OT: Stock and Investment Talk
- Thread starter RU-05
- Start date
Gotta hand it to CW, she is not backing down on TDOC. From today's ARK email:
Teladoc (TDOC) |
40% | Shares of Teladoc, the world’s largest global digital health platform, fell roughly 40% on Thursday after its quarterly earnings report. For perspective, Teladoc previously traded at these levels when it was cashflow negative in 2017. Compared to 2017, its visit volumes are 5x higher, its paid member count is twice as high, annual revenue is 5x higher, it is cashflow positive, and 1 in 6 Americans is a full Teladoc member. The primary reason for Teladoc's sudden stock decline seems to have been its 25% reduction in 2022 AEBITDA* guidance, the result primarily of higher customer acquisition costs in one of its Direct-To-Consumer (DTC) mental health channels. Since COVID-19 began, Teladoc has increased AEBITDA by more than 650% and doubled its AEBITDA margin, boosting its cash position to ~$900 million. Our five-year thesis for Teladoc is built around the company's transition from a general telehealth provider to a B2B enterprise solution for whole-person healthcare. To measure the company's progress, we track utilization––which has increased 160% since 2019––multi-service adoption––which has increased from 67% to 78% over the past year––and competitive wins. One recent example is its new contract with Northwell, New York's largest health system, which Teladoc won from a competitor based on its multi-faceted platform. That said, given the tumultuous market dynamics in digital care, management would have served shareholders and other stakeholders better with a strategy of under-promising and over-delivering. Nonetheless, we do believe that Teladoc’s long-term competitive position and product differentiation are unmatched, gearing it for superior growth over the long term. *AEBITDA = Adjusting for non-cash, stock-based compensation, which has booked almost entirely from the Livongo transaction. |
Link to tomorrow's old man convention:
😁
www.cnbc.com
😁
Berkshire Hathaway’s annual meeting is here: What to expect from Warren Buffett and Charlie Munger
Investors around the globe are waiting to hear from Warren Buffett, along with his right-hand man Charlie Munger, following a flurry of investment activities.
My wild guess is that we will have capitulation in the next few weeks and then stagnate for a while before ending the year strong.
At the risk of making this political, I’d have to say I can’t imagine we don’t rally before November
I’ve been meaning to out there for that, my wife wants to go too. Maybe a road trip next year.Link to tomorrow's old man convention:
😁
Berkshire Hathaway’s annual meeting is here: What to expect from Warren Buffett and Charlie Munger
Investors around the globe are waiting to hear from Warren Buffett, along with his right-hand man Charlie Munger, following a flurry of investment activities.
Surprised by this. Are you DCA consistently? Also which fund? Should’ve done better than 1%.
Lesson of the Day = Buffet and Munger - we never try to time the market:
Also, they missed on March 2020, but I didn't. So am I a better investor? 😜
FYI, lots of great video's on the CNBC YT site on the event.
www.cnbc.com
Also, they missed on March 2020, but I didn't. So am I a better investor? 😜
FYI, lots of great video's on the CNBC YT site on the event.
Warren Buffett says inflation 'swindles almost everybody,' Munger rails against bitcoin, market 'mania' at Berkshire meeting
Berkshire Hathaway Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger are presiding over the company's annual meeting. Watch for updates here.
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Hopefully, will be moving 60-70% of assets into the market the next month or two, but slowly in increments. No one know the bottom of the market.
Cuts both ways. Don't miss out again like you did in 2020. Even ultra bear is flashing this is about done:
.....https://www.youtube.com/watch?v=C00eq9R8wvU&list=WL&index=2
With super max FUD going on, it only will take a tiny bit of good news or less bad news than expected to KABOOM the market. This rebound will happen in a blink of an eye.
After selling my AMZN for about 3,300 buying it back now at 2,360. Not bad.
Why are banks down big when rising interest rates suppose to help banks?
Even though I reduced my stocks exposure, I still owe about 20-25 stocks but reduced the quantity and at least 10-15 stocks are dividends stocks @ 4% interest. Double my 2 year treasury notes up to $100k.
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What‘s on your buy list and price if the market goes down further or in your CORE holdings right now?
Lesson of the Day = Buffet and Munger - we never try to time the market:
Also, they missed on March 2020, but I didn't. So am I a better investor? 😜
FYI, lots of great video's on the CNBC YT site on the event.
Warren Buffett says inflation 'swindles almost everybody,' Munger rails against bitcoin, market 'mania' at Berkshire meeting
Berkshire Hathaway Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger are presiding over the company's annual meeting. Watch for updates here.
