Black Monday

[ValueNZ]

There's a dangerous fantasy on these boards that somehow "value" - ie that person's subjective idea of what a company should be worth - is divorced from how the market actually values companies.

In the majority of cases markets operate efficiently and will value companies pretty fairly. But what you are suggesting is that price=value all of the time. If that were true, what are you doing picking stocks?

[Azz]

In the majority of cases markets operate efficiently and will value companies pretty fairly. But what you are suggesting is that price=value all of the time. If that were true, what are you doing picking stocks?

That's NOT what I'm saying at all.

Look, you do things your way, and I'll do things my way.

[Fortunecookie]

https://www.interest.co.nz/economy/1...ive-first-time

Wage inflation might be trending down.

[Snoopy]

I'm not a trader.

I'm long-term hold for Nvidia. I'm well in the money. They also pay a dividend.

You've got no clue what's happening in the world. A.I. is not "ChatGPT"; it's the rearrangement of "skills" from human to datacenter plug in, and the savings are immense - and who's providing it? Who is the number one company in the number one industry? Is it some retirement home operator in New Zealand? That's the level of creativity on these boards by the big mouths who attack success. I spent some time recently looking at the retirement operators in this country, outcome: bunch of thieves, trouble ahead for that industry. The point I'm making is we here in this country can invest easily now in US companies. Why are you so angry about me early investing in the world's number one stock? And I told these boards too. I know A.I., I know tech, and I know the markets.

Well Azz, I am not saying you are wrong. But in my experience the best investment returns are made when there is a disconnection between price and long term value. if Nvidia is the future and it is priced as though it takes over the future, then there is no money to be made by buying Nvidia now. But do you really think that Nvidia will have a free run to exploit AI? That no competitor will ever emerge? That the Nvidia business plan will run to perfection? I am not saying it won't happen. But an awful lot of ducks have to line up to make Nvidia a good investment from here, if you buy in today.

You're literally saying "one good quarter, so what", for the leading company within an industry that is growing exponentially. And this garbage about "PE" lol, that gets thrown out the window doesn't it when the "E" goes up.

Exponential growth will take care of the earnings. No need to worry about that old fashioned PE stuff. It is different this time......

Some of us who have been around the markets a while have heard this story before.

SNOOPY

[moka]

https://www.youtube.com/watch?v=Il_1w5Kvt_A
Collateral Contagion Is The Big Risk Everyone Should Worry About | Market Analyst Gordon Long

27:00 The complexity now is beyond the peril and here's the problem. You can't fix it because you don't even understand what's going on. Because it's so opaque there's nobody that has real visibility. You could have a problem in Argentina in a company or a bond and that cascade like the first World War in the Balkans could suddenly take over. That's the exposure that we're currently in and you don't know what type of derivative it might be.

The government etc are trying to hold the system together and keep it running as happily as they can by stealth liquidity. The macro data, it's flashing recessionary warnings and yet stock market is powered higher this year and the recession hasn't hit.
We're doing very aggressive deficit spending this year. We've got a wartime deficit in a peacetime economy.

29:45 The system is kind of being propped up right now by this this large amount of stealth liquidity.
The confusion comes that says look we're tightening with quantitative tightening, we're tightening on our credit standards, so therefore we're taking the liquidity out of the market at a pretty sound level.
How can we have markets going up? Well, the answer is we have stealth liquidity, and it's calculated, it's planned, and they have taken advantage of two events, one in March with the deposit run out of Banks, and then when we finally resolved the debt ceiling in June.

31:15 So we came in with this BTFP program. The government pumped money into the banks at really the same level of which the deposits are going out and the deposits are still going out and we're still putting more money into it. So, we're not pumping liquidity into the economy, the central bank is pumping money into the banks to keep them solvent.

It's going to come to an end. They can't keep doing this for a number of reasons.
It fed in with this rush into artificial intelligence that was able to happen and it's taken the market with it, but it's unsustainable unless the government continues to hand out money directly, and that is printing more of it and taking our debt even higher and to do that how is it going to pay the debt. Where is the funding going to come to bring the new money in?

