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2021 - Is inflation finally back in the conversation?


Reagan1k

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2 hours ago, 52-80 said:

why are pension funds holding assets using leverage/margins? 

this shouldn't be a thing.

Turns out that cutting regulations just to cut regulations may lead to a bad time

https://www.theguardian.com/business/2022/jul/08/bank-official-sounds-alarm-over-free-lunch-city-deregulation

Quote

Changing insurance rules known as Solvency II that were inherited from the European Union is seen by the government as a key Brexit “dividend” for Britain’s financial industry.

Jacob Rees-Mogg, the Brexit opportunities minister, has called for a rewriting of EU financial rules to trigger an “investment big bang” in Britain powered by the City of London.

Robber Barons win again! 

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4 hours ago, 52-80 said:

why are pension funds holding assets using leverage/margins? 

this shouldn't be a thing.

leverage in the form of margin in itself isn't a bad thing.  if done correctly it can help reduce the risk and volatility of a portfolio.  

1 hour ago, Captainant said:

Turns out that cutting regulations just to cut regulations may lead to a bad time

https://www.theguardian.com/business/2022/jul/08/bank-official-sounds-alarm-over-free-lunch-city-deregulation

Robber Barons win again! 

those proposals haven't happened yet and frankly even if they had occurred wouldn't have been the reason behind the crisis.  

 

these pension funds were making bets against the uk gvt bonds moving in a big way in either direction.  they were apparently irresponsibly leveraged to the point that when they needed to raise more cash they had to close these positions which moved the trade even more against them necessitating even more selling becoming a snowball effect.  

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3 minutes ago, gsoda3 said:

those proposals haven't happened yet and frankly even if they had occurred wouldn't have been the reason behind the crisis. 

literally has nothing to do with the instruments or mechanisms of holdings (only about margining systems)... but its great scapegoat fodder

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1071899/20220328_Review_of_Solvency_II_Consultation.pdf

 

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17 minutes ago, 52-80 said:

literally has nothing to do with the instruments or mechanisms of holdings (only about margining systems)... but its great scapegoat fodder

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1071899/20220328_Review_of_Solvency_II_Consultation.pdf

 

not only great scapegoat fodder, it's an attempt at a gotcha moment you'd expect from a facebook post.  

 

for anyone who doesn't want to get lost in the technicalities of portfolio or margin risk you can just stop at this:  in the UK insurance products and pension products are different, just like here.  the funds that were in trouble yesterday were pension funds.  the article posted above with the proposal to reduce the cash requirements of margin lending was specifically for insurance.

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On 9/29/2022 at 5:02 AM, 52-80 said:

why are pension funds holding assets using leverage/margins? 

this shouldn't be a thing.

Who knew I should be a pension manager; I mean I can't really time investment buy/sell decisions very well, but I'm not losing on margin or with leverage.

Vote Wally money manager of the year!

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Help me understand why this isn’t a good chart? July and august show .0% and .1% increases that’s .6% on an annualized basis. Show anything below .3% in any given month and you’re on track for your annualized target. Current annualized numbers have 5.2% as a floor through January 31, 2023.  Numbers in November 2022 could drop .7-8% alone as last October drops off the chart.  I’m not saying we are out of the woods I’m just having a hard time reconciling the panic of inflation with what’s currently happening. I’m more concerned the fed will be too hawkish and not moderate at the right time (which I think the right time to slow down could be after the next hike).

92D7F5BC-BF91-4911-937D-F4C372EE9706.jpeg

Edited by troph
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2 hours ago, troph said:

Help me understand why this isn’t a good chart? July and august show .0% and .1% increases that’s .6% on an annualized basis. Show anything below .3% in any given month and you’re on track for your annualized target. Current annualized numbers have 5.2% as a floor through January 31, 2023.  Numbers in November 2022 could drop .7-8% alone as last October drops off the chart.  I’m not saying we are out of the woods I’m just having a hard time reconciling the panic of inflation with what’s currently happening. I’m more concerned the fed will be too hawkish and not moderate at the right time (which I think the right time to slow down could be after the next hike).

92D7F5BC-BF91-4911-937D-F4C372EE9706.jpeg

Includes energy, while core inflation has actually worsened??

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2 hours ago, troph said:

Help me understand why this isn’t a good chart? July and august show .0% and .1% increases that’s .6% on an annualized basis. Show anything below .3% in any given month and you’re on track for your annualized target. Current annualized numbers have 5.2% as a floor through January 31, 2023.  Numbers in November 2022 could drop .7-8% alone as last October drops off the chart.  I’m not saying we are out of the woods I’m just having a hard time reconciling the panic of inflation with what’s currently happening. I’m more concerned the fed will be too hawkish and not moderate at the right time (which I think the right time to slow down could be after the next hike).

