investmentwatchblog--2020-08-18--Fannie Mae + Freddie Mac adding a “Adverse Market Fee” for all refinances starting Sept 1

Quick snippet from the first paragraph in the article : Fannie Mae and Freddie Mac announced Wednesday evening that they @ @ @ @ @ 0.5 % adverse market fee on all refinances , including both cash-out and non-cash-out refis @ @ @ @ @ into effect Sept. 1 .
If you have a refinance in progress , you ’ @ @ @ @ @ getting the closing/settlement accelerated before Sept. 1 ASAP .
For all others , it ’ @ @ @ @ @ Edit : Just to clarify – I believe if you have your rate locked , @ @ @ @ @ ) be okay and the lender would have to absorb this fee .
Best to @ @ @ @ @ even if you have your rate locked ) to be sure .

by outwiththenoise
www.marketwatch.com/story/refinancing-your-mortgage-will-cost-more-thanks-to-a-new-fee-from-fannie-mae-and-freddie-mac-2020-08-13
Quick snippet from the first paragraph in the article:
We are primarily funded by readers. Please subscribe and donate to support us!
Fannie Mae and Freddie Mac announced Wednesday evening that they will now be charging a 0.5% adverse market fee on all refinances, including both cash-out and non-cash-out refis. The new fee goes into effect Sept. 1.
If you have a refinance in progress, you’ll want to see about getting the closing/settlement accelerated before Sept. 1 ASAP. For all others, it’s likely too late.
Edit: Just to clarify – I believe if you have your rate locked, then you may (?) be okay and the lender would have to absorb this fee. Best to call the lender tho (even if you have your rate locked) to be sure.


investmentwatchblog--2020-08-18--AutoAlways check if your leased car has equity before giving it back to the dealer

A lot of you probably have cars that haven ’ t moved in a long time ( thanks COVID ) and might find yourself in a situation where you ’ re unknowingly sitting on car lease equity like I was .
Here ’ s how I found out and how to check for yourself .
I recently paid the last month of my car lease so I planned to turn it in to the dealership and pay a $ 300 disposition fee like most people do , but due to a change in my commute length and COVID leading to @ @ @ @ @ @ @ ended up using only half of the miles I was allowed in the lease .
I decided to get the car appraised by used car dealers and was surprised to learn I had $ 4k of equity in the car ( appraised at $ 17.5k while lease end buyout was $ 13.5k ) .
$ 4k is almost half the total amount I paid to lease the car over the past 36 months , so this is a huge return .
I accepted an offer from an online used car dealer , scheduled @ @ @ @ @ @ @ they took the car I got my equity check in the mail while the check for the lease end buyout was sent directly to the financing company by the used car dealer… It was that easy .
Here ’ s a brief rundown on how to do this : • Call the lease end maturity center for your car and ask what the current lease end buyout is for a third party dealer .
Be specific because this amount is different than if you were to buy it out yourself .
This amount @ @ @ @ @ @ @ payments , so only call when you ’ re serious about ending the lease .
• Make sure to ask your financing company if you can sell your lease to a third party dealer .
Some don ’ t allow you to while others won ’ t let you do it during the last 30-60 days before the lease maturity date , so if you ’ re thinking of doing this call asap to ask how the exact process works so you can plan ahead .
• When you ’ re ready to @ @ @ @ @ @ @ .
Carmax , Carvana , Vroom , Shift , and used car dealers are all places to get free appraisals .
Online appraisals are generally higher than in-person ones , but check everywhere .
These appraisals only last 2-6 days so you need to be ready to turn in your car fairly quickly .
• Accept an offer , set-up the pick-up/drop-off , and make sure the dealership buying the car has the information needed to make the lease end buyout to the financing company • Cancel your car insurance for the sold @ @ @ @ @ @ @ plates ( some states don ’ t require this ) , and hopefully walk away with some surprise money TLDR – My car lease was coming to an end and I was going to pay a $ 300 disposition to give it back to the dealership , but decided to get it appraised and ended up making $ 4k by selling it to a used car dealership .
EDIT : Not here to argue whether leasing is good or bad ( that ’ s up to you ) or if specific cars should/shouldn @ @ @ @ @ @ @ the deal you can get ) , I ’ m just here to present an often overlooked and potentially lucrative end of lease option to those who do choose to lease .
EDIT 2 : Didn ’ t realize this would get so much attention , but glad to help in any way .
This whole scenario happened in California .
The process could differ slightly in another state as some have pointed out and I have no idea how this process works in other countries , sorry !
EDIT 3 : You @ @ @ @ @ @ @ lease end to do this , but you need to check with your financing company for your situation .
If you have a car that ’ s not near lease end , but you don ’ t need anymore you can also use this method to potentially get out of the lease without paying early termination fees by giving it back to the dealer .
Make sure to ask for the current third-party lease buyout ( might also be lease payoff amount , same thing ) , not lease end buyout as they @ @ @ @ @ @ @ Also ask if there are any fees associated with an early lease buyout just in case .
EDIT 4 : Getting a few messages about this , please DO NOT lease a car assuming this scenario will play out for you .
this is 100 % a result of the circumstances we ’ re living in now that if you can take advantage of , you should .
Lease a car assuming you will get nothing back and will have to pay a disposition fee to get rid of it if you don @ @ @ @ @ @ @ s the reality for a lot of people .
Remember I did not make a PROFIT on my leased car , I just got a significant portion of the amount I paid for the lease back that I didn ’ t anticipate getting .

