re: Fed leaves interest rates unchanged and hints at 3 rate cuts in 2024.DowJones sets record.

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Consumer credit card debt is up ~2% from Q2-Q3 while Real GDP for the same period is up only ~1.3%.

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Do you think credit card debt and GDP are one-to-one correlated?

LINK

Big bump in q3 and just short of ATH.

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Not that anybody cares about earnings anymore

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It’s all about multiple expansion with rates heading down.

Eventually you still need the E though.

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Almost half the companies in the R2000 have no or negative earnings. There’s clearly other factors that are more important for whoever is driving these massive moves.

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I can’t remember where but I heard somewhere that some huge % (maybe 90%?) of the R2000 can’t afford to pay their debt if they have to refinance at current levels. Anyone else verify/hear this?

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Small caps are getting slaughtered. Almost half the companies in the R2000 have no or negative earnings. There’s clearly other factors that are more important for whoever is driving these massive moves.

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Russell 2k > S&P > MAG 7 over last few weeks. A month doesn’t make a trend but it could be the early innings of new leadership. Hell.. regional banks have absolutely crushed the last 30-45 days.

I was laughing my arse off this morning when I saw KRE up 5%

December will be interesting. I would bet a lot of tax related selling and risk off rotation occurs indicative of the term structure of treasury yields falling hard. Marginal growth has been almost entirely the Federal government and they won’t be able to meet the comps next year. Tons of stimulus ended in September. We will see if Grandma Yellen can put that $900B to use to prop up growth.

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I’m not really talking about the Fed as much as I’m talking about the risk free rate on the 10y. All else being equal, multiples would expand on lower discount rates alone.

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Yeah. Being back below 4% is huge - for a lot of reasons.

Debt, if serviced or defaulted at some point, will slow the economy and affect interest rates (BEAR). America remains employed at historically high levels (BULL). They're running out or have run out of the free money handed to them over the past few years (BEAR). Human nature being what it is and socialist thought has me believing people won't cut back their borrowing (BEAR). Inflation has decreased somewhat because supply logistics were unfurled from the COVID-19 plandemic (BULL). Technical innovations via AI and robotics will move quickly in some industries most suitable by the former, but more slowly in the latter (BULL). This will make companies more profitable (BULL), but some will lose jobs or have to gain new skills in the new economy (BEAR).

Is there an inevitable result of this combination of events? Can we predict which trends will happen before others? Regardless, it will take time to reach a new steady state. I'll take the bump now, and my strategies will allow me to deleverage and be prepared for any eventual blowback.

One certainty is that markets fluctuate. I hope the pattern of them rising twice as often as naught proves robust.

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I’m not really talking about the Fed as much as I’m talking about the risk free rate on the 10y. All else being equal, multiples would expand on lower discount rates alone.

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That's financial theory that's not going to hold up at the end of a business cycle (Again, how many people are transacting in the equity market using DCFs?). Albeit we just started a new one in 2022. The yield curve is inverted and is never wrong. If we get a bull steepener, a signal of higher growth and inflation, and the commercial banks are lending again then flows will go into equities and you'll see that multiple expansion. But right now there's a tightening money cycle happening.