Down goes the Dow

Growth expectations falling quite a bit right now - the Fed's GDP Now had 6.7% growth forecast until this week...now its just 5.0%. Which is still a massive big number, but a lot less than 6.7%.

Somewhat ironically, this is probably GREAT news for the stock market because it means inflationary pressures should ease quite quickly. And the Fed itself is breathing a relief sigh 'cause they can act slower now.

WSJ:

The outlook for economic growth in the first quarter and 2022 is darkening amid the latest wave of Covid-19, as consumers grapple with high inflation and businesses juggle labor and production disruptions.

Forecasters surveyed by The Wall Street Journal this month slashed their expectation for growth in the first quarter by more than a percentage point, to a 3% annual rate from their forecast of 4.2% in the October survey.

The combination of higher inflation, supply-chain constraints and the fast-spreading Omicron variant caused economists to trim their forecast for growth to 3.3% for the current year as a whole, based on the change in inflation-adjusted gross domestic product in the fourth quarter of 2022 from a year earlier, from 3.6% in October. Last year, output rose 5.2%, economists estimate.

Interesting, and it's been mentioned a few times on this thread in the last couple of months how Omicron (and consequent slowing to the re-opening), supply chain issues, etc. might have exactly the effect on inflation that seems to be playing out in the revised forecast, as a sort of dampening effect, and therein being a silver lining to the bad news, if you will.

The Kiplinger site pointed out that while the slower growth may be offset by the unusually high rate of household savings in effect now, lower income households will be effected by the slower growth and higher prices relatively.

I wonder if Tu. trading will see a bump from this(?).

GS chiming in with lower growth estimates:

GOLDMAN SACHS: Fading expectations for fiscal stimulus + Omicron "have led our economists to downgrade their growth outlook in recent weeks. ... They forecast 3.4% GDP growth this year, a stepdown from the 5-6% pace in 2021 but still above their 1.75% estimate of trend growth."

Yeah but will the shorter pump and peak of Omicron cause things to go back to normal faster in the US and Europe? While the later peak in Asia or an inevitable Chinese outbreak will cause production and supply chain issues at the same time as the increased demand from consumer countries? Thus more inflation that becomes sticky.

Swaglord369 wrote:

Yeah but will the shorter pump and peak of Omicron cause things to go back to normal faster in the US and Europe? While the later peak in Asia or an inevitable Chinese outbreak will cause production and supply chain issues at the same time as the increased demand from consumer countries? Thus more inflation that becomes sticky.

yeah, except that aren't those the countries that actually have effective plans and strategies to mitigate the virus? Maybe they will actually mount a viable response and won't suffer manufacturing declines like we did.

But regardless, manufacturing is expected to pick up in this country, so maybe it will offset their onset.

Good question, though.

I hear that markets are up in Asia at the moment, up 0.8%.

agip I feel like we need a new bet for 2022.

Whaddya got for me?

Prof. Racket wrote:

agip I feel like we need a new bet for 2022.

Whaddya got for me?

Hmmm some bets I might be willing to take one way or the other:

CPI in the 4q: over and under

Which will perform better in 2022: SP500 or SCHD?

Emerging markets ex-China in 2022: over and under. (ticker EMXC)

which will perform better in 2022: TIPS or straight treasuries?

So I'm doodling about on a holiday morning on Bring a Trailer.

I wonder 'what's the most expensive vintage car sold at auction?'

It might be the 1962 Ferrari 250GT. $48 million.

So I wonder what the return rate on that was.

If you bought one new in 1962 it cost $18,000.

Keep it for 60 years and sell it for $48 million.

I have that at 14% per year.

But of course you had to pay for insurance, garaging, upkeep, etc. Lots of money. So the real return is less than that.

I'm sure I could figure out a return subtracting the cash outlays but nah not today.

OR

With your $18,000 you buy the Dow in 1962, reinvest the dividends and do nothing else to the present day.

You get 10.4%.

I suspect on a cash on cash basis the Ferrari did better, but not by a whole lot. And that is literally buying the most collectible car of all time. Other cars appreciated far less so almost everyone had worse luck.

Point is what an amazing wealth generating machine the stock market has been. You just sit there and have one of the best investments the world has ever produced.

agip wrote:...1962 Ferrari 250GT ... So I wonder what the return rate on that was. ... I have that at 14% per year.

In today's topsy turvy world, used cars are a great investment!

In related news, I was reading earlier today that with 3G networks being taken out of service this year, a lot of relatively recent cars will lose some internet-related functions, and may either need a software patch or else just be SOL. I saw that Igy's porsche was on the list to take a hit. I would share a link to the article if I could find it again, but sadly I cannot...

$18k works out to about $166k in today's dollars.

Also goes to show how powerful generational wealth can be.

one of the biggest amazements I have is how little generational wealth there is in my circle.

I grew up...upper-middle class on a coast, so not poor. Everyone went to college, everyone's parents had gone to college. Not a set of struggling set of people.

And I work in personal investments.

And I live in a big city where a home costs well over a million dollars on average.

There's shockingly little inherited wealth. Even after a great stock market and housing market.

People just don't seem able to save money for the long run. It's against their natures.

But sure, this is anecdotal. And as my generation inherits from our parents I'm sure I'll hear a lot more about people inheriting a lot of money.

