[DrVenture]

What I understand is what I posted. That white collar, particularly tech industries, over-hired and are now making corrections. That and FED rate hikes have had an impact on the labor market at the high end. Where we differ is in the definition of "job recessions". I have seen real job recessions. And context. This comes across as a staffing pullback in the face of record profitability, and FED rate hiking from near zero to mid 5's.

The chart that you posted shows an unemployment rate (all occupations) of 4.4% - higher than a year ago, but still historically low. August of 2023 was 3.9% - extremely low. In October of 2009 the same figure was 10%. Context is everything.

As an individual interested in economics, I am sure you know that rate hikes, to lower inflation, have the consequence of impacting the job market. Which they appear to have done to the tune of .5% over the past 12 months. Not a huge number, when still well under 5%. This also means that the lowering of rates now underway, has a strong potential to reverse any losses associated with the FEDs effort to quash inflation. Thus, recent data points need to be taken in that context.

[DrVenture]

Originally Posted by kudos

https://www.nytimes.com/2024/08/21/b...s-economy.html

"Numbers"

It is behind a paywall. But, the headline says it all. No one is arguing the "numbers". The pushback is two fold. Firstly, an objection to the characterization that Powell said that the numbers are "fake". He did not. Secondly, that these numbers represent anything except a typical response to two years of rate hikes having the expected result of lowering inflation and impacting the labor market.

We are still at 4.4% unemployment. New data may show a trend otherwise, but that data does not exist as of yet. And may actually go the opposite direction, due to aggressive rate lowering. All remains speculation until the numbers are collected and a trend line emerges.

I make no predictions, but this labor impact was telegraphed by the Fed for more than two years. Making it appear cause and effect. And it is the data that they have been looking for to lower rates more aggressively.

I am certainly not making any investment moves based on anything that I have observed. I doubt anyone else is, either.

[kudos]

Originally Posted by DrVenture

No one is arguing the "numbers".

The numbers were "fake" when months later they realized they were completely wrong. Also, how they categorize full-time jobs these days or lengths to determine if someone is unemployed or not still throws everything off.

[DrVenture]

Originally Posted by kudos

The numbers were "fake" when months later they realized they were completely wrong. Also, how they categorize full-time jobs these days or lengths to determine if someone is unemployed or not still throws everything off.

.

Except nothing about the way they do those calculations has changed. And if it did, they would be fully transparent about that.

Here is a thorough article regarding the hows and whys of economic data revisions. It is nothing new, been going on for a very long time.

https://journals.ala.org/index.php/d...view/6383/8404

From the link (2017) "There’s a small rub, however, in the Payroll Employment Number: It is a very rough estimate and is revised the following month—and then again the month after—as more information arrives at the BLS. These revisions can be large and may materially change the picture of the economy. Here’s an example: The first release (October 3, 2008) of the September 2008 nonfarm payroll employment data indicated a loss of 159,000 jobs. The second release (November 7, 2008) of the September 2008 employment data indicated a loss of 284,000 jobs. The third release (December 4, 2008) of the September 2008 data indicated a loss of 403,000 jobs."

Sound familiar?

We will have to agree to disagree and look back in 6 months to see where we are. Anyone like to make any predictions?

[other_evolved]

Originally Posted by DrVenture

As an individual interested in economics, I am sure you know that rate hikes, to lower inflation, have the consequence of impacting the job market. Which they appear to have done to the tune of .5% over the past 12 months. Not a huge number, when still well under 5%. This also means that the lowering of rates now underway, has a strong potential to reverse any losses associated with the FEDs effort to quash inflation. Thus, recent data points need to be taken in that context.

So many people do not understand this point. In order to combat inflation, rates go up, and pain is the point and the cure. It's like chemotherapy.....try to kill of the bad without killing off too much of the good.

[XutvJet]

Originally Posted by DrVenture

Not sure what your definition of "closing in fast" is.

We had a recession in 2020, just 4 years ago.

2022 brought a near 25% S&P correction that lasted 287 days. Less than two years ago.

We also saw a 13% drop (correction) in the Nasdaq this year, along with an 8.5% S&P drop.

The market has been on a unsustainable climb since about 2017. COVID really made things weird when it comes to the market and what has happened in the last 4 years is a bit of an anomaly. The Fed, Wall Street, investors, companies, and consumers have gotten WAY to used to unrealistically low interest rates. Dialing back the interest rate isn't going to help things like the Fed hopes. Consumers and business have lived outside their means for too long. Consumers are piling on debt because they don't have the money but can't stop living beyond their means. It will be like a miniature version the 2008 collapse. It will be rapid and the trigger not clearly known until it's pulled.

