Since there are VERY FEW of us that remember what it was like in the 1970's and early 1980's.....here is a bit of a history lesson with analysis of the current situation. The Last Time the Fed Created a Recession https://awealthofcommonsense.com/2022/10/the-last-time-the-fed-created-a-recession/ (BOLD is my opinion OR what I consider important content) "The long-term average inflation rate in the United States going back 100+ years is right around 3% per year. Obviously, there is a range around that long-term average. For instance, in the 38 years from 1983-2020, inflation finished the year below 3% more than 60% of the time. Inflation was running at more than 4% in just 5 years and finished above 5% just once (in 1990 when it was 5.4%). Inflation has been mild for the past four decades or so to say the least (until the past 18 months or so that is). The period before this was much different. From 1968-1982, the annual inflation was 4% or higher in 14 out of 15 years.1 Prices were up 5% or more in 12 of those years. It was more than 6% in 3 out of every 5 years and over 10% on four separate occasions. For the current cycle, the inflation rate has been above 3% since April 2021, so we’ve been dealing with higher-than-average price increases for around 18 months. Back then, inflation was above 3% for 18 years. While inflation did start coming down from the lofty levels of the early-1980s, it wasn’t below 3% in a calendar year until 1986. So how did they finally tame the inflationary beast back then? The Paul Volcker-led Federal Reserve put the economy into a recession…twice. Volcker took over as Fed chair in the summer of 1979 and immediately began raising short-term interest rates. They would go as high as 20% before he was done. There was a brief recession to kick off 1980 that was followed by yet another recession that started in 1981 just one year after the first one ended. From the start of 1980 through the end of 1982, the United States spent 22 out of 36 months in a recession. The unemployment rate was nearly 11% at the worst point of the cycle. Like today, people really hated inflation back then. But they didn’t like the recession any better. Binyamin Appelbaum documented the Fed-induced recession in his book The Economists’ Hour: The prime rate—the rate banks charged the best customers—topped out above 20 percent. Other rates went much higher. Consumers stopped buying cars and washing machines; millions of workers lost their jobs. Without jobs, many lost their homes and hopes of a comfortable retirement. Factory workers suffered most. Unemployment in the auto industry reached 23 percent. Among steelworkers, it hit 29 percent. And the damage was enduring: a study of Pennsylvania workers who lost jobs in the mass layoffs found that six years later they were still earning 25 percent less than before the recession. As Americans suffered, they noticed a new kind of pilot was guiding the economy. Auto dealers sent Volcker the keys to cars they could not sell. Home builders sent chunks of two-by-four wooden beams. “Dear Mr. Volcker,” one wrote on a block with a knothole. “I am beginning to feel as useless as this knothole. Where will our children live?” A home builders’ association in Kentucky published a wanted poster for Volcker. His crime: Murder of the American Dream. Interest rates over 20%. Millions of people out of a job. Manufacturing and construction industries decimated. Surprisingly, there was political will for this to happen. That’s how bad inflation was at the time. Before he became president, Ronald Reagan told a reporter in the late-1970s, “Frankly, I’m afraid this country is just going to have to suffer two, three years of hard times to pay for the binge we’ve been on.” Reagan gave his full support of the Fed’s actions that threw the country into a nasty recession. And it worked…kind of. Volcker certainly slayed the dragon named inflation. But I’m not sure you could say workers are much better off. Applebaum explains: In fact, American workers did not recover from the Volcker shock. The median income of a full-time male worker in 1978, adjusted for inflation, was $54,392. That number was not matched or exceeded at any point in the next four decades. As of 2017, the most recent available data, the median income of a full-time male worker was $52,146.79. The nation’s annual economic output, adjusted for inflation, roughly tripled over those same four decades. Yet the median male worker made less money. I have a hard time with these types of economic data points. While it may be true that inflation-adjusted wages haven’t grown based on certain measures, it’s not like everyone stays in the same income category their entire career. People move up (and sometimes down) the wage spectrum over time throughout their careers. But labor (workers) has seen its negotiating power decline over the past four decades while capital (business owners) has flourished. Now look at how much negotiating power workers have: People who are switching jobs are seeing by far the biggest wage growth. This is a bad thing in that it