You may have noticed that the stock market is down
So here’s a thread to discuss it.
The Dow Jones Industrial Average dropped more than 1,000 points Monday as financial markets buckled in anticipation of inflation-fighting measures from the Federal Reserve and fretted over the possibility of conflict between Russia and Ukraine.
Stocks extended their three-week decline on Wall Street and put the benchmark S&P 500 on track to a so-called correction — a drop of 10% or more from its most recent high. The price of oil and bitcoin fell, and so did the yield on 10-year Treasury notes, a sign of investor concern about the economy.
“Investor concern” – you better believe it. I think that any investor who isn’t concerned must have been on a desert island for quite some time.
I’m surprised the economy and the market aren’t in even worse shape. It’s not just the effect of long-term COVID lockdown and lack of leadership. It’s that the current administration seems to be purposely driving the country off a cliff.
And maybe they are, if you believe they’re motivated by the Great Reset. Then again, never ascribe to malice what can be adequately explained by stupidity and incompetence. On the other hand, malice and incompetence aren’t mutually exclusive. Unfortunately, though, if the Biden administration is malicious, it’s also been rather competent at accomplishing its goals.
Extremely volatile.
As I type the Dow is down ‘only’ 460.
Defund the Swamp.
Griffin:
Yes, it’s not unusual for stocks to drop a lot and then pick back up in a single day.
The question is what is the long-term prospect for our economy.
The best word to describe the current situation in our beleaguered republic is “kakistocracy”, which is even more useful than the wonderful “anarcho-tyranny” because it describes the astonishing level of misgoverning not only at 1600 and throughout this illegitimate administration (basically, the entire foetid swamp, especially the “alphabet agencies”), but the mismanagement which has engulfed corporate America, Wall Street, Madison Ave., Hollywood, Silicon Valley, K-12, the colleges and universities, as well as publishing houses, libraries, museums and other cultural institutions. Nothing has been safe from increasingly rapid corruption by leftist maleficence and by “woke” insanity.
neo,
Well the stock market is not a very good judge of the economy.
One truism is that the stock market likes inflation but they really hate when the Fed starts doing something about it and that is kind of what we have happening now plus there is usually 1-2 10% market corrections every year and we didn’t have one in 2021 so this is probably overdue.
These things are always jolting because it takes a week to undue the gains of months. I also think Ukraine is just a cover that has little to do with what is going on now instead this is about rates and concerns about future earnings. The market is forward looking and they are seeing slower growth and less liquidity.
Okay, how are we going to get rid of the Biden, Harris, Pelosi.., chain of succession?
In the past 2 weeks:
NASDAQ is down about 15%
DJIA is down about 8.5%
S&P 500 is down about 10%
(My guess is Griffin knows this.)
That is less than 3% – big deal. It hasn’t been a valid indicator for quite some time as it is only 30 companies (those with the largest market caps, which no doubt most of the readers here are aware but many others are not which allows for the useless headlines meant to alarm). You want a sign re inflation? Check out https://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm#irate
You can buy inflation indexed treasury bonds at a yield of 7.12% The rate is locked for the next six months then it resets. It’s a 30 year bond but you can terminate after a year and forgo the last 3 months interest.
Yes, it’s not unusual for stocks to drop a lot and then pick back up in a single day.
Also known as a “dead cat bounce.”
I predicted this the other day.
“……libraries, museums and other cultural institutions.” LOL, yep!
So as you may remember I was a volunteer docent at the New England Air Museum until the move to Florida. I miss doing that sort of work and found there’s a museum of science and history here in Jax. I contacted them and when they found out I was a physicist and had docent experience they were very enthusiastic and had me fill out an application form so then they could arrange an interview. One box on the form said, “describe you thoughts on diversity, equity and inclusion”. I simply said, “treat everyone the same”. After waiting over 4 weeks, I called and was told they determined I wasn’t a “good fit”. I probably would have hated it there anyway.
