Control Panel: Speculating like it's 2021

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/finance/stocks/market-speculation-meme-stocks-cd331396?mod=hp_lead_pos4

Meme Stocks and YOLO Bets Are Back and Fueling the Market’s Rally

Shares of unprofitable companies have outperformed since early April, and investors are now speculating like it’s 2021

By Jack Pitcher, The Wall Street Journal, July 5, 2025

Forget the Magnificent Seven. Investors are now learning to love the Unprofitable 858.

Meme stocks and money-losing companies are now back in favor, and underpinning a rally that has lifted the market to records. …

The speculative rally has been part of a recent broadening beyond just the big tech shares that have driven the bulk of market gains this year. It isn’t necessarily surprising to see parts of the market that had been hit hardest during a downturn also outperform on the way back up, analysts say, but longer periods of froth can often end poorly…

Just three months after individual investors were the most bearish they have been since 2009, the YOLO [‘you only live once’] trade is back… [end quote]

The stock market is in a risk-on mood. SPX and NASDAQ index are at record highs. VIX is low.

The Fear & Greed Index is in Extreme Greed. Margin balances in securities accounts, which correlate with SPX, are high. The trade is risk-on as stocks and junk bond prices are rising much faster than the price of the 10 year Treasury.

Treasury prices are stable with a positive yield curve from 2 years on. The important 10 year Treasury has averaged 4.4% since the start of 2025. The real (inflation-adjusted) yield of the 10 year Treasury is 1.87%. This has fluctuated in a stable channel just below 2% since November 2022. The 10 year TIPS yield is slightly higher at 2.0%, close to the normal yield prior to the 2008 financial crisis and the Fed’s repression of interest rates.

USD continues its decline which began at the start of 2025. Gold is stable but copper, silver and oil are rising. Eight members of the OPEC Plus oil producers group said Saturday that they would pump an additional 548,000 barrels a day starting in August, equivalent to roughly half a percent of global production, which may cause a fall in the price of oil.

The big news this week was the OBBBA which was signed into law. This will have many Macroeconomic impacts. The tax reductions for upper incomes will likely be a boost for the asset markets.

The OBBBA also impacts the energy markets.

How the G.O.P. Bill Will Reshape America’s Energy Landscape

Here’s a rundown on the winners and losers in the legislation muscled through Congress.

By Brad Plumer, The New York Times, July 3, 2025

The giant policy bill muscled through Congress by Republicans is poised to remake American energy by slashing tax breaks for wind and solar power and electric cars while maintaining some federal support for sources like nuclear reactors and geothermal plants. [end quote]

Economic activity in the manufacturing sector contracted in June for the fourth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. Manufacturing employment continues its gradual decline beginning in 2023.

Economic activity in the services sector grew in June after just one month of contraction, say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business ®. The Services PMI® indicated expansion at 50.8 percent, above the 50-percent breakeven point for 11th time in the last 12 months. Services represent about 80% of GDP.

Part of the OBBBA is dramatic increase in funding for ICE to ferret out and deport illegal immigrants. Many of these work in service roles so removing them will have a Macro impact on agriculture, hospitality and healthcare. Americans will demand higher wages so the effect will be inflationary.

People in the lowest 10% of income distribution in the U.S. stand to lose noncash government benefits such as Medicaid coverage and food stamps worth nearly $1,600 annually on average, according to an analysis of an earlier version of the bill by the Congressional Budget Office.

The OBBBA slashes over $1 trillion in healthcare spending over the next decade, mostly from Medicaid, the joint federal and state program that provides health insurance to poor Americans. It is the biggest cut to federal healthcare spending—and to Medicaid—in history. Along with other Trump administration changes to the rules for Obamacare plans, the reduction in subsidies is projected to reduce the number of people with coverage by another 5.1 million if Congress doesn’t extend them. Millions – perhaps 10% of the U.S. population – will lose health insurance coverage. Hospitals will be hit with unreimbursed emergency care. Rural hospitals may be forced to close. Insurance companies, hospitals and pharmaceutical/ medical device companies will be hit. State budgets will be hit – bigly – if they want to continue insuring their populations.

The tremendous increase in the federal deficit will play out over years. CBO projects an increase of roughly $2.4 trillion in primary (non-interest) budget deficits over the 2025-2034 period. This increase is primarily due to substantial reductions in revenues and non-interest outlays. Furthermore, when accounting for the increased interest costs on the additional debt, the total impact on the deficit rises to nearly $3 trillion.

But the METAR is a short-term weather report.

