Hi Mr B, love your thought process and how you lucidly explain it. I'm learning alot from and grateful for your writing. Quick question - some macro strategists are suggesting longing long term bonds/treasuries, with the thought that as Fed continue to tighten, recessionary factors will be deflationary and a flight to safety. What are your thoughts?
Brilliant, again. You are definitely on my short list of who I have to read as soon as they write. If only I had heeded your warnings a bit better.
I couldn't help notice biotech/pharma was top of the list of industry groups for your "Contraction" quadrant. Just as XBI is trying to bottom after a brutal 16 month bear market. Hmmm ...
One thing about the Fed. So many folk way smarter and savvy than me seem to care what the Fed says. I don't understand that. Doesn't the Fed get it wrong just about every single time? "Long way from neutral"? "Inflation is transitory"? "75 bps is off the table"? Etc. Why does anyone care about the dot plot?
i agree whirly…i most often listen to fed to reinforce what they don’t know/appreciate and then evaluate how to position for what they’re missing today and talking about in 6mos. it’s also know as thinking independently….not easy for many.
again a great report. Both interesting and kind of "elegant".
I hard copied some of your datatables on historic evidences in the market data. Just to have them in my Idea-diary as inspiration and reminder . I appreciate your work very much and look forward to your next piece. Even when behind payroll...
Not Surprising to get another nice bounce on the way down lots lower. Nor is it surprising how quickly the inflation peaking ( energy & oil tops) &, buy bonds ( USTs et cetera) is becoming increasingly a consensus.
When anyone googles on social media & major periodicals ( inflation running hot) posts, thats also a cool indicator 😂
Your earning work is very well detailed. Thanks.
Just a question. Is there any downside room for your $190 EPS number in an global slowdown-recession where inflation backs off but remains well above 3, closer to 4%?
That’s where we stand.
Here in Europe for example, we’re in deep Dudu both on CB being blind to so many issues &, can’t help but recall every profit recession I’ve lived through ( since ‘87) has “salami like” cutting scenarios. Once stocks signal. Analysts downgrade 1st bite at the apple. Then economy takes its turn. More than expected. Analysts downgrade once again. 2nd bite at the apple. Then economic trend continues other direction (👇). Stocks dip again. Analysts cut again et cetera.
there is always room for downside. the $190 estimate is a reasonable one and has been triangulated a couple different ways. like any forecast...it will need to be evaluated along the way.
yes i agree with the process you outlined...'death by paper cuts' which will result in analyst views of upside as being marked down as time passes...and then those "cheap" valuations and "crazy" sell offs all make sense as lower fundamental value is realized.
just keeping in mind that stocks typically bottom 9-12mos before EPS bottoms...so still leaves room for market bottom later this year...maybe 3Q?
Let me ask you something , as you mentioned bonds rallying with lower PMI & Hard landing possibility , but this also meaning FC's going to ease , some risk assets going to rally etc. Exact opposite of what FED wants.
Will FED pushback this pricing ? How can do it ? I mean they are extremely hawkish anyway.
Powell didnt eliminate 100bps possibility etc.
Are we going to see another bond market - FED fight ?
Also , FED binded himself in CPI and clearly stated they want MORE THAN 1 slow CPI.
Does it means every bad PMI , every bad data going to cut hike pricings and Speakers trying to pushback this expectation.
thanks hakan. thank you for the feedback and interacting with my work.
the fed typically doesn't take more than the market is willing to give them. the recent 75bps hike/communication debacle is a good example. i believe we will start to see the costs associated with the fed's lax response to inflation last year and the rapid tightening of financial conditions will hit growth in 2H22...most now agree on direction having fought it for the early part of the year and the debate has now shifted to severity (recession or not).
IMO inflation follows growth. yes there was a brief period in the 1970s when inflation was stubborn despite weak growth, but no one acknowledges the 30yrs prior and 40yrs after that event when the economy responded in a different way. i could be wrong, but i'm inclined to fade the 5yr out of 100yr scenario many subscribe to and think we will see y/y inflation fall into early 2023. will we get to the magical 2% threshold? i don't know. but as we fall from 6.5% (core) toward 3% i can imagine alot of the inflation fear will change and expect alot of inflation trades to reprice lower too. at that point, it will be relevant to study/evaluate where inflation is troughing before the next cyclical growth upturn.
on yields and stock markets...there are many many examples of yields falling and stock prices falling together. most common during periods of significant growth slowdown and/or recession. so i don't see yields lower at this stage as a measure of fed policy as much as its a reflection of future growth assessment.