The stock market decoupled from the economy shortly after Covid-19 struck. Interest rates at essentially zero. Where to put your money? Plus, many foreign investors have come in because we are a bastion of stability (at least that’s the way it looks to them) in a chaotic world. The selloff today was in response to so much bad news, but apparently, some investors realized that the bad news means that the Fed probably won’t rush to raise interest rates. Hence, a quick buying spree and recovery of some of the losses.
The long term outlook? If I knew, I would be sitting on my own island. IMO, this is a re-run of 1979 -81. Inflation will continue until our oil industry gets back to doing their thing, the supply chain normalizes, and the Fed quits printing money. All that depends to a great extent on who’s in power in D.C. Rough times ahead – at least for the next two years.
Inflation hedges will do well for the next two years. Real estate, commodities, oil and gas, etc. That’s if my guess about “conditions” ahead of us is correct. No guarantees there.
I kinda doubt Fauci is worried about the current stock market: $10.4 million in investments is a pretty nice cushion.
https://nypost.com/2022/01/15/dr-faucis-financial-disclosure-shows-10-4m-in-investments/
Although there is this
https://confoundedinterest.net/2022/01/24/the-market-has-never-plunged-10-this-fast-to-start-a-year-but-weve-had-biden-as-president-for-a-year/
Rufus,
Yep, that’s a correction (for now anyway could obviously be more). The NASDAQ is tech heavy and many tech companies borrow heavily and so the theory goes they are affected more by rising rates which is one reason it has been hit harder plus it is generally higher in the highs and lower in the lows.
One problem is that rates have been so low for so long that there is an entire generation of money managers that don’t know what it is like to operate in an environment with even 4-5% rates. Even if the Fed raises rates four times this year we would still be at like 1.25-1.5% or so. That is historically very low but to hear people talk it’s like 15% or something.
For the first time since the COVID-19 recession, the ‘R -word’ is stalking the Bull market.
Some say it turned bearish in November, almost coincident with the Omicron variant. Others say December or when market leading hi-tech stock turned down.
At any rate, the Fed bank planned 4 (to 6 some say) interest rate hikes in 2022 to counter inflation have become the leading talk for the New Year, tipping positive market incentives very recently. Add to this, the new seriousness about Russian invasion of Ukraine and US capitulation led by Putin’s buddy Bide. (Peter Schweitzer reckons that the Biden family has raked in $31 million from Russia and China in his new book. But who takes “right wing” research seriously? Too few to matter unless, perhaps, if there is an official investigation.)
But, there’s more. The US is a consumer driven economy, and people are already planning on spending less on vacations, and more at Costco bulk necessities. Both ends of the market – well off and working class – predict a drag on economic growth.
Finally, there’s growing evidence of pessimism among the people towards the future. This is a strong predictor of recession. (If you don’t recall, the surprise election of Trump reversed surging pessimism: in May of 2016, 74% thought the US was on the “wrong track” because of Obama.)
Additionally, there’s corporate word that supply chain woes on the shortage CPUs essential for auto and big consumer item production have worsened in the 4th quarter, and it’s not expected to get better before 2023. A similar crunch story reigns with energy and the oil necessary to make it.
Thus, the stock market is finally taking measure of a possible tipping point of the already quickly stalling economy. Finally.
The bond markets seem to think the Fed will raise interest rates by about 1/4 to 1/2 % when it meets in three months.
The reason the Fed would do this is to slow inflation. The reason the Fed should do this (actually even a greater jump) is to stop the insane, Keynesian stimulus we’ve grown addicted to. We’re at least 3 administrations past where the Fed should have eased up on quantitative easing and an easy money policy.
But because our Congress has been inept forever, and disastrously, destructively inept since Clinton and Gingrich left office, who knows what will happen if the economy slows? And, with high inflation, high commodity costs (oil is at a 6 year high) and the President and Congress increasing regulation the economy will almost certainly slow.