I'm not a doom and gloom type person. I'm just a realist that knows that what's been going on, isn't sustainable. I also work entirely in mergers and acquisitions so I get a bit of view from behind the curtain. Am I planning on selling? Nope. Have I prepared myself for an extended multi-year downturn and likely have my portfolio shrink by 20+%. Yep. I lived this many times now.

[DrVenture]

Originally Posted by XutvJet

The market has been on a unsustainable climb since about 2017. COVID really made things weird when it comes to the market and what has happened in the last 4 years is a bit of an anomaly. The Fed, Wall Street, investors, companies, and consumers have gotten WAY to used to unrealistically low interest rates. Dialing back the interest rate isn't going to help things like the Fed hopes. Consumers and business have lived outside their means for too long. Consumers are piling on debt because they don't have the money but can't stop living beyond their means. It will be like a miniature version the 2008 collapse. It will be rapid and the trigger not clearly known until it's pulled.

I'm not a doom and gloom type person. I'm just a realist that knows that what's been going on, isn't sustainable. I also work entirely in mergers and acquisitions so I get a bit of view from behind the curtain. Am I planning on selling? Nope. Have I prepared myself for an extended multi-year downturn and likely have my portfolio shrink by 20+%. Yep. I lived this many times now.

Thanks for the detailed clarification. I would not disagree that ZIRP is unrealistic. Great for many things, but undoubtedly stimulative under the right conditions. Definitely not great for those reliant on fixed income. It has the tendency to force them to accept lower returns or go further out on the risk spectrum than they might be comfortable with.

I also agree that most people are living far out over their skis. And that the FED rate changes are not going to help them appreciably. In truth, controlling people's poor economic behavior is not their job. So, when the next dislocation comes, there will be a lot of people struggling. That is not likely to change, perhaps ever.

I am always prepared for a drop of 20% or more. I have used such dislocations for my benefit several times. I was the guy buying at 40% discounts in May and April of 2020, when many experienced people were frozen in place. But, if this trip to 0% for a full decade, and now back to 5.5% has taught me anything, it is that there is no "normal".

Little of what was predicted over the past 15 years has actually been proven to be true, based on pure theory. To be more specific, there were many who believed that a full decade of ZIRP policy would result in massive inflation. This never happened, and it eventually took ZIRP, massive monetary stimulus, supply chain disruptions, labor shortages and more occurring simultaneously, to even get to moderate inflation which lasted less than two years. Another example of so many economic minds being very wrong was the notion of what the FED balance sheet expansion would cause. It actually has gone quite well, no one even speaks of it any longer.

I believe the book on economics is still being written and we are possibly in the early chapters. And, if the FED is smart (I believe they are), they will stop lowering rates long before we get to ZIRP again. So, what is the "perfect" number to achieve parity? Who knows? Meanwhile, we will get another big event eventually, and on and on. I am ready to put a lot of money to work over the next two years. As Dirty Harry once said, "Make my day".

[2000cs]

You can’t analyze FED monetary actions using just interest rates. They also are active with their balance sheet. To that you have to consider the stimulative nature of federal spending. The stimulus packages, and student loan debt forgiveness would be among the most stimulative fiscal policies ever tried. Other expansion of the federal government through programs and military spending are also stimulative, but to a lesser degree (because they are inefficient and/or otherwise destructive).

The last 4 years and 9 months have been highly stimulative with the exception of interest rates since inflation reared its ugly head.

[DrVenture]

Originally Posted by 2000cs

You can’t analyze FED monetary actions using just interest rates. They also are active with their balance sheet. To that you have to consider the stimulative nature of federal spending. The stimulus packages, and student loan debt forgiveness would be among the most stimulative fiscal policies ever tried. Other expansion of the federal government through programs and military spending are also stimulative, but to a lesser degree (because they are inefficient and/or otherwise destructive).

The last 4 years and 9 months have been highly stimulative with the exception of interest rates since inflation reared its ugly head.

.

Totally agree. There is a lot to work its way out of the system. And the FED is definitely working against many other complicating factors.

I do have a different mindset about economic matters than most, and far different from what I even used to believe myself. I don't see the various actions as good or bad, per se. Or believe that there is some specific balance to be achieved. Perhaps, more like driving, where various inputs occur constantly (steering, brake, gas, coasting) and under varied conditions (wet, dry, hot, cold, snow, wind).

