The Core
Why We Are Here => Economics & Investing => Topic started by: rcjordan on September 24, 2022, 12:42:25 PM
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Central banks around the world are willing to risk recession to fight inflation
https://www.businessinsider.com/recession-risk-inflation-interest-rate-hikes-threaten-global-economic-downturn-2022-9
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"When asked by CNBC's Jim Cramer if the global economy is entering a recession, FedEx's CEO, Raj Subramaniam, put it plainly. "I think so," he said.
Restoration Hardware's CEO, Gary Friedman, was more colorful when addressing recession worries in a September 8 earnings call.
"We're in a recession. Anybody who thinks we're not in a recession is crazy," he told analysts. "The housing market is in a recession, and it's just getting started."
Friedman and Subramaniam aren't alone. Of the companies included in the S&P 500, 240 brought up "recession" in their second-quarter-earnings calls, according to FactSet analysis. That's the highest share going back to 2010, when the firm started tracking such mentions. It also dwarfs the 212 "recession" citations seen at the start of the pandemic recession in early 2020."
So here we go. Debbie's been telling me to be ready for this one to hurt.
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>>ready for this one to hurt
Are you seeing any impact on the agency?
It's hard to say anything about travel and tourism from local information because of confounding variable (translation: fires), but for a few months now it has felt recessionary. Availability at times when normally there isn't. Hard to fill last-minute gaps. People citing worries about the economy rather than worries about fire for translation. People lowering prices.
It definitely feels like the free money festival of the Escape from Lockdown is over. But tourism is, of course, the ultimate discretionary spend.
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It's a little slower than usual, but we're still growing. I think it's a bit early and the chips will begin to fall soon-ish. During/After holidays?
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The music seems to be slowing.
I see clients running sales to get volume up to make projections fit. Bad idea though as it trains users to expect sales but not my call.
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>> trains users to expect sales
That would be me. There are some retailers both online and B&M where I shop quite a bit but I hardly ever pay "full price". I wait for things to go on sale.
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There are a lot of retailers who's inventories are very, very high right now (40% up from last year) but sales are only up single digits in the 3-4% range. That means there is a lot of cash tied up in products sitting in the warehouses.
So I expect there to be some pretty aggressive promos this holiday season as these retailers try to move through some of that inventory. They definitely don't want it clogging up their warehouses and stores when the new products for 2023 start coming in.
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came up after Doc posted...
'The month of unprecedented deals' — From Amazon to Target, here's what you need to know about the early holiday sales going on now
https://www.cnbc.com/2022/10/07/amazons-prime-early-access-sale-2022-here-are-the-best-deals.html
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For those with clients I think it is important to get them thinking that the cost to conversions is going to go up. They are going to want to pull back, but you have to tell them that that's a mistake and that they need to think about spending more on marketing maintain business as the economy contracts.
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If you can put together numbers on lifetime customer value, that helps make the marketing case. Looking at five years of business at the hotel, a customer was worth something like 1.7x their initial spend. At places with a lot of repeat business and fewer bucketlisters, that number is higher.
If the ads are bringing in new business, the ROAS looks a lot different with lifetime numbers.
That said, you can’t spend 100 dollars on ads for 90 dollars in profit for very long no matter how it pencils out over five years.
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Bullard Dials Up His ‘Minimum’ Fed Rate View to 5%-5.25% Range - Bloomberg
https://www.bloomberg.com/news/articles/2022-11-17/fed-s-bullard-says-more-hikes-needed-to-get-to-restrictive-level
The Great Resignation Has Stalled and Layoffs Have Started | Average Pay
https://www.avgpay.com/the-great-resignation-stalled-and-layoffs-have-started/
RU already there...
Russia’s economy enters recession with 4% contraction | Financial Times
https://www.ft.com/content/e4f0cb9b-695c-4cc3-92c8-f8371de2ac38
Calif??
California stares down $25B deficit after years of record cash - POLITICO
https://www.politico.com/news/2022/11/16/california-25b-deficit-00068081
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The Fed's goldilocks scenario of taming inflation while avoiding a recession is more likely after October CPI report
https://markets.businessinsider.com/news/stocks/stock-market-outlook-fed-goldilocks-soft-landing-possible-inflation-cpi-2022-11
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OOPH! Not what the Fed wanted to see.
US consumer spending surges in January, inflation heats up | Business and Economy News | Al Jazeera
https://www.aljazeera.com/economy/2023/2/24/us-consumer-spending-surges-in-january-inflation-heats-up
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Despite high inflation, Americans are spending like crazy – and it's kind of puzzling : NPR
https://www.npr.org/2023/02/25/1159284378/economy-inflation-recession-consumer-spending-interest-rates
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Further Fed hikes expected after data dashes 'disinflation' hopes | Reuters
https://www.reuters.com/markets/rates-bonds/fed-seen-raising-rates-three-more-times-after-strong-inflation-reading-2023-02-24/
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>> spending like crazy... kind of puzzling
That's easy. If I think that X or Y will cost more next month or next season, in many cases that incentivizes me to buy sooner rather than later.
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My senior economics thesis was "Hyperinflation in Uruguay" and about all I can remember is that convert money to goods ASAP becomes everyone's goal.
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Mortgage demand from homebuyers drops to a 28-year low
https://www.cnbc.com/2023/03/01/mortgage-demand-falls-interest-rates-rise.html
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Fed likely needs to raise rates higher and possibly faster, Powell tells lawmakers
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2 links say higher rates coming...