by HIbdMA
A lot of you probably have cars that haven’t moved in a long time (thanks COVID) and might find yourself in a situation where you’re unknowingly sitting on car lease equity like I was. Here’s how I found out and how to check for yourself.
I recently paid the last month of my car lease so I planned to turn it in to the dealership and pay a $300 disposition fee like most people do, but due to a change in my commute length and COVID leading to WFH for the past six months I ended up using only half of the miles I was allowed in the lease. I decided to get the car appraised by used car dealers and was surprised to learn I had $4k of equity in the car (appraised at $17.5k while lease end buyout was $13.5k). $4k is almost half the total amount I paid to lease the car over the past 36 months, so this is a huge return.
I accepted an offer from an online used car dealer, scheduled the inspection/pick-up, and two days after they took the car I got my equity check in the mail while the check for the lease end buyout was sent directly to the financing company by the used car dealer… It was that easy.
Here’s a brief rundown on how to do this:
We are primarily funded by readers. Please subscribe and donate to support us!
Call the lease end maturity center for your car and ask what the current lease end buyout is for a third party dealer. Be specific because this amount is different than if you were to buy it out yourself. This amount also changes every month as you make payments, so only call when you’re serious about ending the lease. Make sure to ask your financing company if you can sell your lease to a third party dealer. Some don’t allow you to while others won’t let you do it during the last 30-60 days before the lease maturity date, so if you’re thinking of doing this call asap to ask how the exact process works so you can plan ahead. When you’re ready to sell get as many appraisals as possible. Carmax, Carvana, Vroom, Shift, and used car dealers are all places to get free appraisals. Online appraisals are generally higher than in-person ones, but check everywhere. These appraisals only last 2-6 days so you need to be ready to turn in your car fairly quickly. Accept an offer, set-up the pick-up/drop-off, and make sure the dealership buying the car has the information needed to make the lease end buyout to the financing company Cancel your car insurance for the sold car, end your registration/turn in your plates (some states don’t require this), and hopefully walk away with some surprise money
TLDR – My car lease was coming to an end and I was going to pay a $300 disposition to give it back to the dealership, but decided to get it appraised and ended up making $4k by selling it to a used car dealership.
EDIT: Not here to argue whether leasing is good or bad (that’s up to you) or if specific cars should/shouldn’t be leased (depends on the deal you can get), I’m just here to present an often overlooked and potentially lucrative end of lease option to those who do choose to lease.
EDIT 2: Didn’t realize this would get so much attention, but glad to help in any way. This whole scenario happened in California. The process could differ slightly in another state as some have pointed out and I have no idea how this process works in other countries, sorry!
EDIT 3: You don’t have to wait until lease end to do this, but you need to check with your financing company for your situation. If you have a car that’s not near lease end, but you don’t need anymore you can also use this method to potentially get out of the lease without paying early termination fees by giving it back to the dealer. Make sure to ask for the current third-party lease buyout (might also be lease payoff amount, same thing), not lease end buyout as they might give you the wrong figure. Also ask if there are any fees associated with an early lease buyout just in case.
EDIT 4: Getting a few messages about this, please DO NOT lease a car assuming this scenario will play out for you. this is 100% a result of the circumstances we’re living in now that if you can take advantage of, you should. Lease a car assuming you will get nothing back and will have to pay a disposition fee to get rid of it if you don’t keep it because that’s the reality for a lot of people. Remember I did not make a PROFIT on my leased car, I just got a significant portion of the amount I paid for the lease back that I didn’t anticipate getting.


investmentwatchblog--2020-08-18--Unusual Options Activity: OXY

Unusual Options Activity: OXY

Just saw this on the CNBC ticker , someone made a huge bet on OXY to recover .
“ About @ @ @ @ @ November 16 and 20-strike calls traded respectively for a net price of about 60 cents @ @ @ @ @ Khouw , chief investment officer at Optimize Advisors , said Monday on “ Fast Money.
@ @ @ @ @ ’ s a bet of about $ 475,000 in premium , and it might take @ @ @ @ @ for the stock to ratchet up to where this trader needs it to be .
@ @ @ @ @ $ 16.60 on the underlying stock , or about 18 % higher than the current @ @ @ @ @ max out at just under 50 % higher than where the stock is right now @

Just saw this on the CNBC ticker, someone made a huge bet on OXY to recover.
“About 8,000 by 12,000 of the November 16 and 20-strike calls traded respectively for a net price of about 60 cents per contract,” Michael Khouw, chief investment officer at Optimize Advisors, said Monday on “Fast Money.”
In total, that’s a bet of about $475,000 in premium, and it might take quite a bit of work for the stock to ratchet up to where this trader needs it to be. The spread breaks even around $16.60 on the underlying stock, or about 18% higher than the current price, and the profits max out at just under 50% higher than where the stock is right now.


investmentwatchblog--2020-08-18--Walmart Q2 earnings soar, led by nearly 100% surge in e-commerce; sales “normalized” when stimulus t

Walmart Q2 earnings soar, led by nearly 100% surge in e-commerce; sales “normalized” when stimulus tapered off

Walmart ( WMT ) , the world ’ s largest retailer , reported better-than-expected second-quarter earnings results , bolstered by @ @ @ @ @ % during the period , as the coronavirus crisis prompted consumers to flock to e-commerce @ @ @ @ @ the quarter , Walmart ’ r revenue rose 5.6 % , or $ 7.4 billion @ @ @ @ @ a year ago — benefiting from its status as an essential business that remained open @ @ @ @ @ the COVID-19 lockdown .
Walmart also noted that sales , especially in the general merchandise @ @ @ @ @ government stimulus spending , especially at the start of the quarter .
Congress and the @ @ @ @ @ odds over a new stimulus package that ’ s expected to top $ 1 trillion @ @ @ @ @ additional unemployment benefits .
“ As stimulus funds tapered off , sales started to normalize @ @ @ @ @ grew more than four percent , ” the company wrote .

finance.yahoo.com/news/walmart-q2-earnings-results-110617852.html
Walmart (WMT), the world’s largest retailer, reported better-than-expected second-quarter earnings results, bolstered by online sales that skyrocketed 97% during the period, as the coronavirus crisis prompted consumers to flock to e-commerce for their needs.
During the quarter, Walmart’r revenue rose 5.6%, or $7.4 billion, from the same quarter a year ago — benefiting from its status as an essential business that remained open during the darkest days of the COVID-19 lockdown.
Walmart also noted that sales, especially in the general merchandise category, were bolstered by government stimulus spending, especially at the start of the quarter. Congress and the White House are currently at odds over a new stimulus package that’s expected to top $1 trillion, and will likely extend additional unemployment benefits.
“As stimulus funds tapered off, sales started to normalize, but July comps still grew more than four percent,” the company wrote.


investmentwatchblog--2020-08-18--Lessons from the Japanese asset bubble in the 80s

For those unfamiliar , the Japanese stock and property markets by 1989 had run up to absurd valuations ( the Nikkei 225 hit a Shiller CAPE of 80 ) and then collapsed , never to recover .
I used to think this massive bubble proved you can ’ t just buy and hold ignoring all fundamentals and valuations , but recently came across this : ritholtz.com/2017/10/japan-greatest-bubble-time/ Never underestimate how far people can take the markets to the extremes .
This works in both directions .
The pendulum swings back and forth but always seems to go further than most would @ @ @ @ @ @ @ t work as a timing tool .
If you tried to use them in Japan you probably would have gotten out of the market a decade before the peak .
It ’ s easy to say this in hindsight , but there were few scenarios where the late-1980s real estate and stock market valuations could have been validated going forward .
Diversification , as always , is the key to avoiding a blow-up .
The entire point of diversification is to avoid having your entire portfolio in a Japan situation .
The global @ @ @ @ @ @ @ 1990 even when you include Japan in the results .

