https://www.youtube.com/watch?v=K0t6g7RdOoE
Bonds have shown that they're bad hedges against inflation. We haven't had inflation in 40 years so everyone forgot about that. - Siegel
Stocks are real assets, just like real estate is.
Luxury market. Wines and spirits puchases down. Some watches prices going down.
The data the Fed is looking at is changing.
Americans' savings almost gone, while in the rest of the world pandemic savings are still high. How reliant is the consumer to overnight interest rates, and if the answer is ‘Not very,' ...
Costs for United. A flat cost assumption for 2024. Costs up 4-5% yOy. And every 1 point of cost is $1 of EPS on $10 of EPS for 2024. New labor contracts and aircraft delays. 8-10 year restocking cycle (also in Defense). Oil prices up.
El-Erian #philosophy
The market has lost the Fed/policy as an anchor (guide) because it's data dependent (backward looking and dubious). Technicals also not an anchor because the market lost the reliable buyers (Fed, China, institutional investors who are under water, Japan).
Short term, the inherent stabilizers of the market aren't there now. The people who, every time the market went down, would come in to lock in those interest rates (who have been buying and watching the valuations continue downward). The market is hunting for buyers of conviction.
We know supply is gonna go up. The Fed is going to offer more bonds.
(Excessive) data dependence is ridiculous because it means using tools that have lags. The notion you are looking at a forward-looking economy in inherently inconsistent.
He said previous Feds had taken a forward-looking view instead. Controversial at the time, but it was critical in anchoring the markets.
“Permacrisis”
https://www.youtube.com/watch?v=raZxiN0uy1Q
https://www.youtube.com/watch?v=PfHycqsG7bs
Higher rates don't matter to many people. Answer to the question why the higher rates aren't really affecting the economy.
Morgan Stanley saw about 50% less money coming into accounts than the year before. The year before, everyone was making 1% on their cash and they could be making 5%, so they all called and made money moves. Now everyone's sitting with 5% and there's no fomo from equities.
Tax loss harvesting in October. Mutual funds want to clear losers off their books before the tax cutoff (October), so they are willing to sell even at an 80% loss when the stock is only down 70%. After October, those sellers have left the market, and this leads to rallies in these low-quality stocks. They go up Nov through Jan.
Bitcoin. The spot ETF is back in the news, and bitcoin jumped again, up about 20% to $35k. It had been as low as $17k last year. When it rose to $70k during Fed money printing, it was tracking with the stock market, drawing considerations that it was tethered to the market now. But this year it has gone up 100% from lows, and up the most recent 40% (from 25 to 35) while the market has not gone up really much (not a risk on tech market), so it appears to be not correlated now. Fink called it a ‘flight to quality’. TLT is down about the same as bitcoin is from their highs. But people aren't buying TLT.
Pompliano called bitcoin the most disciplined central bank in the world, because no one bails it out. If the Fed approves an ETF, that might be good for bitcoin. If the Fed bans bitcoin, people might buy it because they'll really think it's not inside the system, and isn't controlled by any government.
Luxury brands have come down from their highs (last march, 6 months ago), stocks down about 30 or 40%. Sales are back in line with tradition. Hermes is down 12%. Most discretionary items most vulnerable. Champagne sales down for first time in 3 years.
Chanel flat bag is $10k. 4 or 5 years ago, it was $5k.
Most buyers of luxury are not wealthy. They're upper middle class that like to splurge. They currently don't have all that extra cash.
https://www.youtube.com/watch?v=zG_l_7bCR8g
Rich-cession. High earners filing for unemployment. Credit. They're looking at the stock market, which is their holding. Many companies survive because of rich people spending, and all that is driven by the stock market. Top 20% by income account for 50% of spending (?in the economy or just luxury?). Their spending keeps the economy going, keeps companies profitable.
Tech giants and Financial companies (Wells cut 11k jobs ie 5% of their workforce), which had made headlines for laying off thousands of people at a time last year, has stopped doing such layoffs.
