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no lah, no crash, just slow down.... short term pain, long term gain!

(29-08-2022, 09:44 AM)Behappyalways Wrote: [ -> ]Risks out there....


Look at currency......look at China Rmb. HK dollar is also too strong for HK due to peg

China currency should be ok, as they can follow russians and do a GOLD peg as they probably have more than enough reserves and prepared for american sanctions. Especially with TAiwan, i heard americans are discussing some new agreement for closer ties started since the Pelosi visit. Not sure if China's hand will be forced into taking Taiwan before said agreement is done, just like Ukraine wanting to join NATO forced RUssia's hand.

(29-08-2022, 03:36 PM)brattzz Wrote: [ -> ]no lah, no crash, just slow down.... short term pain, long term gain!

hahaha I really wanna see what Biden says during end of october when USA get 3rd consecutive quarter of negative GDP plus bad employment numbers. Still no recession?  hahaha

The definition of recession is different in USA vs the rest of the world. In USA, it is not defined by two quarters of negative growth. It must be defined by an institution in USA called NBER. So you can have 4 quarters of say -0.5% growth consecutively, but NBER says it is not recession

https://www.bea.gov/help/faq/485

This has some implications especially if the institution keeps shouting "no recession"

Does it matter if we are in a recession? Or if the relevant agencies recognize this is an "official" inflation?

When is the best time to buy (or sell)? Before, during, or after a recession?

Because I'm not sure how, simply knowing whether or not we are in a recession (official or not), is actionable as a long term investor in individual companies, which may or may not be affected by a recession, if and when we get one.

Even if they are affected by a recession (e.g. earnings growth slow down a little, or temporary decline), we do not know how the market will react to that. Some companies' equity price, can continue to appreciate, during an "official" recession.

Tactically, I don't understand the point of this discussion as long-term investors. Just me personally.

“I certainly was not excited to see the stock market rallying after our last Federal Open Market Committee meeting," he added, referring to the Fed's policy-setting panel, which last met July 26-27 and delivered a second straight 75-basis-point rate hike.

Fed's Kashkari: 'happy' with market reaction to Powell speech -Bloomberg
https://www.reuters.com/markets/europe/f...022-08-29/

Actually I thought Powell speech was quite neutral except to debunk the market's forecast that rate cut coming in early 2Q23 as US go into recession, but then that is in the context of rates going above 4%.

The bigger question is whether Fed will hike to 4% or pause around 3-3.5%; if it is latter then I think a soft landing and no rate cut will be needed in 1H23. The neutral rate is estimated 2.5% by several governors but Fed has to hike above neutral to quell inflation. Say if Fed hikes to 3.5% and inflation goes back to 2% by June 2023 during recession then it's already 1.5% real rate

My guesstimate remains that inflation trajectory will trend towards 5% by Dec 2022 and 2% by June 2023. Nobody really know if Fed will overhike to >4% but I hope they hike 50bp in Sept and maybe another 25-50bp in Nov to pause. (Originally I was hoping for 50bp in July before the June CPI numbers)

The key variable is going to be wage growth and labour demand which is softening and labour supply that is strangely tight. Another way to look at it is even if wages go up 5% this year it will be negative real growth so the inflationary impact on wages is not the same as headlines

(06-07-2022, 09:39 PM)specuvestor Wrote: [ -> ]UST 30years also just dipped below 3%.Hopefully Fed will hike 50bp in July and 25bp in Sept to signal they can see what is coming rather than what has happened. I guess the economy probably can at best absorb 2.5% fed funds and QT for next 12 months. The new normal still lives.

(17-06-2022, 10:19 AM)specuvestor Wrote: [ -> ]It's a catch22. If Fed funds goes 3.25-3.5% I suspect the yield curve might invert. Market is already looking at 2Q23 recession. Question is whether it will be a mild one.

2H22 inflation should come off to maybe 5% by year end due to higher base in 2H21. In fact the Core CPI and PCE is already showing that trend even as CPI bounced up to 8.6%

US 30 yr mortgage rates doubled to above 6% in a month. SG fixed mortgage rate above 2%. There will be short term economic pain for sure but I think the market looks forward so it's important to see what is the Fed thinking in next week's testimony and post July 50bp hike (if they hike 75 I think it sends wrong signal already).

