Random Thought of the Day

Quote: PotPie

2022, yes it was down.
But not 2023.
And inflation is lessening.
So far this year it's a completely different story.

By, "Lessening," I think you mean increasing at a slower rate.

The condition of the economy, as ever, is cyclical.

Quote: PotPie

Not claiming I can forecast the the future of the economy.
In any event, although I respect the work of the Conference Board, I don't believe they can accurately predict a recession.
I believe the U.S. and the world economy is too complex for a prediction such as that to be very meaningful.

Also, I haven't followed your postings but terrapined stated that you are a righty.
If he is correct and that is true, it can become a political thing for righties to be negative about the economy as they attempt to dislodge a Democratic Prez.

I vote Democratic but I'm not making the case that the economic picture is rosy.

Just not buying all of the negativity.

Yeah, he cited four different sources including a .gov; definitely coming from a position of bias. /sarcasm

Tanko's entire post was founded very solidly.

One of his sources, Bloomberg, leans slight left for the love of God!

Is the stock market long term variance like a gambling return? Or am I supposed to get upset if it underperforms and exicted when it overperforms?

The stock market is biased to the upside (ignoring derivatives).

The maximum gain of a long buy is infinite.

The maximum gain of a short sell is 100%.

Quote: Tanko

They don't base their predictions on current numbers. They look at trends.

Personal income may be up, but Real Income is down, and consumer credit is now at an all time high of $1 trillion.

Poverty rate increasing. Real Median Household Income falling steadily since 2019. Real Hourly Earnings down 1.8% year over year. Durable Good Orders are down 4.5%. The US International Trade Deficit reached -$90 billion in Feb. It was -$67 billion in December. Manufacturing indexes steadily contracting for the past twelve months. US Productivity up only 1.7% in the fourth quarter. Unit labor costs up sharply higher 3.2% in fourth quarter.

The worst thing about losing your manufacturing base, as we are, is that when a recession does occur, it is harder to recover from it. Manufacturing is now only 12% of the US GDP. Less than half of what it was fifty years ago.

For those who might have difficulty following all of this, not that I am saying anyone does, here is some plain English to describe what it's illustrating:

1.) "Real Income," refers to purchasing power and relates wages to inflation, but can also relate wages to CPI. Quite simply, and this is just for example, if your wages/salary went up by 5%, but the cost of everything you buy (particularly those things that you have no choice but to buy), or other expenses, were to go up 7.5% across the board, then you have experienced a decrease in Real Income, despite making more money.

2.) An increase in wages relative to the costs of what you have to buy is actually not the only factor, though it is the easiest one to point to. For some wage earners, another factor is the potential for increased wages to put you in a higher tax bracket, to cause you to have to pay federal income tax in the first place or to result in you getting a lesser tax, 'Refund,' from the Government for those who get more than they actually paid in.

3.) There are other forms of cost increase that some people don't immediately contemplate, such as interest rate increases on variable rate credit cards and loans. Here's a chart illustrating the increase to credit card interest rates:

https://www.lendingtree.com/credit-cards/average-credit-card-interest-rate-in-america/

With that, for those who were already carrying a balance---the amount they are paying in interest has increased. In the meantime, with the price increases across the board as a result of inflation, we find that many US consumers are now putting more on their credit cards than they were before, as evidenced by the national average for credit card debt:

https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/

Whereas people might have been able to afford stuff just paying cash before.

Of course, some of this ends up being circular in that higher interest rates, combined with people not being able to afford to make as high of payments to bring their balances down (again, because of the increase to consumer costs relative to wages) sort of self-perpetuates in credit card outstanding balances continuing to increase across the board.

One aspect of this that's especially interesting is, if you look back on the chart through the years of the Great Recession, and also during COVID, these average balances went down. This is going to sound pretty wild, but Recessions are actually terrific for the poor, lower-middle and maybe even the middle class, at least for those who manage to keep their jobs. Not only do their earnings remain consistent whilst prices drop, but they also tend to be more conservative with their spending just in case something does happen to their jobs.

4.) I think manufacturing is almost irrelevant to cite as the nation's lack of manufacturing stems largely from outsourcing it as a result of more lax regulations and cheaper labor elsewhere. To a certain extent, if you can't compete with extremely low labor costs in other countries, in certain industries, it actually means your country is doing fairly well overall---which we basically always have as long as I have been alive.

***While I'm generally opposed to too much Government regulation, if the Government was going to regulate anything, then I think the best way to regulate would be to have (or have stronger) price controls on things vis-a-vis the end consumer. If you increase wages or social safety nets sharply, then prices will rise accordingly---either due to demand or the fact that companies aren't going to just eat the increased labor costs---and then you just end up playing the same exact game with bigger numbers, except, the companies paying out wages are likely to overcorrect which means that price increases, on average, will exceed increases to wages making it even worse for most people.

Quote: rxwine

Is the stock market long term variance like a gambling return? Or am I supposed to get upset if it underperforms and exicted when it overperforms?

The, "Stock market," doesn't necessarily matter unless you invest in Index Funds. It's how your portfolio performs that matters.

Quote: Mission146

The, "Stock market," doesn't necessarily matter unless you invest in Index Funds. It's how your portfolio performs that matters.

It was more a rhetorical question. Just buy the right stocks at the right time. Or sell at the right time. Just like how I always pick the right bet and never lose.

It's never the economy or the market. It's you. (not you, but the general you meaning everyone)

Quote: rxwine

It was more a rhetorical question. Just buy the right stocks at the right time. Or sell at the right time. Just like how I always pick the right bet and never lose.

It's never the economy or the market. It's you. (not you, but the general you meaning everyone)

If you're sitting on a bunch of cash, then the most likely way to succeed is just to wait for another recession (or nationwide emergency), let the market overreact, pick an industry where the market has REALLY overreacted, look for companies who could remain solvent for a year or two even if they literally did not make another dollar in the interim, then buy the shizz out of those companies.

You never lose if you know what's going on. If everyone loses everything, just make sure you control the oxygen available. : )

Quote: Mission146

The, "Stock market," doesn't necessarily matter unless you invest in Index Funds. It's how your portfolio performs that matters.

That is very, very true and is the reason why I and millions of others have turned to index funds.

If an investor doesn't do this then he is in the predicting business.

With index funds you are only predicting that the overall upward bias of the market as a whole will continue during the duration of your hold.

For many, including myself, this means decades.

Still, of course, no guarantees. But no sleepless nights.

The worst that I've been thru was the dotcom bust which iirc lasted 2.5 years.

Many might consider this strategy way too tame. I don't care. I'm not going to pretend that I can predict stuff. Anybody can call me a wimpy investor if they want. I can take it.




One other point about your longer earlier post - re price controls.

Private enterprise hates price controls and would lobby strongly against them, and they are very powerful.