by Artikash
For those unfamiliar, the Japanese stock and property markets by 1989 had run up to absurd valuations (the Nikkei 225 hit a Shiller CAPE of 80) and then collapsed, never to recover. I used to think this massive bubble proved you can’t just buy and hold ignoring all fundamentals and valuations, but recently came across this: ritholtz.com/2017/10/japan-greatest-bubble-time/
Key takeaways:
We are primarily funded by readers. Please subscribe and donate to support us!
Never underestimate how far people can take the markets to the extremes. This works in both directions. The pendulum swings back and forth but always seems to go further than most would assume is possible. Valuations don’t work as a timing tool. If you tried to use them in Japan you probably would have gotten out of the market a decade before the peak. It’s easy to say this in hindsight, but there were few scenarios where the late-1980s real estate and stock market valuations could have been validated going forward. Diversification, as always, is the key to avoiding a blow-up. The entire point of diversification is to avoid having your entire portfolio in a Japan situation. The global stock market has done just fine since 1990 even when you include Japan in the results.
Other assets you might’ve deiversified into that would’ve saved you: Japanese government bonds, Japanese small cap and value stocks (the Nikkei 225, as name suggests, only has mega caps), and foreign real estate.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.


investmentwatchblog--2020-08-18--Wow! With another USD 1.5 trillion in fiscal #stimulus the US budget #deficit could reach a staggeri

Wow !
With another USD 1.5 trillion in fiscal # stimulus the US budget # deficit could reach a staggering @ @ @ @ @ this year , more than during WOII .
ht @ SoberLook pic.twitter.com/IuA8pRY9Fk The debt spiral @ @ @ @ @ Japan , & the EU are in all stems from this simple realization ( productive @ @ @ @ @ banks ignore this reality and the need for structural reform + encourage even more Debt @ @ @ @ @ 0 % / neg rates which solves nothing🤦♂🤔 pic.twitter.com/wvNooZ73iR

Wow! With another USD 1.5 trillion in fiscal #stimulus the US budget #deficit could reach a staggering 27% of #GDP this year, more than during WOII. ht @SoberLook pic.twitter.com/IuA8pRY9Fk
The debt spiral the US, China, Japan, & the EU are in all stems from this simple realization (productive vs unproductive debt)👇Central banks ignore this reality and the need for structural reform + encourage even more Debt, more QE, more 0% / neg rates which solves nothing🤦♂🤔 pic.twitter.com/wvNooZ73iR
— M/I_Investments (@MI_Investments) August 17, 2020


investmentwatchblog--2020-08-18--What Will The New Economy Look Like?

What Will The New Economy Look Like?

Even though there was a 2nd spike in COVID-19 cases in July , retail sales growth was strong .
The one major weak point was autos and auto parts .
Without that , it was great .
Real retail sales are now 0.6 % above the pre-recession peak .
Retail sales bounced back in 5 months which is a record quick recovery .
It took over 6 years for real retail sales to recover from the financial crisis decline and it took almost 4 years to recover after the 1990 recession .
The enormous fiscal stimulus did it ’ s @ @ @ @ @ @ @ participation in a rising stock market which helps consumer confidence .
In 2009 there were media stories about how retail investors weren ’ t participating in the rally .
People wanted nothing to do with the stock market .
This is the opposite .
The market is exhibiting late cycle characteristics right after a recession ended ( which is unusual ) .
Monthly headline retail sales grow was 1.2 % which missed estimates for 2 % .
That sounds mediocre , but consider the comp was revised up from 7.5 % to 8.4 @ @ @ @ @ @ @ growth even was positive .
Yearly growth was 2.7 % .
Autos and parts had weak monthly growth , but strong yearly growth as they were -1.2 % and 6.7 % respectively .
The used car market is on fire as people are driving instead of flying for vacations ; they are using personal vehicles instead of public transportation .
Lightweight vehicle sales were up from 13.1 to 14.5 million in July which makes the weak retail sales reading perplexing .
Maybe it will be revised higher next month .
Without autos , @ @ @ @ @ @ @ beat estimates for 1.5 % .
The most impressive part was control group sales .
Monthly growth went from 6 % to 1.5 % which beat estimates for 1 % .
As you can see from the chart above , control group yearly sales growth was 7.9 % which was the highest rate since 2000 .
You don ’ t usually see growth explode in recessions .
This indicates the recession is likely over .
Retail sales are just 1/3rd of personal consumption as this report just measures goods .
Essentially , it @ @ @ @ @ @ @ the economy ( outside of housing which is also doing really well ) .
Even though retail sales are 1.7 % above the pre-recession peak , the makeup of the sales is dramatically different .
The biggest shift has been towards online sales .
As you can see from the chart above , non-store sales were 21.9 % above where they were in February .
Monthly growth was only 0.7 % following -1.4 % growth .
That ’ s likely because stores reopened causing some people to go back to shopping how they @ @ @ @ @ @ @ growth was 24.7 % .
As of June , Morgan Stanley projected e-commerce to be 24.5 % of retail sales in 2020 and 25.6 % in 2021 .
However , there have been share losses recently as the economy has reopened .
Non-store sales as a percent of overall retail sales peaked at about 19.5 % in May and has since fallen back to 15.7 % as the chart below shows .
Many of the categories that underperformed during the lockdown have reversed course .
Clothing sales are still down 19.9 % from @ @ @ @ @ @ @ improving .
Department store sales are down over 40 % , while many discount stores such as Ross Stores , Home Goods , and TJ Maxx are back to normal .
Clothing had 5.7 % monthly growth following 110 % growth in June .
Yearly growth improved from -24.6 % to -20.9 % .
On the opposite side , sporting goods and home improvement ( building materials and garden ) are 17.6 % and 8.7 % above the pre-recession level , but have fallen back as their monthly declines were 5 % and @ @ @ @ @ @ @ potential shifts in the market will be determined by how the economy looks once COVID-19 goes away .
Of course , there ’ s always the possibility that we live in a world that isn ’ t fully back to normal for longer than a few more quarters .
For example , if COVID-19 lasts for a few more quarters will we continue to see less people working in offices , limited concerts , and no sporting event attendance ?
Those betting on the COVID-19 growth areas of the economy like cloud computing @ @ @ @ @ @ @ to being right .
Either COVID-19 has an elongated impact on the economy or when it goes away because of better treatment or a vaccine people won ’ t fully go back to the way things were before .
For example , if a worker moves to the suburbs because they can now work from home , they aren ’ t going to want to go back to the office five days per week even if COVID-19 goes away .
Similarly , people may have gotten used to the convenience of shopping online @ @ @ @ @ @ @ be puts and takes .
Concerts and airplane flights will always exist .
The people who like working from home might do so more often .
Work depends on efficiency .
Once employers have a choice , they will look at the efficiency of each option .
For sure , the concept of demanding workers be at the office even if they aren ’ t efficient or needed will go away .
This is the perfect setup for a euphoric market .
For 10 years , investors were told that buying the dip @ @ @ @ @ @ @ .
However , the March bear market rewarded the dip buyers .
Now there is no fear .
People believe if stocks fall , they will rebound quickly .
The S & P 500 just had its best 100 day rally ever ( 50.8 % ) .
The Nasdaq had its 3rd best rally ever ( 59 % gain ) ; the top 2 rallies ended in January 1999 and March 2000 .
The problem for the bulls predicting a bubble is we already had a great move .
It shows how bad @ @ @ @ @ @ @ ’ main argument is to predict a bubble ( at least in the momentum tech stocks ) .
As you can see from the chart above , the 10 day moving average of the put to call ratio is the lowest since 2000 .
The NAAIM index shows fund managers are leveraged long on average .
Retail investors also are all in .
Retail sales had a V shaped recovery because of the fiscal stimulus .
Let ’ s see how retail sales react to the decline in unemployment benefits ( $ 600 @ @ @ @ @ @ @ ) .
The good news is the labor market is rebounding solidly in August .
Some of the trends in retail sales have reversed as the economy has reopened .
What will the new economy look like ?
There is clear euphoria in the stock market because it vanquished the March decline so easily .
With the economy rebounding and the Fed easy , investors think nothing can stop the momentum tech names .