Indeed, Buffett doesn’t seek to time the market in the technical or forecasting sense but you should understand what he is doing (or has done for 50 years). He assesses the value of a business against the quoted price for a portion of said business and buys when he gets more in value than the offered price after taking into account all of his alternatives. And, hopefully, the price isn’t just a little below it’s value, but substantially so to offer a margin of error. When no opportunities are present, he accumulates cash. That cash allows him to act when attractive price / value opportunities arise. He is not, however, simply buying when stock prices fall. Price declines increase the chances that good value may be present, but in and of itself is not the sole determining factor,
If you want a lesson, look what he did with repurchases. He had somewhat more aggressively made repurchases through March, but then stopped in April. Why? Two reasons. First, BRK stock traded at or perhaps slightly above a price he deemed attractive for repurchase (1.5x book, it seems). No timing is considered, just an assessment of price vs value (and I’d say no one has a better assessment of BRK’s value than he does). Second, he deployed money into Y, OXY and HP. Assessing alternatives available to him. Perfectly rational, no timing, but not blindly buying into price declines without considering valuation. Simple, but not easy.
If you can’t, or lack the time to, value businesses, then it probably makes more sense to index (not a variety of leverage inflated sector ETFs, but old fashioned, low cost S&P500 index funds). That’s the vast majority of investors. Because thinking you will outperform on large cap, well followed names over time is delusional. If you want to try and outperform, better to fish where you’re more likely to find mispriclings and where large institutional investors aren’t spending time. But you should only do so if you actually know how to value a company.
That’s the lesson you should take away from WEB. Invest, don’t gamble,
I agree with all of this. When the market is oversold and undervalued, jump into those leveraged ETFs. It's like having your cake and eating it too. Sticking with indexes, but outperforming the market on the way back up. :)
I love following Pomp's newsletter, always with an interesting POV. I'm pasting this particular one because he's the second guy I'm following that predicts rates cuts before the end of the year. I welcome comments from @Frida's Boss and @phs73rc77gsm83 :
To investors,
There is a significant amount of fear in the market right now. People have been watching as risk assets have sold off aggressively since the November 2021 highs, which can be partially attributed to the Federal Reserve’s focus on talking tough about quantitative tightening.
Although it took the Fed months to act, we are now seeing the central bank raise interest rates and taper many of the monetary stimulus programs that they were previously pursuing. Even though growth and risk assets have already fallen, the Federal Reserve is talking about becoming more aggressive with their quantitative tightening over the next few months, and potentially through the rest of this year.
But I don’t know if I believe them.
Regardless of how much tough talk the Fed has engaged in, there has only been an interest rate increase of 25 basis points so far. That was enough to usher in an annualized economic contraction of -1.4% in the United States and -22% for the Nasdaq index. How much more can the Fed really raise interest rates if we are already likely in a recession trend?
Well, that is the problem. Most investors and market participants are refusing to acknowledge the slowing growth and probable recession. In my opinion, they will wait until Q3 when it is smacking them in their head before they start to admit it.
This leads me to a fairly obvious prediction, but one that seems to be contrarian at the moment — the Federal Reserve will be cutting interest rates before the end of 2022.
The idea here is that further interest rate increases will only accelerate the United States economy into a recession. As things get worse, it will become harder for the Federal Reserve to remain committed to their quantitative tightening plan.
Add in the fact that midterm elections are coming up and it seems like a foregone conclusion that the Fed will be pressured to address any recessionary period on a shortened timeline. So how do you prevent the negative impact of recessionary forces? You cut interest rates and return to a quantitative easing strategy.
What is worse than inflation for politicians? Recessions.
If I am correct, the Federal Reserve won’t just cut rates by the end of the year, but they will have to admit defeat in the tightening efforts and re-engage their full QE toolbox. That is definitely not priced into the market at the moment.
Only 34% of people that answered my Twitter poll this weekend agreed that the Federal Reserve will cut interest rates before the end of 2022. This may then lead you to ask what is priced into the market at the moment?
Charlie Bilello @charliebilello
The market is currently pricing in a year-end Fed Funds Rate of 2.75%-3.0%, up from 0.25%-0.50% today. Expectations (from fed funds futures)... 50 bps hike in May 75 bps hike in June 50 bps hike in July 25 bps hike in September 25 bps hike in November 25 bps hike in December
April 28th 2022
30 Retweets80 Likes
The idea of the Federal Reserve increasing rates 2.5% or more after the economy is already growing at -1.4% is insane. If the Fed showcased complete incompetence on the way up via inflation, this would be a showcase of the most ridiculous level of incompetence we may have ever seen by a Fed leadership team on the way down in the market.
