The Stock Market thread

[Edward64]

Originally Posted by albionmoonlight

Dollar cost averaging. Just keep putting the same amount/percentage away every week.

And the good news (which we don't hear about because the media is addicted to bad news) is that all the signs are pointing toward inflation having gotten under control in the medium/long term.

I guess it depends on what under control means

I've read that inflation will be lower but not nearly back to the "old" normal ... so still high relatively speaking.

[Edward64]

Originally Posted by Edward64

Well crap. I'm happy that you guys seem to be doing okay. WTF with my area then?

Not good. Checked zillow again and the theoretical zillow price went down again.

Still happy at how much it has appreciated over the past 2-3 years but somewhat disheartening to see ... especially when you guys are reporting continued appreciation.

Oh well.

[Atocep]

Originally Posted by Edward64

Not good. Checked zillow again and the theoretical zillow price went down again.

Still happy at how much it has appreciated over the past 2-3 years but somewhat disheartening to see ... especially when you guys are reporting continued appreciation.

Oh well.

This month was the first drop we've seen on our home estimate in 2 years. I expected it. Up over 50% in 2 years wasn't sustainable.

[Edward64]

Originally Posted by Atocep

This month was the first drop we've seen on our home estimate in 2 years. I expected it. Up over 50% in 2 years wasn't sustainable.

Good to know (selfishly) that I'm not alone here.

I wonder how far down it'll go. Hopefully, not back down to pre-Covid.

[Edward64]

Just another data point to confirm what we know is coming ...

https://www.cnbc.com/2022/07/11/home...-of-covid.html

Americans are canceling deals to buy homes at the highest rate since the start of the Covid pandemic.

The share of sale agreements on existing homes canceled in June was just under 15% of all homes that went under contract, according to a new report from Redfin.

Homebuilders are also seeing higher cancelation rates.

Higher mortgage rates have also caused some borrowers to no longer qualify for the loans they want.
:
Buyers are also seeing the once red-hot market turn around quickly and dramatically. They may no longer see the urgency in bidding for a home that they feel might depreciate in the coming year.

[Solecismic]

A lot of this is sticker shock on the increased prices. The house a few hundred feet from here ended up selling quickly once the price came down to where it would have been before the run-up.

There's another, right across the street from that one, that went on the market three days ago and already has more than 1,000 views and 50 saves on Zillow - which is a much faster rate than pre-COVID. It seems to be priced reasonably if the owners did the modifications properly that seem to be indicated in the pictures.

A third home at the edge of the neighborhood, clearly a gut-and-restore within a nice brick exterior, went pending within 24 hours of going on the market last month, went back on the market a week later, then pending again within another 24 hours. It seemed priced almost as land would be - well under its Zillow value, but Zillow algorithms can't read real estate pictures and know the extensive remodel requirements.

So I think there's incredible pent-up demand combined with unrealistic expectations now that interest rates are jumping. Anything move-in ready anywhere near the median price for an area is still getting offers very quickly. But people are reluctant to move because they will lose so much simply by leaving their existing mortgages. We would have trouble qualifying for a loan for our current house - even at the price we paid for it three years ago - because interest rates are so much higher. But one requirement was that we had to qualify for a 15-year mortgage. We're not fans of the 30-years.

New housing starts are down mostly because of material costs and the supply chain. Builders are really hurting right now.

[Edward64]

Not sure when they came to be but I've read a couple articles on 50 year mortgages now.

I can't imagine.

Let’s say you take out a 50-year mortgage for $200,000 at 6% interest. Your monthly payments would be $1,053 (just including principal and interest), but your interest paid over the life of the loan would be a little higher than $430,000!

Now, let’s say you take out that same $200,000 at a 4.5% interest rate on a 15-year mortgage. (You probably noticed our example rate for a 15-year mortgage is much lower. More on that below.) Your monthly payments would be $1,530 (again, just principal and interest). So even though you’re paying $500 more a month, your total interest paid with a 15-year mortgage would be just a little over $100,000.

That’s right—the 50-year mortgage would cost you over $330,000 more in interest than the 15-year mortgage. That’s literally enough for another house!

[Solecismic]

When we were in Canada a couple of weeks ago, our fellow B&B guests were a couple from Kitchener who had recently purchased a condo for a price that seemed shocking even with the Canadian dollar floundering these days.

