Anybody Buying Yet? Where’s the Bottom?

[SAJ-99]

Hawkish on speech. The problem is the same 12 people know that a rate increase doesn’t do squat to the price of oil.

 

[Jack Ryan]

I like this move. Shows some conviction. Good to see that BRK is moving upward again after a long period of going nowhere.

Didn't hit my limit on the SPCX but I made money both ways on limit trades with BRK and the SPY.

 

[jryoung]

Sure, that is legit. But it misses the point. The market looks forward. Q2 earnings were amazing and QQQ is lower.

Below is the chart (credit: Yardeni) that sticks with me. The Blue line (earnings) is with inflation, the Red line is GDP minus inflation. It is pretty odd to see these go in different directions. The economy is 'meh" and the earnings are awesome. Sorry, but I don't think that can keep going. Only way it can is the "benefits" of AI have to start showing up in non-tech earnings.

(I hate the word "bubble". If I want to sound like Cramer, there is always a bubble somewhere. I am looking for tomorrow's bubble.)

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That's a good chart. We have so much data now....and noise. You're spot on with earnings outside of tech being necessary. Do you think we have better analytics now with respect to risks related to hidden debt and or leverage than we had in the past? Or with what happened to Situational Awareness an example of how the market/data can react faster to avert a collapse or not overblow a situation? Was Situational Awareness an outlier?

Not sure if that makes sense or not.

 

[SAJ-99]

Do you think we have better analytics now with respect to risks related to hidden debt and or leverage than we had in the past? Or with what happened to Situational Awareness an example of how the market/data can react faster to avert a collapse or not overblow a situation? Was Situational Awareness an outlier?

Prime Brokers know the leverage amounts and report it to regulators. They might have issues tracking pledged collateral, but that wasn't your question. Hedge funds blow up, usually for the same reason. LTCM 1997, Amaranth 2006, Sit Aware this year, etc. Don't worry about those guys. They get new jobs doing the same thing somewhere else. I don't think there is much in the way of hidden debt or leverage and the market has handled the last few blow ups pretty well.

Bear Stearns was a bank. Leverage is the core of their business model. All is fine until it isn't. Their Structured Credit funds went out of business in early 2007. That is considered the "starting flag" of GFC but the investors/prime brokers took the loss. Those funds didn't cause the bank to go under, it was the leverage on their balance sheets.

Back to the point, we have MUCH more (maybe better?) data today. The Fed is probably getting stale data. Hedge funds invest in satellites that take pictures of store parking lots, they buy credit card data, and even individuals can track ships through the Hormuz. The amount of data is amazing.

In today's Q&A, Warsh said he didn't think the labor market had to worsen for inflation to come down. I think this is an incorrect view, at least to get it down to 2% with any speed. I hope he is right and I am wrong.