Hiking interest rates to 3% after an economy is already in a recession would be a financial Armageddon that we haven’t seen in decades.
I’m not arguing that the Fed shouldn’t hike interest rates right now, nor am I arguing that they won’t continue to raise interest rates more this year. But I am arguing that they won’t be able to raise rates as aggressively, nor for as long, as people are anticipating.
There are quite a few investors who have been taking to Twitter, newsletters, podcasts, or the media to claim that we will see a 2000-style clear out of bad companies and bubbles popping. The problem with that theory is that the market is no longer a free market. The Federal Reserve, and increasingly elected officials, won’t allow investors and citizens to suffer. Once they began to manipulate the market with quantitative easing, they can never stop for long periods of time.
There is no returning to normal. We are living in the new normal. Manipulated, Fed-run markets are the default now.
You think people were pissed when they had to pay more money for everyday goods at the same time that their investment portfolios were increasing in value? Wait till you see people’s reactions when their investment portfolios are losing material percentages and the price of goods are still high — that situation is coming faster than you think.
So what is the solution here?
To be honest, I don’t think the Fed has a winning hand to play. They should have never intervened in the market in the first place, but because they did, the market volatility was only going to increase as the Fed became responsible for steering the ship. It is impossible for any group of humans to navigate an economy between high inflation and recession with the periodic use of interest rates and expanding/contracting a money supply. This is a losing game and the Fed is losing handily right now.
Free markets eventually solve the problem. But we don’t have free markets anymore.
We have markets that are so manipulated by the Federal Reserve that all you have to do is adhere to the old adage “don’t fight the Fed.” That is the winning investment strategy these days. Just listen to the Federal Reserve and do what they tell you to do. You would look like a genius over the last decade if that is all you had done.
The louder I hear people screaming in fear of increasing rates and falling asset prices, the more bullish I get. As a friend recently told me, the only way you can be long term bearish in this scenario is if you’re willing to bet on the United States economy failing. That isn’t a bet I’m willing to take and I doubt it is a bet any of you would take either.
The Federal Reserve is going to keep playing their faux confidence game. They’ll raise rates and try to talk tough, but ultimately the Fed will succumb to the macro forces at play. The recession is already here. You can’t ignore it forever. My guess is that we’ll get at least one interest rate cut by the end of the year. My confidence level is probably around 70%.
Nothing is changing in my portfolio or investment strategy. I’m a long term bull. I’m bullish on technology, I’m bullish on the United States, and I’m bullish on bitcoin. If those themes are wrong over the next few years, then I’m not sure I want to be right.
To investors,
There is a significant amount of fear in the market right now. People have been watching as risk assets have sold off aggressively since the November 2021 highs, which can be partially attributed to the Federal Reserve’s focus on talking tough about quantitative tightening.
Although it took the Fed months to act, we are now seeing the central bank raise interest rates and taper many of the monetary stimulus programs that they were previously pursuing. Even though growth and risk assets have already fallen, the Federal Reserve is talking about becoming more aggressive with their quantitative tightening over the next few months, and potentially through the rest of this year.
But I don’t know if I believe them.
Regardless of how much tough talk the Fed has engaged in, there has only been an interest rate increase of 25 basis points so far. That was enough to usher in an annualized economic contraction of -1.4% in the United States and -22% for the Nasdaq index. How much more can the Fed really raise interest rates if we are already likely in a recession trend?
Well, that is the problem. Most investors and market participants are refusing to acknowledge the slowing growth and probable recession. In my opinion, they will wait until Q3 when it is smacking them in their head before they start to admit it.
This leads me to a fairly obvious prediction, but one that seems to be contrarian at the moment — the Federal Reserve will be cutting interest rates before the end of 2022.
The idea here is that further interest rate increases will only accelerate the United States economy into a recession. As things get worse, it will become harder for the Federal Reserve to remain committed to their quantitative tightening plan.
Add in the fact that midterm elections are coming up and it seems like a foregone conclusion that the Fed will be pressured to address any recessionary period on a shortened timeline. So how do you prevent the negative impact of recessionary forces? You cut interest rates and return to a quantitative easing strategy.
What is worse than inflation for politicians? Recessions.
If I am correct, the Federal Reserve won’t just cut rates by the end of the year, but they will have to admit defeat in the tightening efforts and re-engage their full QE toolbox. That is definitely not priced into the market at the moment.
|
Charlie Bilello @charliebilelloThe market is currently pricing in a year-end Fed Funds Rate of 2.75%-3.0%, up from 0.25%-0.50% today. Expectations (from fed funds futures)... 50 bps hike in May 75 bps hike in June 50 bps hike in July 25 bps hike in September 25 bps hike in November 25 bps hike in December
April 28th 2022
30 Retweets80 Likes
The idea of the Federal Reserve increasing rates 2.5% or more after the economy is already growing at -1.4% is insane. If the Fed showcased complete incompetence on the way up via inflation, this would be a showcase of the most ridiculous level of incompetence we may have ever seen by a Fed leadership team on the way down in the market.