We’re trillions in debt and fiat currency past what I thought was sustainable, so shows how much I know, but saying we are in uncharted territory is a vast understatement.
So, yes, as Griffin wrote, “extremely volatile.”
Also as someone above mentioned the big numbers can be misleading going by percentages helps keep things in perspective.
Things are never as good as they seem in the good times and things are never as bad as they seem in the bad times.
The importance of the stock market is that the overwhelmingly white ranks of the upper-middle class and managerial class are currently what’s propping up Biden in the polls. They have been largely insulated from Biden’s disastrous leadership so far but will definitely start to notice if their portfolios and 401Ks start to take a beating.
Mike
The Fed meets this week and on Wednesday they release their statement and Powell gives his press conference. It is expected they will raise rates in March and a total of four or five raises for the year and also may announce they are going to start decreasing their insanely huge balance sheet which is also freaking out people worried about liquidity.
The market’s quite overvalued (though it has been worse in the period since 1994). Just letting the excess air out would translate into a 30% decline in share prices.
Yes, kakistocracy. A decade ago, it looked as if we had the worst political class in history, an observation one might have extended to academe. Now it applies to the general officer corps and the corporate leadership as well. Other sectors may not be at their historical worst, but they are in decline. The courts and the medical profession to name two.
I never understood “never ascribe to malice…” When people continuously act contrary to how any remotely reasonable person should act, regardless of IQ, and when they know or have every reason to know that what they’re doing is wrong, it’s fair to consider them malicious. At a certain point, any ignorance is willful and no longer an excuse.
The importance of the stock market is that the overwhelmingly white ranks of the upper-middle class and managerial class are currently what’s propping up Biden in the polls. They have been largely insulated from Biden’s disastrous leadership so far but will definitely start to notice if their portfolios and 401Ks start to take a beating.
The same people also invest in bonds. I can guarantee you they notice the inflation.
Would Putin move on Ukraine right before his pal Xi’s Berlin 1936 games…er I mean Beijing 2022 games?
J. J. has a sensible post. Long oil until the Putin Partition of Ukraine is over, is the BIG short play, if you have the change. But…long USD (short foreign currencies).
US interest rates are a mess because the Fed Bank has vast amounts of short term debt on its books. Selling them off into the market has been the plan for this year.
It is probably the best macroeconomic way for the Fed to manage this moment. Tank the short term rates in hopes the the long term rates hold or rise somewhat.
The strategy means dollar holdings will keep being attractive (sucking up foreign currencies, and punishing inflated ones like the Turkish Lira and Argentine Pesos and Venezuela), even as the market dives. It will also mean stock market declines won’t last long because liquidity will rush in to rescue it from apparent bottoms of 10 or 20%. (The real mystery is will we witness dramatic stock market declines of 60 or 50%? I say no — not unless more negatives align and corporate income collapses.)
For 2022, this is not just a stock pickers market but a market timers market.
But an increasingly — and unfamiliarly — bumpy one.
“The same people also invest in bonds. I can guarantee you they notice the inflation.”
I think you’re underestimating how un-savvy many of these people are and how consumed they are by in-group signifiers.
Mike
I have to wonder about the impact of the younger crowd who turned from working to gambling on the stock market during C19 era – the Robinhood & meme stock types..
I’ve watched nice gains take a dive in the last hour as well as bounce backs to positive territory in the last 15 minutes. With 8 minutes to go, all indices are positive….
“The U.S. IHS Markit flash composite purchasing managers index, one of the first comprehensive looks at economic growth this year, fell to 50.8 in January from 57.0 in December, severely undershooting expectations and signaling almost no growth in the economy. Economists had forecast a reading of 56.7.”
https://www.breitbart.com/economy/2022/01/24/u-s-economy-slows-to-near-standstill-as-omicron-supply-chain-delays-and-inflation-surge/
Ray+Van+Dune asks, “Okay, how are we going to get rid of the Biden, Harris, Pelosi.., chain of succession?”