35:27 We had two sugar rushes this year, one economic from the stealth liquidity and then one in the financial markets from all the hype and AI.
I guess the question in most investors’ minds right now is can this continue through the election. Presumably part of this is being done so that the administration doesn't have an economic crisis going into an election year.

36:36 The stealth system I just described is unsustainable through to the elections.
The real question is what is their plan to replace it and when is that plan going to unfold.
One plan is associated with using contingent liabilities to guarantee credit that are issued by the government to places like a green deal, it could be climate change, whatever, but organizations that they will guarantee their lending so that they can continue to sustain their spending and their growth.
Contingent liabilities do not go on the debt of the balance sheet of the government. They only go on if somebody defaults on the guarantee. They just sit there until somebody defaults and then the government has to step up.

37:42 This is almost kind of like an off balance sheet transaction, you're not going to have visibility into this. No visibility, you won't even know what's happening, there's no paperwork other than the government says that it has these contingent liabilities somewhere down in a small print and they won't give you any details.

But they'll do that because that's the way that they can easily bridge this and so it's off balance sheet until somebody defaults. That'll be part of the problem or part of the answer, if they're not already doing it because it's the only way out that's sustainable over a longer period and really continues this kind of MMT version of bidennomics.

The second part of it and to me this is the most pressing is that most of the countries are now selling off their dollars not all of them but China, Russia sold off all its U.S treasury. China has taken theirs from about 1.3 down to eight or nine hundred billion.

38:41 All of the Brics are pretty well are getting out of the dollar. The only one that's has been buying, but it's flat has been has been Japan and the Japanese carry trade is so profoundly important to the global economy and has been since the 1970s for 40 years that people just miss it the importance of it.

[moka]

https://www.youtube.com/watch?v=Il_1w5Kvt_A
Collateral Contagion Is The Big Risk Everyone Should Worry About | Market Analyst Gordon Long

39:04 And so it's really trying to ignite the Japanese carry trade and that requires a stronger Yen for them to lend, it requires a larger differential and these are all falling into place.
When it was going down on the left (on the chart) that was a dollar weakening so the Yen was going up and so you could if you were sitting in Japan and you're getting nothing on your interest, one percent you're not going to lend money.
But you make it if the yen is going through the roof, so you lend the money out because they're going to pay you back in Yen and so you're making your money on the currency. You're not making money on the lend you'll end up one percent. You got somebody sitting over an America and says oh my God I could take one percent in Japan, I can buy treasuries here at four and a half, pocket three and a half percent and I put it up in leverage, I can leverage it to twenty percent.

What am I missing here? Well, the answer is you hedge the currency and so the banks throughout the world, insurance companies, the pension plans, this is nothing new to them they've been doing it for 40 years and so they need it and they need the business so there's a big push here. So, the last few years we've had some problems with quantitative tightening, it hasn't been as good for the Japanese, so the Japanese rate of buying has been flat.

And that's been a problem, with the rate at which we're creating increasing the debt, like we need to drive another six trillion dollars up here without putting it on the FED balance sheet so we need people like the Japanese carry trade and there are other carry trades. I'm just focusing on the Japanese because it's so substantial and by the way we cannot have them selling their dollars to shore up their currency. If it keeps falling so that's another push that they are I believe they're highly orchestrating right now and you can see it currency markets, see it in the credit, you know the footprints are pretty large.

42:35 The FED is going to have to pivot at some point because either it fixes inflation and can declare a mission accomplished and start bringing rates down, or as more people think something will break and the FED will have to step in to rescue and start bringing rates down That will cause the long end of the duration curve in U.S treasuries to rise and you can sit in the safety of treasuries and get paid and then when that rescue, that pivot happens you're then going to get capital appreciation on top of all of that.

It's not just something that's going to break, there'll be weaknesses in the market and we think that the FED will then fairly aggressively will pivot.
I don't think it's imminent unless something breaks. I think it could drag itself well out into first or second quarter of next year before it really does pivot. How far and deeply they go will be less than you think. Inflation is nowhere even close to being solved.

46:05 The government will be forced to push more money out through the fiscal spigot and that'll I won't call it hyperinflation yet but I will call it another big surge and it'll be because inflation comes back in a third wave and very strongly.

