Stock Market News – Fed Rates, Inflation and yes, HIGHER TAXES….

In the Stock Exchange News for today we go over the FED, what they can do and can't, inflation, Janet Yellen and here conversation that all is fixed with higher taxes …

News – Fed Rates, Inflation and yes, HIGHER TAXES….

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  1. At 2% inflation we should see a 4% T-Bill and 6% 20year Treasury Bond on average for real returns of 2% and 4% based on a normal yield curve – that means more gyrations to come – LOL

  2. Next month the COLA adjustments go into effect, ~5.4% increase in social security and shift in income tax brackets. I wonder how much this might impact spending and inflation.

  3. Fiscal deficit ‘Not urgent’ translated: “We’ll continue to run up unsustainable debt and in case we don’t get reelected, the other party (and the country) gets burned from the debt jenga tower falling”

  4. Thanks Sven! I appreciate your outlook in these wild times! Hopefully everything works out in the end one way or another

  5. Is there some law of nature that I am not aware of preventing profitable Chinese companies from putting a green day on the board?
    How can Alibaba and JD be down EVERY single day for no reason? How can nobody in the planet see value in those businesses for so long? Not even the “educational” YT portfolios…
    In a rational efficient market and all that, how can a growing business with expanding margins and with $21/share in cash equivalents be trading at $24 ?

  6. Great work. Regarding the Fed decision, I always keep in mind their goals: #1 stable prices and #2: full employment. With unemployment at about 3% we are at full employment. Per Keynes general theory of employment, it will be rare to get to 0% unemployment because aggregate demand will not equal aggregate supply because people dont spend all they earn. You also have the sticky wages problem. With that in mind, if inflation has not reached 2% and we are at full employment, rate increase or pause is more likely. At least that’s what I can rationalize.

    1. yes, but what about the sustainability of the government’s debt? You are correct, with employment at 3% they should not be lowering rates, only at 5%.

    2. @@Value-Investing I am actually very interested on how that large debt will be handled. The best explanations I have found are Dalio “Big debt crisis” and “The changing world order”. I am curious to know whether it will follow a similar path he outlined. Clearly a good opportunity to learn about a macroeconomic event that doesn’t happen in one lifetime so that’s interesting and scary at the same time.

  7. Prepare for anything (i.e. buy cheap stuff that keeps getting cheaper).
    Microsoft? Too expensive in the 200s, buy Alibaba instead. Microsoft nearly doubles, and Alibaba halves… again.
    Any bets for next year? Will risky overvalued Microsoft be closer to 400 or 300? Will deep value Alibaba be closer to 100 or 50, or 30, or 10… ?

    1. @@Value-Investing My point is that you say repeatedly that the massively overvalued businesses the entire planet wants to own are too risky and could drop 50% easily, and that this is a problem.
      But what has dropped 50% this year, and the year before, and the year before that, are not exactly those businesses.
      Alibaba is at $70 and it continues sink weekly on high volume, for no reason at all. If we hit a recession next year, it will halve again just as easily. And if Trump gets elected, if China says something…. What catalyst is there? All the catalysts have already happened, and we are still at the lows and sinking while the “risky overvalued stuff” nears all-time-highs.

  8. Whoever pays attention should have well understood by now that the most likely solution to the current government-driven debt-fueled mess is financial repression. That said, it is never clear how this will play out. For example, financially tight conditions could still be used to periodically quell inflation and force some deleveraging in the private sector.
    Given the uncertainty of it all, however, we should be reminded of Peter Lynch’s dictum “if you spend 13 minutes a year on economics, you’ve wasted 10 minutes”: macro is exciting, but it is in the micro that the real money is made!

  9. Hi Sven, would you do a video on Alibaba? The valuation seems crazy due to how much fear there is. Would like to hear your thoughts. Thanks!

  10. CUT SPENDING!!! I think Powell SHOULD hike rates again. Inflation is still very dangerous. It has already wrecked havoc for average earners and retired people. What we really need is deflation to bring homes, real estate, cars, and consumer goods back in line with reasonable prices. Of course the rich hate the deflation but they kinda like the inflation. To average people however, most people, inflation is devastating and deflation is a sigh of relief. Powell should put the weight of his foot back on the neck of inflation and not release the pressure too soon. High and higher interest rates will bring big ticket prices of anything bought on time back down. Inflation in these items was CAUSED mostly by interest rates TOO LOW. When rates are too low sellers can raise their prices on the asset itself because lower rates hold down payments. But when interest rates go back up people can’t afford the payments on those high asset prices, therefore the prices have to come down. What we DON”T WANT now are lower interest rates. Prices of homes, cars etc will continue to rise out of reach of most people and inflation in other things will take off again! CUT SPENDING!!!

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