by UPFINA
Even though there was a 2nd spike in COVID-19 cases in July, retail sales growth was strong. The one major weak point was autos and auto parts. Without that, it was great. Real retail sales are now 0.6% above the pre-recession peak. Retail sales bounced back in 5 months which is a record quick recovery. It took over 6 years for real retail sales to recover from the financial crisis decline and it took almost 4 years to recover after the 1990 recession. The enormous fiscal stimulus did it’s job. We also have high retail participation in a rising stock market which helps consumer confidence. In 2009 there were media stories about how retail investors weren’t participating in the rally. People wanted nothing to do with the stock market. This is the opposite. The market is exhibiting late cycle characteristics right after a recession ended (which is unusual).
√ #US retail sales back above pre-recession peak in July, just after 5 months! √ This compares with more than 6 years for GFC or nearly 4 years for the 1990 recession pic.twitter.com/pFc4dtMXIN — Patrick Zweifel (@PkZweifel) August 14, 2020
Monthly headline retail sales grow was 1.2% which missed estimates for 2%. That sounds mediocre, but consider the comp was revised up from 7.5% to 8.4%. It’s impressive monthly growth even was positive. Yearly growth was 2.7%. Autos and parts had weak monthly growth, but strong yearly growth as they were -1.2% and 6.7% respectively. The used car market is on fire as people are driving instead of flying for vacations; they are using personal vehicles instead of public transportation. Lightweight vehicle sales were up from 13.1 to 14.5 million in July which makes the weak retail sales reading perplexing. Maybe it will be revised higher next month.
Without autos, monthly sales growth was 1.9% which beat estimates for 1.5%. The most impressive part was control group sales. Monthly growth went from 6% to 1.5% which beat estimates for 1%. As you can see from the chart above, control group yearly sales growth was 7.9% which was the highest rate since 2000. You don’t usually see growth explode in recessions. This indicates the recession is likely over.
Details Of Retail Sales Report
Retail sales are just 1/3rd of personal consumption as this report just measures goods. Essentially, it’s measuring the best part of the economy (outside of housing which is also doing really well). Even though retail sales are 1.7% above the pre-recession peak, the makeup of the sales is dramatically different. The biggest shift has been towards online sales.
Overall retail sales losses may have been fully recovered but there are wide disparities across industries w big winners and big losers. pic.twitter.com/sd2vr0d8eA — Steven Rattner (@SteveRattner) August 14, 2020
As you can see from the chart above, non-store sales were 21.9% above where they were in February. Monthly growth was only 0.7% following -1.4% growth. That’s likely because stores reopened causing some people to go back to shopping how they used to. Even still, yearly growth was 24.7%. As of June, Morgan Stanley projected e-commerce to be 24.5% of retail sales in 2020 and 25.6% in 2021. However, there have been share losses recently as the economy has reopened. Non-store sales as a percent of overall retail sales peaked at about 19.5% in May and has since fallen back to 15.7% as the chart below shows.
We are primarily funded by readers. Please subscribe and donate to support us!
Percent of Total Retail Sales at Non-Store Retailers (Online Sales) pic.twitter.com/bSGXep2H9r — Michael McDonough (@M_McDonough) August 14, 2020
Many of the categories that underperformed during the lockdown have reversed course. Clothing sales are still down 19.9% from before the recession, but they are improving. Department store sales are down over 40%, while many discount stores such as Ross Stores, Home Goods, and TJ Maxx are back to normal. Clothing had 5.7% monthly growth following 110% growth in June. Yearly growth improved from -24.6% to -20.9%. On the opposite side, sporting goods and home improvement (building materials and garden) are 17.6% and 8.7% above the pre-recession level, but have fallen back as their monthly declines were 5% and 2.9%.
Secular Or Cyclical Trends?
One of the biggest potential shifts in the market will be determined by how the economy looks once COVID-19 goes away. Of course, there’s always the possibility that we live in a world that isn’t fully back to normal for longer than a few more quarters. For example, if COVID-19 lasts for a few more quarters will we continue to see less people working in offices, limited concerts, and no sporting event attendance? Those betting on the COVID-19 growth areas of the economy like cloud computing and online shopping therefore have two layers to being right. Either COVID-19 has an elongated impact on the economy or when it goes away because of better treatment or a vaccine people won’t fully go back to the way things were before.
For example, if a worker moves to the suburbs because they can now work from home, they aren’t going to want to go back to the office five days per week even if COVID-19 goes away. Similarly, people may have gotten used to the convenience of shopping online for more items. There will likely be puts and takes. Concerts and airplane flights will always exist. The people who like working from home might do so more often. Work depends on efficiency. Once employers have a choice, they will look at the efficiency of each option. For sure, the concept of demanding workers be at the office even if they aren’t efficient or needed will go away.
Clear Euphoria
This is the perfect setup for a euphoric market. For 10 years, investors were told that buying the dip wouldn’t work in a recession. However, the March bear market rewarded the dip buyers. Now there is no fear. People believe if stocks fall, they will rebound quickly. The S&P 500 just had its best 100 day rally ever (50.8%). The Nasdaq had its 3rd best rally ever (59% gain) ; the top 2 rallies ended in January 1999 and March 2000. The problem for the bulls predicting a bubble is we already had a great move. It shows how bad the risk reward is when the bulls’ main argument is to predict a bubble (at least in the momentum tech stocks).
we have gone from record high to near record low in equity put/call ratios not that it means that much pic.twitter.com/zSOrvJhEWk — HindsightCapital™ (@Data_Junkie_) August 14, 2020
As you can see from the chart above, the 10 day moving average of the put to call ratio is the lowest since 2000. The NAAIM index shows fund managers are leveraged long on average. Retail investors also are all in.
Conclusion
Retail sales had a V shaped recovery because of the fiscal stimulus. Let’s see how retail sales react to the decline in unemployment benefits ($600 per week to $300 per week). The good news is the labor market is rebounding solidly in August. Some of the trends in retail sales have reversed as the economy has reopened. What will the new economy look like? There is clear euphoria in the stock market because it vanquished the March decline so easily. With the economy rebounding and the Fed easy, investors think nothing can stop the momentum tech names.


investmentwatchblog--2020-08-18--Stock valuations have been this high only three times in history. What happened next should give inv

Stock valuations have been this high only three times in history. What happened next should give investors pause

“ I do think this reflects Buffett ’ s cautiousness about the current state — and future prospects — of @ @ @ @ @ Tilson said .
The Recession Is About to Slam Cities : NYT Those with budgets @ @ @ @ @ , sales taxes or direct state assistance will face particular distress .

