Russia’s barbaric act. Research firm GfK found consumer confidence in both the UK and Germany worsened in February, with rising prices cited as the main concern. However, surveys weren’t universally negative. The ZEW Indicator of Economic Sentiment for Germany improved in February as respondents anticipated easing COVID restrictions and an ongoing economic recovery. In Australia, a National Australia Bank survey of business conditions rebounded in February, with firms crediting a slowdown in Omicron cases and an easing of supply bottlenecks. Even a Financial Times/University of Chicago survey of macroeconomists conducted on the eve of war, February 21 – 24, put “geopolitical tensions tied to Ukraine” fourth on the list of things that could pause Fed interest rate hike plans. Not that it will do so, but we think those answers would be radically different in a poll taken today—a point more recent surveys illustrate well. For example, Sentix’s Investor Confidence Index for the eurozone, taken March 3 to March 5, fell from 16.6 in February to -7.0 in March, its lowest reading since November 2020. The gauge’s expectations index fell by -34.75 points—the largest drop in its 20-year history. Sentix found similar results for Germany and Eastern Europe. According to an Infratest poll of German voters conducted from February 28 – March 2, 69% agreed with the government’s plan to increase defense spending, with 47% citing a change in attitude due to Russia’s invasion.[ii] Though the majority of respondents support Western sanctions, 64% fear a deterioration in Germany’s economic situation tied to the conflict. In Australia, a Westpac-Melbourne Institute poll taken from February 28 – March 4 showed consumer sentiment fell for a fourth straight month in March.[iii] Domestic issues (i.e., inflation and floods in southeast Queensland and New South Wales) weighed on sentiment the most, but 87% of respondents were negative on international conditions—likely a sign Russia’s hostilities were hurting moods in the Land Down Under, too. Now, it is important to note that polls don’t predict behavior. Just because someone says they lack confidence doesn’t mean they won’t spend or invest, and as post-invasion surveys show, feelings change quickly. But surveys are a snapshot in time. They reflect how people feel in the moment, which is heavily influenced by what just happened. Considering the nonstop coverage of the Russia-Ukraine conflict over the past two weeks—and all the speculated global fallout—it isn’t surprising for respondents to feel dour, in our view. We have seen other issues dominate headlines over the past 12 months, including COVID variants (and related restrictions), supply chain issues and, most recently, elevated inflation. The persistent attention on those stories puts them atop people’s minds—and likely influences survey respondents’ answers. To be clear, the problems highlighted in surveys are real, and we don’t dismiss their impact. War is a tragedy. The disruptions to commerce hurt businesses and consumers alike. Inflation weighs on households’ finances. But from an investing perspective, the discussion of these issues influences and shapes expectations. Stocks move most on the gap between expectations and reality. As recent surveys show, the former are low right now. That suggests markets already reflect the effects of war, implying the bar for reality to deliver positive surprises on the economic front is pretty low—common during corrections (swift, sentiment-driven declines of -10% to -20% off market highs). While no one can time corrections, in our view, this sort of deteriorating sentiment is common around their lows." MY COMMENT YES.....all these issues are very much anticipated and baked in to stocks and funds. As I said......the FED issue will become reality this week and will lose much of its power to shock and scare investors.
I like this little article and its history review. You Can’t Buy Past Returns https://compoundadvisors.com/2022/you-cant-buy-past-returns (BOLD is my opinion OR what I consider important content) "“What are the historical returns?” That’s the first and often only question many investors ask before allocating capital. Why? Because we’re wired to believe that those returns are indicative of what we’ll receive in the future. If something has gone up 20%, we expect another 20%. If something has doubled, we expect it to double again. If something has gone up 10x, we expect it to be 10-bagger once more. The more extreme the performance, the more emotionally charged we get, and the more likely we are to buy at the worst possible time. History is littered with examples… 1) Tech Bubble In the five-year period from 1995 through 1999, the Nasdaq 100 gained 817%, an annualized return of over 55% per year. Powered by YCharts Tech stocks were all the rage, and many new investors were buying in with the expectation of similar future gains. What happened next? The Nasdaq 100 fell over 56% in the subsequent 5 years, an annualized return of -15% per year. Powered by YCharts 2) Housing Bubble In the five-year period from 2002 through 2006, home prices in Miami rose 126%, an annualized return of over 17% per year. Powered by YCharts The housing mania was widespread, but no market was hotter than southern Florida, with many investors buying multiple homes in the area in search of future riches. What happened next? US home prices plummeted, and Miami prices fell harder than almost anywhere else, down over 50% in the subsequent five years. Powered by YCharts 3) Peak Oil At the end of June in 2008, Crude Oil stood at $140 a barrel, 335% higher than it was just five years earlier. Powered by YCharts Many came to believe in a theory (“Peak Oil”) that Crude Oil production was in the early stages a permanent decline, and speculators rushed in to buy with reckless abandon. What happened next? The global recession worsened, and the price of Oil quickly crashed over 70%. Five years later it was still 28% lower than its 2008 peak, and it remains below it today. Powered by YCharts 4) Gold Mania In the five-year period ending in August 2011, Gold rose 192%, an annualized return of nearly 24% per year. Powered by YCharts The financial crisis, endless quantitative easing, and 0% interest rates – the macro narrative couldn’t have been better and investor demand for Gold soared, making the Gold ETF ($GLD) the largest ETF in the world in August 2011. What happened next? Gold prices fell 28% over the subsequent five years, and did not hit a new high again until 2020. Powered by YCharts 5) Growth Stock Bubble At the end of January in 2021, the ARK Innovation ETF ($ARKK) was up over 785% in the prior five years, an annualized return of nearly 55%. Powered by YCharts Billions were pouring in the fund each week and it became the largest actively managed ETF in the world. Flows, of course, followed performance, as they always do. Nearly 90% of the fund’s inflows had come during the previous year (during which the fund was up 174%) with more than half of those flows coming in just the previous 3 months (during which the fund was up 56%). What happened next? The fund has declined nearly 60% in a little over a year, its largest drawdown to date. Powered by YCharts The names change in every cycle, but the underlying story remains the same: you can’t buy past returns. In purchasing the hottest investment today, you don’t receive its coveted historical track record. Instead, you’re more likely to experience the most powerful force in markets: reversion to the mean. The very best performing assets of the past often go on to become the worst, and vice versa. This is true of funds as well, where top decile funds tend to underperform bottom decile funds going forward (see study). How can an investor avoid the siren song of outsized performance? –First, by learning the countless lessons of history, a few of which I’ve chronicled here. Chasing outlier returns has cost investors dearly, adding risk to their portfolios at the worst possible time. –Second, by staying grounded and sticking to a plan. For most, that means maintaining broad diversification (across asset classes, geographies, styles, and strategies), rebalancing at times to reduce risk, and not letting your emotions (fear and greed) get the better of you. –Third, by using factors other than past performance (which is not predictive, as we have seen) to make investment decisions. The key question: what value does this holding add to my overall portfolio, and how will it increase the odds of me achieving my goals? The next time you’re tempted to go all-in on the latest investment fad, run through this checklist. And say out loud what you know to be true: “you can’t buy past returns.”" MY COMMENT YEP.....chasing returns is a sure return KILLER. Invest with a long term plan. Invest based on fundamental business data. Invest for the long term. Stick with good solid stocks and funds that have proven themselves over the longer term and are NOT the latest FAD. Ignore the financial media and their BREATHLESS opinions about the next big thing. Invest in companies and funds that are proven....you do NT have to get in on the ground floor......it is perfectly fine to get on the business elevator on the 10th floor of an 80 floor building.