I definitely do not view the governments activities as analogous to a business, either. Or believe that it is a zero-sum game. Most of all, I do not concern myself with the actions or activities of others, who I cannot control. Like you asserted, I am looking out for myself and my immediate family.

The Dotcom debacle didn't shake me, even though it impacted me pretty definitively. The credit crisis didn't shake me, I applied lessons form Dotcom. I used both those events as reference for the 2020 collapse. Each of these events has taught me valuable lessons, including this recent bout with inflation and this rate cycle. Finding ways to make events work for me.

I worked nights for many years and in my downtime, I studied investing and economics. Reading everything I could get my hands on, without getting so deep that I lost practical context. My thinking was that it would pay off in a big way. The last 5 years has been spent learning about retirement strategies, including tax strategies. Keeping what you have, being just as important as acquiring it.

One thing that I learned was to ignore the noise and not take the voices of those who have top "credentials" too seriously. I made mistakes not trusting my own judgement, letting people get into my head. Just another lesson, though.

[DrVenture]

Apologies to all for taking the discussion off track. Now we return to our regularly scheduled broadcast.

[Tyga11]

Originally Posted by DrVenture

The reality is that a lot of tech companies over hired coming off CoVid. Now they are doing some force adjustments. This makes people skittish. "Not switching jobs", implies that people have jobs. Nor does it take into account that we are coming off of a record industry hiring spree in the recent past. I have lived through a few white collar "job recessions", including being smack dab in the middle of the Dotcom bust. I have first hand experience with such.

Calling into question published job numbers, without providing relevant conflicting data is simply not credible. BLS data is freely available.

https://www.bls.gov/ces/

Powell simply did not say that the numbers were faked. I work in tech, my son works in tech, many of my friends work in tech. Not seeing what you are seeing. The spin is definitely "next level", and smells political. But, you are free to post numbers, not anecdotes or observations. I am data-driven.

Biggest downward revision since 2009...

I posted the quote and you have your head in the sand.

I can't help you anymore.

[c1pher]

For those who are waiting for the perfect time to jump in, the answer is always now. The market is always going up and down in the short term, but over the longer term, the market is always going up. As stated in this thread a bazillion times, invest in low cost index funds that aren’t actively managed. You will keep more of what you earn. People get clicks or make money for being right that one time the market does drop but recovers, but can then say, “remember in 2009 I said market would drop and called it?” These are the “broken clock is always right twice a day” people. And in every case the market drops, if you just sit tight, you get all your money back and then some. The three bucket strategy works great for most people seeking growth and diversification while reducing risk. These Vanguard funds are all automated index funds with very low (e.g. 0.03% or so) expense ratios so they don’t cut into earnings. Stay away from the ESG funds unless that’s really your thing because they don’t perform as well. As you grow your portfolio, start thinking about keeping liquid money in money markets, maybe 5%, or other places so that you have a way to spend money in some cases without taking out the bulk of your investments. You money can still grow modestly but is available to you.

VOO 50% S&P500
VYM 30% Value/dividend
MGK 20% Growth

Stay away from international funds and actively managed index funds. They don’t beat regular funds and the actives eat into your costs, effectively reducing your returns. You can adjust the percentages depending on your risk tolerances but that’s a typical blend for most people. As you get closer to retirement, you may reduce the growth potential while increase the dividend/value pot.

[DrVenture]

Originally Posted by Tyga11

Biggest downward revision since 2009...

I posted the quote and you have your head in the sand.

I can't help you anymore.

I wasn't seeking help. Thanks anyways, for restating what I posted.

[tom2021]

Originally Posted by DrVenture

Little of what was predicted over the past 15 years has actually been proven to be true, based on pure theory. To be more specific, there were many who believed that a full decade of ZIRP policy would result in massive inflation. This never happened, and it eventually took ZIRP, massive monetary stimulus, supply chain disruptions, labor shortages and more occurring simultaneously, to even get to moderate inflation which lasted less than two years. Another example of so many economic minds being very wrong was the notion of what the FED balance sheet expansion would cause. It actually has gone quite well, no one even speaks of it any longer.

We heard that the ZIRP (Zero Interest Rate Policy) would result in massive inflation. The policy was intended to stimulate the economy by providing liquidity to corporations to help them expand their businesses. However, we now know that ZIRP primarily benefited the stock markets (Wall Street), not Main Street. I believe Ben Bernanke made the right decisions, but he couldn’t control how the market utilized the liquidity.

I recall an episode in 60 minutes. Scott Pelley interviewed Ben Bernanke.