The percentage of global fund managers who believe most asset classes are overvalued has risen to the highest level since 2008. Source Bank of America. #valuation pic.twitter.com/4mdPFPxotZ — jeroen blokland (@jsblokland) August 18, 2020
S&P 500’s forward P/E ratio now sits at highest since mid-2000 pic.twitter.com/R3kCQD4q1J — Liz Ann Sonders (@LizAnnSonders) August 18, 2020
Equity Flows. Updating this stunning chart from DB: (1) Tech keeps getting non-stop record flows. (2) Incredible how there's still *nearly zero* net buying in 8 key Sectors – a winner-take-all market driven by extreme investor preferences. Thinking about the path of max pain. pic.twitter.com/LXD86SHC9r — Macro Charts (@MacroCharts) August 17, 2020
Bank lobbyists are putting on a full-court press urging the Fed to cut an important capital requirement for the 8 biggest U.S. banks, per @morningmoneyben. Re-upping my op-ed on why that's a dangerous idea: t.co/9uV2Zl3cJ7 pic.twitter.com/XDoKxPxQn4 — Jeremy Kress (@Jeremy_Kress) August 17, 2020
According to the latest senior loan officer survey, bank willingness to make consumer installment loans has fallen to the lowest lvls since ‘08. A tightening in lending standards to US households of this magnitude suggests a sharp rise in consumer charge-off rates is approaching. pic.twitter.com/7b7qfIKSMY — Julien Bittel, CFA (@BittelJulien) August 18, 2020
Capacity Utilization and Corporate Cash Flow pic.twitter.com/HZASbUxqkO — Win Smart, CFA (@WinfieldSmart) August 18, 2020
For those who follow Bradley this might be one of the more severe potential down moves in recent years starting on Aug 19th after a good low point in March. pic.twitter.com/ppWStaLn1Z — Thomas Thornton (@TommyThornton) August 17, 2020
“I do think this reflects Buffett’s cautiousness about the current state — and future prospects — of the U.S. economy,” Tilson said.
We are primarily funded by readers. Please subscribe and donate to support us!
Those with budgets that rely heavily on tourism, sales taxes or direct state assistance will face particular distress.


investmentwatchblog--2020-08-18--THE CENTRAL BANK IS FINISHING WHAT THEY STARTED IN 1913

The Federal Reserve is actively trying to destroy the dollar , which was the plan when they started enslaving humanity in 1913 .
The goal has always been to own the world through the debt-based monetary system .
Now that the central bankers have admitted to working on the digital dollar , that will be tracked and traced and wholly centralized and controlled by the banking cartel , it ’ s only a matter of time before we have a choice a make : freedom or slavery .
They are going to attempt to control us with the fiat money @ @ @ @ @ @ @ system of complete subjugation , make no mistake about it .
For those with eyes to see , and ears to hear , you already understand that we aren ’ t going to any kind of a gold-backed monetary system because we already know that by doing that , the central banks will lose power .
Their goal is to have all the power , not relinquish it .
It ’ s also important to realize that they have had a digital dollar for a long time , they just need the right @ @ @ @ @ @ @ to the “ Great Reset.
” This scamdemic has provided central bankers with an opportunity to finish enslaving us all .
It ’ s All Been Planned : Prepare For The Great Reset Gregory Mannarino says in this Market Report : “ We know what ’ s going on here .
It ’ s all about the central banks , the Federal Reserve inflating and inflating to the highest order to finish what they started in 1913 : to be the lender and buyer of last resort .
And we are REALLY in @ @ @ @ @ @ @ as you understand what ’ s going on , you will be able to navigate what ’ s coming .
The Federal Reserve will choose the president , and they will attempt with everything they have to finish what they started using their political puppets as needed .
This is not about left vs. right , in fact , that ’ s the big problem .
People still think there ’ s a difference between republicans and democrats .
Donald Trump “ got down on his knees and praised China , ” all @ @ @ @ @ @ @ After years of opposing rhetoric , resulting in no deal , the president has shown he ’ s in on this takeover by the central banks .
“ It ’ s a joke !
” says Mannarino .
If you still don ’ t understand what ’ s going on , please watch the video below : It is up to us whether politicians and the central bankers succeed in enslaving us .
The solution is simple .
Remove yourself from their system and under no circumstances , accept their digital dollar .
@ @ @ @ @ @ @ no one agrees to and participates in a monetary system that shackles people for life .
Live free .
These people who think they own us don ’ t fear politicians , they fear us waking up to the illusion that those politicians are offering .
It ’ s past time to evolve beyond this system of control and start to lead ourselves .

by Mac Slavo of SHTFplan
The Federal Reserve is actively trying to destroy the dollar, which was the plan when they started enslaving humanity in 1913. The goal has always been to own the world through the debt-based monetary system.
Now that the central bankers have admitted to working on the digital dollar, that will be tracked and traced and wholly centralized and controlled by the banking cartel, it’s only a matter of time before we have a choice a make: freedom or slavery. They are going to attempt to control us with the fiat money they create. This will be a system of complete subjugation, make no mistake about it.
For those with eyes to see, and ears to hear, you already understand that we aren’t going to any kind of a gold-backed monetary system because we already know that by doing that, the central banks will lose power. Their goal is to have all the power, not relinquish it. It’s also important to realize that they have had a digital dollar for a long time, they just need the right crisis to roll it out, similar to the “Great Reset.” This scamdemic has provided central bankers with an opportunity to finish enslaving us all.
It’s All Been Planned: Prepare For The Great Reset
Gregory Mannarino says in this Market Report: “We know what’s going on here. It’s all about the central banks, the Federal Reserve inflating and inflating to the highest order to finish what they started in 1913:to be the lender and buyer of last resort. And we are REALLY in the middle of it.”
We are primarily funded by readers. Please subscribe and donate to support us!
As long as you understand what’s going on, you will be able to navigate what’s coming. The Federal Reserve will choose the president, and they will attempt with everything they have to finish what they started using their political puppets as needed.
Greg Mannarino: “It’s A Game. It’s A Charade. It’s Theater.”
This is not about left vs. right, in fact, that’s the big problem. People still think there’s a difference between republicans and democrats. Donald Trump “got down on his knees and praised China,” all so the markets would go up. After years of opposing rhetoric, resulting in no deal, the president has shown he’s in on this takeover by the central banks. “It’s a joke!” says Mannarino.
If you still don’t understand what’s going on, please watch the video below:
Views: Views:
It is up to us whether politicians and the central bankers succeed in enslaving us. The solution is simple. Remove yourself from their system and under no circumstances, accept their digital dollar. The entire control dynamic will crash if no one agrees to and participates in a monetary system that shackles people for life. Live free. These people who think they own us don’t fear politicians, they fear us waking up to the illusion that those politicians are offering. It’s past time to evolve beyond this system of control and start to lead ourselves.


