But that’s the thing. I read in one article that basically any investor younger than 50 had personally experienced in investment either a full blown bull market with falling interest rates or a crisis in a full panic mode (dot com crash, subprime mortgage crash, COVID crash). What we have now is a normal recession. Yes, rates and prices go up, inflation is soaring, valuations go down, but that’s it. Even the war in Ukraine is too far from US, which is >60% of global market capitalization.
Some authors had even suggested that private investors have learned to stay the course and not to panic sell in downturns .
For the record, I’ve just closed that position at a very slight gain (it’s basically a net zero). I’m expecting the rally to continue these coming days, though economic data may push things downward again. I’m still expecting a bigger drop through the winter though I’m expecting to feel confident enough to go long on margin in the spring. As always, I may be wrong.
Maybe. We have not seen a massive drop yet, mostly due to retail investors not selling (yet).
I don’t think we have ever seen a combination with such high inflation, insane levels of public debt levels and a such an old, unproductive demographic.
You ether take the money from the poor and young or from the old and rich. Longterm inflation or crash. If the FED stays the course and raises rates until inflation is under control we will see defaults on a massive scale.
Am I understanding right that what you call “yield” is the net returns of your investments minus the cash you have inputed to buy them?
The counterintuitive but nice thing is that, while later inputs tend to make the current returns look bad, they are the fuel that will carry future returns once our investments start going up again. Buying on the down part of a downside hurts on the short term but is very rewarding on the longer run.
One of the good things about fitness/life motivational speeches is that they are great for investing turmoil too:
"Inflation, the rate at which prices rise, was 8.2% in the 12 months to September, down from 8.3% in August. Despite the fall, the figure was still higher than forecast."
I just don’t understand why there is/was somehow a (wishful imo) thinking that September YOY inflation (comparing September 2022 to September 2021) could/would/should be significantly lower than the August YOY.
Prices between September 2022 and August 2022 are going to be constant at best, no? Why should they go down in current situation? There was no reason to expect prices between September 2022 and August 2022 to go down…
Monthly inflation in September 2021 was 0.4%.
So if August YOY was 8.3% then at best we could expect September YOY of 7.9%, no?
We have 8.2% instead.
Is it really the 0.3% that is “worse than expected”?
0.3% per month would be 3.6% per year, which is not crazy.
Earliest April 2023 the YoY inflation can drop to about 3%, until then YoY will stay in range of 7-9% IMO.
Don’t blink, you’ll miss it… SP500 futures were up >1.5% before the CPI release, then the SP500 went down to <-2%, then back to >+2%… if we get one more time down, we’ll have made the journey 4 times in just one day.
I’ll gladly take any explanation anybody may have.
The price of gas was down in the US, if I remember correctly, they’ve only taken off again at the start of October, so the headline CPI may have been expected to be down. Core is stable at roughly 6% when averaged and annualized in the recent months, so still elevated. Other factors may have mattered. Expectations are hard to understand.
Allegedly short covering. Which would basically mean that while the forecast missed, many market participants were betting on it (wouldn’t be too surprising after CPI forecasts have missed like 11 out of 12 times or something) and covering drove up the price beyond previous close.
But ultimately, we’ll never know because you don’t have to enter a reason when you do a trade.
I’m not quite sure that I follow, what were these people betting on? They were shorting, i.e. betting that it would go down, so then they had to buy back the shares they sold, which caused the price to go up again?
But does the fact that the closing price was above yesterday’s closing price mean that the shorters (in aggregate) were betting on a larger drop than actually materialised?
Yes, buying back the shares they sold.
Maybe it wasn’t the size of the drop but the volume of trades at that price that was overestimated.
But, I don’t know …
And that’s what they had done now. After estimating that it won’t get worse short term.
But it could have being also closing of hedging positions like short futures, that were opened to protect main positions from potential losses if things would turn worse.
The SP500 went below 3500 at some point, it is possible some trading on technical analysis and/or derivative shenanigans got triggered too, adding to the buying pressure.
Shorts covering would align with the uptrend in futures right before market open, so that can be part of the equation. Thanks @marcel-burkhard for pointing it out.
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