Today was my first trading day without a trade since July 8th.
We're getting triple-whammied this year. Stocks and bond (price)s are down, inflation is up.
The 1930s were bad for stocks, but Treasuries were good. 10-year yields declined gently from a 3-handle to a 2-handle. And CPI inflation never exceeded 3% any year of the decade.
I came back a bit today, but nothing going on makes any sense. It does to somebody. More than one person is getting rich out of this mess. My biggest loser by far is a tax free muni bond fund as it makes up a big chunk of my holdings. Was doing fine until last January or so. I don’t see it being able to compete with CD rates even though they are taxable.
My biggest loser by far is a tax free muni bond fund as it makes up a big chunk of my holdings.
This year it seems the only important characteristic has been duration. The longer the duration, the bigger the bloodbath. iShares has a short-term muni ETF called SUB, and it's only down 4% total return -- better than almost any other bond fund.
But I've been fearing that credit quality would eventually matter, as happened in 2020 when munis and corporates plunged (in price) while Treasuries held nearly steady.
Did you see any muni news today? MUB was only +0.1% while Treasuries and corporates were both + >1.5% at intermediate durations. And TLT near the long end was +3.3%.
Stock to watch tomorrow is MU Micron. The company is drowning in inventory, but after-hours reaction to earnings was slightly green. MU is already down almost 50% this year, so significant damage has been done.
Today I bulked up several of my existing, recently mentioned holdings, including INTC which is down about 50% YTD. Started an FLIY (Italy) position. Immediate outlook for Europe appears bleak, but I feel I need to put my boot in the water.
The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit.
Then on 28 September, they repeated the line but inserted this gem (emphasis added):
... the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome.
They have one foot on the brake, and the other on the accelerator. That's nucking futs.
For markets, this enhances the dollar wrecking ball because the Fed looks like the best-behaved central bank. But I think it also highlights the inevitability of Fed capitulation, joining the others.
My mortgage in 1974 was 9 percent. It became a bargain when Jimmy got going. Back then 9 was considered normal. I don’t ever see the US returning to 2 percent. We will be lucky to get back to 4-6 percent inflation. At the time, many people itemized their deductions including us. The rules were quite different. So Uncle Sap as we called him returned a big chunk of your mortgage interest in tax refunds. Still the 9 percent really bothered me. I think at the time I made about 7,000 a year and the wife about 6,000. We were both only a couple of years out of school. Anyway, I took on another job and also started a small business. The wife did a few extras too like tutoring and stuff. We worked like lunatics and saved everything. No kids at the time and paid off the mortgage around 1981. Then around the same time took advantage of the 18 percent CDs. Paying off the mortgage of course was against sound financial advice but neither of us wanted any debt. The point I am making is mortgages back then in the 9-11 percent range were considered normal and nobody complained. We didn’t have the supply chain issues though and there were no computer chips to worry about getting since they didn’t exist. The lots were chuck full of new cars always. I had no trouble buying my first new vehicle in 1973 for 2,750 bucks and the sticker was 3,450. That’s a 20 percent discount. Today they jack up the MSRP by as much as 20 percent even on used vehicles. Different world. I only see down for the market at this point and I have more exposure than I would like to have myself.
Continue with Google