Mr B, your commentary over the last 12 months has been absolutely brilliant. Bravo sir 👍
Tell me I’m stark raving mad but I’ve put some money to work in beaten down high beta exposure as a play on falling yields.
Falling yields don’t trump fundamentals but as a short term trade with some added spice I like it. I’m keeping a keen eye on energy and will look to close out this trade if this resumes it’s march higher.
I don’t know if you ever plan to go behind a paywall or if there’s a way to donate and support such fantastic content. I’d be the first to sign up.
philip your comment is making me blush, very flattered and i'm thrilled you appreciate the work.
i started this substack primarily for myself as its therapeutic and useful for me to write my thoughts and framework down periodically to give me conviction (or not) on how i go about my trading/investing. more often than not, if you try to write something down and it doesn't sound good or doesn't come to you naturally then its probably not a great idea. additionally, the feedback and interaction w/ participants like yourself is also invaluable as part of the process in shaping an opinion.
hopefully the last 6-9mos of writing has made the quality of work clear and when the time comes for a reasonably priced paid service many others will agree with your assessment. i appreciate your support. -Mr. B
Q1/2 saw some pretty serious moves in reaction to neg earnings reports. You think we continue to see panic fleeing from companies who miss estimates, or do you think enough optimism has boiled off that we'll drop back into more commonly sized moves?
lets see where prices and sentiment are when we get to earnings season. i certainly think its possible that some areas have adjusted to bad news. the challenge today is not the direction (most of us agree) its the severity of the miss and how it changes the outlook
Thank you for another excellent piece!
Hi Mr B, love your thought process and how you lucidly explain it. I'm learning alot from and grateful for your writing. Quick question - some macro strategists are suggesting longing long term bonds/treasuries, with the thought that as Fed continue to tighten, recessionary factors will be deflationary and a flight to safety. What are your thoughts?
Mr.Blonde you should be called Mr.Beast in my opinion your articles are hands down from another world !
Brilliant, again. You are definitely on my short list of who I have to read as soon as they write. If only I had heeded your warnings a bit better.
I couldn't help notice biotech/pharma was top of the list of industry groups for your "Contraction" quadrant. Just as XBI is trying to bottom after a brutal 16 month bear market. Hmmm ...
One thing about the Fed. So many folk way smarter and savvy than me seem to care what the Fed says. I don't understand that. Doesn't the Fed get it wrong just about every single time? "Long way from neutral"? "Inflation is transitory"? "75 bps is off the table"? Etc. Why does anyone care about the dot plot?
i agree whirly…i most often listen to fed to reinforce what they don’t know/appreciate and then evaluate how to position for what they’re missing today and talking about in 6mos. it’s also know as thinking independently….not easy for many.
Mr. Blonde,
again a great report. Both interesting and kind of "elegant".
I hard copied some of your datatables on historic evidences in the market data. Just to have them in my Idea-diary as inspiration and reminder . I appreciate your work very much and look forward to your next piece. Even when behind payroll...
PS What the h... does "% +ve" mean ?
All the best, Michael
thank you for the feedback and acknowledging the work/effort…glad you appreciate it.
% +ve = % of time positive. i use the short hand to fit more in a data table
Doing best work on TWITFIN. Ur work product is one of the very few I’ll re-read & think about 1st b/f giving you a heads up. Thanks once again 🙏
Thank you for this update.
Not Surprising to get another nice bounce on the way down lots lower. Nor is it surprising how quickly the inflation peaking ( energy & oil tops) &, buy bonds ( USTs et cetera) is becoming increasingly a consensus.
When anyone googles on social media & major periodicals ( inflation running hot) posts, thats also a cool indicator 😂
Your earning work is very well detailed. Thanks.
Just a question. Is there any downside room for your $190 EPS number in an global slowdown-recession where inflation backs off but remains well above 3, closer to 4%?
That’s where we stand.
