Control Panel: Stock market rally widening

[mostlylong]

@MarkR

The main point is that it’s been pretty steady over the last 10 years

Look how steep the change is this year.

Rate of change matters.

And that is with US interest rates relatively high (look in the chart how USD appreciated when Fed raised rates, 2020 to 2022).

[buynholdisdead]

@MarkR

The main point is that it’s been pretty steady over the last 10 years, roughly US$1.10-1.12 per euro on average with a range of $1.22 per euro at the 2018 high, and just under $1 per euro at the COVID era low.

Yes it has been in a range but at this time it is at the top of the range. I don’t see it as alarming because it hasn’t climbed up or down from that range but if you want to save money travelling you could wait a year and see if it is cheaper but in the end I think it will even out.

[MarkR]

@mostlylong

Look how steep the change is this year.

I’m looking! It looks about as steep as Apr-Aug 2017, and about as steep as Apr-Aug 2020, and about as steep as Oct 2022 to Jan 2023. And in the other direction, it looks about as steep as Apr-May 2018, and about as steep as Feb-Oct 2022.

@mostlylong

And that is with US interest rates relatively high

Yes, probably because “everyone” is expecting rates to come down late this year and next year.

[mostlylong]

@MarkR

probably because “everyone” is expecting rates to come down late this year and next year.

What is your point, exactly?

Are you saying a <1% change in US rates (pick any reasonable change in rate for any term) explains a 15%ish depreciation in USD vs EUR in 2025 ytd?

I doubt that, or please explain.

[mschmit]

@buynholdisdead

but if you want to save money travelling you could wait a year and see if it is cheaper

Or…since travel is more expensive it would seem that demand is down so you might be able to find a good deal or have a nicer trip due to smaller crowds, depending on where you go

Mike

[Kingran]

@btresist

I don’t see any convincing narrative of how the national debt/deficit is going to decline or even hold constant over the next few years

Debt is red herring. The national debt didn’t go down since the housing crisis. While the cost to service the debt will further strain federal budget, but Japan has shown you can run very high debt level, and low interest rates for a long time.

@btresist

Rising inflation, increasing debt, sharply declining consumer confidence.

Rising inflation… what if tariff’s result only in “transient or one time” raise? Unlike democrats, Trump can actually get the worker visa program implemented. I haven’t seen any indicator pointing towards recession. That doesn’t mean it cannot show up, especially, we have to see the effects of tariff in coming months.

ONe area where I am truly concerned in unemployment. It is the double whammy of inflation and unemployment, “stagflation” I am more worried. Not just inflation alone.

@mostlylong

And that is with US interest rates relatively high

@mostlylong The ZIRP regime has conditioned people to think current rates are high. Current rates are not high compared to historical rates. However, the real rates are high, and Fed may cut to bring it down.

[syke6]

@OrmontUS

Frankly, this will proportionally have a greater negative affect on the poorer strata of our population than on the more affluent strata.

Okay good. The job creators are safe, at least.

[mostlylong]

@Kingran

I haven’t seen any indicator pointing towards recession.

Here’s an important indicator:

@mostlylong

So consumer spending’s contribution to GDP growth has been near zero to slightly negative this year.

Continuing unemployment claims are grinding higher as well.

Setting aside the effects of huge noise from net exports on gdp, growth appears weak at best based on consumer spending.

[mostlylong]

@btresist

Is there any scenario that predicts that curtailing globalism will NOT lead to higher consumer prices?

How about tepid demand in a slower economy plus continued automation plus continuing wealth inequality?

Those are 3 deflationary forces.

Are they enough? IDK.

[syke6]

Just an FYI…small caps have really not benefited from the rally. Since about 2022 small caps have lagged the S&P 500 by quite a bit. Correspondingly, the valuations are lower.

[mostlylong]

@MarkR

I’m looking! It looks about as steep as Apr-Aug 2017, and about as steep as Apr-Aug 2020, and about as steep as Oct 2022 to Jan 2023. And in the other direction, it looks about as steep as Apr-May 2018, and about as steep as Feb-Oct 2022.

Here is some steepness.

Against a basket of currencies, in 2025, USD has largest H1 loss since 1973.

The U.S. dollar has suffered its worst first half of the year since 1973, as “redacted”’s trade and economic policies prompt global investors to rethink their exposure to the world’s dominant currency.