They had spend months offering premiums over asking prices, and I think they were using a form of a balloon 40-year mortgage, where the first however many years are interest only, then you have to requalify for the loan to finance the rest. At that point, you're basically renting with a small hope that the value will increase so much during the initial period that you gain significant equity for the refinance or just to sell.

[QuikSand]

Originally Posted by Edward64

Not sure when they came to be but I've read a couple articles on 50 year mortgages now.

I can't imagine.

But when writers insist on not bothering to put money into present value, they can play silly games with the dollar amounts. A dollar today and a dollar in 2072 are simply not the same thing, by anyone's reckoning.

The effective interest rate, and any consideration paid to get it, that's the story.

[Ksyrup]

I've seen a couple of articles that suggest inflation might be ready to recede - although it might also mean a recession if it's not managed correctly, and we careen from one to the other.

One is lumber prices, which foreshadowed the current inflation. High prices were around $1600 about 18 months ago and still at $1450 as recently as March, but now are at $650.

Then, I saw a tweet yesterday about oil prices dropping under $100 a barrel, although they've rebounded a bit today I see. Still, they are down about $15 since last month.

Not sure if these are good news, or evidence of a quick collapse into a recession?

[QuikSand]

Originally Posted by Ksyrup

I've seen a couple of articles that suggest inflation might be ready to recede - although it might also mean a recession if it's not managed correctly, and we careen from one to the other.

One is lumber prices, which foreshadowed the current inflation. High prices were around $1600 about 18 months ago and still at $1450 as recently as March, but now are at $650.

Then, I saw a tweet yesterday about oil prices dropping under $100 a barrel, although they've rebounded a bit today I see. Still, they are down about $15 since last month.

Not sure if these are good news, or evidence of a quick collapse into a recession?

Picture is not clear. There is plenty of room to say that this is just the dissolution of a supercharged synthetic economy, and we're merely returning to normal-ish. Consumer and business sentiment, though, is an important element in the business cycle, and it's not clear what is driving how people feel these days. A persistent overabundance of unwanted jobs is not a hallmark of a standard recessionary economy, but this might well be a unique situation.

[Arles]

I think the biggest reason the CPI could go down is all the excess inventory stores like Target, Walmart, etc are now holding. Many of these stores panicked with the supply chain issues in Q4 of 2021 and are now trying to liquidate a ton of inventory.

[Edward64]

What’s inside the consumer price index? | Pew Research Center

[Edward64]

Originally Posted by QuikSand

But when writers insist on not bothering to put money into present value, they can play silly games with the dollar amounts. A dollar today and a dollar in 2072 are simply not the same thing, by anyone's reckoning.

The effective interest rate, and any consideration paid to get it, that's the story.

This is a good point.

(I just realized my HP12C is still working but I've forgotten how to use the formula on it)

[Edward64]

Inflation more than expected. I'm thinking this means market will think Fed may make another big .75 basis hike?

Futures still looks good right now. Who knows.

Shoppers paid sharply higher prices for a variety of goods in June as inflation kept its hold on a slowing U.S. economy, the Bureau of Labor Statistics reported Wednesday.

The consumer price index, a broad measure of everyday goods and services, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked another month of the fastest pace for inflation going back to December 1981.

Excluding volatile food and energy prices, so-called core CPI increased 5.9%, compared to the 5.7% estimate.

On a monthly basis, headline CPI rose 1.3% and core CPI was up 0.7%, compared to respective estimates of 1.1% and 0.5%.

EDIT: Ooops, spoke to soon. Futures is solidly in the red now.

[Arles]

Some are even talking 100 bps in financial blogs. I don’t get the 100 bps idea. Gas prices down for 27 days straight. Mortgage rates down from 6.5 in June to the 5s now. Housing prices are down in July and retail with record inventory levels. What is the reasoning that inflation will be worse in July than June?

[Edward64]

You bring up a good point. Don't think 1 basis point is a concern now. Question is should it be .75 or .5. My guess is .5.

The markets has recovered from their 1+% plunge this morning. Nasdaq is back in the black

[Solecismic]

There are many ways to measure inflation. The quote above uses the two most common - Headline Consumer Price Index and Core CPI. The CPI is a weighted average of prices that somewhat reflects what people spend.

