Investing General Discussion

Jysin · Apr 7, 2022

09:04 (US) Fed’s Bullard (voter, hawk): Current Fed policy is too low by about 300 bps
- Even a "generous" reading of monetary policy rules show federal funds rate of around 3.5% needed to fight high inflation vs current rate of 0.25% to 0.5%
- Important that the Fed now ratify the guidance it has given with rate hikes at coming meetings
- Yield curve inversion signal should be taken seriously
- Fed not as far behind the curve as some models show
- Even with financial market tightening, Fed remains behind the curve in inflation fight
- Sees US unemployment rate falling below 3% this year
- Sees US GDP growth slowing to 2.8% in 2022
- US economy is in a good position to navigate rate hikes

Zog · Apr 7, 2022

Wouldn't a falling inflation number with higher rates be good for the market? Serious question.

Profit margins shrinking is bad but wouldn't the idea of fed succeeding to fight inflation be bullish?

Mist · Apr 7, 2022

Zog said:
Wouldn't a falling inflation number with higher rates be good for the market? Serious question.

Profit margins shrinking is bad but wouldn't the idea of fed succeeding to fight inflation be bullish?

Markets like free money, period.

Aldarion · Apr 7, 2022

Out of curiosity, and to learn for future such events, is anyone holding something that didnt get assraped over the last few days? I don't see anything systematic in the top gainers. Looking at my own portfolio, its commodities down, most stocks down across all sectors. A couple unimportant exceptions.

Is anything systematically holding value or is everything just bullshit for a little while?

Blazin · Apr 7, 2022

Aldarion said:
Out of curiosity, and to learn for future such events, is anyone holding something that didnt get assraped over the last few days? I don't see anything systematic in the top gainers. Looking at my own portfolio, its commodities down, most stocks down across all sectors. A couple unimportant exceptions.

Is anything systematically holding value or is everything just bullshit for a little while?

My stockholdings have had an incredible last few weeks up very strongly.

ABBV <- SOld and now out of it
MDT
MRK
ABT
CAH
MPC

All up so much they are pushing my covered calls. Theme is HEALTHCARE and Energy. So my guess is based on your post that you are missing Healthcare exposure. I chose to go almost 60% healthcare for 2022 and so far market participants are following me.

Jysin · Apr 7, 2022

10:45 (US) Fed’s Bullard (voter, hawkish dissenter): Leaning towards supporting 50bps hike at May meeting but will watch data
- Q&A with reporters
- MBS sales are not imminent; Want to get passive runoff started then assess later
- Recent spike in yields means the Fed is not as far behind the curve
- As it stands do not think Ukraine war should be a reason to avoid action on US inflation
- Most of balance sheet decision already priced in, no reason for that to influence pace of interest rate increases
- Would like to see fed funds rate reach 3.5% in H2

Jysin · Apr 7, 2022

Blazin said:
...

All up so much they are pushing my covered calls. Theme is HEALTHCARE and Energy. So my guess is based on your post that you are missing Healthcare exposure. I chose to go almost 60% healthcare for 2022 and so far market participants are following me.

I had LABU calls a month ago. Right idea, wrong timing. Healthcare has been massively oversold and seems to finally be catching a bid.

Blazin · Apr 7, 2022

Jysin said:
I had LABU calls a month ago. Right idea, wrong timing. Healthcare has been massively oversold and seems to finally be catching a bid.

I noticed how Healthcare lagged 20-21 and forces were aligned for them to perform well on the fundamentals. As usual the only thing catching me off guard is just how strong they are, certainly more than I was expecting for being 1/4 of the way into the year. I have two that are now in the money on my calls that expire next week, and I really don't want to let them go so will probably have to roll the calls out if they don't cool off soon.

Gravel · Apr 7, 2022

Jysin said:
09:04 (US) Fed’s Bullard (voter, hawk): Current Fed policy is too low by about 300 bps
- Even a "generous" reading of monetary policy rules show federal funds rate of around 3.5% needed to fight high inflation vs current rate of 0.25% to 0.5%
- Important that the Fed now ratify the guidance it has given with rate hikes at coming meetings
- Yield curve inversion signal should be taken seriously
- Fed not as far behind the curve as some models show
- Even with financial market tightening, Fed remains behind the curve in inflation fight
- Sees US unemployment rate falling below 3% this year
- Sees US GDP growth slowing to 2.8% in 2022
- US economy is in a good position to navigate rate hikes

Wouldn't a sub 3% unemployment rate be historic? Like, getting below 4% means we're all full employment essentially? Or have they fiddled with how it's calculated so much that we'll start seeing negative unemployment rates?

Blazin · Apr 7, 2022

Gravel said:
Wouldn't a sub 3% unemployment rate be historic? Like, getting below 4% means we're all full employment essentially? Or have they fiddled with how it's calculated so much that we'll start seeing negative unemployment rates?

Yes, it "Should" entice the workforce participation to increase. Normally it wouldnt drop below that level because at that point it's sufficiently tight to entice people back into work. Which it is doing, participation is climbing but we still have room for improvement there. This is a prime driver for the fed and the reason they have to be careful not to be too hawkish because expanding that labor pool is what we want.