can slow productivity (because of training and such) but a good thing in that workers finally have the upper hand for once. Look, I understand that the Fed doesn’t want another 1970s on its hands. I can’t even imagine how angry people would be if we have another prolonged period of above-average inflation. But there are a lot of differences between then and now. The biggest one is probably the fact that workers had much more bargaining power back then because of the prevalence of unions. Fifty years ago roughly one-third of all U.S. workers belonged to a union that would represent them in contract negotiations for pay and benefits. Today that number is more like 1 out of every 10 workers. Other differences from this cycle include: Enormous fiscal stimulus because of the pandemic. Interest rates were too low. Supply chains were a huge problem. Consumers were spending too much money. The war in Ukraine. This is not the 1970s in many ways. I’m torn here because on the one hand the longer inflation sticks around the harder it can be to get rid of it. On the other hand, workers finally experienced a period in which they have some power over business owners. Is that really such a bad thing if we see how that plays out? Do we really need to give the upper hand back to capital just because labor finally saw some meaningful gains? I’m just asking questions here." MY COMMENT If you look at the data above....from the OLD days.....inflation of 11.3%, 13.6%, and 10.3% over a three year span. Many industries experiencing unemployment of 20% to 25% to 30%. Etc, etc, etc. You can see why someone like me that lived through that era as a young adult......AND.....remembers it very well......just can NOT get real excited about the current inflation and what is going on right now. The data above ALSO confirms that the current FED target of 2% for inflation is simply.......RIDICULOUS. The target should be about 3-4%. Three percent would be about average.....but....for the worlds most significant and strong economy up to 4% is not out of line for a healthy, firing on all cylinders economy here in the USA. For those that are too young or dont remember the REALITY.....look at the inflation rates in the chart above for 1973 THROUGH 1982.......TEN YEARS. So....EXCUUUUUUSE ME.....for not being too excited about what is going on today.
BUT.......HEY.....the good news.....remember.....WE ARE NOT IN A RECESSION. WELL YEAH.....simply because at the moment the media, politicians, the FED, and most economists have DITCHED the definition of a recession that has been used for decades.
I see that the market are backing off from the losses. NO DOUBT.....due to the FACT that everyone anticipated what the inflation data was going to be today. In spite of the breathless media coverage today......there is....as usual....NOTHING NEW going on. We are NOW at maximum fear mongering.
Yet another observation.....so much for GOLD, BITCOIN, SILVER, as inflation hedges. This is a MYTH.....and is definitely NOT being confirmed in the real world. WATCH OUT.....when you hear those gold and bitcoin commercials on TV. I have said many times.....I have a little hoard of silver and gold.....just for fun. My parents would give us silver dollars and mint sets as kids....so I have continued to buy a some each year. They sit in a relatives safe and do nothing.
AS USUAL.....the key event right now will be EARNINGS. That is what drives stocks.....the actual fundamental business results that reflect the level of success of the business. The early reports have not been bad.....but.....we start the earnings reports FOR REAL tomorrow when the big banks kick it all off. I have ABSOLUTELY ZERO doubt that regardless of the earnings that are reported......considering what is going on now.....the financial media and the 'experts" will NIT-PICK earnings reports to death. They will focus on any little comment, especially in forward guidance, that can be spun as negative. BUT.....have faith....over the long term it is the ACTUAL earnings that will count....NOT....the opinions of the financial people that talk about them in the week or two after they are released.
BIG WOW......I just looked and my account is....GREEN. Way to go Emmett....keep working that phone bank like a maniac. This gives me hope that we are at a market bottom......ALL the doom and gloom and fear mongering is having trouble holding and impacting the markets. Perhaps the negativity has been worn out. Time will tell.....as usual. My stocks that are GREEN at the moment are.....AAPL, NKE, MSFT, NVDA, HON, and GOOGL.
Where my account closed yesterday......was just above my personal low of the year. This is the third time YTD that I have been at or just above that level. The first two times the market than turned around and ran up some nice gains. Perhaps the fact that the inflation data is NOT driving the markets lower......(at the moment).....shows that we are IN FACT at a soft bottom. I will be interested to see if my account once again.....moves up from this personal bottom level......or....if it breaks through to the downside.