We are now in mid-morning dip time and seeing some market weakness. It either escalates from here.....or.....it turns around. In other words no one has a clue where we end the day. My wild ass guess......we end the day in the green.
I am going to start a new tech company to.....enhance the EXPERIENCES of customers. You will have to watch 5 commercials on your digital menu in restaurants to be able to see the food items. At gas stations you will have to watch 5 commercials on the pump before it will allow you to pump gas.......and.....if you watch 15 commercials you get 2cents off your gas price.. At the bank cash machine.....yep.....5 commercials before you can do a transaction. In fact I am going to manufacture digital.....screen doors......that will not allow you into a business till you watch 5 commercials. The modern definition of a......."screen door". Of yes......your phone.....the ultimate tool to suck money out of people........whoops.....I mean ENHANCE THEIR EXPERIENCE......my tech will force......whoops......I mean allow....you to watch 5 commercials every 8 hours in order to be able to continue to use your phone. This is the ULTIMATE END....where we end up.....with the concept of....."people want experiences". The ones deciding what experiences "YOU" actually want will NOT be you. YES.....we continue to the future of the world.....which unfortunately will look like many of the science fiction movies. This is one reason......besides simple efficiency......why I am very selective in what tech I choose to have and use in my daily life.
I am just full of new product ideas today......in response to the "cooler screen door" story above. My first product is a micro key chain cattle prod. Just to be used at home for novelty purposes....of course. But it will have a warning in HUGE print....."not intended to be used for a 2.3 second burst against the glass of an irritating store screen to disable the screen and allow immediate access to the products inside". The second product will be a plastic wedge with a locking clip to make removal nearly impossible without removing the door......that can be used anytime you encounter a screen store door....to attach to the door and crack the door open and keep it from being able to latch and require watching content to be able to open the door. It will be a one time use product...... intended to be left in the door when you are done to help out your fellow shoppers. It will be called....."The Shoppers Friend".
BUMMER........my FLOOD of new house listings in my neighborhood.......9 listings out of 4200 homes......has now fallen to only 7 listings after two went pending in less than two days on the market.
Looks like a NORMAL day in the markets today.....DOWN. The cause of the drop today was ________________. (just fill in the blank with the typical short term market driving short term fear factor). I had about as much luck in my two art auctions that I was bidding in this past weekend. I got skunked in both of them. the first one I was massively under the final bid. The second I was the under-bidder to the winner.
I remain stuck in my negative trading range to start the week.....actually.....not too far from the bottom of my recent range. I ended the day in the red today. I had only TWO of EIGHT stocks in the green today......Home Depot and Honeywell. At least that helps a slight bit. I got smacked by the SP500 by 1.26% as my BIG CAP tech companies had a typical day. I am back to a year to date loss of (-16.82%). Not that this bothers me at all.....it is exactly as I would expect with what is going on right now and the state of the markets. I will try again tomorrow........for a gain.
