Is the stock market going to tank?

[Mazderati]

Saw a stat this morning. Total biotech funding down >60% year over year. IPOs dried up. Renewed talk of synergies. And accelerating those synergies.

[AdironRider]

https://www.theatlantic.com/newslett...lation/661250/

[JimmyCarter]

https://www.theatlantic.com/newslett...lation/661250/

The best part is the PE shops already took the hopes and dreams based profit and left retail holding the flaming shit filled bag

[Brock Landers]

Right now Fed funds futures implying 75 now and another 75 in July. 50 in sept 50 Nov.

[LeeLau]

Bob. My XOM was assigned on a 100 call I sold for $2. Bought at 35 so am not disappointed.


Covered RDBX today (yolo play).

Took my loss on TWTR and moved on. I feel Elon will renege.

[Cono Este]

Bob. My XOM was assigned on a 100 call I sold for $2. Bought at 35 so am not disappointed.


Covered RDBX today (yolo play).

Took my loss on TWTR and moved on. I feel Elon will renege.

For sure, his timing was awful.


Sent from my iPhone using TGR Forums

[4matic]

Gasoline is .40c off it’s high and only .25c off it’s March high. Of course, it takes a while to reflect that.

[dunfree]

https://www.theatlantic.com/newslett...lation/661250/

$300 billion in oil subsidies from investors and nobody cares

[Kevo]

75 basis point hike today.

Target is to get FFR to 3.5% by EOY.

Are we going to pretend that a 3.5% FFR is going to fix 8.6% inflation?

[NWFlow]

Wait for the 9% rate before the next meeting...

[J. Barron DeJong]

75 basis point hike today.

Target is to get FFR to 3.5% by EOY.

Are we going to pretend that a 3.5% FFR is going to fix 8.6% inflation?

Yes (but it’s not actually pretending):



https://twitter.com/markzandi/status...AQBFzdqlnXS4iQ

Estimate for underlying inflation is 2.3%.

Market forecast for inflation over next 5 years was 2.88%/yr average as of last night. Probably moves lower today.



https://twitter.com/treatdevourer/st...AQBFzdqlnXS4iQ

[sirbumpsalot]

Yes (but it’s not actually pretending):



https://twitter.com/markzandi/status...AQBFzdqlnXS4iQ

Estimate for underlying inflation is 2.3%.

Market forecast for inflation over next 5 years was 2.88%/yr average as of last night. Probably moves lower today.

Keep in mind we were paint a 7 handle for months before the russian invasion and embargo....

[summit]

Market likes the 75bp

[J. Barron DeJong]

Keep in mind we were paint a 7 handle for months before the russian invasion and embargo....

Yeah. So before the war, the mix of factors would have been different. Take off the 3.5% from the war, add a couple to Covid (re-opening, spending the stimulus money) and you’re there. The point is that those things aren’t going to keep contributing in the future as they have in the past.

For example, the war caused a massive jump in energy costs - do we expect the same percentage jump again next year, or do we think they level off? If they level off, no contribution to inflation going forward.

[J. Barron DeJong]

Market likes the 75bp

Which market?

[summit]

Which market?

https://finance.yahoo.com/news/stock...114947098.html

[J. Barron DeJong]

https://finance.yahoo.com/news/stock...114947098.html

Meh. Seems like a nothingburger if you zoom out just the tinniest bit:

[RoooR]

For example, the war caused a massive jump in energy costs - do we expect the same percentage jump again next year, or do we think they level off? If they level off, no contribution to inflation going forward.

It's possible that energy stays elevated for quite some time is it not? OPEC isn't meeting their production targets and global demand keeps going up.

[J. Barron DeJong]

It's possible that energy stays elevated for quite some time is it not? OPEC isn't meeting their production targets and global demand keeps going up.

Yes. But to have sustained inflation it can’t just stay at the current elevated level, it needs to jump again. And that seems very unlikely to me. If it just stays at the same price for the next year, then that would actually be helping pull inflation down below the Fed’s 2% target.

The point of the breakdown I posted is that much of the current inflation is due to factors that contributed one time ‘jumps’ in prices, but they aren’t likely to contribute any more of those jumps going forward.

[RoooR]

Is that chart based on any peer reviewed analysis in an economic journal? I'm not durrrr stimulus caused all the inflation, but it WAS a signifigant amount of cash and I personally know a lot of people that bought things they woudln't have. Including a buisness owner who bought a fucking house because of the PPP money.

[MultiVerse]

It depends on the timing of the stimulus. The last round of stimulus was probably overkill and contributed somewhat to today's higher inflation rates.

In addition to the inflationary causes listed in the post(s) above, the Fed's inaction and misapplication of its forward guidance is a big contributor along with its FAIT "flexible average inflation targeting” policy.

Supply side inflation is not the Feds fault. Demand side inflation is. The Fed should have began tightening much earlier when ten months ago demand driven spending or nominal Gross Domestic Product (NGDP) was already exceeding the historic trend.

[J. Barron DeJong]

Is that chart based on any peer reviewed analysis in an economic journal? I'm not durrrr stimulus caused all the inflation, but it WAS a signifigant amount of cash and I personally know a lot of people that bought things they woudln't have. Including a buisness owner who bought a fucking house because of the PPP money.

Not peer reviewed, but it was posted by the chief economist for Moody’s Analytic’s, which probably has some of the most sophisticated macro-economic modeling around.

The issue for the Fed is that they’re trying to steer where inflation is heading in the future, but any policy changes they make have a long lag before they take effect in the market - like over a year.

Until fairly recently the market forecast for inflation looked fine, especially if you allow that the Fed may be planning to allow a period of inflation a little above the 2% target to make up for the time it had been below that target:



It wasn’t until last October that the inflation outlook started moving above 2.5%, and even then it came back down a fair amount. It wasn’t until the war started that it really spiked, but there’s nothing the Fed is capable of doing to prepare for a situation like that.

[MultiVerse]

^ Yeah, that's the issue with the Feds FAIT "flexible average inflation targeting” policy. If instead of making policy based on inflation forecasts, the Fed focused on NGDP it would have started tightening much sooner after demand or NGDP rose rapidly to around 5% early last fall.

Inflation targeting is a vague policy because it doesn't clearly define how much future inflation to allow to make up for past below trend inflation.

[J. Barron DeJong]

Supply side inflation is not the Feds fault. Demand side inflation is. The Fed should have began tightening much earlier when ten months ago demand driven spending or nominal Gross Domestic Product (NGDP) was already exceeding the historic trend.

True about NGDP exceeding historical trend, but consumers were spending down their ‘excess savings’ created by the stimulus, and when they ran out then that would remove a lot of the inflationary pressure without any Fed intervention.

[J. Barron DeJong]

^ That's the issue with the Feds FAIT "flexible average inflation targeting” policy.

I don’t really buy that.

An explicit 2% target just means you don’t make up for past mistakes. If anything then targeting a 2% average over a period of time would help stabilize things (if the market believes the Fed is actually going to commit to hitting that average).

Old way, if you missed the mark, future inflation is only expected to get back to target. New way if you miss, the market should expect you to overcompensate in the future, which should affect market expectations more than the old system (again, assuming the market thinks the Fed is credible in it’s targets).

Edit: You changed your post on me.

Yeah, I do find the idea of NGDP targeting promising. So while I think FAIT is probably better than the previous straight 2% target regardless of past performance, I think NGDP could be better still. But I guess a central bank needs to try it to know for sure.