Baltic Dry Index Gains for Third Straight Week
https://gcaptain.com/baltic-dry-index-gains-for-third-straight-week/
U.S. Adds A Robust 311,000 Jobs Despite Fed's Rate Hikes
https://www.huffpost.com/entry/us-adds-a-robust-311000-jobs-despite-feds-rate-hikes_n_640b34cde4b09c5c6d6e741e
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Wall St and economists no longer expects the Fed to hike rates in March, cites stress on banking system
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Which creates a strange self-contradicting prophecy. If WS strongly believes rates won't go up and acts accordingly, the Fed will be forced to move rates up, no?
I know Krugman is controversial, but he says that people have taken bad lessons from inflation. The inflation of the 1970s and 1980s was so intractable, that it called for draconian solutions, so everyone takes Voelker as the model of how a Fed chairman should act. But he picked some person I did not know, former head of the ECB I think, who he picks as the best central banker ever because he managed to navigate the problem without "blood" (Voelker's word).
He think Powell wants to be Voelker, but that Voelker was a one-off who was successful in one particular situation that is very different from the current one.
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BlackRock warns that investors are making a mistake by betting on the Fed to cut rates
https://www.cnbc.com/2023/03/28/blackrock-warns-that-investors-are-making-a-mistake-by-betting-on-the-fed-to-cut-rates.html
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"Now that this house of cards is collapsing, the credit crunch caused by today’s banking stress will create a harder landing for the real economy, owing to the key role that regional banks play in financing small and medium-size enterprises and households. Central banks therefore face not just a dilemma but a trilemma. Owing to recent negative aggregate supply shocks – such as the pandemic and the war in Ukraine – achieving price stability through interest-rate hikes was bound to raise the risk of a hard landing (a recession and higher unemployment). But, as I have been arguing for over a year, this vexing tradeoff also features the additional risk of severe financial instability."
The Coming Doom Loop by Nouriel Roubini - Project Syndicate
https://www.project-syndicate.org/commentary/federal-reserve-facing-trilemma-inflation-recession-insolvent-banks-by-nouriel-roubini-2023-03
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US labor market cooling; leading indicator flashes recession | Reuters
https://www.reuters.com/markets/us/us-weekly-jobless-claims-increase-moderately-2023-04-20/
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Please put your head between your knees and brace yourselves.
[Business] - Consumer Price Index rose 5.5% in April as Fed mulls more rate hikes
That's a long way from the targeted 2%.
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Used cars are the largest inflation culprit, btw.
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Fed's Barkin: Inflation Still 'Stubbornly High' and Isn't Easing Fast Enough Toward 2% Target
https://www.usnews.com/news/business/articles/2023-05-10/feds-barkin-inflation-still-stubbornly-high-and-isnt-easing-fast-enough-toward-2-target
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>>Consumer Price Index rose 5.5% in April
Saw this headline. In the NY Post they wrote the who article without specifying that...
1. This is the annualized rate
2. This is the core CPI, not the CPI
Then went somewhere else to find out the real story. Dallas Morning News specified that the 5.5% was core and that overall inflation was 4.9%. But they also said that this was the amount of inflation since last March (i.e. April 1, 2022 to March 30, 2023). That's not the same as the annualized rate in April.
Anyway, I know, that's pedantic. Inflation is higher than the target 2%. But I have trouble trusting anything when the journalists or, more likely with this sort of "data" article, the bot writing the article is fundamentally innumerate.
According to the DMN, the March number was 5.6% since the previous year, while April was 5.5%, that would indicate a significant drop in order to affect the overall rate like that, but I'm not sure they are reporting the numbers correctly.
And in any case, there are many reasons to suggest that an inflation rate closer to 4% would be a better target. And there's even more to suggest that there should be no target. The whole target thing was a mistake that went public and now the Fed is wedded to it for no strong economic reason.
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Changing Recession Predictions Give Soft Landing Advocates Hope - Bloomberg
https://www.bloomberg.com/news/articles/2023-05-17/changing-recession-predictions-give-soft-landing-advocates-hope
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The housing slowdown is a top signal that the US is headed into a moderate recession, Fannie Mae says
https://markets.businessinsider.com/news/commodities/us-housing-slowdown-recession-economy-mortgage-rates-inflation-fannie-mae-2023-5
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>>headed into a moderate recession
it feels like we are already there
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https://www.cnn.com/2023/06/01/investing/macys-earnings-costco/index.html
"Macy's and Costco sound a warning about the economy"
>it feels like we are already there
Agreed, we just don't all know it yet. My debbie says we're going to bottom this summer/fall and start climbing out during holidays, barring any major geopolitical events/changes. I'm wondering if that timeframe might have a dash of wishful thinking, however.
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U.S. recession 2023: Soft landing comes into view for the economy
https://www.axios.com/2023/07/18/us-recession-2023-prediction-probability
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Why the latest jobs data is raising hopes about a soft landing : NPR
https://www.npr.org/2023/08/04/1192120360/jobs-employers-economy-soft-landing-recession-inflation
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https://www.bloomberg.com/news/articles/2024-01-05/yellen-declares-us-economy-has-achieved-soft-landing?leadSource=reddit_wall
Janet Yellen Says US Has Achieved a Soft Landing After December Jobs Report - Bloomberg
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Paywall, so maybe this is covered in the article.
The ex post facto explanation going around now is that an Ed-Med-third thing I don’t remember economy is less sensitive to inflation. People generally don’t skip their operations or cancel getting a degree because the price of milk went up. So we see less job loss than in a manufacturing economy where lose a job them tighten belts then factory orders go down and people lose factory jobs and so on im a downward spiral that is hard to reverse.
And everyone has already built Ed-Med inflation into their budgets. Of course, I think those two have to reach a limit at some point, but those are secular tends, not short-term economic cycles.