Not much new going on for long term investors at the moment. Here is the big event of the week. Here’s everything the Federal Reserve is expected to do at its meeting this week https://www.cnbc.com/2022/03/14/her...-expected-to-do-at-its-meeting-this-week.html (BOLD is my opinion OR what I consider important content) "Key Points The Federal Reserve meets this week and is expected to begin unwinding the massive economic help it provided during the pandemic. That process will likely start with an interest rate hike of a quarter percentage point, but policymakers also will update their outlook for rates as well as GDP, inflation and unemployment. At the last update, officials projected inflation would run at 2.7% — obviously a massive undershoot of current conditions. The Federal Reserve this week faces the monumental challenge of starting to undo its massive economic help at a time when conditions are far from ideal. In the midst of a geopolitical crisis in Ukraine, an economy that is off to a slow start and a stock market in a state of tumult, the Fed is widely expected to start raising interest rates following the conclusion Wednesday of its two-day meeting. Those three elements pose a dauting challenge, but it’s soaring inflation that the Fed will focus on most when its meeting starts Tuesday. “The economic outlook supports the Fed’s current plans to boost the federal funds rate in March and to begin to reduce their balance sheet over the summer,” wrote David Kelly, chief global strategist for JPMorgan Funds. “However, there [are] a number of areas of uncertainty which should make them a little more cautious in tightening.” The Federal Open Market Committee meeting will be focusing on more than a solitary interest rate hike, however. There also will be adjustments to the economic outlook, projections for the future path of rates, and likely a discussion about when the central bank can start reducing its bond portfolio holdings. Here’s a look at how each will play out, according to the prevailing views on Wall Street: Interest rates Markets have no doubt the Fed will enact an increase of a quarter-percentage point, or 25 basis points, at this meeting. Because the central bank generally doesn’t like to surprise markets, that’s almost certainly what will happen. Where the committee goes from there, however, is hard to tell. Members will update their projections through the “dot plot” — in which each official plots one dot on a grid to show where they think rates will go this year, the following two years and the longer range. “The ’25′ is a given. What matters most is what comes after,” said Simona Mocuta, chief economist at State Street Global Advisors. “A lot can happen between now and the end of the year. The uncertainty is super high. The trade-offs have worsened considerably.” Current pricing indicates the equivalent of seven total increases this year — or one at each meeting — a pace Mocuta thinks is too agressive. However, traders are split evenly over whether the FOMC will hike by 25 or 50 basis points in May should inflation — currently at its highest level since the early 1980s — continue to push higher. A basis point is equal to 0.01%. From a market perspective, the key assessment will be whether the hike is “dovish” — indicative of a cautious path ahead — or “hawkish,” in which officials signal they are determined to keep raising rates to fight inflation even if there are some adverse effects on growth. “We think the message around the rate hike has to be at least somewhat hawkish. The real question is whether the Fed is carefully hawkish or aggressively hawkish, and whether the meeting springs any surprises or not,” wrote Krishna Guha, head of central bank strategy for Evercore ISI. “Our call is that the Fed will be carefully hawkish and will avoid springing any surprises that might add to uncertainty and volatility.” Regardless of exactly how it goes, the dot plot will see substantial revisions from the last update three months ago, in which members penciled in just three hikes this year and about six more over the next two years. The longer run, or terminal rate, also could get boosted up from the 2.5% projection. The economic and inflation outlook The dot plot is part of the Summary of Economic Projections (SEP) , a table updated quarterly that also includes rough estimates for unemployment, gross domestic product and inflation. In December, the committee’s median expectation for inflation, as gauged by its core preferred personal consumption expenditures price index, pointed to inflation in 2022 running at 2.7%. That figure obviously vastly underestimated the trajectory of inflation, which by February’s core PCE reading is up 5.2% from a year ago. Wall Street economists expect the new inflation outlook to bump up the full-year estimate to about 4%, though gains in subsequent years are expected to move little from December’s respective projections of 2.3% and 2.1%. Still, the sharp upward revision to the 2022 figure “should keep Fed officials focused on the need to respond to too-high inflation with tighter policy settings, especially against a backdrop of strong (if now more uncertain) growth and an historically tight labor market,” Citigroup economist Andrew Hollenhorst wrote in a Monday note. Economists figure there also will be adjustments to this year’s outlook for GDP, which could be slowed by the war in Ukraine, explosive inflation and tightening in financial conditions. December’s SEP pointed to GDP growth of 4% this year; Goldman Sachs recently lowered its full-year outlook to just 2.9%. The Atlanta Fed’s GDPNow gauge is tracking first-quarter growth of just 0.5%. “The war has pushed the Fed staff’s geopolitical risk index to the highest level since the Iraq War,” Goldman economist David Mericle said in a note over the weekend. “It has already raised food and energy prices and it threatens to create new supply chain disruptions as well.” The Fed’s December projection for unemployment this year was 3.5%, which could be tweaked lower considering the February rate was 3.8%. The balance sheet Outside the questions over rates, inflation and growth, the Fed also is expected to discuss when it will start paring the bond holdings on its nearly $9 trillion balance sheet. To be sure, the central bank is not expected to take any firm action on this issue this week. The bond-buying program, sometimes called quantitative easing, will wind down this month with a final round of $16.5 billion in mortgage-backed securities purchases. As that ends, the FOMC will start to chart the way it will allow the holdings to start reducing, a program sometimes conversely called quantitative tightening. “Balance sheet reduction will likely be discussed but increased uncertainty makes us think formal normalization principles will be announced in May or June,” Citi’s Hollenhorst said. Most Wall Street estimates figure the Fed will allow about $100 billion in bond proceeds to roll off each month, rather than being reinvested in new bonds as is currently the case. That process is expected to start in the summer, and Fed Chair Jerome Powell likely will be asked to address it during his post-meeting news conference. Powell’s Q&A with the press sometimes moves markets more than the actual post-meeting statement. Mocuta, the State Street economist, said given that Fed policy acts with a lag, generally considered to be six months to a year, Powell should focus more on the future rather than the present. “The question remains, where are you going to be in the middle of 2023?” she said. “How is inflation, how is growth going to look then? This is the reason I think the Fed should be more dovish and should communicate that.”" MY COMMENT We need the FED to raise rates by 0.25%.....and.....make it EXTREMELY clear how they intend to raise rates for the rest of the year. We also need them to DEFINITIVELY spell out how and when they are going to quantitatively tighten their balance sheet. In order to move forward the markets need clear cut guidance on both these issues....plus.....confirmation that the FED is not going to be too aggressive. The language in their report and especially the language used in the Q&A needs to be absolutely clear and NOT subject to interpretation. If not......than the risk of a down market this year increases significantly.
