All Things Economic

Haven’t heard that , but I would not doubt it .Gonna be a diesel shortage by September .

According to an article on Bloomberg today, the economy in Russia has now contracted more than any year since 1994.

The question I have for our markets today is "where is the bottom?" Looking at the historical charts, while obviously a gross measure, is interesting. Taking historical long them gains in the markets of roughly seven percent per year, and going back to December of 1992, one would expect, all else being equal, for the valuation of the S and P 500 to be around 3,600 at year end 2022, and the Nasdaq to be around 5,400.

Do those figures seem absurdly low? Consider that in bear markets (as of this writing the S&P 500 is at 4,010, or approximately 150 points from official bear market territory. The NASDAQ is already there) the average drop to the market bottom from the recent peak is 30%. For the S&P 500 that would be roughly 3,360.

While for the NASDAQ, a drop to 5,400 would be almost 65% off of its peak of 15,645, this would not be much different from the NASDAQ level after the pop of the 2000 tech bubble. Extrapolating the norm from the December 31, 1992 level would have put the expected NASDAQ index at roughly 1355 at the end of 2002. In actuality it was 1336 which, for the record, was off almost 72% from it's high of 4,697 in February of 2000.

For the S&P 500 by comparison, the expected index level at the end of 2002, based on historical growth, would have been be roughly 870. Compare this to the actual index level of 880 which was off roughly 40% from its high of 1,518 in August of 2,000.

If you are watching the market on a daily basis..you don't know how the market works.
Free money was never a wise move by the feds andcat that time future inflation was predicted...and here were are...
Comrade Putin accelerated the timeline

And just like that….

The gains of yesterday are wiped off the board with the Dow losing 3.12%, the NAS losing 4,99% and the S&P losing 3.56%

"The best explanation I have read for this is that traders are pleased the 'Fed didn't throw even more cold water on the economy'"

It's more accurate to say that the market had already priced in an even more hawkish position from the Fed, since the S&P is down over 13% since January 1. Don't worry, it was just froth and is already correcting itself, at least for the moment.

After the Fed raised interest rates by 50 basis points yesterday, as expected, and for the first time since the year 2000, the S and P 500 rallied nearly 3%. This despite Fed Chairman Powell saying that additional 50 basis increases were "on the table" for both the June and July meetings and that the fed would move as early as next month to sell $3 Trillion worth of bonds, including mortgage backed securities, off it's balance sheet.

The best explanation I have read for this is that traders are pleased the "Fed didn't throw even more cold water on the economy"

Wow. I'm reminded of Paul Harvey's old closing line: "This is Paul Harvey....Good day?"

Mortgage applications dropped for the seventh week in a row last week. Also, and not surprisingly, the proportion of applications that are refinances declined by 15% last week and are now down 56% from one year ago. Since January, Adjustable Rate Mortgages have doubled as a percentage of all applications.

@Hot
I would generally agree with you about trying to beat the market, in most cases anyway. I do think there are "can't miss" exceptions that come along once in a while. If you have insight into an industry in that regard, or simply think there is an irresistible trend at play in the economy or society that a particular solid and well managed company is well placed to dominate, I don't see any reason not to bet heavily. I've personally had the good fortune to see that set of circumstances come together a grand total of probably four times since the late 1980's.

I think where people can easily go astray is to try and invest out of necessity or under time constraints when such insights and good bets just aren't available. In that case...what you said. Go with an ETF and stay there for at least five years.

@8-Inch

Economic growth in 2021 was 5.7% for 2021, the highest since 1984. But I'm guessing Fox News didn't report that. Also the 6.9% growth in Q4 2021 was clearly unsustainable due to much of this growth being in the form of inventory accumulation.

Personally I am more worried about continued shortages of skilled labor coupled with a low unemployment rate, (I'm guessing fox didn't report that either) and continued high consumer spending fueling rampant inflation. Part of the decline in GDP BTW is due to lower government spending which I see as positive and long overdue. The real news remains inflation and the inevitable, if glacially slow, Fed response to it which I think is likely ultimately cause actual damage to the economy.

The drop in GDP was almost entirely a drop in government spending and a drop in exports.

Isn't a drop in government spending what the conservatives want?

So this is good, right? The Dow is up half a percent...

“ I suspect an increase in interests rates by the fed is coming. The R word is around the corner if not already here”

An additional increase by the Fed is most certainly coming, unless they’ve lied to us. The only question is how many increases and how much.

We are not in a recession. We would need at least two consecutive quarters of negative growth.

Recession is not a bad thing. It’s not a scary thing. It’s a normal part of any business cycle. The scary thing is artificially growth.

GDP was 6.9 % in Q4 of 2021 ....GDP expected growth for Q1 2022 was set at 1.1 %.... Q1 2022 actual GDP is -1.4%, the lowest in 2 years

What is your take on this?

I suspect an increase in interests rates by the fed is coming. The R word is around the corner if not already here.

"US economy shrank 1.4% at beginning of 2022, marking worst quarter in 2 years"

Headline from Fox news...
The question is, two years ago did they tell us how bad the economy was under the last president?

