September Charts of Interest: It's Getting More Expensive

Barry from TX posted 6 days ago:

Charles, #1 several AAII members recently advised members to ignore Fed FOMC FFR decisions and key inflation measures (the producer PPI prices, consumer CPI prices, and final consumption PCE prices) that all of my brokers report on weekly, and yet you have time to notice and gather data on price increases in mortgage rates (up @7%), AI capex financing (up @14% YOY), diesel fuel (up @ $8.00 in CA), and movie tickets (up @$16-$23). #2 Paying attention to what’s going on around you that matters to your survival. You cannot turn off your brain. Our five senses are hard-wired to involuntarily transmit billions of neuro-sensors to appropriate brain areas every microsecond. #3 Proprioception (knowing where you are in the world) is called the "6th sense.” #4 Note: It is the basis for most sports, especially golf. #5 Humans who choose/no not to pay attention to what these proprioceptors sense about their own position, movement, and awareness of the world around us have mattered ever since the first dinosaur invented the original version of DoorDash home delivery, using inattentive humans as delivery boys for a meal. #6 Finally, you earn yet another Attaboy for noticing the parallelisms of the number of “butts in seats” and the “tail risk” of a severe downturn in financial markets as an example of recency bias. Kudos.

Rob from NC posted 5 days ago:

Barry, the biggest issue is what you're going to DO with all this "essential" information. I don't completely ignore this stuff (I review it in passing, like all the other "news"), but it all has to be taken in context, and it CERTAINLY is not going to dictate my investment decisions. What are YOU going to do, now that you have all these important figures in front of you? I'm going to stay the course, just as I always have. Next month's figures might turn around, and those who reacted to the "uncertainty" or economic "distress" will be sitting on the sidelines while my stocks are popping. All these figures you mentioned are historical. They tell us nothing about what will happen next week, next month, or next year--and THAT is what will move the market. Will it go up or down next week, next month, or next year? NOBODY knows! But I am counting on my equities continuing to increase in value over the LONG HAUL, just as they have over the past 45 years (unless the crazy socialists truly take over).

Barry from TX posted 3 days ago:

Dr. Bob, #1 I think the ONE most "essential" piece of information influencing future market returns will be federal monetary policy under Chairman Warsh. He is a monetarist. #2 The most famous monetarist, Nobel laureate Milton Friedman, argued that the Fed should follow a steady, predictable rule for growing the money supply rather than trying to micromanage the business cycle. A monetarist is an economist who believes the money supply is the most important driver of economic growth and inflation. #3 Friedman was the guru that rescued Ron Reagan from the late 1970-early OPEC oil crisis that caused the 1980s inflation up to 18%. Does this all sound familiar? This is our main problem we face today and is exactly what Warsh intends to do. So pay attention to what Warsh does, not what he says. #4 The money supply (aka "M2) = the AMOUNT of money in circulation x the SPEED it circulates (changes hands). This number = total spending. #5 Monetarists argue that printing too much money causes INFLATION. This is THE problem today. Monetarists, like Warsh, focus on regulating the money supply and letting the market fix itself. [That's why QT monetary policy is the one "essential data."] #6 The US has printed too much money since the 2021 COVID-19 pandemic (Biden 2021-2023) and the Iran war oil price INFLATION (DT2 2025-2026). #7 Some DATA supporting the need to reduce INFLATION are: (1) fed Quantitative Tightening (“QT”) --> (2) raises nominal interest rates and --> (3) drives up the cost of money --> (4) increasing personal credit/loans/mortgages and business borrowing AND --> (5) business investments and capex AND --> (6) economic goods and services in general (which is “compatible” with the current bull market expansion cycle) --> (7) where earnings growth increases price momentum --> (8) a rising tide that raises all equity boats. #8 Some DATA supporting the need to control/reduce fiscal policy (government spending) --> (1) an existing high federal debt is 230% of GDP --> (2) signaling that the market is significantly overvalued by historical standards (apologies to CAPE data) AND --> (3) total US national debt is $40T (4) = $119,581 for every citizen, and (5) the FY26 Budget Request was $1.6T AND (6) the FY27 Budget Request is $2.2T (up 37.5% YOY), AND (7) US federal debt service costs are $1.4T --> (8) CPI (consumer inflation), the Fed’s favorite inflation measure @3.4%, and --> (9) PPI (producer inflation) @5.4% (the 2.0% difference is passed along to consumers). That's the fiscal and monetary mess we are in today. #9 To reduce prices from rising (to reduce INFLATION), the Fed must slow down the RATE OF GROWTH of the MONEY SUPPLY. #10 The Fed does this by (1) selling USTs across the yield curve (from VST 1 Mo USTs to VLT UST 30 Yr bonds --> (2) to take cash out of circulation --> (3) which makes cash more valuable and bids up the price of USTs --> (4) which increases the amount of interest we are paying all those UST holders (the bad news). #11 I hope this helps all AIIers understand why watching Fed FFR rate changes -- the one "essential" data point – are so important to understand how to anticipate and manage market returns. Comments?

Rob from NC posted 2 days ago:

Barry, my friend, you have presented a bunch of data and some wonderful theory, and I take no major issue with any of it. But my question remains: What are YOU going to DO with all that information and applied theory? You say watching the FFR changes are "important to understand how to anticipate and manage market returns." Okay, how are YOU now anticipating and managing market returns (whatever that means)? I lived and invested through pre-Greenspan years, through the '87 crash, through the fantastic 90s tech market, the dot-com bust, the stagnant early 2000s, the '07-'09 meltdown, and the mostly bull market ever since. And I've been successful by (almost) always doing the same thing, which is to buy good equities when I can get what I believe to be a good bargain, and then I hold onto them until I conclude either (1) I made a mistake in buying a particular security or (2) I could sell a particular security and buy one that is substantially better. (I confess that I also let short-term tax issues influence some of my selling activities.) As I wrote previously, I watch what is going on with mostly passing interest. I don't bury my head in the sand, but I can neither control the FFR data nor use that data (or any other data) to make any predictions about what will happen to the stock market next week, next month, or next year. TRYING to do either of those two things is, in my humble opinion, a fool's game. But if you can play that game and win, more power to you!