I agree with.....and like...... this little article. So simple......yet so difficult for most people to actually do. Elon Musk shared advice for how to invest during periods of inflation—and it echoes Warren Buffett https://www.cnbc.com/2022/03/14/elo...t-on-how-to-invest-during-high-inflation.html (BOLD is my opinion OR what I consider important content) "When it comes to hedging against inflation, Elon Musk and Warren Buffett have recommended similar strategies. On Sunday, Tesla CEO Musk tweeted that in times of high inflation, it is “generally better to own physical things like a home or stock in companies you think make good products,” rather than keeping your money in cash. The second half of his tweet lines up with investing advice Buffett, CEO of Berkshire Hathaway, has given in the past. Back in 2009, at the tail end of the Great Recession, Buffett said at Berkshire Hathaway’s annual shareholder’s meeting that one of the best ways to protect against inflation is to own a part of “a wonderful business.” That’s because no matter what happens with the value of the dollar, the business’ product will still be in demand. He used one of his own investments as an example: “If you own the Coca-Cola company, you will get a given portion of people’s labor 20 years from now and 50 years from now for your product and it doesn’t make any difference what’s happened to the price level,” because people will still pay for the products they like. Inflation has been steadily climbing all winter. U.S. consumer prices are up 7.9% year-over-year, which is the highest jump in 40 years. Gas price increases have led the way, followed by hotels, rental cars and furniture. The higher the inflation rate, the more quickly cash loses value. Investments, on the other hand, generally grow over time. That’s why during periods of high inflation, Musk and Buffett both recommend investing in strong companies whose stocks are likely to stay consistent. “If you are sitting on too much cash, you are doing yourself a disservice,” financial advisor Delano Saporu, CEO of New York-based New Street Advisors Group, recently told CNBC’s Michelle Fox. However, it’s important to remember that stock picking can be risky, and even if a company performs well in the past, there’s no guarantee its stock will go up in the future. Instead, many experts, including Buffett, recommend investing in low-cost index funds, which are less volatile, but still take advantage of market growth. And because these funds hold every stock in an index, they are automatically diversified. In fact, the S&P 500, which includes companies like Amazon, Apple and Microsoft, has outpaced inflation over the years. “Consistently buy an S&P 500 low-cost index fund,” Buffett said in 2017. “Keep buying it through thick and thin, and especially through thin.”" MY COMMENT Not much to add to the above since I am in total agreement in theory......and....in real life.
Wow, got killed today. Down by something like 4.5%. Ouch. Took the opportunity to buy a few shares of eqt on the dip
This is a good chunk of the people that left the work force....until now. Older Americans head back to the workforce amid inflation and volatile stocks https://finance.yahoo.com/news/older-americans-head-back-to-the-workforce-171922301.html (BOLD is my opinion OR what I consider important content) "A growing number of retirees are heading back to work. In February, 3% of retired workers made the decision to return to work, marking the highest percentage to date during the pandemic and a continuation of a trend that started in the spring of last year, Nick Bunker, the director of economic research at Indeed Hiring Lab, told Yahoo Money. Strong demand for workers and COVID vaccinations initially helped to fuel the return, Bunker said. “Even more retirees could come off the sidelines.” Now financial need, exacerbated by inflation and a volatile stock market, is coming to the fore. No matter the reason, many may find it harder than expected to jump back in. Many may return In the past two years, millions of older workers stepped out of the workforce on their own volition, while others were slashed in payroll cutbacks. The majority of those, though, have not signed up for their Social Security benefits, according to research from the Center for Retirement Research at Boston College. Their reasoning: They’re not really calling it quits. While 1 in 5 workers retired earlier than planned because of the pandemic, AARP research found, the question remains if these “retirements are permanent,” according to an analysis from Miguel Faria e Castro, a senior economist at the St. Louis Federal Reserve. “Many of these new retirees may decide to return to the labor force,” e Castro wrote, “which will depend on personal factors as well as aggregate labor market conditions.” ‘Financial need is likely the driver’ Many new retirees may have no choice but to return, especially those with less means. For instance, older workers without college degrees had a median household retirement savings of $9,000 in 2019, according to a study last year from The New School’s Retirement Equity Lab. That’s far less than the $167,000 the same cohort with college degrees had saved up. “Financial need is likely the driver for working at older ages,”Jennifer Schramm, AARP’s senior strategic policy advisor, told Yahoo Money. “Retirees with lower savings may be the most likely to seek to reenter the labor force.” Those same, less educated retirees were more likely to be forced into retirement as well, according to Teresa Ghilarducci, a professor of economics and policy analysis at the New School for Social Research. In April 2020 when unemployment peaked during the pandemic, workers between 55 and 64 without a degree were 67% more likely to experience unemployment than college-educated older workers, the New School study found. They “were retired early, they didn't retire early,” Ghilarducci told Yahoo Money. “Economically precarious older workers are being pushed to retire at earlier ages while more privileged workers — especially those who can do their jobs remotely now — are able to delay retirement.” ‘Single greatest risk’ Another push back into the workforce has come from rising inflation, which has ratcheted up the cost of everything from milk to gasoline. Consumer prices rose by 7.9% in February compared with a year ago, according to the Bureau of Labor Statistics’ monthly report, the highest inflation rate since January 1982. There’s no question that the rising cost of living is top of mind. And Russia’s invasion of Ukraine is driving up oil and gas prices, a development that could worsen inflation. Inflation is already the “single greatest risk” to retirement plans in 2022, according to a quarter of respondents in a surveyof 1,115 adultsconducted by Allianz Life Insurance Company of North America. While other concerns affecting retirement declined (outliving one’s money, increased healthcare costs, and job security), worries about the rising costs of living tripled to 25% from 8%. “I suspect that new retirees will need to generate income,” Marc Miller, founder of CareerPivot.com, told Yahoo Money. “Many are not prepared for retirement, and inflation will get them to that realization quicker.” ‘Volatile stock market’ Pandemic retirements have been especially high for college graduates 65 and older, many of whom could afford to drop out of the labor force with gains in stock market and housing values, said Richard Johnson, a senior fellow in the Income and Benefits Policy Center at the Urban Institute, where he directs the Program on Retirement Policy. But a faltering stock market or falling housing values could theoretically spur a return to work in the months ahead for this group of retirees, Johnson told Yahoo Money. Some financial planners are catching the anxious buzz from clients. “I’m hearing from retired clients that rising costs for so many things as well as a volatile stock market plays into their minds and budgets and has them thinking about the need to return to work,” Glenn Frank, a Bedford, MA-based financial planner at Lexington Wealth Management and author of “Your Encore Retirement Planning Guide,” told Yahoo Money. The deck is still stacked against older workers The desire by retirees to return to the workforce may be there, but the reality is more complicated. Older workers are wondering where all those jobs are, Yahoo Finance Senior Columnist Rick Newman recently wrote. “Going back to a previous career after retirement has always been difficult but is really hard now with the explosion of ageism in the marketplace,” Miller said. It takes far longer for a worker over 50 to land a new position than someone younger, according to data from the Bureau of Labor Statistics. In February, the percentage of jobseekers ages 55+ who were long-term unemployed was 36.1% compared with 23.7% among those ages 16 to 54. The average duration of unemployment was 34.4 weeks for those 35 to 44; 24.8 weeks for those 45 to 54; 30.1 weeks for those 55 to 64; and 34.4 weeks for those 65 and over. Gary Socha, 68, knows all about those weeks of job searching. After he was laid off in April 2020, the Damascus, Md.-resident spent a year and four months applying for jobs before landing a part-time, remote position as an advertising and event sales representative in August of last year. It had been an unplanned retirement for Socha, who at the time was the general manager in charge of marketing and sales strategies across print and digital platforms at the Loudoun Times Mirror. “I had spent two decades as an executive in the publishing field, but I ended up being a casualty of the pandemic,” Socha, who is grateful to be back on the job, told Yahoo Money. “I like to be busy, and it's nice to make money right now.” “I'm not sure that I'll ever retire, at least not for quite a while.”" MY COMMENT Retirement.....a very difficult time to manage financially.....especially for those that were retired due to AGEISM. Add in the very DISMAL median retirement savings numbers in this article and you have a large population of people that will need to come back to work This group is a HUGE knowledge base......the employers dont care and will throw them under the bus. Their institutional knowledge and work ethic are also totally discounted by younger employees.