The dollar index, which measures the currency’s strength against a basket of six others including the pound, euro and yen, has slumped more than 10 per cent so far in 2025, the worst start to the year since the end of the gold-backed Bretton Woods system.

[captainccs]

@Kingran

Debt is red herring. The national debt didn’t go down since the housing crisis. While the cost to service the debt will further strain federal budget, but Japan has shown you can run very high debt level, and low interest rates for a long time.

What I said:

@captainccs

The cause of crashes is debt but there are two kinds of debt

1. Debt backed by the full faith and credit etc.
2. Private and corporate debt

It is highly unlikely that Uncle Sam’s debt will exceed America’s full faith and credit etc.

@Kingran

ONe area where I am truly concerned in unemployment. It is the double whammy of inflation and unemployment, “stagflation” I am more worried. Not just inflation alone.

Extreme economic uncertainty is often the precursor of revolution and war

• Storming the Bastille
• German hyperinflation
• Hugo Chavez

The Captain

[Kingran]

@captainccs

Extreme economic uncertainty is often the precursor of revolution and war

• Storming the Bastille
• German hyperinflation
• Hugo Chavez

This is German hyperinflation… US is talking about 3 to 4%, about 1% to 2% higher than their target… nothing closer.

[Kingran]

@syke6

Correspondingly, the valuations are lower.

How bad small cap underperformance? I own $IWM, that is 10% of my (me and my wife together) entire portfolio. I haven’t even looked at it for over 3 months… It is that bad…

Why I haven’t sold in non-taxable account and moved? Because you keep telling the valutions are lower, once fed cuts rates they will benefit…

sometimes, we fall victim to our own narrative

[Kingran]

@captainccs

Extreme economic uncertainty is often the precursor of revolution and war

1. Stocks: all-time highs
2. Home Prices: all-time highs
3. Bitcoin: all-time highs
4. Money Supply: all-time highs
5. CPI Inflation: averaging 4% per year since 2020, double the Fed’s “target”
6. Fed: expected to cut rates 3x by end of this year

These are not what you see before a revolution…

I know there are lot of folks have fear of recession that can be caused by ‘black swan’ or one or two things going wrong. The truth is market has faced many such ‘events’ and rallied back, very resilient. For ex: momentarily, for a fleeting second, ‘deepseek’ froze AI investments, and now meta is paying $100 M signing bonus. AI investments are $500 B capex, suddenly it is freezing would have been very bad.

I am sure economic cycles will turn. We may have a recession. But if you looked at the recent years, your bear market is just couple of months, if not in weeks. We are not in 2 or 3 years of steadily declining and taking another 4 or 5 years to recover environment.

It is important to understand the environment we are investing in. Of course your risk tolerance, time frame, could vary.

[captainccs]

@Kingran

1. Stocks: all-time highs
2. Home Prices: all-time highs
3. Bitcoin: all-time highs
4. Money Supply: all-time highs
5. CPI Inflation: averaging 4% per year since 2020, double the Fed’s “target”
6. Fed: expected to cut rates 3x by end of this year

The problem is that the American population is highly segmented into silver spoons and pitch forks .

Venezuela, pre Chavez, was also highly segmented but the lowest classes were not homeless, they lived in very modest homes. Some in the highest economic scale were pretty darn reprehensible but somehow peace prevailed. America thrives on highlighting division, a bad habit.

Just a personal observation. I stress “pre Chavez” because he tried to emulate American style discrimination based on race and wealth. He succeeded for a time but it went against the Venezuelan psyche, created by the spirit of unity fomented by Bolivar to defeat the Spaniards.

The Captain

[Kingran]

@captainccs

The problem is that the American population is highly segmented into silver spoons and pitch forks .

Pitch forks??? I am not sure which America you are talking about.

[captainccs]

@Kingran

I am not sure which America you are talking about.

That’s part of the problem.

The Captain

[bjurasz]

@Kingran

Pitch forks??? I am not sure which America you are talking about.

We saw a sample of that on Jan 6, 2021. Again in Wisconsin when two Democrat lawmakers were assassinated. (And Trump could not be bothered to talk about it, or attend the funeral). We saw it again when a Trump supported killed 2 firefighters.

[captainccs]

There is plenty more but it’s considered party politics so I’ll skip it.

The Captain