investmentwatchblog--2020-08-18--Why Warren Buffett Buying Gold Miners Is Important?

Jason talks about why Berkshire Hathaway adding even 0.5 % assets under management ( AUM ) of gold stocks to @ @ @ @ @ why other value investors may soon follow Warren Buffett into gold stocks .

Jason talks about why Berkshire Hathaway adding even 0.5% assets under management (AUM) of gold stocks to its portfolio is important and why other value investors may soon follow Warren Buffett into gold stocks.
We are primarily funded by readers. Please subscribe and donate to support us!


investmentwatchblog--2020-08-18--Second Wave? | Europe grapples with prospect of new COVID outbreak, tightens restrictions

The spectre of a second wave of COVID is haunting a pandemic-weary Europe , governments are again rolling out unpopular @ @ @ @ @ is growing increasingly fed up .

The spectre of a second wave of COVID is haunting a pandemic-weary Europe, governments are again rolling out unpopular restrictions, but the public is growing increasingly fed up.
We are primarily funded by readers. Please subscribe and donate to support us!


investmentwatchblog--2020-08-18--Barr will ask court to shut down ALL discovery into Clinton email issue and DEFENDS Obama State’s ha

Barr will ask court to shut down ALL discovery into Clinton email issue and DEFENDS Obama State’s handling of Clinton emails.

OUTRAGE : Rather than appeal court shutdown of Clinton testimony , Barr @ TheJusticeDept just told @ JudicialWatch it will @ @ @ @ @ ALL discovery into Clinton email issue and DEFENDS Obama State 's handling of Clinton emails @ @ @ @ @ who runs DOJ .
t.co/K2bPVABAoQ

OUTRAGE: Rather than appeal court shutdown of Clinton testimony, Barr @TheJusticeDept just told @JudicialWatch it will ask court to shut down ALL discovery into Clinton email issue and DEFENDS Obama State's handling of Clinton emails.@RealDonaldTrump should ask who runs DOJ. t.co/K2bPVABAoQ
— Tom Fitton (@TomFitton) August 18, 2020


investmentwatchblog--2020-08-18--Trump Support Appears to Skyrocket in Battleground and Matchup Polling… Surges With 150 Times More N

Trump Support Appears to Skyrocket in Battleground and Matchup Polling… Surges With 150 Times More Negative News Coverage than Current Challenger

Vote in person .
A landslide that is visible election night is important to overcome the mail-in ballot fraud .
Sounds like rationale people don ’ t believe the chattering of the Fake News anymore .
DNC Night One — I Think the Democrats Want Trump to Win .
“ A series of individually recorded remote speeches gave it a ‘ Gee we ’ re sorry we can ’ t be there for your 90th birthday , Uncle Joe , ’ vibe .
That ’ s perfectly fine when it ’ s Uncle Joe ’ s 90th birthday but it @ @ @ @ @ @ @ ’ s Uncle Joe ’ s 90th attempt at becoming President of the United States .
And Uncle Joe isn ’ t even at his own party to watch because he ’ s in the basement.
” UPDATE : St. Louis couple who drew guns on protesters to support Trump at RNC .
WELL , TO BE FAIR , TRUMP IS CAPABLE OF COMPLETING A SENTENCE .
Clammed up : Trump takes 700 % more questions than Biden in one month .
Related : Joe Biden Still Doesn ’ t Know How Many @ @ @ @

Vote in person. A landslide that is visible election night is important to overcome the mail-in ballot fraud.
Sounds like rationale people don’t believe the chattering of the Fake News anymore.
DNC Night One — I Think the Democrats Want Trump to Win. “A series of individually recorded remote speeches gave it a ‘Gee we’re sorry we can’t be there for your 90th birthday, Uncle Joe,’ vibe. That’s perfectly fine when it’s Uncle Joe’s 90th birthday but it’s not as fun if it’s Uncle Joe’s 90th attempt at becoming President of the United States. And Uncle Joe isn’t even at his own party to watch because he’s in the basement.”
UPDATE: St. Louis couple who drew guns on protesters to support Trump at RNC.
We are primarily funded by readers. Please subscribe and donate to support us!
WELL, TO BE FAIR, TRUMP IS CAPABLE OF COMPLETING A SENTENCE. Clammed up: Trump takes 700% more questions than Biden in one month.
Related: Joe Biden Still Doesn’t Know How Many Grandchildren He Has.
AC


investmentwatchblog--2020-08-18--Melbourne: Authorities to Use Surveillance Drones to Catch People Not Wearing Masks

“ High powered drones will be used to find people not wearing masks and cars too far from home , @ @ @ @ @ Melbourne news report .
The drones will also be used to ensure skate parks and @ @ @ @ @ surveillance devices can be flown up to a distance of 7km and produce images so @ @ @ @ @ a vehicle ’ s number plate from 500 meters away.
” What ’ s society @ @ @ @ @ years from now ?

