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Markets still falling like whoa

Llano Estacado

By Llano Estacado
in Business and Markets

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Eastwood
Eastwood

That's why I'm out. There is no end game, IMO. This has to be fixed outside of the market and I got too nervous about what that entails for retail investors. They will always be last on the list, if o

Rusty Shackelford
Rusty Shackelford
Eastwood
Eastwood

I'm not a financial advisor. This is not financial advise. I don't work in finance. I do not have a degree in finance. Actually, I have a BA and I'm bad at math past Cal I. I won't apologize for the l

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washparkhorn

washparkhorn 9939

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Posted (edited)

When the deficit hawk head of the Fed says stimulus needed, Wall Street listens. Good news for the market (and the markets crave certainty).   Until there is increased uncertainty again, which there will be, the Fed is not letting the economy crumble. Dollar strengthens. Markets Rally. Rinse and Repeat, until that doesn't work anymore. 

Be careful out there. A lot of elements in motion with some illogical players thrown in.  Know you exit routes, always.  

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Parliament

Parliament 14283

Posted
Posted

So this is gonna cause a whole buncha inflation, correct? All that money we got gave is sitting in our checking accounts is fixin' tah get spent once things open up. Too much money chasing too few goods. Bam. Inflation.

So how do we as individuals protect ourselves? Is it as simple as staying invested in stocks?

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B00M

B00M 6437

Posted
Posted
2 hours ago, Parliament said:

So this is gonna cause a whole buncha inflation, correct? All that money we got gave is sitting in our checking accounts is fixin' tah get spent once things open up. Too much money chasing too few goods. Bam. Inflation.

So how do we as individuals protect ourselves? Is it as simple as staying invested in stocks?

Where the fuck do you live where you're so locked down you can't buy items right now that could become scarce and contribute to CPI? Russia? Ohio? I don't think the price of cruise tickets and sporting events factors into inflation calcs

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washparkhorn

washparkhorn 9939

Posted
Posted (edited)
3 hours ago, Parliament said:

So this is gonna cause a whole buncha inflation, correct? All that money we got gave is sitting in our checking accounts is fixin' tah get spent once things open up. Too much money chasing too few goods. Bam. Inflation.

With respect, the Fed knows how to bleed off inflation, e.g. put upward pressure on bond yields by the Fed cutting back on US Treas. securities.

The Fed has limited tools to combat a stalling economy. <----- We are here.

Demand-pull inflation (too much money chasing too few goods) is not significant at this time. Quite the opposite generally - we have excess capacity and little demand.

Cost-push inflation is tempered by the public backing (funding) the maintenance of markets during Covid (stabilize markets and relationships, and wait for the consumer to return, which was prudent policy but incomplete). 

Easy two-part  and  new analysis from the St. Louis Fed on your concerns: https://www.stlouisfed.org/on-the-economy/2021/march/servicing-national-debt and https://www.stlouisfed.org/on-the-economy/2021/march/does-rising-national-debt-portend-rising-inflation

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"Andolfatto noted that exactly how large a deficit the government can run depends on the debt-to-GDP ratio, which the government doesn’t determine. The ratio is determined by market demand for debt, which, in turn, depends on the structure of interest rates either set or influenced by the Fed. “There is presumably a limit to how much the market is willing or able to absorb in the way of Treasury securities, for a given price level (or inflation rate) and a given structure of interest rates,” Andolfatto wrote. “However, no one really knows how high the debt-to-GDP ratio can get. We can only know once we get there.”

The purchasing power of nominal wealth is inversely related to the price level, Andolfatto pointed out. While a higher price level means the average person’s money buys fewer goods and services, inflation is the rate of change in the price level over time. It’s also helpful to distinguish between a change in price level that is temporary and a change in inflation, which is persistent.

A one-time increase in the supply of debt that doesn’t correspond to increased demand can likely mean a change in the price level or the interest rate, or both, the author explained. A continuing debt issuance not met by a corresponding growth in the demand for debt is likely to show up as a higher rate of inflation. How the interest rate on U.S. Treasury securities is affected depends mainly on Fed policy, Andolfatto wrote.

“As long as inflation remains below a tolerable level, there is little reason to be concerned about a growing national debt,” the author wrote. “Like a firm that finances itself with convertible debt, the prospect of involuntary default is never a concern.”

In reality, a firm that exercises its conversion option is likely to experience share dilution, while a government that monetizes debt is likely to experience a jump in the price level, he added.

The Fed has had an official 2% inflation target since 2012 (see the figure below), but Fed officials have said they would be willing to let inflation exceed this target if it would help an improving labor market. But what might happen if inflation rises and remains above a tolerable level? The Fed might have to cut back on purchasing U.S. Treasury securities, which could put upward pressure on bond yields.

 

Inflation is a political scare tactic presently. 

Remember your Fed Chair is a Deficit Hawk/Republican and he is not worried about inflation (the Fed has the tools to combat inflation). The Fed is working the other side of the equation because that is where the systemic risk lies.  

Inflate (2% ideally) or die. 

Edited by washparkhorn
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LTtxfan

LTtxfan 49329

Posted
Posted
On 3/2/2021 at 2:03 PM, washparkhorn said:

With respect, the Fed knows how to bleed off inflation.     Inflation is a political scare tactic presently.   Remember your Fed Chair is a Deficit Hawk/Republican and he is not worried about inflation (the Fed has the tools to combat inflation). The Fed is working the other side of the equation because that is where the systemic risk lies.    Inflate (2% ideally) or die. 

So what foreign land are you writing us from??

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Tailgate

Tailgate 3022

Posted
Posted

Everyting I read late last year is happening:

"Look for a choppy first half of 2021 and then markets should be in good shape in second half of the year when vaccinations and some sense of "normalcy" returns.

A healthy pullback IMO. Could go more in the next few weeks...but I am holding steady.

 

 

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Cheeseweasel

Cheeseweasel 26438

Posted
Posted
18 minutes ago, Tailgate said:

Everyting I read late last year is happening:

"Look for a choppy first half of 2021 and then markets should be in good shape in second half of the year when vaccinations and some sense of "normalcy" returns.

A healthy pullback IMO. Could go more in the next few weeks...but I am holding steady.

 

 

100%. I'm not falling for the "Get out now and get back in later" trap. Because I'll fuck it up on both ends.

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hornian

hornian 5222

Posted
Posted
1 minute ago, Cheeseweasel said:

100%. I'm not falling for the "Get out now and get back in later" trap. Because I'll fuck it up on both ends.

That's where I'm at. I left everything in my portfolio in March last year, and ended up 45% for the year anyway. 

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Slacks

Slacks 6838

Posted
Posted
1 hour ago, Cheeseweasel said:

100%. I'm not falling for the "Get out now and get back in later" trap. Because I'll fuck it up on both ends.

Yeah... this is where most of my negatives come from...  I have learned to just buy more and be patient. I'm not a trader.  I'm a guy who would like to have assets.

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