This is from a Yahoo Financearticle-

“In a report published last month, S&P Dow Jones Indices (SPDJI) analysts found that 85.1% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2021. It was the 12th straight year that more than half of the managers in this category lagged the index.

According to a different report, SPDJI analysts found that only 22% of the stocks in the S&P 500 outperformed the index from 2000 to 2020“

In other words, picking individual stocks is really hard; most investors would be unwise to try.

I've been wondering whether college was worth the cost (in time and money) since I went off to the college of knowledge while friends went to work as a crab fishermen, a union construction worker and a tool and die maker, for three examples. Studies as recently as about ten years ago showed that the lifetime earning benefits of a college education were substantial. I question whether this would be so if young people with good pay and low expenses (no mortgages for example) were to invest with discipline during those early years.

In any case, I just read an analysis by the fed of several student debt relief proposals being pitched to President Biden, and/or that he is reportedly "considering". Still not clear which he could do on his own without Congressional approval.

The first is a blanket forgiveness of $10,000 in debt per borrower. This would proportionately benefit borrowers living in wealthier zip codes to a slight degree. This would reportedly cost $321 billion.

The second is a blanket forgiveness of up to $50,000 per borrower. Not surprisingly (to me) this would increase the proportionate benefit to those in wealthier neighborhoods. An interesting aspect of this proposal was that it would also benefit an older demographic, presumably due to the fact that graduate degrees tend to rack up more debt. This proposal would cost nearly $1 trillion.

The third proposal is to apply an income limitation of $75,000 to borrowers in either of the above scenarios. This would substantially shift the percentage of beneficiaries to residents of the lowest income zip codes - from 22% of the total to 35% in the case of the $10,000 forgiveness level. This would also substantially reduce the cost of both proposals.

What does the job entail doing?? Do you risk loss of fingers, hands, life??? Can I drive a big pickup on dirt roads?

Come to the oil field and become a MWD Field Operator. Starting pay is 3,200 a week for a trainee. No degree required. We're so short on hands we're about to resort to driving around town in a van and kidnapping people off the street and forcing them to take a great paying job.

I understand.

My wife could be successful in college, but she likes being out in the fresh air and going to different job sites. So she completed a journeyman program in painting, and is happy with her choice.

I didn't walk into a college classroom until I was 34. Before that I had a successful career in restaurants and bars, and in health insurance claims processing.

But it was time for a change.

tbr - "You were already going to trade school."

Yes, it was my decision, however I was tested for and pushed into an accellerated (advanced) program for 5th, 6th, an part of 7th grade. The homework requirements were ridiculous, and I complained and wanted out. Nobody was accepting that, so I simply stopped doing ANY homework. They allowed me to drop out of that program.

Had I continued, I probably could have had my pick of just about any college, but it would have been a waste of my time and my parents money at that stage of my life. When I went to college, I did so because I WANTED and was ready to. I graduated at the top of my class recieving a number of awards and was inducted into some Phi Beta Cappa honor society. I asked someone what that meant and someone said, "It means that they'll want money from you" ;-)

I went to school nights and worked full time days, and when I graduated, the college I went to seemed to think I would donate to them for some crazy reason. When I asked, they talked about scholarships and grants. I told them my company paid for it and I didn't take a dime from the college and I felt I owed them nothing, so please stop calling for donations.

Trade schools offer various trade choices (i.e. electrical, carpentry, plumbing, welding, auto repair, etc). You don't select your trade till your sophmore year. Some of the trades are in higher demand than others.

My freshman year I went through carpentry, electrical, machine shop, and sheet metal. A different trade every semester. My grades for that plus my other academic scores, (math, science, english, etc) determined my ranking at the end of the year. That ranking determined if you were able to get your first or second choice for a given trade. That, and how many others also wanted that trade.

It used to be that trade school was a place where people that weren't college material (or in my case, just disliked school) went. Last I heard, it is more difficult to get into trade school than high school.

I did eventually go to college and got a 4 year degree, but I did so by working for a company that reimbursed me for my tuition. Back then, companies were more inclined to invest in you.

I joined the Air Force after High School, easier to move on and away to do my own thing when you have only 50 bucks to your name..

What do you mean by trade choices? they told you what classes or jobs the school will direct you to? what year in school were you when the ranked you..? I'd tell them to fuk off..

You were already going to trade school.

I am talking about being tracked before you get to that point...

When I went to trade school, your trade choices were determined solely by your academic rank. Literally, every student was ranked against every other student at the end of freshman year based on grades. A list was actually posted publicly so all could see where they (and others) ranked. It had nothing to do with race, gender, sexual preference, etc.

Now the actual job market may have been another matter, but at least your trade choices were based on academic achievement.

Certainly it is.

But there are issues of equity involved.

As long as there is systemic racism, sexism, homophobia, etc., you will have a disproportionate number of non-primary groups being tracked into "less desirable" occupations.

I'm sure I will get some pushback on that statement...