You exposed Emmett's secret phone bank....Zukodany. Direct lines to all the big investment banks, and all of the significant investors around the world. He even has a direct line to EF Hutton. For you OLD GUYS........"when EF Hutton talks, people listen".
Agree with a lot of what has already been said at this point. Inflation is well entrenched and it can be a bitty to knock off. Especially since we just sat around and fed it for so long. Strange times too....things are sort of out of whack. Inflation is eating cash holdings, bonds are reverse of what they would normally do, stocks are down, and there is not much place to take refuge this time. Ride it out and hold on. So much of this is all known info at this point and time. I certainly expected no change in the data at this point and the increase of rates "should" be known to everyone by now. About the only uncertainty at this point is other global issues.
Funny… traders are in heaven during these troubled times. Todays proof of that… there’s absolutely no reason why the markets are up strongly right now other than people buying dips… makes sense.. the market had a few red days now and traders figured out a temporary bottom. Make that money guys!
Markets green today. I'm up over 1.5%, less than the index. Index is up 2.3% but eqt and de both up less than 1.5%
Apparently Schwab and Co. agree with you zukodany.... “It’s the nature of the beast these days where sometimes you get these intraday big swings. We can all speculate on what might be behind it,” said Liz Ann Sonders, chief investment strategist for Charles Schwab & Co. “A lot of it has to do, for lack of a better word, the mechanics of the market, the fact that there’s more shorter-term money in the market, there’s more money that moves around based on algorithms, quantitative strategies. And at any point in time you can have triggers that can cause a 180 in the middle of the day.” "With calling the direction of stocks a near impossibility, professional traders have been busy limiting their exposure to surprise moves. Institutions bought more than $10 billion in puts on individual stocks last week, a record for that group and close to the most ever by any cohort of traders, according to Sundial Capital Research. There was circumstantial evidence those wagers paid off in the immediate aftermath of the government’s report on consumer prices, which showed hotter-than-expected inflation. While equity futures sold off, the Cboe Volatility Index, a gauge of market anxiety tied to options on the S&P 500, actually fell, potentially a sign of profit-taking by hedged traders. And as those positions were monetized, that prompted market makers to unwind short positions they had put on to maintain their neutral market stance. “It’s a combination of short covering/put selling,” said Danny Kirsch, head of options at Piper Sandler & Co. “It’s a very-well hedged event. It’s trading like event passed, sell your hedges, contributing to market rally.”
The great thing with my long term plan is I don't have to worry if the above post I added is right, wrong, or indifferent. I just simply stick to my plan. I'll take any GREEN day I can get (if it holds), but the short term is filled with this all along the way. We have seen a rally here and there as can happen during bear markets. Either way no change for me other than adding some more contributions along the way.
Yup Smokie… the traders are behind this and are in a way sticking their middle finger to the feds… is that the best you got??
I made good money today......way into the GREEN. I had a single stock down....AMZN. I did, however,.....get beat by the SP500 by 0.62%. The SP500 was on FIRE today.
YEAH.....you could see the short term traders moving the markets yesterday during the last 15 minutes as they positioned for the CPI today. BASICALLY what we now have short term is.....LEGAL.....market manipulation as they tend to act in concert. As to LIZ's comment above.....YEP......we now see the markets getting jerked around short term by the ALGO and QUANT COMPUTER trading programs that ALL tend to act in concert......more manipulation (legal). That led to the last minute drop yesterday and the sharp sell-off at the open today. Than later today, we saw all the shorts MADLY trying to cover their positions....which led to a self sustaining RALLY today. The markets are significantly driven by the short term traders day to day.....WAY BEYOND.....anything we have ever seen before in history. The regular retail investors.....just sit and watch. We now basically have TWO MARKETS......the short term and the long term. The two are extremely disconnected. this is what you get compliments of the.....COMPUTER ERA.