“High powered drones will be used to find people not wearing masks and cars too far from home,” according to a 7News Melbourne news report. The drones will also be used to ensure skate parks and playgrounds remain empty.
The surveillance devices can be flown up to a distance of 7km and produce images so clear they can “read a vehicle’s number plate from 500 meters away.”
We are primarily funded by readers. Please subscribe and donate to support us!
Police are preparing to launch their aerial arsenal as part of a crackdown on COVID rule breakers. High powered drones will be used to find people not wearing masks, and cars too far from home. t.co/5zYfOfohG3 @tdolling #7NEWS pic.twitter.com/Yy84UBTH0V — 7NEWS Melbourne (@7NewsMelbourne) August 17, 2020
What’s society going to be like five years from now?
Tess


investmentwatchblog--2020-08-18--Robinhood Now Valued at $11.2 Billion With New Fund Backing

Robinhood Financial raised new funding at a valuation of about $ 11.2 billion , as Dan Sundheim ’ s D1 Capital Partners poured $ 200 million into the online trading company .
The seven-year-old firm was most recently valued at $ 8.6 billion during its July funding round , before it posted record trading figures for June .
It revealed daily average revenue trades of 4.31 million for the month , greater than any of its publicly traded rivals .
The latest investment and valuation were announced by Robinhood in a blog post on its website .
Robinhood ’ s @ @ @ @ @ @ @ both fascination and criticism from Wall Street , with concerns persisting that the platform attracts many young users who many not understand the risks of stock wagers .
D1 ’ s new investment marks a vote of confidence from a prominent hedge fund investor .
Sundheim was chief investment officer at Viking Global Investors before striking out on his own and opening D1 to outside investors in 2018 .
It was one of the largest hedge fund launches of that year , and he was among an early crop of investors to invest @ @ @ @ @ @ @ stocks .

Robinhood Financial raised new funding at a valuation of about $11.2 billion, as Dan Sundheim’s D1 Capital Partners poured $200 million into the online trading company.
The seven-year-old firm was most recently valued at $8.6 billion during its July funding round, before it posted record trading figures for June. It revealed daily average revenue trades of 4.31 million for the month, greater than any of its publicly traded rivals. The latest investment and valuation were announced by Robinhood in a blog post on its website.
Robinhood’s surge during the Covid-19 pandemic has garnered both fascination and criticism from Wall Street, with concerns persisting that the platform attracts many young users who many not understand the risks of stock wagers. D1’s new investment marks a vote of confidence from a prominent hedge fund investor.
Sundheim was chief investment officer at Viking Global Investors before striking out on his own and opening D1 to outside investors in 2018. It was one of the largest hedge fund launches of that year, and he was among an early crop of investors to invest in both publicly traded and privately held stocks.


investmentwatchblog--2020-08-18--Alternate headline: The Fed’s actions have set up for the best selling opportunity since just before

Alternate headline: The Fed’s actions have set up for the best selling opportunity since just before the GFC. The clock is ticking.

Alternate headline : The Fed 's actions have set up for the best selling opportunity since just before the GFC .
The clock is ticking .
t.co/8GhbbPaVW6 “ .. August is on track to be the third month of the past four where insider selling exceeded $ 15 billion , TrimTabs said .
Insider selling is at a pace unseen since 2006.
” New York ( CNN Business ) US stocks are on the cusp of a remarkable feat : setting new all-time highs during the middle of a pandemic .
Yet there are signs that at least some leaders @ @ @ @ @ @ @ sustainability of a mega rally that has catapulted the S & P 500 by 51 % since the March 23 lows .
CEOs , leading shareholders and other senior executives are rushing to take chips off the table .
So-called insiders have dumped more than $ 50 billion worth of shares since the start of May , according to TrimTabs Investment Research .
August is on track to be the third month of the past four where insider selling exceeded $ 15 billion , TrimTabs said .
Insider selling is at a pace @ @ @ @ @ @ @ insider selling could be a warning sign for the booming market because insiders , by definition , are privy to more information about the true health of their companies than average investors .
And if they were confident in the market rally , insiders would be unlikely to sell now .
Yet many are heading for the exits just as markets make new milestones .

Alternate headline: The Fed's actions have set up for the best selling opportunity since just before the GFC. The clock is ticking. t.co/8GhbbPaVW6
“.. August is on track to be the third month of the past four where insider selling exceeded $15 billion, TrimTabs said. Insider selling is at a pace unseen since 2006.”
See www.cnn.com/2020/08/17/investing/insider-selling-stocks-market/index.html
New York (CNN Business)US stocks are on the cusp of a remarkable feat: setting new all-time highs during the middle of a pandemic.
Yet there are signs that at least some leaders of Corporate America are skeptical about the sustainability of a mega rally that has catapulted the S&P 500 by 51% since the March 23 lows.
CEOs, leading shareholders and other senior executives are rushing to take chips off the table.
So-called insiders have dumped more than $50 billion worth of shares since the start of May, according to TrimTabs Investment Research. August is on track to be the third month of the past four where insider selling exceeded $15 billion, TrimTabs said. Insider selling is at a pace unseen since 2006.
The pace of insider selling could be a warning sign for the booming market because insiders, by definition, are privy to more information about the true health of their companies than average investors. And if they were confident in the market rally, insiders would be unlikely to sell now. Yet many are heading for the exits just as markets make new milestones.


investmentwatchblog--2020-08-18--The fraudsters want to raise the US inflation target

Today brings us a new variation on an old theme .
This is the issue of what is the right level for an inflation target and sometimes we go as far as to whether there should be one at all ?
This begins with something of a fluke or happenstance .
This is the reality that inflation targets are usually set at 2 % per annum following the lead set by New Zealand back in the day .
This has become something of a Holy Grail for central banksters in spite of the fact that it had no theoretical backing @ @ @ @ @ @ @ explains .
In fact it was as we see so often a case of trying to fit later theory to earlier practice .
Basocally it was from a different world where inflation was higher and they wanted something of an anchor and an achievable objective .
Also there is another swerve as other time the central bankster preference for theory over reality has led to claims that it provides price stability when it does not .
Let me illustrate from the European Central Bank or ECB .
The truth is in some ways @ @ @ @ @ @ @ because if we return to the real world it simply isn ’ t .
Also the inflation measure ignores owner-occupied housing an area where we often find inflation .
It was relative price stability when inflation was higher but was never updated with the times leaving central bankers aping first world war generals and fighting the previous war .
What about now ?
Here is CNBC from earlier this month .
Actually then CNBC became refreshingly honest .
Not fully honest though because we only need to look back to yesterday and the @ @ @ @ @ @ @ ( lost ) decades .
This theme was added to last week by an Economic Letter from the San Francisco Fed .
I have helped out by highlighting the bits which exhibit extreme Ivory Tower style thinking .
In general people think inflation is under recorded and would be more sure of this id they knew that housing inflation is either ignored or in the case of the US fantasy rents which are never paid are used to estimate it .
It turns into something the Arctic Monkeys dang about .
Yesterday Bloomberg @ @ @ @ @ @ @ way but got itself in something of a mess .
The preferred measure PCE ( Personal Consumption Expenditure ) was chosen because it gives a lower reading than the more commonly known CPI in the US .
This is a familiar tactic by central banksters and if we add in the gap which is often around 0.4 % we see things change .
Next apparently things move in response to what the Fed is thinking as opposed to the interest-rate cuts , bond buying and credit easing .
Rising inflation expectations are presented @ @ @ @ @ @ @ the real world the old concept of “ sticky wages ” is back and in more than a few cases involves wage cuts .
There is an air of unreality about this which is extreme even for the Ivory Towers of economic theory .
After all the last decade has given them everything they could dream of in terms of zero and sometimes negative interest-rates and bond buying on a scale they could not have even dreamt of .
If we go back a decade they believed it would work and by that @ @ @ @ @ @ @ target and rescue the economy .
But they have turned out to be the equivalent of snake-oil sales ( wo ) man where the next bottle will always cure you and even has “ Drink Me ” written on it in big friendly letters .
But it did not work and even worse like a poor general they left a flank open which is that by having no exit strategy they were exposed to any future downturn .
So the Covid pandemic was unlucky in severity but not the event itself as something @ @ @ @ @ @ @ To my mind the policy failure has been that central banksters got caught up in the here and now and forgot they had defined a fair bit of inflation away .
So they did not realise the real choice was to lower the target to 1.5 % or 1 % or to put in a measure of housing inflation that represents inflation reality rather than a non-existent fantasy .
Thus they have ended up on a road to nowhere where in their land of confusion they have ended up financing government deficits .
@ @ @ @ @ @ @ new role .
Next up they look to support the economy but the truth is that we see another area where they have seen failure .
Keynes explained that well I think in that you can shift expectations or trick people for a while but in the end Kelis was right .
So whether they end up targeting average inflation or simply raise the target does not matter in the way it once did .
The real issue now is getting politicians weaned off central banks financing their deficits for them .
Good @ @ @ @