92D7F5BC-BF91-4911-937D-F4C372EE9706.jpeg

The concern for the Fed, especially last month, was core inflation accelerating. I think it was 0.6% vs 0.3% expected. 

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On 9/26/2022 at 9:54 PM, 52-80 said:

hey guys what kinda meme stock is this and where can we buy it?

image.thumb.png.1cf7263bd9f7f105b22ab81d5c13501a.png

 

guess all the expectations of a fed pivot is dead x_x

Volatility in fixed income is all sorts of fun

Peak to trough is -40bps in a matter of a few days.  Maintenance margin for /10Y is $280 per contract.  40bps move = change in value of $400… or a 1.4x returns on cash  

image.thumb.png.6236a857eed9bdf4b0d3031b61d60650.png

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On 9/26/2022 at 9:36 AM, Wally Fairway said:

we are going to need a very concerted effort along multiple fronts to bring inflation under control
maybe something like the advertising campaign launched in 1974
Should We Be Scared of Inflation? - St. Louis Trust & Family ...

 

It was so successful that the administration was able to bring it under 2.5% by mid-1983, only took 9 years for that little button to have a big impact

Footnote: I would like to thank that high inflation rate for ruining the Michigan economy, which led me to move to the great state of Texas and I spent the 80's and most of the 90's in the Houston area

You got run out of Michigan just in time to get to Houston for the big oil bust?  Let me know the next time you're re-locating so I can short banks in the region.

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On 9/30/2022 at 7:42 AM, Wally Fairway said:

Who knew I should be a pension manager; I mean I can't really time investment buy/sell decisions very well, but I'm not losing on margin or with leverage.

Vote Wally money manager of the year!

Options aren’t margin or leverage?  That’s a new one.

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1 hour ago, Fudge Nuggets said:

You got run out of Michigan just in time to get to Houston for the big oil bust?  Let me know the next time you're re-locating so I can short banks in the region.

I got back to Michigan about 10 years before the auto industry crashed; I expect the next big market in Michigan will be related to the water rights of the lakes that surround it.

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49 minutes ago, Wally Fairway said:

I got back to Michigan about 10 years before the auto industry crashed; I expect the next big market in Michigan will be related to the water rights of the lakes that surround it.

I look forward to see how Los Angeles DWP annexes Muskegon 

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RBA “pivots”with smaller .25 rate increase. Australia/RBA can be a bellwether for Fed action.

Bad News = Good News: JOLTS job openings down one million. Jobs report Is Friday  

Equity markets pricing in pivot already (danger Will Robinson).

Oil up with OPEC cutting output and SPR ending releases at end of the month.  Additional sanctions on Russian oil creates an inflationary spiral.  

tldr: premature pivot prognostication

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5 minutes ago, washparkhorn said:

RBA “pivots”with smaller .25 rate increase. Australia/RBA can be a bellwether for Fed action.

Bad News = Good News: JOLTS job openings down one million. Jobs report Is Friday  

Equity markets pricing in pivot already (danger Will Robinson).

Oil up with OPEC cutting output and SPR ending releases at end of the month.  Additional sanctions on Russian oil creates an inflationary spiral.  

tldr: premature pivot prognostication

Yeah one of my key follows thinks pivot is way down the line with core inflation still rising and oil going back up with OPEC+ looking committed to maintaining prices. 
 

The same caveat as always applies. A forced pivot a la BoE saving pension system. 

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6 hours ago, Fudge Nuggets said:

Lower prices -> lower trade?

Lower manufacturing -> lower prices?

that graphic is all sorts of fucked up  Stronger $ definitely has its negatives but that graphic is a shitty way of trying to explain them  

 

The Dollar Doom Cycle is not a controversial concept. A strong dollar is a liquidity tightener - and a safe haven. The normal off-ramp is the Fed lowering rates. And therein lies the problem. The Fed is so fearful of inflation that it cannot lower rates. Hence - the global dollar doom cycle becomes a risk. I hope that helps. 

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8 minutes ago, washparkhorn said:

The Dollar Doom Cycle is not a controversial concept. A strong dollar is a liquidity tightener - and a safe haven. The normal off-ramp is the Fed lowering rates. And therein lies the problem. The Fed is so fearful of inflation that it cannot lower rates. Hence - the global dollar doom cycle becomes a risk. I hope that helps. 

I do get it, but maybe find a graphic that says what you have stated above instead of the garbage in the original graphic.

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