[moka]

https://www.youtube.com/watch?v=Il_1w5Kvt_A
Collateral Contagion Is The Big Risk Everyone Should Worry About | Market Analyst Gordon Long

46:30 We forgot the three things that got us out of the 70s, and we're not fixing those and that's why I say I'm so confident that we're going to see inflation come back in another big wave. Three things that got us out of the 70s – Volcker magic, petrodollars and the Japanese carry trade.

By the Volker magic I'm not talking about the great story everybody knows that they took interest rates up to 19. I’m talking about the real way he solved it. What Volcker was before he became chairman he was the president of the New York Fed. And he believed then that the only way he could solve inflation was to get rid of the liquidity, tighten the liquidity spigot. And so he forced the liquidity spigot to be tightened before he actually in the summer of 79 became chairman. And when he went in as chairman he was forced to increase interest rates because the economy was falling so bad that he increased the rates he drove them up quite significantly and he drove them into a recession, so by the summer of 80 we were in a recession and he had to bring him down. He looked like a fool.
But he knew that the real solution was the liquidity and what you did with the rates was short term, it would give you a recession, it would solve with problems shorter term but it was not going to solve the inflation.

The second time around he just talked the inflation right up and he says because I know I bought enough time on that liquidity I have really slowed it, I got to give it a shot and he did it and he broke it and managed that liquidity level all the way through the great moderation.
I know we pump money with quantitative easing and we put it out, but it was in a managed controlled fashion it wasn't volatile, it wasn't like the Biden Administration pumping out six trillion dollars like a shock to the system. That and the stealth liquidity that is pumping it into the system, that ain't going to fix inflation.

49.21 And we haven't solved the energy problem. I said there was three, the Volcker problem, there was the petrodollar that the Secretary of State put into place and that was agreement with Saudi Arabia and the petrodollar as of eight months has gone away and remember the petrodollar was all about supporting Saudi Arabia, supporting them with arms and keeping them in power, the King, energy would only be bought and sold in dollars U.S dollars and they had to take the money and deposit it in a U.S bank in treasuries, from there they could do other things with it. It had to do that, which solved lending problems, it solved the beginnings of inflation problems in terms of the energy costs.

We've just ostracized Saudi Arabia so badly that no longer are they transacting and well they now have the BRICS 11, and three of them now control 48% of the world's energy market so we have this energy problem that got us got us out of the 70s, like Volcker got us out of the 70s.

Then the third was the Japanese carry trade that we brought really into existence then and it's the only one we may be able to reinvent. I remember these deals and how important it and it allowed us to consume more than we produced for 40 years. We're botching at least two of those and are not going to be able to rely on all three of those factors that led to this great moderation. And we're gonna have to figure out how to navigate a new world that doesn't involve all of those.

What's going on right now is unsustainable, there probably is some sort of correction coming, unclear exactly when but probably measured in quarters not years, where the FED will likely have to intervene, yields will come down long bond prices will go up but then because of the dramatic centralized response both on the on the monetary side from the central banks but probably also maybe on the fiscal side, as well inflation's going to re-explode and they're going to have to tighten rates again to get that under control and so there's going to be some sort of down and up progression.

When I had Felix Zulauf on this channel at the beginning of the year he said we're now entering the decades of the roller coaster where you're just gonna see these this high volatility ability and I think what you just described there is kind of exactly the type of thing that Felix is talking about where you're going to see kind of very aggressive policy in one direction until the whole system starts to fall apart and you're going to see it lurch to the other side on policy and we're going to just see a lot of this violent swinging back and forth and that's going to cause roller coasters both in terms of economic growth but also obviously in terms of financial asset prices

[troyvdh]

Guys...with respect remember the principle of KISS...again we are way overdue for ...some may say ..a "correction".
As Warren said...."lets see who is not wearing trunks"....

[moka]

https://www.youtube.com/watch?v=Il_1w5Kvt_A
Collateral Contagion Is The Big Risk Everyone Should Worry About | Market Analyst Gordon Long

53:19 It'll still be much more volatile, and specifically in the non-equity markets, it's going to be in currencies and in bonds and in credit and then especially in things like high yield credits.