by Shaun Richards
Today brings us a new variation on an old theme. This is the issue of what is the right level for an inflation target and sometimes we go as far as to whether there should be one at all? This begins with something of a fluke or happenstance. This is the reality that inflation targets are usually set at 2% per annum following the lead set by New Zealand back in the day. This has become something of a Holy Grail for central banksters in spite of the fact that it had no theoretical backing as this from the Riksbank of Sweden explains.
There was no relevant academic research from which to draw support; instead, the New Zealand authorities had to launch the new regime more or less as an “experiment” and quite simply see how well it worked in practice.
In fact it was as we see so often a case of trying to fit later theory to earlier practice.
This shows that it does not seem to be until the mid-1990s, i.e. about five years after its introduction in practice, that inflation targeting began to attract any significant interest in the academic research.
Basocally it was from a different world where inflation was higher and they wanted something of an anchor and an achievable objective.
Also there is another swerve as other time the central bankster preference for theory over reality has led to claims that it provides price stability when it does not. Let me illustrate from the European Central Bank or ECB.
The ECB has defined price stability as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%.
The truth is in some ways in the “as defined” bit because if we return to the real world it simply isn’t. Also the inflation measure ignores owner-occupied housing an area where we often find inflation. It was relative price stability when inflation was higher but was never updated with the times leaving central bankers aping first world war generals and fighting the previous war.
What about now?
Here is CNBC from earlier this month.
Recent statements from Fed officials and analysis from market veterans and economists point to a move to “average inflation” targeting in which inflation above the central bank’s usual 2% target would be tolerated and even desired.
Actually then CNBC became refreshingly honest.
To achieve that goal, officials would pledge not to raise interest rates until both the inflation and employment targets are hit. With inflation now closer to 1% and the jobless rate higher than it’s been since the Great Depression, the likelihood is that the Fed could need years to hit its targets.
Not fully honest though because we only need to look back to yesterday and the Japanese experience which has gone on for (lost) decades. This theme was added to last week by an Economic Letter from the San Francisco Fed.
We are primarily funded by readers. Please subscribe and donate to support us!
Average-inflation targeting is one approach policymakers could use to help address these challenges. Taking into account previous periods of below-target inflation, average-inflation targeting overshoots to bring the average rate back to target over time. If the public perceives it to be credible, average-inflation targeting can help solidify inflation expectations at the 2% inflation target by providing a better inflation anchor and thus maintain space for potential interest rate cuts. It importantly can help lessen the constraint from the effective lower bound in recessions by inducing policymakers to overshoot the inflation target and provide more accommodation in the future.
I have helped out by highlighting the bits which exhibit extreme Ivory Tower style thinking. In general people think inflation is under recorded and would be more sure of this id they knew that housing inflation is either ignored or in the case of the US fantasy rents which are never paid are used to estimate it. It turns into something the Arctic Monkeys dang about.
Fake tales of San Francisco
Echo through the room
Yesterday Bloomberg suggested such a policy was on its way but got itself in something of a mess.
But the Fed’s preferred measure of inflation has consistently fallen short, averaging just 1.4% since the target’s introduction.
The preferred measure PCE ( Personal Consumption Expenditure) was chosen because it gives a lower reading than the more commonly known CPI in the US. This is a familiar tactic by central banksters and if we add in the gap which is often around 0.4% we see things change. Next apparently things move in response to what the Fed is thinking as opposed to the interest-rate cuts, bond buying and credit easing.
“Rising inflation expectations are, in part, indicative of the market beginning to price in the Fed’s shift,” said Bill Merz, senior portfolio strategist and head of fixed-income research at U.S. Bank Wealth Management in Minneapolis.
Rising inflation expectations are presented as a good thing whereas back in the real world the old concept of “sticky wages” is back and in more than a few cases involves wage cuts.
Comment
There is an air of unreality about this which is extreme even for the Ivory Towers of economic theory. After all the last decade has given them everything they could dream of in terms of zero and sometimes negative interest-rates and bond buying on a scale they could not have even dreamt of. If we go back a decade they believed it would work and by that I mean hit the 2% inflation target and rescue the economy. But they have turned out to be the equivalent of snake-oil sales(wo)man where the next bottle will always cure you and even has “Drink Me” written on it in big friendly letters.
But it did not work and even worse like a poor general they left a flank open which is that by having no exit strategy they were exposed to any future downturn. So the Covid pandemic was unlucky in severity but not the event itself as something was always going to come along. To my mind the policy failure has been that central banksters got caught up in the here and now and forgot they had defined a fair bit of inflation away. So they did not realise the real choice was to lower the target to 1.5% or 1% or to put in a measure of housing inflation that represents inflation reality rather than a non-existent fantasy.
Take a ride in the sky, on our ship fantasii
All your dreams will come true, right away ( Earth Wind & Fire)
Thus they have ended up on a road to nowhere where in their land of confusion they have ended up financing government deficits. This rather than inflation targeting is the new role. Next up they look to support the economy but the truth is that we see another area where they have seen failure. Keynes explained that well I think in that you can shift expectations or trick people for a while but in the end Kelis was right.
Seen it in your one to many times
Said you might trick me once
I won’t let you trick me twice.
So whether they end up targeting average inflation or simply raise the target does not matter in the way it once did. The real issue now is getting politicians weaned off central banks financing their deficits for them. Good luck with that…….
The Investing Channel