The Core CPI removes food and energy from the measurement. As such, it's not as relevant from a "what's going on now" perspective, because food and energy are rising at an incredible rate right now. But they are also the most volatile (they will also decrease at a greater rate when they decrease), so when looking at trends, it's more useful.

Then there's the Trimmed Mean CPI, which removes the top 8% and bottom 8% of measurements from CPI, regardless. Often they're food and energy, but they don't have to be. So it's even more useful for long-term trends, but it's less informative as a raw measure for the current situation.

Then, you can look at the PCE Chain Index (Personal Consumer Expenditures), which is more a measure of what people are actually spending than the CPI - its weights are based on what people actually spend. The CPI is different for reasons that we probably shouldn't talk about here, but could be quite valid.

Next, you look at wage growth. Many ways to do that, but they're much more consistent. When that's higher, you worry about older people on fixed incomes. When that's lower, you worry that if it trails inflation by too much, the economy slows down.

There seems to be some agreement that when inflation is around 2-3% and unemployment is relatively low (many prefer to use labor participation rate instead, but that has its own issues), your economy is probably doing "great", whatever that means.

The biggest factor today is the Energy CPI. Right now, it seems to be rising at a rate of about 80% per year. With the recent drop in crude prices, that should also take a drop when next measured. But from an historical perspective, the three highest years of Energy CPI rise were 1980 (31%), 1974 (29%) and 1979 (25%). 2021 was also 25% and 2020 was 21% - those are fourth and fifth on the list. It's likely 2022 will take the top spot, and it won't be close - the not-close part is due to Ukraine, but it would have been higher than 30% regardless.

This is driving all the other increases. Experts differ on their expectations for energy prices a year from now, but some say crude will hit $200 a barrel in the very near future (and that would be due to Russia cutting supplies) and some say it will stabilize. No one really knows for certain. But again, the invasion of Ukraine is only one spike in what looks like a strong inflationary trend in energy prices. We'll know a lot more when winter hits and what Europe will do with expected shortages.

[Arles]

Good post, Jim. One thing to remember - crude oil took a massive dive with Covid in 2020 (dropped into the 20s). Crude oil was at $62.70 and rising in January of 2020 and was $76 in January of 2022. That's a 20% increase over two years and isn't terrible. It has since increased almost 40% mostly due to the war in the Ukraine - but it was probably headed back to 2018 levels (80-90) anyway over time. Going to the 40s and 50s during covid has made this oil spike seem a lot worse. Without covid, oil would have gone from the 80s to to low 100s due to the war (which seems reasonable).

[Edward64]

Market is still in the red but has fought off from the 1.5%+ lows this morning. Someone give the market some xanax!

On a happy note, Apple has done better than the market past couple days. Looking for Tim Cook to save the Nasdaq.

[Arles]

Fed came out and said a 100 bps raise seemed excessive and more likely 50-75 and that caused stocks to rip today.

[Edward64]

I've read some articles on NFTs hurting also.

I never really understood NFTs, just seems like people with too much disposable money spending on crap.

[sterlingice]

Don't forget money laundering

SI

[Edward64]

Originally Posted by sterlingice

Don't forget money laundering

SI

Good point. I wonder if the Byrdes were caught in the downturn

[GrantDawg]

Wrong thread

[Edward64]

Originally Posted by Edward64

Not good. Checked zillow again and the theoretical zillow price went down again.

Still happy at how much it has appreciated over the past 2-3 years but somewhat disheartening to see ... especially when you guys are reporting continued appreciation.

Oh well.

Well darn. Just under a week when I last checked and price went down again when I checked this morning.

This better be reflected as lower inflation in the "shelter" bucket.

[Ksyrup]

Good timing. Just came here to post this tweet about the housing market.

The percentage US home for sale that have cut their asking price over the last 4 weeks is at the highest level we've seen since Redfin started tracking the data in 2015.https://t.co/Y6kBvWyJww pic.twitter.com/q21t1Ql9AU

— Charlie Bilello (@charliebilello) July 16, 2022

[NobodyHere]

Originally Posted by Edward64

Well darn. Just under a week when I last checked and price went down again when I checked this morning.

