Skeptical Investment: 2023-01-06

*** denotes well-worth reading in full at source (even if excerpted extensively here)

Economic and Market Fare:

Grannis: The Inflation Tide Continues to Recede

Fed will cause unnecessary harm to the US and world economy this year

ISM Manufacturing Contracts For 2nd Month, Prices Paid & New Orders Plunge

Samsung Profits Plunge 69% As Global Chip Demand In 'Full-Fledged Ice Age'

Flexport CEO Warns Container Shipping In "Great Recession"

Flexport founder and co-CEO Ryan Petersen warned a global shipping downturn is underway. He said the container shipping industry is in "recession" as a glut in capacity plagues major shipping lines. This comes right after Baltic Exchange's dry bulk sea freight index crashed on Tuesday, an ominous sign the global economy could be headed for turmoil. ....

Baltic Index Crashes Most On Record As Recession Alarm Flashes

....... Meanwhile, JPMorgan Global Composite PMI shows worldwide economic business conditions slid into contraction territory last August.

Job Openings Come In Much Hotter Than Expected Despite Continued Deterioration In Hiring

Inside The "Strong" Jobs Report: Full-Time Workers -1K; Part-Time Workers +679K

Two Things That Signal Job Growth Is About To Slide

Quotes of the Week:

Rosie: ISM just settled the recession debate. Of the 18 industries, down to just 2 reporting any growth and up to 13 in contraction. We last saw a gap like this in April 2020.

Shepherdson: I don't want to be alarmist but aggregate hours worked fell in the three months to Dec for the first time in more than *eight years*, excluding the initial Covid shock. Remind me please why the Fed needs to keep sledgehammering?

Charts:
1:

1b:

Just a quick sidenote.

Manufacturing orders are falling at a rate that we haven’t seen since the Great Depression.

That is all. pic.twitter.com/OWV6DhuFPv
— Justin Hart (@justin_hart) January 5, 2023

...

The ISM Prices Paid index called for US CPI at 8% already in summer 2021.

Its rapid decline now points to sub-2% headline inflation at the end of this year already! pic.twitter.com/dH8w5XBtfv
— Alf (@MacroAlf) January 4, 2023

...

“The employment data published in the establishment survey is not confirmed by the household survey, which is well known to be more useful/accurate, especially at major turning points in the economy.” https://t.co/icBF1bqUx9 pic.twitter.com/nFOxQKlhkO
— Jesse Felder (@jessefelder) January 6, 2023

...

FUNDSTRAT sees another monthly #CPI gain of 0.1% for December — which, it says, “would represent a massive decline in the pace of inflation and put the 3M annualized (SAAR) rate at ~2%.” It “would be the ‘floor dropping’ out of [the Fed’s inflation] forecast.”@fundstrat pic.twitter.com/Ep5eJ03Qp3
— Carl Quintanilla (@carlquintanilla) January 6, 2023

Bubble Fare:

The Calm Before the Shitting of Bricks

.......... Which get us to the the next point: by this time in both 2000 and 2008, the Fed was ALREADY easing. So this idea that they will push the economy deep into recession and push markets lower, THEN bail them out has no basis in reality. They neither bailed out the stock market nor the housing market the last two cycles. Unless you consider SPX -50% a successful bailout.

The risk isn't that the Fed restarts inflation, the risk is that they create runaway deflation. In 1980, Volcker had 19% of Fed rate to ease. This Fed has 4.25%. Consider the fact that the 1990, 2000, and 2008 recessions all required 5.5-7% of rate cuts.

In other words, if the Fed woke up to their incipient mistake tomorrow, it would still be too late to bailout markets and the economy.

On a related note, Burry is ignoring the fact that in 2008 the CPI collapsed 7 percentage points WHILE the Fed was easing. It actually went negative. 7% is an interesting number because it happens to be the current CPI.

In summary, the only REAL question is, how much does the Fed have to crush the Nasdaq and the housing market in order to collapse CPI. And then once they find that out the hard way, they can jump in their time machine and go back one rate hike.

That is the bull case in a nutshell.

Markets Have "Considerably More Downside" In 2023: Mark Spiegel

.... Mark On Macro And Tesla

Before I continue, I want to clearly state that the chance of this fund’s 2023 performance being anywhere near that of 2022’s is roughly equal to the chance of Elon Musk offering me a board seat at Tesla. (For the record, I would not accept such an offer as I don’t want to go to jail!) Okay, now that that’s out of the way…

Tesla’s inevitable meltdown (alright, so I was a mere eight years too early!) was a big contributor to this year’s performance (and we remain short it, as I believe it has another 90% to go), as were our other short positions in the S&P 500 (via SPY) and, early in the year, the garbage-stock ETF ARKK (which I covered way too early, leaving lots of additional profit on the table).

.... Meanwhile, we continue to carry a large SPY short position, as I believe the major indexes—although not all individual stocks—have considerably more downside to go, the inevitable hangover from the biggest asset bubble in U.S. history. Stated simply, there’s no way an “everything bubble” built on 0% interest rates and $120 billion/month in quantitative easing can not implode when confronted with near-5% rates and $90 billion a month in quantitative tightening.

(not just) for the ESG crowd:

‘It’s Not Either/Or’ — Population and Consumption in the Climate Solutions Debate