Hiking interest rates to 3% after an economy is already in a recession would be a financial Armageddon that we haven’t seen in decades.
I’m not arguing that the Fed shouldn’t hike interest rates right now, nor am I arguing that they won’t continue to raise interest rates more this year. But I am arguing that they won’t be able to raise rates as aggressively, nor for as long, as people are anticipating.
There are quite a few investors who have been taking to Twitter, newsletters, podcasts, or the media to claim that we will see a 2000-style clear out of bad companies and bubbles popping. The problem with that theory is that the market is no longer a free market. The Federal Reserve, and increasingly elected officials, won’t allow investors and citizens to suffer. Once they began to manipulate the market with quantitative easing, they can never stop for long periods of time.
There is no returning to normal. We are living in the new normal. Manipulated, Fed-run markets are the default now.
You think people were pissed when they had to pay more money for everyday goods at the same time that their investment portfolios were increasing in value? Wait till you see people’s reactions when their investment portfolios are losing material percentages and the price of goods are still high — that situation is coming faster than you think.
So what is the solution here?
To be honest, I don’t think the Fed has a winning hand to play. They should have never intervened in the market in the first place, but because they did, the market volatility was only going to increase as the Fed became responsible for steering the ship. It is impossible for any group of humans to navigate an economy between high inflation and recession with the periodic use of interest rates and expanding/contracting a money supply. This is a losing game and the Fed is losing handily right now.
Free markets eventually solve the problem. But we don’t have free markets anymore.
We have markets that are so manipulated by the Federal Reserve that all you have to do is adhere to the old adage “don’t fight the Fed.” That is the winning investment strategy these days. Just listen to the Federal Reserve and do what they tell you to do. You would look like a genius over the last decade if that is all you had done.
The louder I hear people screaming in fear of increasing rates and falling asset prices, the more bullish I get. As a friend recently told me, the only way you can be long term bearish in this scenario is if you’re willing to bet on the United States economy failing. That isn’t a bet I’m willing to take and I doubt it is a bet any of you would take either.
The Federal Reserve is going to keep playing their faux confidence game. They’ll raise rates and try to talk tough, but ultimately the Fed will succumb to the macro forces at play. The recession is already here. You can’t ignore it forever. My guess is that we’ll get at least one interest rate cut by the end of the year. My confidence level is probably around 70%.
Nothing is changing in my portfolio or investment strategy. I’m a long term bull. I’m bullish on technology, I’m bullish on the United States, and I’m bullish on bitcoin. If those themes are wrong over the next few years, then I’m not sure I want to be right.
And... only buy or buy more BRK-A when BRK-A/BRK-B is buying it back.
With AAPL down, wonder if WB is adding to his holding?
Yes, I’d think you want to be on the same side of a trade as Buffett. And I suspect he may be buying again given the recent price decline, though not quite as aggressively since the cash balance is down to $100bn or so. He’s never said as much, but I think the minimum cash he wants around is far greater than the $20bn he stated years ago. The insurance business is just too big to hold less.
Also read that he was buying Apple until the price ran up, so I suspect he may be purchasing more, now.
He mentioned that he brought in the first qtr until it went up and the current price is lower than at any time in the first qtr.
Added some AAPL today but I hope Apple breaks 150 later.
PINE, I know you expect the market to go down significantly lower S&P 3600-3800 at least. Are you buying anything or you still waiting? I‘m still nibbling and prepared for 3,800. I hear if it break 4,000 it will fall much further.
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I love following Pomp's newsletter, always with an interesting POV. I'm pasting this particular one because he's the second guy I'm following that predicts rates cuts before the end of the year. I welcome comments from @Frida's Boss and @phs73rc77gsm83 :
To investors,
There is a significant amount of fear in the market right now. People have been watching as risk assets have sold off aggressively since the November 2021 highs, which can be partially attributed to the Federal Reserve’s focus on talking tough about quantitative tightening.
Although it took the Fed months to act, we are now seeing the central bank raise interest rates and taper many of the monetary stimulus programs that they were previously pursuing. Even though growth and risk assets have already fallen, the Federal Reserve is talking about becoming more aggressive with their quantitative tightening over the next few months, and potentially through the rest of this year.