Do inversions predict recessions, or do they cause recessions, as Arnott said?
Recessions always start with an economy that's booming. It's the nature of the peek, said Arnott.
People are talking about bitcoin and equities being ‘the safe asset’ because they've lost confidence in government bonds because of the nature of this interest rate risk. El-Erian
Real estate. 7% interest rate for loans for good credit applicants. Homebuilders are paying sometimes 10-11% now, which may lead to restriction of supply and raise rents.
https://www.youtube.com/watch?v=1iiIUoVFNbY
SBF said he bought the Miami Heat arena as advertising, because he didn't believe in Facebook ads, and it was considered a 19-year advertising investment, so it would be 1% of FTX's revenue.
‘It’s t-bill and chill for people at upper end of wealth spectrum'
https://www.youtube.com/watch?v=PhyHchGE3N4
The 10-year at 5%, reflects uncertainty about how high the Fed has to be. If inflation weakens and unemployment picking up, the Fed will start to cut, is what the markets will think. Tom Lee.
If the economy slows but consistent with soft landing, that's ‘bad news is good news’ but if it's a sudden slowing because we just ran out of gas that's actually ‘bad news is bad news’.
$2t a month a gross issuance.
Inflation might be below 3% next year, said Rieder. However due to government borrowing the long end might not come down. He thinks we'll get a normal curve soon.
Consumption is 70% services in the US. In 100 years there's only been 14 negative quarters of negative growth in services.
China has been tightening over the past year, at various levels including nationally.
The return to office has stalled - JPM guy
What worked in low interest environment (last decade) may not work now, in high interest. Sea change, according to Howard Marks. Teslas were cheap, solar panels were cheap, when financing was low, but cost many percent more now. The companies if they want to keep sales figures have to lower their price to meet consumers' purchasing power. Over the past week or so, Marks, Barrons and Ackman have all publicly advocated bonds to degrees. Siegel also thinks the 10-year is near the top.
McDonalds reported well-higher revenue because of higher prices, but traffic was actually lower.
https://www.youtube.com/watch?v=XupM5_zHDbM
https://www.youtube.com/watch?v=mWiW6gE2cmY
Canada talking about higher for longer. Unknown what will be the thing people cut from their personal budgets, if rent/inflation continues and wages grow less quickly, what will be the things not purchased?
https://www.youtube.com/watch?v=JN9u-lRkXXE
Families in the US on average are 40% wealthier than before 2019. Investments and real estate. The biggest demographic is under 35, who are like 150% wealthier (no other demographic is anywhere close). Do young people have a work experience completely different from any other generation?
Net worth may be irrelevant to peoples ‘happiness’ because you can't spend a house or a 401k. Prices are inflated.
Biggest names in S&P, the top 10%, are paying an effective interest rate of 2.5%, while the bottom 50% are paying 5.5%.
WeWork bankrupt. Doesn't seem much illustrative of any significant larger theme. They leased a lot of offices.
Bond talk day, Nov 1. Bond rates dropped, based on a bit better than expected news about treasury refunding, and then a bit more on reports of weaker economic data. $2b is worth 15basispoints lower. Long end demand starting to wane.
AirBNBust hasn't really happened. Rising interest rates help the company (even if the opposite for it's host clients). AirBNB has cashflow. It gets to hold billions of dollars between the time guests pay and hosts receive. Same for Expedia and Booking. But the headwinds talked about before are still potential. Bookings are down and ADR rates are down/moderating, and there are policy changes in some cities.
https://www.youtube.com/watch?v=KwqPdZH3s10
So companies do tests and share results of tests with Federal government before public release. Bio synthesis screening. Content authentication.
EV purchases have slowed, but companies that had based their premise on the wide adoption of EVs are facing more serious pressures, and corporations are cutting back investments.
Lack of affordable EVs.
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