a la Lou Reed & David Bowie
5 Likes
Fed raises rates 0.75%, markets leap.
Alphabet earnings and revenue growth both below expectations, stock rises 8.6%.
Iâm not sure why people complain about investing, this is all so obvious and intuitive.
Jim
29 Likes
An asideâ
Inflation is a very interesting subject.
Surprisingly, there is a wonderfully insightful presentation on the topic in John Oliverâs most recent show.
https://www.youtube.com/watch?v=MBo4GViDxzc
Not recommended because itâs funny, but actual economic insight.
The key points that you donât often hear are that the recent burst of inflation does NOT, as many people would have you believe, involve any single big reason.
And that there is a huge difference between inflation caused on the demand side and inflation from the supply side, which is explained unusually wellâŚusing frogs.
He doesnât go much (enough) into the fact that the appropriate policy response(s) depend very much on what mix of the two is causing the problem.
But still, much better than most articles and presentations quoting economists.
Jim
26 Likes
But still, much better than most articles and presentations quoting economists.
Jim, I whole heartedly agree with you. Cut out the âcuteish - laughter addedâ comments and thereâs a helluva lot of truth in what heâs saying.
Thanks for sharing and thinking of us.
Tex
1 Like
Fed raises rates 0.75%, markets leap.
Maybe knowing whatâs ahead, even if that is not good, is better than insecurity?
If so, if todayâs action is just relief that the time of insecurity is over, it wonât last, as the facts that bad times are ahead indeed (Powell: ânarrow path to soft landingâ) will come brutally into the foreground when that emotional relief is gone.
markets leap
$Trillions waiting on the sideline and full employment world wide.
Tech and S&P will outperform BRK in next 5 and 10 years.
Dollar cost average, sleep well, get rich slowly.
3 Likes
this is all so obvious and intuitive.
Sell the rumor, buy the news.
Hereâs another informative article regarding inflation and recession. This link is to a NY Times gift article by Paul Krugman presented yesterday:
https://www.nytimes.com/2022/07/26/opinion/recession-gdp-ecoâŚ
Tom
The John Oliver show was a nice summary of how not to get distracted by one side or the other saying âHey, look! Did you hear that!â while excitedly pointing towards one shiny object, or shouting about one loud noise.
Interestingly, he didnât present much in the way of solutions.
In the beginning, he noted that if the issue is an over-supply of money, then the Fed has some ways to try to address that.
Otherwise, he briefly presented a couple of ideas in one minute at the end of a roughly 24 minute presentation about ways he thought people could be helped through an inflationary period:
(1) refundable child tax credit which is offset by higher taxes on higher earners
(2) expanded rental assistance
But were those supposed to be solutions, or palliative care?
I wonder if inflation, or other macro economic effects, can be modeled in a similar way that AI (e.g. neural nets) can model fluid flow and other physical phenomena. Such modeling requires lots of data, but perhaps there is enough data. If youâve got a black box that works well with small effects that happen frequently, and works well with moderate effects that happen less frequently, and works well with some much sparser large effects, then perhaps itâs an OK model?
The downside to such empirical modeling is that itâs a black box. The upside is that youâve got something, to the extent that itâs validated out-of-sample, that might be better than waving your hands about âsupply and demandâ.
1 Like
Fed raises rates 0.75%, markets leap.
Alphabet earnings and revenue growth both below expectations, stock rises 8.6%.
Iâm not sure why people complain about investing, this is all so obvious and intuitive.
Paying attention to details sometimes matters. The Fed switched from committing to raise rates, to meeting to meeting they are going to look into it. The fed starting by talking about inflation and ended the press conference pretty dovish.
So the market reacting positively. Separately, after the last meeting also market rallied only to fizzle next day and hit some new lowâs.
The question is how many are positioned for a second half rally?
1 Like
Excellent presentation. Not bad at all for a Brummy.
Maybe I should buy one of the regular frogs.
Otherwise, he briefly presented a couple of ideas in one minute at the end of a roughly 24 minute presentation about ways he thought people could be helped through an inflationary period:
(1) refundable child tax credit which is offset by higher taxes on higher earners
(2) expanded rental assistance
But were those supposed to be solutions, or palliative care?
Well, I suppose to be fair, heâs an investigative comedian, not the chairman of the Fed or the leader of a congressional committee : )
His brief starting point isnât unreasonable: inflation spikes really hurt some people, and maybe it might be useful to consider ways to ease that pain.
Subsidizing the price of hydrocarbon fuels is NOT the right way to do that, it should be noted.
His analysis is keen in that one way: it really does matter what mix it is of demand surge and supply constraints.
If I were in charge (which I certainly would not want to be), Iâd ask the Fed to research,
product by product experiencing price rises, a best guess of the level of supply constraint within that category.
Some of that will be obvious (bicycle parts have an 18 month back order), and some of it can be deduced by the turnover volume.
e.g., prices rising but shipments falling, itâs almost certainly a supply problem in that category.
This âdiffusionâ metricâpercentage of categories rather than weighted average price riseâ
would give an idea which fraction of the overall inflation impulse is coming primarily from supply constraints versus spiking demand.
The monetary response ought then to be only in proportion to that demand driven fraction, perhaps?
For the supply constrained goods, well, there really isnât much anyone can do other than wait it out.
Maybe help a few who might really need help while it lasts, but otherwise, the to-do list is empty.
For stuff that nobody can find more of, like tantalum, itâs going to stay expensive and weâll all have to adapt.
For stuff that will respond to the invisible hand of the market, it will fix itself as high prices attract new supply.
So far, there arenât any new factories producing those frogs in response to the obvious shortage,
and rising interest rates wonât change that for the better.
Might hurt the process a lot, in fact, if I have to borrow money to build that frog factory.
But, given some time and visible demand, Iâm sure somebody will have those extra large frogs in stock soon.
Jim
16 Likes
Shoot, they already are:âŚ
https://www.fountainsusa.com/products/design-toscano-giant-câŚ
1 Like