This better be reflected as lower inflation in the "shelter" bucket.

My place's zestimate is still going up. It's almost double what I paid for it 3 years ago (granted it didn't cost much in the first place).

[sterlingice]

I mean, we all knew this was a bubble - a number of people have been saying it for a while. There shouldn't be a market where people have to FOMO into a 30 years investment. But, if you have to move, you have to move and have to have someplace to live so you're getting completely screwed here.

As for the people buying up houses for investments to squeeze homeowners and renters, well, I'm sure there's a circle in hell for that.

SI

[Solecismic]

COVID makes it difficult to move, so supplies dropped and bubbles inflated. Demand kept prices moving quickly when interest rates were so low.

Now interest rates are rising (right now, at quite reasonable levels, but still shocking if you were used to those historic lows) and people can afford less.

Supplies are still extremely low, but the economy is in rough shape. So the bubble is starting to burst, which is why there are so many price drops.

Houses priced realistically are still selling quickly. It's people who want/need to rent who are screwed in this market. Zillow is a useful tool, but its pricing algorithms don't reflect the current market very well.

If you can sit this one out, you should, especially if you're paid off or in a 2-4% mortgage. It's just not a good time to move. Yet our neighborhood just had another home come on the market and the number of views/saves on Zillow is incredible. I think all these sales lately are retired people down-sizing.

[JPhillips]

Originally Posted by QuikSand

Picture is not clear. There is plenty of room to say that this is just the dissolution of a supercharged synthetic economy, and we're merely returning to normal-ish. Consumer and business sentiment, though, is an important element in the business cycle, and it's not clear what is driving how people feel these days. A persistent overabundance of unwanted jobs is not a hallmark of a standard recessionary economy, but this might well be a unique situation.

I wrote about weirdflation—commodity prices are crashing and nominal wage growth is falling, but inflation is up; jobs are booming, but growth is falling; consumer sentiment is *the worst in 60 years* but restaurants, airplanes, and theaters are full. https://t.co/5WkTkObFWw

— Derek Thompson (@DKThomp) July 18, 2022

[Edward64]

Well crap. I thought today was going to be a good day.

And it's because of Apple?

The late-day pullback follows a Bloomberg report that said Apple plans to slow hiring and spending on growth next year to deal with a possible downturn. Shares of Apple declined nearly 2.1%.

“When Apple, a $2.4 trillion dollar company market cap-wise, rolls over, it’s obviously going to have a pronounced impact on the headline indices and it just reminds people that companies are buckling down because of what they’re seeing out there,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

[GrantDawg]

I meant to post this when I saw it last week, but forgot. I had just saw some discussion (not here) that Google uses is twice that of the closest competitor, and someone said they thought Google and Amazon are going to stay dominate forever. Then I saw this. In the digital age, peoples practices and the money that goes with it can change rapidly.
Google Says Young People Using Instagram and TikTok To Search | PetaPixel

[cuervo72]

Good heavens, they're going to turn the internet into a friggin' picture book...

[Ksyrup]

Originally Posted by GrantDawg

I meant to post this when I saw it last week, but forgot. I had just saw some discussion (not here) that Google uses is twice that of the closest competitor, and someone said they thought Google and Amazon are going to stay dominate forever. Then I saw this. In the digital age, peoples practices and the money that goes with it can change rapidly.
Google Says Young People Using Instagram and TikTok To Search | PetaPixel

I choose to believe that the pic at the top of that article was purposefully created as an artsy 80s version of goatse.

[Edward64]

Nice day in the US markets. And Japan and HK also jumped 2%. Wed futures are positive right now. Bitcoin is doing well past couple days.

I read the markets are up 8% from the lows so I did take a peek at my portfolio tonight. Still ugly but at least we are trending up right now.

EDIT: welp, futures have now changed to red this morning.

[GrantDawg]

Originally Posted by cuervo72

Good heavens, they're going to turn the internet into a friggin' picture book...

That's totally what I don't get, and I guess it shows my age. When I Google something, I am looking for information or a specific website. I just can't imagine wading through TikTok videos and creator pictures to find what I am looking for. It seems super inefficient.