Pelosi will be gone on Jan 4th. Biden and Harris no later than Jan 20th 2024. Of course if they stumble into a nuclear war with Russia and/or China it could be sooner. I think that a low probability scenario but certainly within the realm of possibilities.
shadow,
Malevolence is their motivation, incompetence their level of skill.
Griffin,
I don’t think that Biden’s puppet masters intend to get into a shooting war with Russia but they might well stumble into one.
For the record all three major indices ended up between .3 and .6% positive.
Doesn’t change any of the commentary by anyone above but it may signify a short term bottom. Or not, who knows.
Ray+Van+Dune (2:33 pm) refers to “the Biden, Harris, Pelosi.., chain of succession”.
I do wish there was a little more disruption in *this* supply chain!
Im surprised it took so long. Ive been preparing for this the last 14 months, so I havent been hit like others. Im not at all happy about it.
All the young bucks are getting their lesson.
I think you’re underestimating how un-savvy many of these people are and how consumed they are by in-group signifiers.
Perhaps.
Saw this post, went upstairs to do some housework, listening to Larry Kudlow on Fox Business. All indices up slightly. Of course, they were already down from recent highs. We have a neighbor who used to be a day trader. So glad he doesn’t do that any more. What a ride today!
I’m young enough to ride this out, assuming Biden doesn’t go full Hugo Chavez on us in this next year. That’s unfortunately a big assumption.
I wish I knew why the stock market does what it does. I took most of my money out of the market a few years ago and now of course I wish I had invested in Tesla.
I don’t really know what to invest in right now. I think stocks are due for a major correction but so far I’ve been wrong. I thought gold and silver would have gone up a bit more with all the inflation worry, but they’ve been flat for awhile. Perhaps I should put all my money in fine whiskey, ammunition and freeze dried food. But I don’t really like whiskey and I don’t know where I’d store all the food. Oh well. I recently bought about a ten year supply of dental floss so that’s one less thing I need to worry about.
T.I.N.A.
There Is No Alternative.
Or maybe to be exact there is no better alternative.
There has been no where in the world to get return on investment like the US stock market for a long time at least since 2017 which partly explains why the market has been so buoyant.
Is that going to be true going forward?
Having planned to retire this year I may have to postpone.
Griffin….”There has been no where in the world to get return on investment like the US stock market for a long time at least since 2017 which partly explains why the market has been so buoyant.”
Return on investment has a *lot* to do with valuation at the starting point. See John Hussman’s piece The Wealth is the Denominator and focus on the chart ‘actual subsequent 12-year nominal return *versus* (the valuation metric of) market cap/value-added’.
https://www.hussmanfunds.com/comment/mc211015/
“the current administration seems to be purposely driving the country off a cliff” likely at ChiCom behest.
When asked what the Stock Market would do next J. P. Morgan is said to have replied … “It will fluctuate.”
You can feel like a genius when your stocks are going up in price. But then you should feel like an idiot when they go down.
Some of the best advice Dad gave me was to always have ‘an emergency fund’.
Even though we are both long retired and get pensions plus Social Security, we STILL have one.
One psychologically worrying thing is there are a lot of theoretical adults now who’ve never known a world where the stock market didn’t always go up and up by a lot. Even with the financial crises of the past couple of decades, the market always quickly rebounded to reach new highs.
The S&P 500 was at 283.16 in January 1928. It was at 315.02 in June of 1982. It hit 4,766.18 in December 2021. We’ve reached the point where merely a return to historical norms will feel like the apocalypse to two or three generations of stock traders.
Mike
@ physicsguy > “One box on the form said, “describe you thoughts on diversity, equity and inclusion”. I simply said, “treat everyone the same”. After waiting over 4 weeks, I called and was told they determined I wasn’t a “good fit”. I probably would have hated it there anyway.”
And Florida is one of the saner Red states.