I sent you a chart on inflation saying inflation comes in waves and I've said it's going in three waves but we've found that the inflation it stays with us, and we keep going. It appears we go from inflation to deflation but the answer is that we have both and they're always working but they get more emphasis at any given time and lately we've fallen into a deflationary part it doesn't mean inflation has stopped it may slow down.
What's really driving this volatility and what's the core of it is that inflation is getting to be more and especially in the United States with a 70% consumer economy.

57:14 We're eating our seed corn. If you were to increase wages which have been under under utilized for years, the share of the profits that are going to labor, they have every right to be striking right now and the fact that we're seeing strikes at the level that we're seeing right now says that we're very much at the beginnings of this inflation driven from labor.
When the UPS settled at 170 000 for a driver the shock waves went through every union in the country. Automotive UAW went out on strike and they want a 40 increase, they want a four-day work week paid for five days, and they want all their pensions reinstated. We've got this massive move towards strikes and that's why the service sector are having to pass it on so that another and that has nothing to do with energy, it has nothing to do with food which will spike on food and energy and fertilizer so it's coming.

58:43 Artificial intelligence is going to be very, very threatening to the professional white-collar workers as more and more apps unfold. I don't be political here but I have to make the statement. We got something like 6 million thereabouts immigrants right now coming across the southern border. That's not by coincidence, that is planned. And it's actually good news bad news because they're going to need jobs. The realities are that they're going to want to work and they're not going to demand 40% increases.

I think that this is a way that the bidenomics is looking out because they know the inflation wave is coming, they know this is a given no matter what they want to tell you.
We had these just-in-time global supply chains that we found out were highly efficient, but not resilient, and we don't want to be caught the way that we were caught during the pandemic but of course labor costs a lot more here than it did in places like China. An influx of cheap workers will be one of the ways in which we absorb some of the shock of reshoring.

I have to stress with our listeners that you got to pay attention to today, this is politics, these are huge strategic moves that are going to impact profits and direction and funding and liquidity coming out of the government because they're cornered, they're trapped. If you were sitting in the White House what are you gonna do, you're not going to just let it happen. I don't know what they're gonna do.

1:02:30 I'm going to take all this stuff into consideration. I don't want to become collateral damage. I think this is a time to take your foot off the equity side of the house. There's other ways to make money other than the stock market there will be a time to come back in.
I think that there should be an element of gold and silver in your portfolio, but I really caution because you can guarantee that the government will tax the living heck out of it, they will regulate it or they will fix the pricing.

The whole move to commodities I think is still in front of us but it's still out of way, so that we've had the first wave of that of investing in commodities across from grains right across the spectrum through energy. But there's a time and a place because the whole advent of the BRICs 11 has almost cemented that into place where money really is going to shift, it's not about de-dollarization, it's about the real value of money, being you either build it, you mine it or you produce it, you don't print it and so though the commodity players are so powerful now that they're going to start dictating what you pay and that's where the pricing is going to be. So, at some point commodities are going to begin their second big wave up so that's what you need to be giving a lot of thought.

On the shorter term I believe that the investment focus is in the area of bonds, it's in the area of credit and in area of high yield risk zombie corporations. This is time to be prudent that's what I'm trying to say, time to be cautious, it's a risk, it's a world in change right now and we can't forecast it but it'll be your ability to react to it and have the capital and money available.

When it does happen and it's so obvious this is the best investment opportunity you've ever had, but it's too late because you don't have any money and you've lost it on the move and you got into early or whatever. If you had just been patient.

1:06:07 I'm actually more optimistic about what's in front of us. This is a world shifting from a unipolar to a multi-polar world. There's some great opportunities so don't be frightened of it but just do your homework. A big period of transition here and as a result there's probably going to be some pretty big repricings as we head into the transition and you want to make sure first and foremost that you don't get wiped out so that you can deploy your capital.

[Valuegrowth]

Stocks and bond sell-off have resumed.Oil is bucking the trend. More pressure for industries and other consumers.