The tale of the markets today. Stock market news live updates: Stocks stage big turnaround after plunging on inflation data; Dow soars 800 points, S&P 500 gains near 3% https://finance.yahoo.com/news/stock-market-news-live-updates-october-13-112745635.html (BOLD is my opinion OR what I consider important content) "U.S. stocks powered higher Thursday from large early-session drops as Wall Street shook off inflation data that showed consumer prices climbed more than expected. The S&P 500 (^GSPC) was up nearly 3%, marking its biggest intraday comeback since February. The Dow Jones Industrial Average (^DJI) edged higher by more than 800 points, or 2.8%. The technology-heavy Nasdaq Composite (^IXIC) ticked up 2.2%. The 10-year Treasury yield moved closer to 4%. In energy markets, Brent crude, the international benchmark for oil prices, rose 2.37% to $94.64 per barrel. The Bureau of Labor Statistics released its Consumer Price Index (CPI) for September early Thursday, which showed prices rose 8.2% over the prior year and 0.4% over the prior month. The core consumer price index, which excludes food and energy, rose 6.6% from a year ago, marking the highest level since 1982. Core CPI rose by 0.6% month over month. Economists surveyed by Bloomberg had expected a slight deceleration to 8.1% annually and the core reading to accelerate to 6.5% from a year earlier. The reading marks another hotter-than-expected CPI print. Shelter, food, medical care indexes were the largest of "many contributors," the reported noted. The retreat of overall inflation — from 8.3% year-over-year in August — came as gasoline prices have eased. Analysts said the report essentially clinched at least another 75-basis-point rate hike from the Federal Reserve when it meets in November. "The stronger than expected 0.4% rise in consumer prices in September, driven yet again by a stronger increase in core prices, nails on a 75bp rate hike at the November meeting and, in contrast to the Fed minutes released yesterday, suggests that the Fed may need to continue raising rates at that pace in December and perhaps beyond too," wrote Michael Pearce, senior economist at Capital Economics. Thursday's session continued a murky week for investors marked by corporate earnings in addition to the inflation data. On Wednesday, the Producer Price Index (PPI), a measure of prices at the wholesale level, rose 0.4% in September after falling 0.2% during the prior month. Also on Wednesday, investors mulled minutes from the Federal Reserve's latest monetary-policy meeting, in which several Fed officials suggested the risk of doing too little to control price increases outweighed the risk of doing too much. Wall Street was watching for any hint at when and how much the central bankers will slow their rate increases. But officials’ forecasts from September indicated restrictive monetary policy would stay in place until inflation meaningfully comes down. “Therefore, while the FOMC may have a dovish faction, for now they are far out of the majority and are still only tentatively making a case to slow the pace of hikes,” analysts at Bespoke Investments wrote in a note to clients. On the corporate front, Delta Air Lines (DAL) kicked off earnings before the open. Delta posted a quarterly profit miss by Wall Street estimates on Thursday, while the carrier forecast travel demand to remain robust despite growing risks of an economic recession. Shares of Netflix (NFLX) ticked up more than 5% following news that the streaming company would roll out a streaming plan with advertising for about $7 per month starting Nov. 3 in the U.S. as a way to boost subscribers. Elsewhere on Wall Street, JPMorgan Chase CEO Jamie Dimon on Thursday said he had "total faith and trust" in Fed Chair Jerome Powell. "They are doing the right thing now. A mild recession is far better than stagflation," he said of the Fed's campaign to rein in inflation. At the annual Institute of International Finance event in Washington, D.C., Dimon also said he doesn't think there will be a "soft landing" and that his "gut" tells him the Fed funds rate will eventually need to be moved higher than 4%-4.5%. Financial heavyweights such as the Dimon-led JPMorgan Chase (JPM) and Morgan Stanley (MS) are set to report earnings on Friday, while BlackRock (BLK) reported earnings on Thursday that included a 16% drop in profit. "I still think household balance sheets are in decent shape," JPMorgan Asset Management Global Market Strategist Jordan Jackson told Yahoo Finance Live on Wednesday. "I will acknowledge that we do anticipate another quarter of a buildup in loan loss provisions across banks. This would be the sixth consecutive quarter that banks have decided to build up those loan loss reserves. And that is certainly going to act as a drag on overall bank earnings."" MY COMMENT The Ten Year Treasury pushing toward 4% is HUGE. The markets today took a HUGE bounce off the bottom. If we can follow up with more tomorrow......this will be a nice indicator that we are at the market bottom.......in my view.....a soft bottom. BUT.....that does not mean we go back to a BULL MARKET right now. The next steps will be earnings and the election. If everything lines up nicely with those steps......we "MIGHT" see a chance for the markets in about early to mid 2023.