We are seeing a similar open today to yesterday. BUT....today seems to have more conviction. Oil is down, the ten year is down, the war drags on in Ukraine and the FED starts tomorrow. So far so good. I am bouncing up and down stuck in my little trading range that covers about 6% from top to bottom.
Are we in a bear market........no not yet is my view. Weekly Market Pulse: Is This A Bear Market? https://alhambrapartners.com/2022/03/13/weekly-market-pulse-is-this-a-bear-market/ (BOLD is my opinion OR what I consider important content) "I don’t know the answer to the question posed in the title. No one does because the future is not predictable. I don’t know what will happen in Ukraine. I don’t know how much what has already happened there – and what might – matters to the US and global economy. I don’t know if the Fed is making a mistake by (likely) hiking interest rates by an entire 1/4 of 1% this week. I can only see things as they are today and think about similar times in the past and know that it is different this time because it is always different this time. I can look back at history to the Crimean War in the mid-1850s when Russia faced off against the West in part of Ukraine and marvel at how little things have actually changed over the last 170 years. I can read “The Charge of the Light Brigade” and marvel at the bravery – or idiocy – of Brits charging down the Russian guns on horseback armed with swords. But I don’t think I will get much information that will be relevant to managing our portfolios today. Yes, indeed, things are different this time. The S&P 500 is down 12.7% from its all-time intraday high, set on the second trading day of this year and so doesn’t qualify for bear market status, which is generally agreed on as -20%. That peak-to-trough drawdown is actually a tad below the yearly average for the S&P 500 since 1950 (-13.6%). In other words, this isn’t anything special although I’m sure it doesn’t feel that way to most people. Why? Because the S&P 500 is just part of the market. The NASDAQ composite index peaked in November and is down 20.8%. The Russell 2000 index of small company stocks peaked in early November, before the NASDAQ, and made its intraday low – so far – on the day Russia invaded Ukraine (-22.9%). Those markets are in a four-month decline that definitely qualifies for the bear tag. European stocks fell 26% from intraday high to intraday low and are still down 21% from the high. That’s a bear market. Chinese stocks (MCHI – iShares MSCI China) are down 49.2% since peaking in February of last year. That is most definitely a bear market. Almost every national stock market in Europe is in a bear market. Korea peaked over a year ago and is down nearly 30%. On the other hand, Latin American markets are up 15.5% YTD despite Chile being in the middle of rewriting their Constitution and Colombia on the verge of becoming the latest country in the region to shift left politically. Who predicted that in their 2022 Outlook? There are bear markets and bull markets going on all the time. The task of an investor is to own fewer of the former and more of the latter. You’ll never be able to own none of the former and all of the latter – and trying to do so will probably cost you as many bulls as bears. It is easy to get distracted by all that is going on in the markets and the world more generally. The Fed has stopped QE and will raise interest rates this week by 0.25%. Russia and Ukraine will continue fighting and talking, probably a lot of the first and little of the second. They might come to a ceasefire – or not. Oil prices are up 45% this year and 65% over the last year. That is going to impact the US and global economy but the magnitude is hard to judge. The US is still a large producer of crude oil and we are a lot more energy efficient than in 2008, the last time we had an oil shock. Other commodities are up too, from wheat to corn to palladium. There’s a lot to worry about – and nowhere near a complete list – and there is no way to determine in advance exactly how the economy will adjust to any of them. Rather than try to predict how all these things will be resolved – something no one can really do – investors should concentrate on observing and interpreting the present as best as they can. If we didn’t know about Ukraine and were to observe the conditions that exist today in the markets and in the economic data, would we have reason to believe a recession was imminent and that we should change our portfolios in anticipation? That is, after all, what we’re all wondering, right? Recessions are almost always associated with bear markets even if the reverse isn’t necessarily true. So, we all want to see that recession before it gets here and take action to prevent any negative impact on our net worth. If we block out the emotional impact of Ukraine – which is a horrific situation – and concentrate on the facts we have today, we find this: The economy slowed in Q3 last year but re-accelerated in Q4. The first quarter this year is an unknown but the data released so far is not recessionary. The CFNAI actually accelerated to 0.69 in January and the 3-month average sits comfortably above the zero line at 0.42. There are certainly areas to worry about but overall the economic data for January and what we have for February has been solid. The Citigroup Economic Surprise index is positive and rising right now. Credit spreads have widened from about 3% at the low to around 4% now. That is a decent rise but nowhere near what we would see in a recession. In 2020, the spread hit 10.9% and in 2008 the spread blew out to 21.8%. It also rose to around 9% in 2011 and 2016 without triggering a recession. Spreads have widened but are not consistent with recession. The yield curve has flattened considerably and the spread between the 2-year and 10-year Treasury yield is currently just 25 basis points. Yield curve inversions are generally associated with recession (although the track record on that isn’t as good as you probably think) so an inversion would be a warning. But we aren’t inverted yet, may not invert and even if we do it is an average of 16 months from inversion to recession. Interest rates are rising although real rates remain negative. This is the most worrisome of indicators in my opinion. Negative real rates say absolutely nothing good about future real economic growth. Real rates had been rising prior to the Ukraine invasion so this might be temporary but if not, it probably means rising prices are going to stick around for a while. And it probably also means that real growth isn’t going to be all that robust. There are some other indicators and markets we track that also show some stress but we don’t see anything that says recession is imminent. The macroeconomic picture does not dictate any change in our strategic allocation. If we thought recession was near, we would shift our portfolios to a more conservative stance but right now we have no evidence on which to base such a change. The only thing that should be affecting your portfolio right now is momentum. Value and dividend stocks are leading right now and that is true whether you look at US or non-US stocks: It seems obvious in retrospect but the key to outperforming during this correction was not to avoid stocks altogether