But I don’t know if I believe them.
Regardless of how much tough talk the Fed has engaged in, there has only been an interest rate increase of 25 basis points so far. That was enough to usher in an annualized economic contraction of -1.4% in the United States and -22% for the Nasdaq index. How much more can the Fed really raise interest rates if we are already likely in a recession trend?
Well, that is the problem. Most investors and market participants are refusing to acknowledge the slowing growth and probable recession. In my opinion, they will wait until Q3 when it is smacking them in their head before they start to admit it.
This leads me to a fairly obvious prediction, but one that seems to be contrarian at the moment — the Federal Reserve will be cutting interest rates before the end of 2022.
The idea here is that further interest rate increases will only accelerate the United States economy into a recession. As things get worse, it will become harder for the Federal Reserve to remain committed to their quantitative tightening plan.
Add in the fact that midterm elections are coming up and it seems like a foregone conclusion that the Fed will be pressured to address any recessionary period on a shortened timeline. So how do you prevent the negative impact of recessionary forces? You cut interest rates and return to a quantitative easing strategy.
What is worse than inflation for politicians? Recessions.
If I am correct, the Federal Reserve won’t just cut rates by the end of the year, but they will have to admit defeat in the tightening efforts and re-engage their full QE toolbox. That is definitely not priced into the market at the moment.
Only 34% of people that answered my Twitter poll this weekend agreed that the Federal Reserve will cut interest rates before the end of 2022. This may then lead you to ask what is priced into the market at the moment?
The market is currently pricing in a year-end Fed Funds Rate of 2.75%-3.0%, up from 0.25%-0.50% today. Expectations (from fed funds futures)... 50 bps hike in May 75 bps hike in June 50 bps hike in July 25 bps hike in September 25 bps hike in November 25 bps hike in December
April 28th 2022
30 Retweets80 Likes
The idea of the Federal Reserve increasing rates 2.5% or more after the economy is already growing at -1.4% is insane. If the Fed showcased complete incompetence on the way up via inflation, this would be a showcase of the most ridiculous level of incompetence we may have ever seen by a Fed leadership team on the way down in the market.
Hiking interest rates to 3% after an economy is already in a recession would be a financial Armageddon that we haven’t seen in decades.
I’m not arguing that the Fed shouldn’t hike interest rates right now, nor am I arguing that they won’t continue to raise interest rates more this year. But I am arguing that they won’t be able to raise rates as aggressively, nor for as long, as people are anticipating.
There are quite a few investors who have been taking to Twitter, newsletters, podcasts, or the media to claim that we will see a 2000-style clear out of bad companies and bubbles popping. The problem with that theory is that the market is no longer a free market. The Federal Reserve, and increasingly elected officials, won’t allow investors and citizens to suffer. Once they began to manipulate the market with quantitative easing, they can never stop for long periods of time.
There is no returning to normal. We are living in the new normal. Manipulated, Fed-run markets are the default now.
You think people were pissed when they had to pay more money for everyday goods at the same time that their investment portfolios were increasing in value? Wait till you see people’s reactions when their investment portfolios are losing material percentages and the price of goods are still high — that situation is coming faster than you think.
So what is the solution here?
To be honest, I don’t think the Fed has a winning hand to play. They should have never intervened in the market in the first place, but because they did, the market volatility was only going to increase as the Fed became responsible for steering the ship. It is impossible for any group of humans to navigate an economy between high inflation and recession with the periodic use of interest rates and expanding/contracting a money supply. This is a losing game and the Fed is losing handily right now.
Free markets eventually solve the problem. But we don’t have free markets anymore.
We have markets that are so manipulated by the Federal Reserve that all you have to do is adhere to the old adage “don’t fight the Fed.” That is the winning investment strategy these days. Just listen to the Federal Reserve and do what they tell you to do. You would look like a genius over the last decade if that is all you had done.
The louder I hear people screaming in fear of increasing rates and falling asset prices, the more bullish I get. As a friend recently told me, the only way you can be long term bearish in this scenario is if you’re willing to bet on the United States economy failing. That isn’t a bet I’m willing to take and I doubt it is a bet any of you would take either.
The Federal Reserve is going to keep playing their faux confidence game. They’ll raise rates and try to talk tough, but ultimately the Fed will succumb to the macro forces at play. The recession is already here. You can’t ignore it forever. My guess is that we’ll get at least one interest rate cut by the end of the year. My confidence level is probably around 70%.
Nothing is changing in my portfolio or investment strategy. I’m a long term bull. I’m bullish on technology, I’m bullish on the United States, and I’m bullish on bitcoin. If those themes are wrong over the next few years, then I’m not sure I want to be right.