[sterlingice]

Originally Posted by GrantDawg

That's totally what I don't get, and I guess it shows my age. When I Google something, I am looking for information or a specific website. I just can't imagine wading through TikTok videos and creator pictures to find what I am looking for. It seems super inefficient.

That just makes me think of the whole fad of recipe sites that have to tell a giant story just to get you to the stupid recipe. Look, I just want the recipe not your life story.

SI

[Arles]

Elon back to his Tesla earnings smoke and mirrors. Knowing he would take a massive paper loss on bitcoin, he sold 75% of it (at a loss) to raise $950 million to boost his EPS for earnings.

[Edward64]

Originally Posted by Arles

Elon back to his Tesla earnings smoke and mirrors. Knowing he would take a massive paper loss on bitcoin, he sold 75% of it (at a loss) to raise $950 million to boost his EPS for earnings.

Must be nice to be able to lose all that money and not worry too much about it.

https://www.cnbc.com/2022/07/20/tesl...n-q2-2022.html

Analyst Brian Johnson at Barclays estimated earlier this week that Tesla would see a $460 million bitcoin-related impairment given the selloff.

“This should be not taken as some verdict on bitcoin,” he said, adding that Tesla is open to increasing its crypto holdings in the future

However, when asked about bitcoin’s potential as an inflationary hedge on the earnings call, Musk said that Tesla’s main goal is to accelerate the transition to sustainable energy, and called bitcoin “a sideshow to a sideshow.”

[Edward64]

I remembered reading that EU rates were really low or even in the negative. Somehow, I figured it would have been increased already with all the news about inflation in Europe.

Apparently not.

Macro economics are obviously different from the US and I'm sure their best minds had a rationale, just seems weird at the "delay" (?) since US started raising rates in Mar.

In a bold attempt to get inflation under control, the European Central Bank on Thursday announced it would hike its key interest rate by a half percentage point.

That marks the first time since 2011 that the ECB has raised rates, and takes Europe's main rate back to zero. Rates in the region have been negative since 2014.
The move, which takes effect on July 27, comes as Europe battles record inflation fed by surging energy prices. Annual inflation in the European Union jumped to 9.6% in June. It reached 8.6% for the 19 countries that use the euro.

The central bank had previously said it would increase rates by a smaller margin, but decided it needed to be more aggressive based on an "updated assessment of inflation risk."

[Hammer]

I have been thinking how odd it is how different the UK and U.S. strategy is towards interest rates. We have barely touched them. Thinking seems to be that inflation won't be all that influenced by interest rate rises, so what's the point in the downside. Oil prices and the like. Stock market is pretty solid as a result. So far I like the U.K. strategy, much less disruptive. When oil comes down, so will food and fuel. Interest rates won't help energy bills either.

Mortgage rates are also largely unaffected. It seems like these big rises are just cutting your own throat. I guess they have their reasons. But to be honest I don't get it. Sure they want to slow the economy down, which will help some. But is that the extent of it? Can that justify the pressure it causes?


The other thing is many countries have high national debt right now, I know the U.S. does. I just don't see how they can continue with the current strategy as again they seem to be shooting themselves in the foot as they are increasing budget deficits. At the same time reducing GDP. That is dangerous.

I believe the FED will have to pivot soon or the system will break. 0.75-1.0 next time, then maybe another 1.0 total over the next few meetings.

[Edward64]

I agree, I don't get why UK & US inflation fighting are different, you'd think it would be similar ... but evidently it is not. I'll have to research this a little more

Not an economist but from what I've read, Fed raised rates significantly to kill the inflation/stagflation of in early 80's, and that worked. I think that is the playbook now.

It will be interesting to know what the Fed will do this month, and how the markets will react. July has been a great month so far ...

[Hammer]

Originally Posted by Edward64

I agree, I don't get why UK & US inflation fighting are different, you'd think it would be similar ... but evidently it is not. I'll have to research this a little more

Not an economist but from what I've read, Fed raised rates significantly to kill the inflation/stagflation of in early 80's, and that worked. I think that is the playbook now.

It will be interesting to know what the Fed will do this month, and how the markets will react. July has been a great month so far ...

Yeah, I don't know. Just a thought, but maybe the U.S. being such a huge economy can move prices of bigger picture things like oil? Where as the U.K wouldn't scratch the paintwork.