Take solace in this op-ed by The Great Doctor P (who incidentally may have a new calling).
https://nationalpost.com/opinion/jordan-peterson-why-i-am-no-longer-a-tenured-professor-at-the-university-of-toronto
“The appalling ideology of diversity, inclusion and equity is demolishing education and business”
(many people prefer his slight emendation of the acronym)
https://babylonbee.com/news/doctor-who-ratings-saved-as-the-doctor-regenerates-into-dr-jordan-peterson
Worth clicking just to see the picture.
@PhysicsGuy:
Are you anywhere near Kermit Weeks’ Fantasy of Flight museum? I’m pretty sure he’s not full of @#$%.
If ever there was a guy who spent his huge inheritance in a fun and responsible manner, it’s Kermit W.
Checked. He’s quite a bit further South. You’ll just have to buy yourself a small plane and commute then.
This may explain some of the naïve reactions of the younger set in re the economy.
https://www.theblaze.com/news/wharton-students-guess-average-american-salary
“Nina Strohminger, a professor of legal studies and business ethics at the school, said in a tweet Thursday, “I asked Wharton students what they thought the average American worker makes per year and 25% of them thought it was over six figures. One of them thought it was $800k.”
“Really not sure what to make of this (The real number is $45k),” she added.”
“On the other hand, malice and incompetence aren’t mutually exclusive….”
No, but neither are malice and competence.
There is such a thing as having a genius for destruction. (Taking control over the language is a definite pre-requisite, as Orwell—perhaps echoing the Psalmist—has told us again and again…and now, even Orwell is being canceled!)
Indeed, “Biden” and “his” extensive, well-entrenched cohort) is aiming for that iceberg…AKA “The Great Reset”(TM) or perhaps even “The Great Correction”, “The Great Emancipation”, “The Great Liberation” or “The Great Redemption”….”The Great Replacement”?….
So as to achieve a “more perfect” “justice”….
What confuses us (or most of us…or maybe just some of us?) is that leaders—and political parties—are not generally supposed to purposefully destroy the country they purportedly lead.
Most people who are “normal” (whatever that might mean) would find such a phenomenon counter-intuitive. Or scandalous? stupid? evil?…Though comic genius’s like Mel Brooks might well be able to make it pure comedy….
(OTOH, perhaps it’s perfectly normal for those who view themselves as Divine—it matters not which “religion”!—or divinely inspired…(which, unfortunately, would seem to go hand in hand with declaring their enemies Demons….)
Unfortunately, and not for the first time, “normal” has been turned on its head so that the “normal” has become the perverse; and the perverse is being pushed hard and on multiple fronts so that it will become the norm…along with all the corruption, destruction and collapse that such perversity entails.
Essentially, the Democratic party’s credo is: “USA delendo est”.
Their overarching ethos: “How much can we destroy and how quickly?…while pulling the wool over the eyes of those we wish to destroy and making their lives as miserable as possible.”
It begins…
…speaking about “destruction”, that is (with “Obama-Light” leading the way):
“Kenney declares food crisis, demands feds end the mandate”—
https://www.thecountersignal.com/news/kenney-declares-food-crisis-demands-feds-end-the-mandate
H/T Blazingcatfur blog.
So Albertans are the “canaries in the coal mine”, now? Well, it does make sense: those oil-producing—and oil-sands-loving—“enemies of the people” ..
Tuvea @ 9:42pm,
Sage wisdom from the honorable Justice Elihu Smails:
AesopFan,
That Babylon Bee piece is well done and hilarious. If I had to guess, I’d bet that’s Frank Fleming’s work.
AesopFan,
That statement from Professor Strohminger says a great deal. How incredibly out of touch.
Maybe it was just the blue collar neighborhood I grew up in, but when I was in High School everyone worked and everyone was very cognizant of what things cost. I made $2.85/hour and some of my co-workers were adults. Even if their spouses had similar jobs, I had a pretty good idea what household income was for many.