but to avoid growth stocks. Or to put it another way, to pay attention to valuations. We drastically reduced – and never bought for newer clients – the S&P 500 last year and haven’t owned the NASDAQ index. We did that because the valuations made no sense to us – and frankly some of them still don’t. Most of our equity exposure is in value and dividend stocks. We did have an allocation to EM stocks but we sold it last Monday because the rising dollar – and Putin – forced our hand. The impact on our portfolios was negative but small (less than 1% overall for most accounts). We own all of the above ETFs for ourselves and clients. Many of the large, popular stocks are still grossly overvalued in my opinion. And you don’t have to get into real speculative names to see what I mean. Clorox was down 10% last week and now 43% since its peak in mid-2020. If you own it, I’m sorry to be the one to tell you but it is still absurdly priced at 30 times next year’s earnings estimate for a company with 5-year average revenue growth of less than 5% and earnings growth even lower. Okay, I hear you, that’s a pandemic stock and doesn’t count so how about Kimberly Clark trading at 20 times earnings and negative earning growth over the last 5 years? That one was down 9% last week. There are still a lot of stocks like these that are overpriced relative to their present and their future. But the list is getting shorter. Only about a third of the stocks in the S&P 500 are above their 200-day moving average, a widely used measure of uptrend vs downtrend, bull or bear. The bad news is that if the S&P 500 does do the complete bear market, that number is likely to fall into the teens. I would also point out that many of the technology stocks that were so overpriced before this selloff have come down quite a bit. Some of them look downright reasonable compared to Clorox and Kimberly Clark and they’re growing a lot faster. I wouldn’t call tech cheap yet but it is certainly getting there. Only 18% of the NASDAQ stocks are above their 200-day MA. That percentage has been lower in the past but not by much. For diversified investors, the design of your strategic portfolio (your long-term target allocation) was a big factor for your returns. If you have commodities and gold in your strategic allocation, you have outperformed (we own various commodity and gold ETFs). If you didn’t, it was more likely tactical decisions that determined your return. Did you own growth or value stocks? US or international? Did you own high-quality dividend stocks? The gap between good and bad tactical decisions this year has been wide. The return difference between value, growth, and high dividend is pretty extreme; the Select Dividend ETF (DVY) has outperformed the S&P 500 growth (IVW) by over 17% YTD. But the gap between a strategic portfolio that owns commodities and one that doesn’t is pretty wide too. The standard 60/40 stock/bond portfolio is down over 9% this year. Adding just 5% in gold and 5% in commodities would have reduced that loss by over a third to less than 6%. But there are no free lunches; if you included commodities and gold in your portfolio for the last decade (that’s what a strategic allocation means) they’ve mostly been a drag on performance. But then, the purpose of those assets is to reduce the overall volatility of your portfolio, to act as a hedge against the other assets in your portfolio. And they have proven their worth this year even as bonds – the traditional diversifying asset – have provided little cushion. Forget whether this is a bear market or a correction. Your success or failure in investing should not be dependent on making perfect tactical choices. It should and will be determined by the design of your portfolio, your strategic choices. Getting the tactical right is a bonus but if you get it wrong – and even if you got this one right, you might not get the next one – your strategic choices should lessen the pain. If your tactical decision was to own growth stocks but your strategic decision was to always hold some commodities, you’ve still done pretty well this year. And that’s all you can ask for. I don’t know if the S&P 500 will fall far enough to be declared a bear market. And it’s the wrong question in any case. Investors should be assessing their strategy right now. Did your portfolio perform as you expected in the correction? You should also reassess your tactical decision-making. Was your allocation to growth stocks too high? To value stocks too low? How do you make tactical decisions? If your answer has the word feeling in it, you might need to rethink your process. Corrections and bear markets are learning opportunities – mostly about yourself. Don’t miss it." The economic environment continues to be marked by a rising dollar and rising interest rates. The reversal in the 10-year Treasury yield last week was not driven by expectations of better growth but rather the worsening inflation outlook. Commodity prices moderated some last week with crude oil down 5.5% on the week after spiking to over $130 early in the week. But rising oil prices are starting to be reflected at the pump and rising prices at the grocery store were already notable prior to the Ukraine war which promises to further disrupt agricultural supplies on a global basis. Investors are noticing and trying to protect themselves by buying TIPS. The 10-year breakeven rate is now up to 2.94% although the rise may be about over. The 10-year TIPS yield was basically flat last week; the rise in inflation expectations was driven by the rise in nominal rates. Is the demand for inflation protection is already peaking? It is interesting that the 10-year TIPS yield today is less than it was at the end of the year before the outbreak of hostilities in Ukraine although inflation expectations have risen recently. The dollar’s rise has been steady, up about 0.5% last week, but nothing that seems threatening at the moment. Obviously, everyone is focused on the Euro and it has fallen against the dollar but the move this year (-3.6%) has been pretty muted considering what is going on. The dollar index is at the high end of the range it has been in for the last 7 years, driven primarily by the Yen and the Euro. It is up 8.4% over the last year but essentially flat over the last 7 years. Against EM currencies, which is where we usually find problems in a rising dollar environment, the dollar is up less than 1% this year and essentially flat over the last year. The rising dollar is not, as yet anyway, a problem. Indeed, our inflation problem would be a heck of a lot worse if the dollar was headed in the other direction. Commodities finally took a breather last week, down over 5% on the week. Not surprising considering the 20% gain the previous week. Commodities weren’t the only thing down last week as the major asset classes all fell. Bonds fell as the 10-year rate moved back above 2% and that also negatively impacted rate-sensitive REITs. The bright spots last week were gold (+0.94%) and European stocks (+2.71%). Value stocks continue to outperform with small value down just 0.37% last week. It isn’t small that is the key but rather value. Small and large cap value are both down just over 5% this year versus a 17% loss for growth stocks. The only positive sector