[Hammer]

Originally Posted by Hammer

I bought more at $635 yesterday. I suspect it goes lower, but in 2 or 3 years I would be shocked if that buy doesn't work out.

Tesla buy from early June.

I lost my nerve on this one and sold at $812. I am still hugely bullish on Tesla, if they are left alone to operate. Still edges out Bitcoin as my largest holding, even with this sale. Although I got in early with an average cost price of $280 so doesn't owe me much.

Shanghai is the plant that really drives Tesla profits. Just concerned that it may be shut down again. The Bitcoin sale bailed them out in Q2 earnings. Just seems a dice roll as to whether or not they are allowed to stay open for business.

[flere-imsaho]

Originally Posted by Edward64

I agree, I don't get why UK & US inflation fighting are different, you'd think it would be similar ... but evidently it is not.

For starters:

1. UK GDP is one tenth that of the US. It is less than the state of California's.

2. USD is the world's reserve currency, GBP is not.

3. U.S. median income is almost twice that of the UK.

4. The UK has universal healthcare and income supports. The U.S. (in comparison) does not.

Having lived in both countries, my own personal view is that the countries are a lot more different than people think despite a) the ostensible common language (even that has a lot of differences), b) the seismic shifts brought about by Reagan and Thatcher at the same time, and c) the close diplomatic/geopolitical ties.

Originally Posted by Hammer

I am still hugely bullish on Tesla

I'm curious as to why? The EV market is only getting more competitive and with that, Tesla's offerings often don't compare favorably.

[Edward64]

Got lucky with my free number of reads for WSJ. Essentially this article says there are differences in what has caused inflation (US is worse than EU).

The U.S. and Europe Have Different Inflation Problems - WSJ

Both the U.S. and Europe have a combination of persistent domestic demand-driven inflation and transitory global supply-driven inflation, but the ratios are very different in the two economies. It would be a mistake for U.S. policy makers to overstate the degree to which inflation is global and neglect addressing the many U.S. specific causes. Conversely, Europeans should take a more measured approach and not overreact to the disproportionate amount of global inflation they are facing. Administering different treatments could make both families happier in the end.

[Edward64]

Originally Posted by flere-imsaho

I'm curious as to why? The EV market is only getting more competitive and with that, Tesla's offerings often don't compare favorably.

For the next 5-7+ years, I see Tesla still dominating in the US because of branding. Domestic EV industry is just going to nibble at Tesla's heels.

China EV industry is obviously growing significantly but think there are going to be bumps on the road for Chinese EVs in the US (certainly) and Europe (probably).

Main threat is European cars. They also have branding and can see them compete with Tesla.

I know Tesla is working on self-driving but other auto companies are doing the same. They are also doing their own batteries.

But I agree with you, I think Tesla can continue to grow but not like before. They may pull out an Amazon (books, online store and diversifying into AWS, movies and apparently healthcare) and Musk is going to be a force. If Musk was to somehow fold Tesla & SpaceX into a company, that speculative growth would be fantastic.

[Hammer]

Originally Posted by flere-imsaho

I'm curious as to why? The EV market is only getting more competitive and with that, Tesla's offerings often don't compare favorably.

Tesla have a cult like status amongst followers. Almost like Apple in some ways. People will over pay for products. The waiting list for a Tesla is a mile long.

But more than that their margins are insane. That's what set them apart. Just a license to print money. No other auto manufacturer is even close.

I guess some may talk about the Tesla bot and FSD, but the fundamental underlying business is super strong.

And on a side note I just saw its $840 now. Doh.

[Arles]

It will dump back below $800 here soon. My problem with Tesla is their management tends to over-promise and under-deliver. Their cybertruck (originally promised for 2019) is now looking like late 2023 and there are countless other examples. Musk also seems to be in every business that isn't making more EV vehicles (space, batteries, crypto, buying Twitter). The best companies that make it have a leader singularly focused on killing competitors in their main business (Jobs, Bezos, Gates, etc).

Musk seems more interested in memes and slight of hand tricks to fool investors (latest Bitcoin sale for one). There is a cult following, but there also was one for Blackberry. At the end of the day, he needs to make cheaper, better EV alternatives than everyone else. And I don't think that's close to his main focus right now.