When my kids were in High School I noticed a lot of their friends didn’t have jobs. Even if one is from a white collar home, it’s important to do hourly labor when young, but I guess a lot of families don’t function that way. When they were Juniors in High School I also “opened the books” regarding our household. I’d sit down with them and tell them my income. Then I explained what is taken out of my gross pay and what my net income is. Then I went through our monthly budget; mortgage, their private school tuition, saving for their college, groceries, auto loans, insurance… Walking them all the way through to disposable income.
Home economics. Ought to be mandatory in every High School.
zaphod,
Thanks for the tip on Kermit Weeks. I have driven by that museum dozens (a hundred?) times but never stopped in. I will make a point of doing that now. Our family loves museums! One of the Little Fireflies has built her career on our family’s many, many days spent in museums.
Like an alcoholic addicted to the “wee pick me up” first thing in the morning, this economy has become addicted to nearly free borrowing and student loan pauses. First, interest. Most entities borrowing (from the federal government to individual families) can only afford to do so because interest is 4% or below. Double or triple interest costs, and most of these entities become functionally bankrupt. We need at least an 8%-10% interest rate to stop this inflation, but 4 or 5 percent would take out a bunch of cities and states, and 8% would take out the Treasury. Some of us poor sods 50ish remember 14% inflation somewhat (I remember that we could afford the house, but not the furnace the first year….), but few of working age remember having to try to actually pay it.
The stimulus plan and stopping federal student loan payments goosed the 2020 econony, at the cost of real inflation hitting the 15% to 20% range for a while. Now, even middle class people need the student loan payment money just to make ends meet. (I’m looking at my budget if payments restart, and it is going to HURT. And those are loans for my kids, not for us.) The Government will have no choice but to issue a blanket forgiveness of most or all of the outstanding student loans, or watch the economy crash in March (including a massive amount of defaults).
Trump went to Wharton. I bet he had a more accurate idea of what people get paid.
Aesop, Peterson as The Doctor could totally work! Imagine them casting a colonial!
Rufus, I took home ec in eighth grade and then general business later on in high school. Both were useful, though the home-economics not as much as I expected. Maybe it just took a few decades to really take root. (One of my regrets from junior high is not putting more effort into the decorative cushion project in that class. The substandard grade I got from the teacher for that was amply deserved. But that was the usual last-minute habit rearing its head again.)
“The Government will have no choice but to issue a blanket forgiveness of most or all of the outstanding student loans”
But if that “blanket forgiveness” is just the government stepping in and paying off those loans…what does that actually achieve? The federal deficit in 2021 was roughly $3 trillion. That’s about three times bigger than in pre-pandemic 2019.
Total student debt in the U.S. is about $1.7 trillion. I don’t think there’s any way the Feds can take on that much extra debt as interest rates are going up to fight inflation.
Mike
Phillip, I take it your “decorative cushion project” did not leave you with the life cushion you had hoped for. I presume that is partly because whatever you used as stuffing did not include enough Benjamins. 🙂
I’d like to see a thread here on real estate valuations. I find them insane.
MBudge said: But if that “blanket forgiveness” is just the government stepping in and paying off those loans…what does that actually achieve?
It will be step 1 of recognizing that practically all dollar-denominated loans will default or take a massive haircut. There is no way that Treasuries, state bonds, and municipal bonds will be paid at face value with uninflated dollars, we just don’t have the free wealth in the economy to leach off that much money.
Either the US declares a loan jubilee or it inflates. The first hurts the rich and the people saving (i.e. the people who can recover the best), the second destroys everyone and probably leads to a Yugoslavia style crack-up (even if there is something called the USA on the other side).
As I told my late wife and kids a couple of years ago, it wouldn’t bother me so much that we seemed to be replaying the Great Depression and Weimar Germany if people weren’t 100% intent on using history as a how-to guide to do it again. Nothing since then has changed my mind.