I think economists underestimate 200bp hike in 6 months with QT on consumption and economic activities. Logistical bottlenecks including transport costs and energy prices are expected to come off in 2H22

But I do agree with Mike Burry that Biden's populist fiscal pump prime provided the spark. Biden signed the package in March and US inflation hit 5% in May and Powell say it was transitory

(16-06-2022, 03:54 PM)Behappyalways Wrote: [ -> ]https://fred.stlouisfed.org/series/T10YFF

US 10 year treasury should be around 1.5% to 2% above Fed's benchmark rates.

According to the “dot plot” of individual members’ expectations, the Fed’s benchmark rate will end the year at 3.4%, an upward revision of 1.5 percentage points from the March estimate.

https://www.cnbc.com/2022/06/15/fed-hike...-1994.html

If the Fed expects 3.4% by year end, then likely that 10 year treasury will probably hit 5%.

If the 10 year treasury bond rate is used as risk free rate, imagine the valuation of risk assets if it really hits 5%. Plus lower earnings due to recession, it would be a double whammy when you do valuation.

The next Fed meeting will be 45 days later and it is expected to raise rates by 0.5% to 0.75%. That meant that the 10 year treasury rate will probably rise to 4% by end July...



With no share buyback due to earnings announcements and probably earnings downgrade, things do not look good.

The sovereign bonds are probably going to get squeeze further with US increasing interest rate. Another good reason for me to like gold.

Anyone wants to buy the dip???
..........
The funny thing about the phrase "fortune favors the brave" is that the Roman author Pliny the Elder famously said this just before setting sail toward Mt. Vesuvius mid-eruption, and then immediately died

(29-08-2022, 10:35 PM)Wildreamz Wrote: [ -> ]Does it matter if we are in a recession? Or if the relevant agencies recognize this is an "official" inflation?

When is the best time to buy (or sell)? Before, during, or after a recession?

Because I'm not sure how, simply knowing whether or not we are in a recession (official or not), is actionable as a long term investor in individual companies, which may or may not be affected by a recession, if and when we get one.

Even if they are affected by a recession (e.g. earnings growth slow down a little, or temporary decline), we do not know how the market will react to that. Some companies' equity price, can continue to appreciate, during an "official" recession.

Tactically, I don't understand the point of this discussion as long-term investors. Just me personally.

hi Wildreamz,

I do agree 100% with what you talked about (ie. recessions don't have a significant impact on our investing decisions). And most probably the people who are actively involved in the discussion, actually do agree with you too. But that doesn't mean one can't discuss about a recession. It may be pointless to some people, but it will be arrogant to impose our own rule on others, isn't it?

I think VB.com is wise enough to be able to differentiate between "discussion" and "action".

For most people, the 2 issues above are hard to separate but from my participation on VB.com for these years, I think most VBs do separate them.

Hi Weijian, thanks for giving me a chance to clarify. I probably didn't choose my words wisely.

The discussion on whether this is a recession or not has been a popular topic on FinTwit, as well as in various investment circles. 

It's not about my own "rule" (in fact, I'm open to making money from any obvious market inefficiencies), just wondering earnestly, if there is any tactical/actionable value of knowing whether or not we are in a recession (official or not).

Just because I do not see/understand the value, doesn't mean there isn't any value. Hence, I'm hoping someone (especially those who actively thinks about such things, and engage in such discussions) could explain this to me. I could be overlooking some obvious points. 

Maybe the intention is that, this is just a discussion about semantics, which is perfectly fine as well.

So which one is it?

Interest rate is the cost of money and the boom bust cycle follows it. Buffett doesn't really care about it because the basic assumption is that the business and management will adjust accordingly to the changing circumstances in the next decade or so.

I am not a believer of buy and hold forever so the boom bust cycle will affect Asset Allocation decisions. If the market look forward 9-12 months then it has already discounted a mild recession and in my view this bubble is not as precarious as previous ones with little systemic risks. But if the Fed policy mistakes enabled a serious recession then all bets are off and Asset Allocation and risk budgeting will have to adjust accordingly.

If Fed rate hike is coming off then another obvious trade is short USD and long SGD, JPY etc but that's out of VB's context. So personally I don't see it as semantics.