I don’t know who Pomp is, but read the letter he sent out. A little hard to follow. On the one hand, he said he thinks QT will end this year and rates will be cut / QE will restart. On the other, he said he wasn’t arguing for the Fed to not raise rates, or that they won’t raise rates through this year. Not sure which side he is arguing.
Bottom line, we’ve had zero percent rates, or close to zero, for about a decade. Unprecedented, and can’t exist into perpetuity. Unwinding unprecedented actions doesn’t happen without some bumpiness, perhaps extreme bumpiness. I’d recommend reading the recently published book The Lords of Easy Money.
To the question on what the Fed will do, im no Fed expert. That said, I’d guess that the political calculation is less important for midterm elections than for a Presidential year, and wouldn’t be surprised to see continued rate increases and balance sheet unwinding until CPI readings fall significantly. Don‘t think a mild recession or a relatively tame equity market drawdown will stop further tightening. But like I said, I’m no Fed expert.
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Thanks for the post! Lots of common sense in this column. Last April, we saw the first big jump in inflation. Why is this important? Because April 2021 is now our comparison for the next inflation data point. May 2021 experienced a big jump as well. No more comparisons to the super low inflation days of the first COVID year. As such, the base effect is now working in our favor. Look for inflation to start ticking down very soon. And when that happens.....KABOOM!I love following Pomp's newsletter, always with an interesting POV. I'm pasting this particular one because he's the second guy I'm following that predicts rates cuts before the end of the year. I welcome comments from @Frida's Boss and @phs73rc77gsm83 :
To investors,
There is a significant amount of fear in the market right now. People have been watching as risk assets have sold off aggressively since the November 2021 highs, which can be partially attributed to the Federal Reserve’s focus on talking tough about quantitative tightening.
Although it took the Fed months to act, we are now seeing the central bank raise interest rates and taper many of the monetary stimulus programs that they were previously pursuing. Even though growth and risk assets have already fallen, the Federal Reserve is talking about becoming more aggressive with their quantitative tightening over the next few months, and potentially through the rest of this year.
But I don’t know if I believe them.
Regardless of how much tough talk the Fed has engaged in, there has only been an interest rate increase of 25 basis points so far. That was enough to usher in an annualized economic contraction of -1.4% in the United States and -22% for the Nasdaq index. How much more can the Fed really raise interest rates if we are already likely in a recession trend?
Well, that is the problem. Most investors and market participants are refusing to acknowledge the slowing growth and probable recession. In my opinion, they will wait until Q3 when it is smacking them in their head before they start to admit it.
This leads me to a fairly obvious prediction, but one that seems to be contrarian at the moment — the Federal Reserve will be cutting interest rates before the end of 2022.
The idea here is that further interest rate increases will only accelerate the United States economy into a recession. As things get worse, it will become harder for the Federal Reserve to remain committed to their quantitative tightening plan.
Add in the fact that midterm elections are coming up and it seems like a foregone conclusion that the Fed will be pressured to address any recessionary period on a shortened timeline. So how do you prevent the negative impact of recessionary forces? You cut interest rates and return to a quantitative easing strategy.
What is worse than inflation for politicians? Recessions.
If I am correct, the Federal Reserve won’t just cut rates by the end of the year, but they will have to admit defeat in the tightening efforts and re-engage their full QE toolbox. That is definitely not priced into the market at the moment.
Only 34% of people that answered my Twitter poll this weekend agreed that the Federal Reserve will cut interest rates before the end of 2022. This may then lead you to ask what is priced into the market at the moment?
The market is currently pricing in a year-end Fed Funds Rate of 2.75%-3.0%, up from 0.25%-0.50% today. Expectations (from fed funds futures)... 50 bps hike in May 75 bps hike in June 50 bps hike in July 25 bps hike in September 25 bps hike in November 25 bps hike in December
April 28th 2022
30 Retweets80 Likes
The idea of the Federal Reserve increasing rates 2.5% or more after the economy is already growing at -1.4% is insane. If the Fed showcased complete incompetence on the way up via inflation, this would be a showcase of the most ridiculous level of incompetence we may have ever seen by a Fed leadership team on the way down in the market.
Hiking interest rates to 3% after an economy is already in a recession would be a financial Armageddon that we haven’t seen in decades.
I’m not arguing that the Fed shouldn’t hike interest rates right now, nor am I arguing that they won’t continue to raise interest rates more this year. But I am arguing that they won’t be able to raise rates as aggressively, nor for as long, as people are anticipating.
