Random economic notes from experts
US stock market has lost $7t in 2022.
Generational buying opportunity.
But some of these stocks have almost doubled in PE since pandemic lows.
Some were used as bond proxies, defensive plays in an uncertain world.
The 3 major areas of the world are all slowing economically. China lockdowns for Covid. Europe's looking at a recession this year. US is slowing. Growth scare is yet to be priced into markets.
Keep an eye on investment grade, because if there's been excessive leverage taken there, that's when finance contaminates the economy (instead of the other way around).
Stagflation as the baseline (El-Erian). Something worse depends on soft or hard landing. Inflation stuck at 5 to 6%. Complacency about CPI numbers.
UK leader to cut 90k civil servant jobs.
Some ask if Apple stock bounce (May 12) was a signal for a market bottom.
We've priced in probably a hard landing. (Brian Kelly).
We don't know if the type of stock trader who is interested in ARK-types are buying in. The prime brokers and the market makers know; they know if they're creating to lend but they won't tell us. (Jan van Eck) Vandatrack tracks retail flow and I think they're showing buyers. (Batnick)
Investors are waiting for a higher low, watching constantly wanting to buy.
There were a lot of narratives about why the bond market was the way it was over the past 10 years. The Central Bank. There's just one reason.
IPOs (Rivian) and growth stocks (Zoom) were huge but now are small relative to established companies. "It was a relative game." "Did you see what they're paying for Tesla?"
"Everything trades off of Apple, I think."
The labor market is SO tight.
"The Fed is happy. The market decline is orderly (haven't had to pause the market) They're being very transparent about what they're doing. And people still have jobs."
The only problem is that our cost of living is going up. Wages are going up, but how is your quality of living?
There's 1.9 (reported) jobs right now for every 1 person seeking a job. You can quit your job and get another one in a snap. How powerful do you feel? Stocks in your portfolio are 30% lower than they were a year ago.
If there's a recession, we're not low enough (stock market). Because multiples will have to come down and earnings will come down with them.
The elephant. The Fed is going to get out of fixed income market. And we have commercial banks that provide no liquidity to the fixed income market. So that is where the breakage can happen. Because everyone has to borrow money if they want to buy a house or anything else?
Does that Fed tighten too much? I don't think they care about asset prices, because they need to kill inflation. They made a boo-boo and they really want to fix it. "Causing inflation." ("Transitory.") That is their job: price stability.
The pain that's going to come from borrowers having to pay a lot more debt.
Corporations are OK (balance sheets). It's governments that have borrowed too much money.
The biggest global risk is a China recession. And that's priced in because China's in a recession.
Everything prices off of treasuries.
Circled on the calendar. In June the Fed leaves the fixed income market. (Back in July?)
The Fed wants to reload their ammo, so they can come back into the market if they want to. Then they can do bond market intervention if they want. As the liquidity comes out of the system and the labor market is still OK. It could be really tough for investors but that's not important to them.
I think they're more mad at having to pay $200 to fill up their gas tank than anything else right now. The pocketbook of the household is going up. Everything.
Wages are sticky inflation. Everything else is fixable. You can have more wheat next year. We're getting close to the wage price spiral but we're not there yet.
The stock market is not the economy, but it is the economy to private companies.
There's a lot of ebbs and flows to valuations.
One of the price-setters for venture capital and growth tech is Masayoshi Son, lost $24b in Q1. (He made a lot in Alibaba. He doesn't currently have a lot of money to spend, so.) He still put $2.5b out on the street in Q1. SOFTBANK.
Some people focus on 0 to 1. I want to focus on 1 to 2. You wanna have more than 1 product. So, Robinhood had low-cost trading. Then what? That's not the company, that's just the 0 to 1. How do you get your competitive pricing moat? You almost know Coinbase is gonna get decreasing revenue from their customers, just because there's going to be more competition. ROBINHOOD. COINBASE.
There's a lot of fintech companies, all spending money on trying to win customers. The race to zero.
What are you betting on in the crypto space (for private investing)? Software development teams, that can solve a problem that needs to be solved for a long period of time.
I can't hire enough people, and you have to pay them too much. My brokerage account shrunk. My cost of everything is up. Everyone quit on me.
Consumer credit boomed in March (2022). Sign of gas prices are too high, and I need to leave a higher balance on my credit cards. I was not squeezed for the last 2 years (stimi checks). I'm not paying with cash anymore; I'm putting half on my credit card. (credit was way down during stimulus check-era.)
People say consumer spending is doing good because it's still high. But that's not the right reading. They don't want to be spending that. That's just what it costs now.
If you greenlight (and regulate well) onshore crypto, people don't need to go to offshore). But the problem is the FCC needs to fight against the banking regulators.
Bitcoin is maturing as an asset. The biggest country stopped mining and it survived. The mining difficulty rate adjusted. ... But it is not hedging against inflation. Gold didn't hedge inflation in the current environment really well either (it did hit a high last year).
The dollar is weakening and strengthening. It's at a 20-year high.
MARKET HISTORY when thinking about Bitcoin. FDR made it illegal for individuals to buy gold. But they could buy gold coins. Coograms and Maple Leafs. Everyone bought gold through futures contracts instead. And then we had gold bullion ETFs.
I think gold has underperformed the last 5 years because of Bitcoin. People born with a cellphone in their hand. People in Ukraine.
Smart Contracts have outperformed over the last 12 months. One of them has to be a winner. And you should also buy a basket.
GDX is more liquid than gold. In a bear market it's hard to trade a gold company.