last week was energy but with everyone already on that bandwagon, I’d be wary of jumping in now. Take this time to think seriously about your strategic and tactical approach. You can’t control what goes on in the geopolitical arena. You can’t predict it and even if you could the market reaction might not be what you expect. But you can control your process. You have complete control over the design of your portfolio. You have complete control over the tactical changes you make. Concentrate on the process of making those decisions, not the outcome. Whatever strategic portfolio you choose, it won’t be ideal in all scenarios. Even with the best process, you will make tactical mistakes. “It is better to be approximately right than exactly wrong.” Not John Maynard Keynes “Striving to better, oft we mar what’s well.” The Duke of Albany in King Lear Or as it is better known: “A wise Italian says that the best is the enemy of the good.” Voltaire Or as we said in the Navy, “keep it simple, stupid”." MY COMMENT NO......I dont care if we are in a bear market or not. Labels dont matter.....specially over the long term. I do care if my MODEL PORTFOLIO is performing as expected and in line with the conditions. Yes.....I believe it is. When I look at my results this year they are exactly what I would expect based on the short term market conditions. AND.....since I dont care about the short term......I sit and wait for it all to average out over the longer term. I do like the talk in this article about portfolio theory and strategy. Whatever your style and goals.......your strategy in terms of how and why you set up your portfolio in a certain way is going to determine if you meet your goals.
I like this little.....rational.....article. $100+ Oil Isn’t a Tipping Point Why surging fuel costs can hurt your pocketbook, but not the economy. https://www.fisherinvestments.com/en-us/marketminder/100-oil-isnt-a-tipping-point (BOLD is my opinion OR what I consider important content) "With the tragic events unfolding in Ukraine right now, financial market and budget impacts may seem small in comparison. Nevertheless, the conflict and the international community’s response have spurred oil prices to climb, and with them, gasoline prices—a real financial concern to many Americans as oil sits above $100 and some outlets forecast the national average gas price will soon hit $5 per gallon. As we wrote a few weeks ago, oil’s latest spike seems mostly sentiment-driven, and longer-term supply and demand drivers still suggest prices should stabilize sooner rather than later, even with uncertainty surrounding Russian oil supply roiling markets. However, some pundits speculate elevated oil prices will tip the economy into recession. While oil’s record prices did coincide with 2008 – 2009’s recession, coincidence isn’t causality. Oil’s hitting any level has no direct bearing on broader economic activity. Oil’s rise and recent surge don’t automatically foretell weaker growth. The US economy doesn’t have a set relationship with oil prices. When oil spent much of 2011 – 2014 above $100, no recession ensued. Conversely, while high oil coincided with recession in 2008 – 2009, the issue then was mark-to-market accounting rules’ incinerating bank capital unnecessarily and the government’s haphazard, panic-sowing response—not oil. Counterintuitively, falling oil prices created a US economic headwind in the last decade. When oil prices collapsed in 2014, it caused US producers to cut back. One of the largest GDP detractors over the next two years was oilfield machinery investment. In 2015’s second half, it caused GDP’s sharp slowdown. Higher oil prices have the opposite effect on GDP, incentivizing more investment. Second, the popular reason why oil allegedly dictates the economy’s direction is flawed. High oil prices hit households in the pocketbook, diverting consumer spending from more fun destinations—but from an overall economic perspective, fuel costs still count as spending. That means they contribute positively to GDP. Not that GDP is the be-all, end-all, but it shows casting high oil prices as an automatic economic negative isn’t accurate. High gasoline prices create winners and losers within consumer spending and can shift activity, but non-fuel spending is pretty resilient. Exhibit 1 shows personal consumption expenditures (PCE) excluding energy and retail sales excluding gasoline stations (a narrower measure focused on goods). They hit record highs in January, even with oil’s climb to $89 that month from $48 per barrel starting 2021. Exhibit 1: Higher Oil Isn’t Bothering Consumer Spending Source: Federal Reserve Bank of St. Louis, as of 3/14/2022. PCE excluding energy and retail sales excluding gasoline stations, January 2020 – January 2022. Exhibit 2 shows how these series behaved the last time oil prices rose above $100 per barrel. On February 1, 2011, WTI crude hit $100.40 and stayed mostly above that until oil’s collapse in September 2014, rising as high as $128.14 on March 13, 2012.[ii] Consumer spending excluding energy and non-gas retail sales hardly skipped a beat. Exhibit 2: It Didn’t When Oil Was Last Over $100 Source: Federal Reserve Bank of St. Louis, as of 3/14/2022. PCE excluding energy and retail sales excluding gasoline stations, January 2011 – December 2014. This looks only at consumption—what about higher costs for producers? Oil (crude and refined products) comprised only 9% of producer prices in December, up from December 2020’s 7%, but the same level as December 2019, before COVID crushed oil prices.[iii] Oil isn’t to be discounted, but it is equally mistaken to overrate the effect. Third, a big reason why oil isn’t hampering growth: The economy is less energy-dependent than it was in decades past. While rising fuel costs aren’t great, energy’s share of consumer spending—which is over two-thirds of GDP—has fallen. (Exhibit 3) In January, energy consumption amounted to 4% of PCE. This is up a percentage point from 2020’s lockdown lows, but it is basically hovering around pre-COVID levels presently. It is still well below 2011 – 2014 levels, when oil last traded around current prices, so maybe it rises further still. But again, oil prices didn’t drive an economic contraction then. It is also still around half late-1970s’ and early-1980s’ levels many pundits invoke when arguing oil will drive a recession. Exhibit 3: Energy Consumption Still a Teeny Part of Consumer Spending Source: Federal Reserve Bank of St. Louis, as of 3/14/2022. Energy PCE as a percentage of PCE, January 1959 – January 2022. As Fisher Investments’ founder and Executive Chairman Ken Fisher wrote recently, developments in Europe—which is the swing factor pertaining to oil supply—are worth watching. But, as he noted, they aren’t worth overrating, either. There is little reason to think oil hovering near where it was during an expansion eight-ish years ago is automatically troubling today.' MY COMMENT Over my investing lifetime I have seen the boom and bust in oil prices.......and oil stocks........ many, many, times. I dont really think it is anything to use as an investment or economic indicator. It bounces around like a ping pong ball......same with production and drilling data. Over the medium to long term it is fundamentals that control EVERYTHING.