There are quite a few investors who have been taking to Twitter, newsletters, podcasts, or the media to claim that we will see a 2000-style clear out of bad companies and bubbles popping. The problem with that theory is that the market is no longer a free market. The Federal Reserve, and increasingly elected officials, won’t allow investors and citizens to suffer. Once they began to manipulate the market with quantitative easing, they can never stop for long periods of time.
There is no returning to normal. We are living in the new normal. Manipulated, Fed-run markets are the default now.
You think people were pissed when they had to pay more money for everyday goods at the same time that their investment portfolios were increasing in value? Wait till you see people’s reactions when their investment portfolios are losing material percentages and the price of goods are still high — that situation is coming faster than you think.
So what is the solution here?
To be honest, I don’t think the Fed has a winning hand to play. They should have never intervened in the market in the first place, but because they did, the market volatility was only going to increase as the Fed became responsible for steering the ship. It is impossible for any group of humans to navigate an economy between high inflation and recession with the periodic use of interest rates and expanding/contracting a money supply. This is a losing game and the Fed is losing handily right now.
Free markets eventually solve the problem. But we don’t have free markets anymore.
We have markets that are so manipulated by the Federal Reserve that all you have to do is adhere to the old adage “don’t fight the Fed.” That is the winning investment strategy these days. Just listen to the Federal Reserve and do what they tell you to do. You would look like a genius over the last decade if that is all you had done.
The louder I hear people screaming in fear of increasing rates and falling asset prices, the more bullish I get. As a friend recently told me, the only way you can be long term bearish in this scenario is if you’re willing to bet on the United States economy failing. That isn’t a bet I’m willing to take and I doubt it is a bet any of you would take either.
The Federal Reserve is going to keep playing their faux confidence game. They’ll raise rates and try to talk tough, but ultimately the Fed will succumb to the macro forces at play. The recession is already here. You can’t ignore it forever. My guess is that we’ll get at least one interest rate cut by the end of the year. My confidence level is probably around 70%.
Nothing is changing in my portfolio or investment strategy. I’m a long term bull. I’m bullish on technology, I’m bullish on the United States, and I’m bullish on bitcoin. If those themes are wrong over the next few years, then I’m not sure I want to be right.
The Feds are not going to raise rates anywhere close to what they have been talking about.
Plan accordingly!
If you are not at least 80% in the market, you are screwing up again. Man up and go TQQQ and UPRO!
Over the last couple weeks, I entered new positions in one energy company, one bank, one staples, one tech and an inverse S&P 500. Holding tight on a couple pharmas. Reduced BRK-A by half, maybe three weeks ago; expect to get back in after a fashion. (Apologies to WB.) Also have been in and then out and then back in a couple commodities ETFs. But, yes, cash is set aside for coming opportunities. AAPL on the list.
Actually, I was thinking about TQQ and UPRO yesterday but I don’t want to try to catch the knife. I will have to see a bottom before buying them. I ‘m using DCA to buy the stocks over the month. I’ll be in 30-40% within 2 weeks. This is similar to what I did after March 2020.
I love following Pomp's newsletter, always with an interesting POV. I'm pasting this particular one because he's the second guy I'm following that predicts rates cuts before the end of the year. I welcome comments from @Frida's Boss and @phs73rc77gsm83 :
To investors,
There is a significant amount of fear in the market right now. People have been watching as risk assets have sold off aggressively since the November 2021 highs, which can be partially attributed to the Federal Reserve’s focus on talking tough about quantitative tightening.
Although it took the Fed months to act, we are now seeing the central bank raise interest rates and taper many of the monetary stimulus programs that they were previously pursuing. Even though growth and risk assets have already fallen, the Federal Reserve is talking about becoming more aggressive with their quantitative tightening over the next few months, and potentially through the rest of this year.
But I don’t know if I believe them.
Regardless of how much tough talk the Fed has engaged in, there has only been an interest rate increase of 25 basis points so far. That was enough to usher in an annualized economic contraction of -1.4% in the United States and -22% for the Nasdaq index. How much more can the Fed really raise interest rates if we are already likely in a recession trend?
Well, that is the problem. Most investors and market participants are refusing to acknowledge the slowing growth and probable recession. In my opinion, they will wait until Q3 when it is smacking them in their head before they start to admit it.
This leads me to a fairly obvious prediction, but one that seems to be contrarian at the moment — the Federal Reserve will be cutting interest rates before the end of 2022.
The idea here is that further interest rate increases will only accelerate the United States economy into a recession. As things get worse, it will become harder for the Federal Reserve to remain committed to their quantitative tightening plan.