But geez just regular investments from a working life should make have created a ton of massively wealthy people. But I don't think it did. Probably the forced savings of a mortgage has created more wealth than an optional tool like the stock market. Even tho housing has appreciated at maybe half the rate of the stock market. But the fact a mortgage forces you to save every month makes the difference.

I grew up in a community of recent immigrants and british expats. Parents were refugees. Mom has nothing except a house in Toronto, which will likely all go to a deadbeat brother who has lived in the same room for 48 years.

For everyone of us there is a family like my wife’s US side—Suez/oil engineer, all boomer kids had trust funds, gov contractors in DC, etc—but those boomer kids have spent it all, will probably die with houses offset by debt.

There was wealth, but the generation before ours got this idea that “you can’t take it with you”.

Patrick Ewing said it best on their behalf: We make a lot, but we spend a lot”. I see it even among the X’ers and Y’ers in the DC branch of her family.

I have seen people inherit money. I have come to the conclusion that there is no better window into someone’s psychology than to suddenly give them a bunch of money. It is absolutely fascinating. Might happen to me in 20 years, but by then I’ll be an old man, so I’ll probably just buy orthotics, soft toilet paper, shredded wheat, and some Smooth Move.

So, no change!👍

I grew up fairly poor, although I can't say I felt poor. We didn't have much nice stuff. Among my siblings we shared a lot of hand-me-downs. I always had a bike, but never a new one, and never a speed bike. But somehow me and my friends and siblings had rich adventures anyway. I think an outside observer would characterize my status as a kid in kind of the same way Homer Simpson described his life: upper lower middle class... :-)

My spouse and I have managed, through a combination of good education, hard work and a lot of luck, to turn the tables. Now we are solidly lower upper middle class. :-)

We did wind up with a bit of inherited money over the last couple of years, which is a mixed blessing. It's nice to have the money (maybe 3-5% of our net worth I'd guess; it will eventually cover some post-covid travel and bought us a very nice sculpture), but I'd much prefer to still have its prior owner around to hang out with and trade barely believable stories over coffee.

I believe a Bitcoin move back under $42k will be a negative drag on equity markets.

lol I guess we were upper upper lower class, or lower lower middle class, however that works out :)

Heck, I know how to darn socks!

lol by money, I was talking about potentially life-changing money. It is fascinating to watch what happens to people.

IDK about you guys, but I fantasize/plan for highly unlikely events, like for real being told that I now am sole owner of a US bank account for $1B. I always wonder what the VERY FIRST THING is that I would do.

I mean the very first thing. Today, as for many days, I would do what I normally do--I am leaving the office for lunch at home with my wife. However, after doing the dishes, we would get in the car and go to a friend's cabin in the north woods and hole up for a bit.

But I also consider what I would do with it, ultimately--who I would give what. I find myself considering giving something to the various people who through my life have shown me unnecessary acts of kindness or consideration, and who could otherwise use the money. I would also like to give a bunch to 2 of my ex-gf's because there were and are great, but that would be difficult. I would leave out some "family" members, for sure. I would also endow, as I already have, some funds earmarked for education scholarships--small, but meaningful, and spread widely.

Among other things, of course.

But ask people who haven't considered it seriously, and what a bunch of whack-job answers you can get. And the thing is, they're often kind of serious.

Nice to have a day off, but I am doing effing euro stuff, no holiday over there...

Well the first thing you should really do is call a tax lawyer.

It's a fun way to pass the time on a long run too. I've got all sorts of scenarios played out at this point, including squandering it completely and ending up on the streets, giving it all away to charity, wisely investing it, and everything in between.

heh but seriously, I know a lawyer who specializes in helping the families of super rich people who run afoul of laws and various mores.

having a ton of money is a dangerous situation - it messes up a lot of people.

Which is one reason I have a relatively conservative portfolio - having too much money is a curse on you and especially your kids, if you have them. I figure a 60/40 portfolio will make me richer, sure, but not too rich.

VS-SJW-IR-TS idiot wrote:

agip wrote:...1962 Ferrari 250GT ... So I wonder what the return rate on that was. ... I have that at 14% per year.

In today's topsy turvy world, used cars are a great investment!

In related news, I was reading earlier today that with 3G networks being taken out of service this year, a lot of relatively recent cars will lose some internet-related functions, and may either need a software patch or else just be SOL. I saw that Igy's porsche was on the list to take a hit. I would share a link to the article if I could find it again, but sadly I cannot...

well, that is clearly a bit of bad news for you, Igy. And no doubt would effect it's appreciation value going forward.

Time to take the bull by the horns, Igy, (and what a wonderful expression that is, btw!), and do what must be done.

Trade it in for a Tesla.

And you're luck got even better, becuase Tesla is about the only company that accept cryptocurrency as payment.

So simply plunk down a little of that money you have been wasting in SARK, put it into bitcoin, and in a few days or weeks (possibly less!) you will have enough to buy a car with a future.

Don't feel that you need to thank me, that's what the DGTD buds are for.

seattle prattle wrote:...

So simply plunk down a little of that money you have been wasting in SARK, put it into bitcoin, and in a few days or weeks (possibly less!) you will have enough to buy a car with a future.

Don't feel that you need to thank me, that's what the DGTD buds are for.

Haha, good one!

And BTC just needs to lose another $26k to land in my recommended buying window. :-)