The METAR for next week is sunny.
Wendy

https://www.wsj.com/health/healthcare/medicaid-cuts-healthcare-trump-bill-7236d5e6?mod=hp_lead_pos2

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https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/june/

https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/june/

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We could be on the cusp of another “roaring 20s:”, outside of the government debt. USian businesses protected from foreign competition. No regulation. No welfare. Higher education for the elite only.

Steve

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May be tricky to get those same foreigners to fund the US deficit, though.

Inflation from higher prices of US-made goods - suppose a sweatshop approach can mitigate it to some extent.

Unless perhaps the five cornerstones of populist economic policy are being followed (according to a Der Spiegel commentary):

Concentrate on quick, immediate effects. Don’t worry about longer-term consequences.

Use few instruments that are (seemingly) easy to understand. Do not get involved in pesky details.

Try to achieve the greatest possible control over these instruments. Rules and unwritten norms only restrict you unnecessarily.

Seek out opponents (real or imagined) whenever the opportunity presents itself. Your public feuds give you undivided attention and disguise your obvious shortcomings.

(+1) Make sure you get as much as you can for yourself and your people.

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The seeming solution is a big circle yank, where the Fed prints money and gives it to banks. The banks then deposit the money with the Fed. for which they are paid interest. That keeps the printed dollars out of the hands of Proles, who might spend it and promote inflation.

There have been posts before, that some of the “policy” seems to be aimed an pushing Proles to work more hours. A lot of restaurant servers make more money off tips, then their base minimum, or sub-minimum, hourly wage. Making tip income tax-free makes the job more financially attractive for the servers, who have no real skill, while not “burdening” the “JC”. Similarly, making overtime wages tax free makes working more hours more financially attractive for the Proles, without burdening the “JC” with paying shift premiums. Curtailment of Medicaid also pushes low/no skill Proles to work more hours.

As suggested on this board before, Proles may see the practical end of the 5 day/40 hour week, in favor of a 6 day/60 hr week.

Table of average hours worked per week, by year, in the US at this link.

Steve

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The OBBBA requires 20 hours of work, school or volunteering to qualify for Medicaid. Yes, curtailment of Medicaid may push low/no skill Proles to work more hours. But it’s not a 6 day/60 hr week.

Wendy

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Watch it escalate. as the “JCs” cry they still can’t get enough people to work. Michigan tried the same thing, during “his” last go around. The bill’s sponsors admitted that the work requirement was entirely about forcing people to take lousy jobs.

“This is all about trying to find more workers,” he said. “We have an obligation to review on a pretty regular basis all our policies, all our laws, all our statutes that may unintentionally result in disincentives to engage in the workplace, because every business owner I know is searching for and seeking workers.”

Keep in mind, the narrative that has been propagated about anyone on assistance: they are “welfare queens”, who leach off of people who work.

Another luminary weighing in on the Michigan legislation.

“Welfare benefits should always be a hand-up, not a handout," Leonard said. “But instead our current system takes millions of dollars from hard-working Michigan families and gives completely free benefits to people who are oftentimes perfectly able to work and earn their own health coverage.”

Never mind the fact that most people on assistance already work. Never mind the fact most people on assistance are white. They have been demonized for forty years.

Steve

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I think you’ve gone too far there, Steve.

Before saying restaurant servers have no skill, I suggest you try balancing three plates on your arm then carry another plate in your other hand from the kitchen to the table. Then remember who is drinking regular and decaf coffee so you can refill those correctly while telling the next table that their food will be out shortly and bussing a table on your way back to the kitchen for that order. And don’t forget the specials of the day and that the cook told you he’s out of broccoli so the only vegetable option for side orders is carrots.

And you have to do all that while the kid at table 8 is screaming his head off and the lady you just served is mad because her bread touched the vegetables and is now “soggy and unfit for human consumption” due to your incompetence as a server.

IMNSHO, there are some definite physical and mental skills involved with being a server.

—Peter

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They aren’t licensed plumbers, or mechanics, or electricians.

I worked in retail. It isn’t easy, but it doesn’t take any skill you really need to train for.

Steve

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Let me fix that:

And:

It’s a scam and they use guilt, fear, intimidation, and blame to shift the argument away from themselves, the wealthy, who profit off the rest of us. And keep us confused and fighting each other.

Don’t fall for it.

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Of course. The Shinies have made welfare out to be solely for the benefit of “others”, at the expense of “hard working” white people. Centuries of pogroms have been launched with narratives like that.

Steve

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Translation: “Someone’s getting something you aren’t. Blame them, not me!”

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