Major Moves Those of you who were trading through the Financial Crisis of 2008 and the subsequent rebound on Wall Street will remember an interesting period where every day felt like an opposite day. Whenever bad economic news would come out, stocks would jump higher. Conversely, whenever good economic news would come out, stocks would slump lower. On the surface, this market action seemed crazy. Why would traders push stocks higher on bad new? However, when you dug a little deeper, everything made sense. Traders were hoping the Federal Open Market Committee (FOMC) was going to boost its economic stimulus program with quantitative easing (QE), and they knew the FOMC was more likely to inject money into the economy if the economy was doing poorly. So traders were translating every bit of bad economic news as one more reason the FOMC would ultimately have to take action. I think we're seeing the same thing happening again. I've been talking all week about the growing belief … [Read more...] about Bad Economic News Is Good Again
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Share to Twitter Share to Linkedin Things have changed in our economy since the misery index was first invented in the 1970s. As I wrote on May 10 , one of the big changes is that more people own stocks — 41.9% of household wealth comes from stocks — about twice the level in 1992. So I developed a new misery index and it is higher than it’s been in the last 12 years. And it looks to me like it will keep getting worse unless a miracle happens. The Old Misery Index The last time we had high inflation in the U.S. was in the 1970s. In that decade, Richard Nixon severed the final links between the U.S. dollar and gold. The result was high inflation and high unemployment, according to Investopedia . An economist, Arthur Okun, created a simple misery index by adding the nation’s annual inflation and unemployment rates. Dubbed stagflation, several year of high inflation and high unemployment yielded a misery index of 12.7% in 1976. Jimmy Carter … [Read more...] about New Misery Index At 12 Year High
Share to Twitter Share to Linkedin Today Warren Buffett and Charlie Munger held court at the 2022 Berkshire Hathaway BRK.B BRK.A shareholder meeting. I’ve attended the event twice in Omaha. This year I watched on my iPad from a Starbucks SBUX in Ocean City, Maryland. Watching it live in Omaha is better. Yet as always, Buffett and Munger imparted their wisdom as only they can. Here are seven things I learned. 1. Berkshire Earnings Declined 53%, But Not Really The headline number for Q1 2022 was a decline of earnings from $11.71 billion last year to $5.46 billion this year. Dig a bit deeper into the numbers, however, and you realize why Warren Buffett has criticized an accounting rule that requires Berkshire to report unrealized investment gains and losses on its statement of operations. Berkshire’s operating earnings increased year over year. In Q1 2021 the company’s operations earned $7.018 billion (after tax). In the first three … [Read more...] about 8 Things I Learned From The 2022 Berkshire Hathaway Meeting
- A + A NEW YORK (May 17): US retail sales grew at a solid pace in April, reflecting broad-based gains and suggesting demand for merchandise remains resilient despite rampant inflation. The value of overall retail purchases increased 0.9%, after an upwardly revised 1.4% gain in March, Commerce Department figures showed on Tuesday. Excluding vehicles and gas stations, sales rose 1% last month. The figures are not adjusted for inflation. The median estimate in a Bloomberg survey of economists had called for an 1% increase in overall retail sales from a month earlier and a 0.7% jump in the figure excluding autos and gas stations. Treasuries sold off after the report, while stock futures held gains and the dollar remained lower. "While the increase will look less impressive after taking price movements into account, today's data still suggests that the squeeze on household incomes from inflationary pressures isn't yet having a material impact on discretionary … [Read more...] about US retail sales show consumer standing firm in face of inflation
Share to Twitter Share to Linkedin I’ve been drawing this and similar charts for months now: I actually think this will come to rest around $15,000 and $20,000 but the bottom could be around and even below $10,000. Bear in mind the low, however horrible it will look on the chart, will only last for perhaps minutes while the equilibrium low will be significantly higher. As I write, bitcoin BTC is at $29,300 having earlier hit $25,300 for a few minutes. Although that certainly looks like a capitulation there is almost certainly a lot more to come, because the driver for this mover is the draining of U.S. liquidity by the Fed and therefore a super rampant dollar crushing all currencies before it, including the euro and U.K. pound. Then there are the forced sellers in the Russia/Ukraine conflict to help push the crypto charabanc off the cliff. So unless something turns the corner the above chart still holds as a good road map. This has been … [Read more...] about Bitcoin, Ethereum Price Crash May 2022. What Next?