This is certainly the case.....on steroids.....where I live. Housing inflation is going nowhere but up: Morning Brief https://finance.yahoo.com/news/hous...g-nowhere-but-up-morning-brief-090848522.html (BOLD is my opinion OR what I consider important content) "Rapid rent growth will persist The rent is too damn high. Once only referring to a single-issue political party led by former New York City mayoral candidate Jimmy McMillan in the 2000s, the phrase now resonates across the U.S. Rent growth, not just soaring energy prices, is doing its part to push inflation to a 40-year high and there’s little sign of it letting up. Rent inflation rose at a seasonally adjusted annual rate of 4.2% (highest since 2007) and an increase of 0.6% month-on-month (highest level since 1987), according to the Bureau of Labor Statistics' Consumer Price Index (CPI). Much of the gain was fueled by four Sun Belt cities — Miami, Dallas, Denver and Phoenix — that experienced a surge of inbound migration during the COVID-19 pandemic as people who could work remotely sought more space in lower cost, less dense U.S. metropolitan areas. The CPI rent print is a lagging market indicator (it doesn't measure rent for new lease activity), but recent reports from the likes of Apartment List and CoreLogic reveal there’s more upside. Even in major cities like New York, where rents tanked at the height of the pandemic as a result of a mass exodus of residents, rent prices have soared to new highs and staged a comeback to tenants’ dismay. In March, median rents in New York stand at $2,045 for a one-bedroom and $2,152 for a two-bedroom. Single-family rent extended record growth for the 10th straight month in January, up 12.6% from a year ago, according to new data to be released by CoreLogic this morning. Sun Belt cities, led by Miami with a nearly 40% annual increase, registered the largest gains. The results echo Apartment List’s most recent report for February, which revealed annual rent growth was 17.6% for all housing types and a 0.6% monthly increase that still exceeds pre-pandemic levels. Apartment List’s vacancy index sits at 4.5%, well below the 6% pre-pandemic norm. Annual rent growth was 17.6% in February, according to Apartment List. “Vacancy rates are at their lowest level in a generation … Landlords and property managers are seeing their costs go up,” said Frank Nothaft, chief economist at CoreLogic, adding that landlords will be passing those higher expenses on to consumers. “Rents will go up.” Sarah House, senior economist at Wells Fargo & Co., told Bloomberg she doesn’t expect rent prices “to peak until maybe the third quarter of this year.” Fueling the rental demand are historically low number of homes for sale and skyrocketing home sale prices. A lot of consumers are simply "priced out of the for-sale housing market and will have to continue renting," Marcus & Millichap CEO Hessam Nadji recently told Yahoo Finance Live. Surprisingly, according to RealPage, a property-management software provider to landlords, some consumers are actually keeping up with housing costs. "New renter incomes were at $70,116 nationally, up 11% above the pre-pandemic high," said RealPage. And in another positive sign, rent-to-income ratios remained in the low 20% for the average renter household signing a new lease. RealPage added: “Renters are bringing big incomes and they are paying rent on time. We’ve seen this not only in our own data, but in reporting from all the publicly traded rental housing REITs.” That may be the case. Still, housing affordability remains a major nationwide problem, pushing some states to ponder enacting rent-control measures to stymie rapid growth. “Cooling will take some time ... It will come through additional rental supply coming into strong multi-family rental construction,” said Nothaft, adding that this past year there was a pick-up in investors purchasing single-family homes intending to rent them out. “This adds to the rental stock. More inventory will work to moderate rent growth over time.” And don’t expect the Federal Reserve’s move to tame inflation with a 25-basis point interest-rate hike, likely to come tomorrow, to do much. Even if they raise interest rates seven times this year (as predicted by Goldman Sachs), “it should not trigger a collapse in rents,” said Omair Sharif of Inflation Insights. “The big debate right now” is how high will rent inflation go. Sharif predicts an annual rate of 5%-5.5% by the end of this year, while folks like the San Francisco Fed and former U.S. Treasury Secretary Larry Summers project the rate of rent inflation will increase to 7.1% and 7.4%, respectively, in December 2022." MY COMMENT An issue for many people....especially in certain big cities. Part of the problem is all the restrictions that the government put on landlords in the pandemic. For every action (force) in nature there is an equal and opposite reaction. Especially in the housing and rental markets.