Here in Europe for example, we’re in deep Dudu both on CB being blind to so many issues &, can’t help but recall every profit recession I’ve lived through ( since ‘87) has “salami like” cutting scenarios. Once stocks signal. Analysts downgrade 1st bite at the apple. Then economy takes its turn. More than expected. Analysts downgrade once again. 2nd bite at the apple. Then economic trend continues other direction (👇). Stocks dip again. Analysts cut again et cetera.
there is always room for downside. the $190 estimate is a reasonable one and has been triangulated a couple different ways. like any forecast...it will need to be evaluated along the way.
yes i agree with the process you outlined...'death by paper cuts' which will result in analyst views of upside as being marked down as time passes...and then those "cheap" valuations and "crazy" sell offs all make sense as lower fundamental value is realized.
just keeping in mind that stocks typically bottom 9-12mos before EPS bottoms...so still leaves room for market bottom later this year...maybe 3Q?
Great Piece.
Let me ask you something , as you mentioned bonds rallying with lower PMI & Hard landing possibility , but this also meaning FC's going to ease , some risk assets going to rally etc. Exact opposite of what FED wants.
Will FED pushback this pricing ? How can do it ? I mean they are extremely hawkish anyway.
Powell didnt eliminate 100bps possibility etc.
Are we going to see another bond market - FED fight ?
Also , FED binded himself in CPI and clearly stated they want MORE THAN 1 slow CPI.
Does it means every bad PMI , every bad data going to cut hike pricings and Speakers trying to pushback this expectation.
Would love to hear from you.
Have a good day.
thanks hakan. thank you for the feedback and interacting with my work.
the fed typically doesn't take more than the market is willing to give them. the recent 75bps hike/communication debacle is a good example. i believe we will start to see the costs associated with the fed's lax response to inflation last year and the rapid tightening of financial conditions will hit growth in 2H22...most now agree on direction having fought it for the early part of the year and the debate has now shifted to severity (recession or not).
IMO inflation follows growth. yes there was a brief period in the 1970s when inflation was stubborn despite weak growth, but no one acknowledges the 30yrs prior and 40yrs after that event when the economy responded in a different way. i could be wrong, but i'm inclined to fade the 5yr out of 100yr scenario many subscribe to and think we will see y/y inflation fall into early 2023. will we get to the magical 2% threshold? i don't know. but as we fall from 6.5% (core) toward 3% i can imagine alot of the inflation fear will change and expect alot of inflation trades to reprice lower too. at that point, it will be relevant to study/evaluate where inflation is troughing before the next cyclical growth upturn.
on yields and stock markets...there are many many examples of yields falling and stock prices falling together. most common during periods of significant growth slowdown and/or recession. so i don't see yields lower at this stage as a measure of fed policy as much as its a reflection of future growth assessment.
hope that helps
Long IGV, long SARK (ARKK has been beaten up, but it is still dominated by a lot of sh#@ cos that will collapse in a recession!).
sure i can get behind that
Mr B, your commentary over the last 12 months has been absolutely brilliant. Bravo sir 👍
Tell me I’m stark raving mad but I’ve put some money to work in beaten down high beta exposure as a play on falling yields.
Falling yields don’t trump fundamentals but as a short term trade with some added spice I like it. I’m keeping a keen eye on energy and will look to close out this trade if this resumes it’s march higher.
I don’t know if you ever plan to go behind a paywall or if there’s a way to donate and support such fantastic content. I’d be the first to sign up.
Best wishes.
philip your comment is making me blush, very flattered and i'm thrilled you appreciate the work.
i started this substack primarily for myself as its therapeutic and useful for me to write my thoughts and framework down periodically to give me conviction (or not) on how i go about my trading/investing. more often than not, if you try to write something down and it doesn't sound good or doesn't come to you naturally then its probably not a great idea. additionally, the feedback and interaction w/ participants like yourself is also invaluable as part of the process in shaping an opinion.
hopefully the last 6-9mos of writing has made the quality of work clear and when the time comes for a reasonably priced paid service many others will agree with your assessment. i appreciate your support. -Mr. B
Q1/2 saw some pretty serious moves in reaction to neg earnings reports. You think we continue to see panic fleeing from companies who miss estimates, or do you think enough optimism has boiled off that we'll drop back into more commonly sized moves?
lets see where prices and sentiment are when we get to earnings season. i certainly think its possible that some areas have adjusted to bad news. the challenge today is not the direction (most of us agree) its the severity of the miss and how it changes the outlook