People get rather angsty about the UE rate and would be better served to track the UE rate plus participation, can't just look at one of them. THe pandemic response (thanks govt ) drove people out of the work force and some of them are going to be very hard to entice back, the participation rate changes very slowly just a tenth here and there so we ideally need a few years of low unemployment to get the participation back inline with historical levels.

Mist · Apr 7, 2022

I have absolutely no faith that the workforce participation rate is capturing anywhere even close to all consistently reoccurring income generating activities.

Aka a whole bunch of people found some hustle that pays the bills that isn't yet being accounted for. And this has probably been going on for a while, since the last recession, and exacerbated recently.

Sanrith Descartes · Apr 7, 2022

Aldarion said:
Out of curiosity, and to learn for future such events, is anyone holding something that didnt get assraped over the last few days? I don't see anything systematic in the top gainers. Looking at my own portfolio, its commodities down, most stocks down across all sectors. A couple unimportant exceptions.

Is anything systematically holding value or is everything just bullshit for a little while?

Blazin responded but I want to expand on it. I believe it is more than just Healthcare/energy. We are seeing rotations into safer value plays. Consumer staples for example. WMT hit a 52-high today. KO 52 high today. PG closing in on a 52-high, HDV near a new high as is JEPI. Its not industrials because the war shot the industrials up and so they are already up. With inflation ripping and no end in sight, people will stop eating out at restaurants but still have to eat. Places like WMT excel at cheap stuff and cheap groceries and this is what gets boosted during these periods.

This is why a diverse portfolio is so important.

Aldarion · Apr 7, 2022

Sanrith Descartes said:
Blazin responded but I want to expand on it. I believe it is more than just Healthcare/energy. We are seeing rotations into safer value plays. Consumer staples for example. WMT hit a 52-high today. KO 52 high today. PG closing in on a 52-high, HDV near a new high as is JEPI. Its not industrials because the war shot the industrials up and so they are already up. With inflation ripping and no end in sight, people will stop eating out at restaurants but still have to eat. Places like WMT excel at cheap stuff and cheap groceries and this is what gets boosted during these periods.

This is why a diverse portfolio is so important.

Its true, youve both nailed areas my portfolio lacks (aside from index funds) - consumer staples and healthcare. Every time I look for something to buy in either sector I only seem to find stocks at their ATH. Got plenty of energy but just apparently the wrong ones!

Jysin · Apr 7, 2022

Sanrith Descartes said:
.... With inflation ripping and no end in sight, people will stop eating out at restaurants but still have to eat. ..

Nothing we can't bail out.

12:04 (US) House passes $55B COVID relief bill for restaurants and businesses - press

Sanrith Descartes · Apr 7, 2022

Aldarion said:
Its true, youve both nailed areas my portfolio lacks (aside from index funds) - consumer staples and healthcare. Every time I look for something to buy in either sector I only seem to find stocks at their ATH. Got plenty of energy but just apparently the wrong ones!

Its the challenge of diversity. When growth is ripping no one wants to own staples or Utilities. When the recession is on the horizon, everyone piles in to the cash cow value stocks. This is where the balance comes in. Owning WMT is never "flashy". But with its dividend you can make 12-15% a year. The good thing about it and why you own it is that it never really tanks and in times of bad economies it shines.

Sanrith Descartes · Apr 7, 2022

Jysin said:
Nothing we can't bail out.

12:04 (US) House passes $55B COVID relief bill for restaurants and businesses - press

When a family of four are having to spend $35+ at a fast food restaurant they stop eating out or at least cut the frequency. This type of spending is how we got to 8% inflation.

Jysin · Apr 7, 2022

Sanrith Descartes said:
When a family of four are having to spend $35+ at a fast food restaurant they stop eating out or at least cut the frequency. This type of spending is how we got to 8% inflation.

I 1000% agree. My post was in jest.

Sanrith Descartes · Apr 7, 2022

Just getting back to my office. Dropped in an order to grab FDX at $199 and sell some May puts on F at the $12 strike (adjusted after yesterday's order didnt hit and we tanked again today). BA is starting to look like that drunk bitch at the bar at 3am. I know I will probably regret it, but it could end up being a good ride for a very short amount of time.

Mist · Apr 7, 2022

Sanrith Descartes said:
When a family of four are having to spend $35+ at a fast food restaurant they stop eating out or at least cut the frequency. This type of spending is how we got to 8% inflation.

I don't see how the second part of your statement tracks.

We got to 8% inflation because of energy prices, housing prices, car prices, materials prices, Fed money printing, over a decade of low Fed interest rates finally catching up to us once the music stopped, businesses getting their payrolls covered, government handouts, and tariffs on cheap imports from China, in that order.

We did not get to 8% inflation because of people going to Five Guys.

Sanrith Descartes · Apr 7, 2022

Mist said:
I don't see how the second part of your statement tracks.

We got to 8% inflation because of energy prices, housing prices, car prices, materials prices, Fed money printing, over a decade of low Fed interest rates finally catching up to us once the music stopped, businesses getting their payrolls covered, government handouts, and tariffs on cheap imports from China, in that order.

We did not get to 8% inflation because of people going to Five Guys.

The second part was in direct reply to the Covid Spending bill I replied to. In my mind the two responses worked together.

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