Wednesday, January 18, 2023

Stock Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.


  1. Your analysis is always inspiring!
    Would the Bank of Japan be an issue down the road? Would abandoning the yield curve control trigger a massive US debts sell off?
    Interestingly, I once came across a theory discussed by Mohamed El Erian about inflation. He said inflation will remind sticky dropping to 3%-4% by the middle of this year. Once that happens, the Fed will have to make a judgement call to either stick with the arbitrary 2% target or live with the reality of 3%-4%. My gut feeling is that they won't budge because of reputation reason.
    I think this year is all about corporate earnings. Market valuations are still very high, 18X-20X, compared to the downturn of corporate earnings.
    Overall, much appreciated for taking the time to create this great video! Thank You!

    1. Thanks Sam! Yes, I do believe the BOJ ending, or continuing to expand its YCC range is market-relevant. Not just for US debt; Japanese investors are huge owners of foreign assets. A move that bolsters the yen can become reflexive and incite a serious rush back to the yen and out of foreign securities. Of course it's never the "crisis" we expect that does long-term harm to markets, but it's one to watch out for...

      I actually sympathize with El Erian, from a practical standpoint... Meaning, I do not believe the 2% target is sustainable in the go-forward environment... It'll of course get there (and lower) in a serious recessionary environment, but I'm in the camp that says, structurally, it probably can't stay there and the Fed will have to live with something in that 3-5% range... Which from a debt to GDP standpoint is, frankly, the answer -- let inflation run hotter than rates (a la the 1940s YCC) over a few years and US debt to GDP abates... and (ycc) government can fund itself at less than devastating rates (as it rolls all that low-interest short-term debt).

      I agree, current valuations do not appear to reflect where corporate earnings are likely to go during recession.