...Elon is a disgrace !
....Goldman I reckon needs to get out first before calling a recession.
...I agree and disagree with "cash is trash" Dalio on his article below. The Feds action is already inducing recession but unlikely to bring inflation down to the 2pc target, unless Powell takes rates beyond 4pc
This is what Graham Summers says:
The U.S. has over $31 TRILLION in debt. At these debt levels, every 1% increase in rates means an additional $310 BILLION in interest payments.
We were already paying $305 billion in interest payments per year when rates were at ZERO.
They’re now at 1% and the Fed claims it’s going to raise them to 3%.This would mean the U.S. spending nearly $1 TRILLION in interest payments… without reducing our debt by even a penny.
Unless oil retraces quickly back to $80 and supply shortages end (first with end of the Ukraine war), everything is likely to stay high until and unless we get demand destruction. The problem is that demand destruction is unlikely to happen much even with higher prices as long as employment remains high and wages higher due to shortage of labour, which is happening. So yes Powell raising rates as high as is tolerable for the US is only going to make inflation come down perhaps 2-3% lower from 8.6%, and therefore they need to do bigger hikes (like 100bps) and sooner ....so if Powell wants to bring it to 2pc, he would likely have to push rates a lot higher than the 3+pc the market is factoring and we will likely get stagflation as Dalio says.
But yet Powell needs to hike rates because he has no other means to bring inflation down as he has no control over supply issues and the high price of oil. His rate hikes and QT would reduce household wealth via lower equity values in their portfolio and hope the wealth effect would help curb consumption and bring inflation lower. I still maintain Powell will raise his inflation target to 4pc down the track once he knows that it is impossible to bring it down to 2pc despite raising as high as he possibly can. And if the market wants to call that a Fed pivot (which is not), then we may see some positive but even that would be a little too late by then.
...US market came back with a vengeance today, which was not a surprise given oversold levels and short covering after big shorts last week. Steve Miller aka Slim also showed us in his cycle analysis that a move to the upside was imminent before going lower a little later. But nothing has changed since markets grappled with protracted inflation and prospect of recession first making its mark last week. I did indicate on this thread that the bear market never goes down in a straight line and that my projection(s) is not to be taken as meaning big falls is going to happen tomorrow, the next week or the next month, it is about the trend(s) forward.
....so this week could be good for the US market with perhaps follow through buying over the coming days , perhaps by up to 5% max to just under 4k on the S&P500. Just note that July 13 is the next CPI data release and July 26 is Apple's next quarter earnings release. Both may not be good news. Until then, it could be choppy with upside bias, but bigger drops ahead once we see more evidence of stagflation and its negative effects on corporate earnings. That's indices, individual stocks can continue to contract in their mean reversion process independently of the major indices.
ASX to rise, Wall St rallies broadly, Tesla surgesTimothy Moore
Australian shares are poised to catch the bear market rally that has lifted shares in Europe and the US. Tesla surged 9.4 per cent after Elon Musk confirmed he’ll cut salaried staff by 10 per cent as the economic outlook dims.
ASX futures were up 44 points or 0.7 per cent to 6459 near 6.35am AEST.
- On Wall St: Dow +2.2% S&P 500 +2.5% Nasdaq +2.5%
- In New York: BHP -0.1% Rio +1.3% Atlassian +2.5%
- Tesla +9.4% Apple +3.3% Amazon +2.3% Alphabet +3.9%
The local currency was 0.3 per cent higher; the Bloomberg dollar spot index was little changed. On bitstamp.net, bitcoin was up 3 per cent to $US20,915.01 at 6.40am AEST, paring earlier gains above $US21,000.
The yield on the US 10-year note surged 6 basis points to 3.28 per cent at 4.41pm in New York.
On Wall Street, all 11 S&P 500 industry sectors advanced, paced by a 5.1 per cent advance for energy. The VIX eased 2.7 per cent to 30.19.
The New York rally came even after Goldman Sachs lifted its probability of the US entering a recession over the next year to 30 per cent from 15 per cent in line with the Federal Reserve’s decision to lift rates fast.
Stagflation will be the cost of reducing inflation: DalioTimothy MooreBefore the Bell editor
Jun 22, 2022 – 4.42am
Bridgewater Associates co-founder Ray Dalio said it’s both “both naïve and inconsistent” to think that all the US central bank to check rising prices is to lift rates and “everything will be good”.
The hedge fund billionaire said “supposed experts” assessing moves in financial markets “is like listening to nails scratch against a chalkboard because they are typically saying incorrect things in an erudite rather than commonsense way.
“Markets and economic movements are driven by much simpler and more commonsense linkages than most people articulate.”
In a LinkedIn post, Dalio also said it was a “misunderstanding” of how the economy works to focus on inflation alone.
“The facts are that: 1) prices rise when the amount of spending increases by more than the quantities of goods and services sold increase and 2) the way central banks fight inflation is by taking money and credit away from people and companies to reduce their spending.”
Dalio said lifting rates “just shifts some of the squeezing of people via inflation to squeezing them via giving them less buying power”.
At the end of the day, there isn’t anything that the Federal Reserve can do “to fight inflation without creating economic weakness”, Dalio said.
“With debt assets and liabilities as high as they are and projected to increase due to the government deficit, and the Fed also selling government debt, it is likely that private credit growth will have to contract, weakening the economy.“
As a result, Dalio said “over the long run the Fed will most likely chart a middle course that will take the form of stagflation”.
