OT: Great Thoughts on the Current Market

[Barnaby&Neill]

For those with some time, this is a great “how we got here, and where we be might going” piece with respect to the market, investment strategies (not specific guidance — Howard Marks offers more ‘market philosophy’ than investment advice in his memos), interest rates and inflation.

https://www.oaktreecapital.com/insights/memo/sea-change

 

[jreinsdorf]

Very informative article. Depressing but informative. 1-3 more years of subpar to meh returns in the market imo. I have 12-14 more years in the market so I'm staying the course.

 

[Unionst]

Thanks for posting. A very thoughtful piece.

 

[Unionst]

Very informative article. Depressing but informative. 1-3 more years of subpar to meh returns in the market imo. I have 12-14 more years in the market so I'm staying the course.

Not necessarily depressing for a retiree like me because his logic says fixed income will be paying off better than in recent years.

 

[T2Kplus20]

For those with some time, this is a great “how we got here, and where we be might going” piece with respect to the market, investment strategies (not specific guidance — Howard Marks offers more ‘market philosophy’ than investment advice in his memos), interest rates and inflation.

https://www.oaktreecapital.com/insights/memo/sea-change

Sorry, not buying it. The Fed is either going to pivot in the next few months or throw the economy into a real recession. If the latter, the Fed will start cutting rates by mid-2023 and likely begin the QE printing machine soon afterwards.

Why? Because that is what the Fed does now.

 

[T2Kplus20]

Very informative article. Depressing but informative. 1-3 more years of subpar to meh returns in the market imo. I have 12-14 more years in the market so I'm staying the course.

Excellent POV and advice. I have a similar timeline, so it's steady as you go.

 

[czxqa]

Sorry, not buying it. The Fed is either going to pivot in the next few months or throw the economy into a real recession. If the latter, the Fed will start cutting rates by mid-2023 and likely begin the QE printing machine soon afterwards.

Why? Because that is what the Fed does now.

And it's exactly this thinking, prevalent on Wall Street, which is causing the inverted yield curve we have seen lately. The old axiom "Don't fight the Fed" has in effect gone out the window. RN the entire market is fighting the Fed. Problem is the Fed has the hammer and Powell has the will to use it. I think the sooner the market accepts that there is no pivot coming next year and the zero rate environment is gone, the sooner prices can stabilize at the new level appropriate to a world in which the discount rate is likely to be 5% for an extended period.

 

[T2Kplus20]

And it's exactly this thinking, prevalent on Wall Street, which is causing the inverted yield curve we have seen lately. The old axiom "Don't fight the Fed" has in effect gone out the window. RN the entire market is fighting the Fed. Problem is the Fed has the hammer and Powell has the will to use it. I think the sooner the market accepts that there is no pivot coming next year and the zero rate environment is gone, the sooner prices can stabilize at the new level appropriate to a world in which the discount rate is likely to be 5% for an extended period.

Real-time inflation is negative right now and has been for a few months. Even the moronic Fed will realize this soon. The market (especially the bond market) is betting that even Powell can't be that stupid. My bet is Biden/DC intervenes if recessionary signs really pop-up. Remember, Biden got Powell to pivot and dump the transitory talk late last year as a condition for his reappointment.

 

[RU84]

For those with some time, this is a great “how we got here, and where we be might going” piece with respect to the market, investment strategies (not specific guidance — Howard Marks offers more ‘market philosophy’ than investment advice in his memos), interest rates and inflation.

https://www.oaktreecapital.com/insights/memo/sea-change

Thanks for sharing. Howard Marks always has great insights and perspective. Whenever there is a crisis governments and central banks overstimulate the economy for too long. When the economy recovers there's too much money and easy credit in the system resulting in inflation. Now the Fed has to fix it. Unfortunately fixing it causes short term pain to stock and bond markets, housing and the real economy through a probable recession. The only question with a recession will be when and the magnitude.

 

[RUTGERS95]

And it's exactly this thinking, prevalent on Wall Street, which is causing the inverted yield curve we have seen lately. The old axiom "Don't fight the Fed" has in effect gone out the window. RN the entire market is fighting the Fed. Problem is the Fed has the hammer and Powell has the will to use it. I think the sooner the market accepts that there is no pivot coming next year and the zero rate environment is gone, the sooner prices can stabilize at the new level appropriate to a world in which the discount rate is likely to be 5% for an extended period.

bond market has never been wrong because we've always been the smartest guys in the room

Bond guys don't look at the return to be made but the maximum acceptable loss vs any given possible return and this matters when moving markets

 

[RU848789]

Great historical journey through the world of finance and I think his outlook is probably reasonable - thanks for posting.

 

[Bagarocks]

Not necessarily depressing for a retiree like me because his logic says fixed income will be paying off better than in recent years.

Im in agreement with yer view of the article.
Retiring next year, just saw my Financial Advisor last week, got out of some high yield aggressive Bond funds.
And Im staying the course, after all the commotion this year Im still up almost 6% on my investment portfolio.
Sea-change huh.

 

[ru109]

Interest rates needed a reset and it was either going to be a hard or soft reset. So far it seems like the Fed is doing a good job and it's going to be a soft reset. I've got a little over 10 years left till retirement so I'm staying the course.

 

[RUScrew85]

Sorry, not buying it. The Fed is either going to pivot in the next few months or throw the economy into a real recession. If the latter, the Fed will start cutting rates by mid-2023 and likely begin the QE printing machine soon afterwards.

Why? Because that is what the Fed does now.

Agree on the pivot. I think the Fed missed the soft landing (if it was ever possible) and we're getting a nice big recession with QE in 23.

 

[ashokan]

Lots of wise experts have said US already in a recession or has one looming (Dimon)
The usual two months of GDP decline (used as definition for recession) happened last summer.
Some prices came down, and a lot of that has been attributed to demand destruction and collapsing economies (China consuming less oil etc).
Inflation wasn't about 6.0 for 40 years, and now its still above 7.0
That's if the pre-election numbers can even be trusted
Its Christmas week when people are distracted, so Fed Bank of Philly clarified that 10k jobs added (March-June) were mistakenly reported as 1,100,000 added.
Oh what a surprise.


Meanwhile the US manufacturing PMI is lowering to below other major nations .
New orders hit a 14 yr low (2020 lockdowns aside).
Also "aside" are Saudi's making a deal with Xi, Iran and Russia working to undercut the dollar, Kissinger warning to end Ukraine escapade or risk WW3, Iran and Israel risking war, 550k a month ready to cross border with end of title 42 and domestic insults on US economy (like China owned HSBC saying it wont fund new oil fields, CA and NY looking to sue oil companies, crypto corruption in the billions, trillions that cant be accounted for in US ( Pentagon missing 4 trillion) and global derivatives.
Oh and Europe is de-industrializing.

Market stats aside, we are in a big house full of gas leaks and idiots at home and abroad are throwing matches around. Be careful of stats - lots of stuff under the table being ignored.
As Custer said "What Indians?"

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