Add in the fact that midterm elections are coming up and it seems like a foregone conclusion that the Fed will be pressured to address any recessionary period on a shortened timeline. So how do you prevent the negative impact of recessionary forces? You cut interest rates and return to a quantitative easing strategy.
What is worse than inflation for politicians? Recessions.
If I am correct, the Federal Reserve won’t just cut rates by the end of the year, but they will have to admit defeat in the tightening efforts and re-engage their full QE toolbox. That is definitely not priced into the market at the moment.
Only 34% of people that answered my Twitter poll this weekend agreed that the Federal Reserve will cut interest rates before the end of 2022. This may then lead you to ask what is priced into the market at the moment?
The market is currently pricing in a year-end Fed Funds Rate of 2.75%-3.0%, up from 0.25%-0.50% today. Expectations (from fed funds futures)... 50 bps hike in May 75 bps hike in June 50 bps hike in July 25 bps hike in September 25 bps hike in November 25 bps hike in December
April 28th 2022
30 Retweets80 Likes
The idea of the Federal Reserve increasing rates 2.5% or more after the economy is already growing at -1.4% is insane. If the Fed showcased complete incompetence on the way up via inflation, this would be a showcase of the most ridiculous level of incompetence we may have ever seen by a Fed leadership team on the way down in the market.
Hiking interest rates to 3% after an economy is already in a recession would be a financial Armageddon that we haven’t seen in decades.
I’m not arguing that the Fed shouldn’t hike interest rates right now, nor am I arguing that they won’t continue to raise interest rates more this year. But I am arguing that they won’t be able to raise rates as aggressively, nor for as long, as people are anticipating.
There are quite a few investors who have been taking to Twitter, newsletters, podcasts, or the media to claim that we will see a 2000-style clear out of bad companies and bubbles popping. The problem with that theory is that the market is no longer a free market. The Federal Reserve, and increasingly elected officials, won’t allow investors and citizens to suffer. Once they began to manipulate the market with quantitative easing, they can never stop for long periods of time.
There is no returning to normal. We are living in the new normal. Manipulated, Fed-run markets are the default now.
You think people were pissed when they had to pay more money for everyday goods at the same time that their investment portfolios were increasing in value? Wait till you see people’s reactions when their investment portfolios are losing material percentages and the price of goods are still high — that situation is coming faster than you think.
So what is the solution here?
To be honest, I don’t think the Fed has a winning hand to play. They should have never intervened in the market in the first place, but because they did, the market volatility was only going to increase as the Fed became responsible for steering the ship. It is impossible for any group of humans to navigate an economy between high inflation and recession with the periodic use of interest rates and expanding/contracting a money supply. This is a losing game and the Fed is losing handily right now.
Free markets eventually solve the problem. But we don’t have free markets anymore.
We have markets that are so manipulated by the Federal Reserve that all you have to do is adhere to the old adage “don’t fight the Fed.” That is the winning investment strategy these days. Just listen to the Federal Reserve and do what they tell you to do. You would look like a genius over the last decade if that is all you had done.
The louder I hear people screaming in fear of increasing rates and falling asset prices, the more bullish I get. As a friend recently told me, the only way you can be long term bearish in this scenario is if you’re willing to bet on the United States economy failing. That isn’t a bet I’m willing to take and I doubt it is a bet any of you would take either.
The Federal Reserve is going to keep playing their faux confidence game. They’ll raise rates and try to talk tough, but ultimately the Fed will succumb to the macro forces at play. The recession is already here. You can’t ignore it forever. My guess is that we’ll get at least one interest rate cut by the end of the year. My confidence level is probably around 70%.
Nothing is changing in my portfolio or investment strategy. I’m a long term bull. I’m bullish on technology, I’m bullish on the United States, and I’m bullish on bitcoin. If those themes are wrong over the next few years, then I’m not sure I want to be right.
Sorry, I don’t have anything profound to say about his thoughts. As more of a buy and hold investor I don’t spend a lot of time trying to predict what I’d call short if even mid term swings of markets or interest rates. As you know, we can find predictions on the market, market segments, individual stocks, interest rates, etc that are “all over the board” at both ends of the spectrum. Having said that, I do think the Fed got itself into a bit of a mess and would like to follow its planned path of rate hikes; however, given the recent and current market/economy, I don’t think they will be able to. I think it’s certainly possible that given these conditions, there be less hikes and they’d hoped for in the next 12-18 months unless the economy straighten out. So while a cut is possible, I wouldn’t guess it’s probably (though again, I think the Fed likely won’t be able to raise rates in the way they’d like to if the economy was in better shape.)
Just my two cents, though. Good discussion, thanks for posting this.
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