OT - Dow plunges 1,175 - worst point decline in history

[dddd]

Originally Posted by Matt92037

This. Credit Suisse is in big trouble and anybody who listens to Cramer for financial advice will also have portfolios that are in big trouble.

I'm still recalling Cramer making a strong pitch for Xerox stock, back in 2000.
Luckily, my rather naive self had worked for that company, so I didn't buy the stock (that tanked just days later).

[verticaldoug]

You can look at Turkey as poster boy for ignoring conventional bond market wisdom, and trying to go your own way with MMT. President Erdogan believes high rates cause high inflation, so he insists the Central Bank cut rates even as the currency craters and inflation rages.

He has managed to depreciate the Turkish Lira from 2 to 18.5 since 2010. He's manage to take a problem which would have required a little bit of pain to correct back in 2015 to an outright disaster.

The eventual medicine the country needs is going to be very painful. For all the talent the Turkish people have, this country is headed to eventual default and currency controls.

Lebanon where the official Lebanese Pound rate is 1500 but unofficially the black market rate is 38,000. The gov is planning to devalue to 15,000 later this month, but that's less than halfway, and not sure if it helps or hinders the economy. Just more political denial....



Turkey’s Inflation Exceeds 83% as Erdogan Wants Even Lower Rates
2022-10-03 07:06:14.517 GMT


By Beril Akman
(Bloomberg) -- Turkish inflation accelerated last month to
a level last seen in mid-1998, fueled by an experimental central
bank policy that has chased away foreign investors and eroded
the lira’s value.
Consumer prices rose 83.5% on an annual basis in September,
according to data released on Monday by Turkey’s statistics
agency, in line with the median forecast in a Bloomberg survey.
Monthly inflation accelerated 3.1%, slightly less than expected
in a separate poll.
The acceleration follows a series of interest-rate cuts
this year by central bank Governor Sahap Kavcioglu that threaten
to pile even more pressure on inflation. The surprise policy
turn has made Turkey an outlier among global monetary
authorities, most of which are aggressively tightening to get a
grip on price increases.
As a result, Turkey has the world’s deepest negative
interest rates when adjusted for inflation, depriving it of a
buffer to protect local assets against a selloff. The lira has
lost more than 50% of its value against the dollar in the past
12 months.
Turkey’s central bank said in its latest forecast in July
that inflation should peak somewhere between 80% and 90% by
October. The government estimates that it’ll slow to 65% at the
end of this year.

Lebanon Set to Re-Peg Currency If Recovery Plan Is Approved (1)
2022-09-29 07:15:53.344 GMT


By Omar Tamo
(Bloomberg) -- Lebanon is moving to abandon its currency
peg after more than two decades, though the plan depends on
approving a long-delayed recovery program.
The Lebanese pound’s official rate, which has been set at
1,507.5 per dollar since 1997, will be fixed at 15,000, the
Finance Ministry said in a statement on Wednesday. The decision,
effective on Nov. 1, was confirmed by the central bank.
The ministry later said, however, that the step was
contingent on the approval of a financial recovery plan that
Lebanon failed to adopt for more than two years since the
government’s debt default.
The program, designed to end an economic collapse, marks an
attempt to restructure the banking sector and the central bank’s
balance sheet by recognizing billions of losses in the financial
system.
The previous fixed exchange rate rate unraveled following a
financial meltdown that started in 2019. The local currency now
trades at about 38,800 pounds per dollar on the parallel market.
Lebanon is looking to turn the page on a crisis labeled by
the World Bank as one of the worst globally since the mid-19th
century. The economic meltdown pushed three-quarters of the
country’s population into poverty, with the pound losing more
than 90% of its market value.
In April, Lebanon reached a preliminary agreement with the
International Monetary Fund on a $3 billion loan, a deal that is
conditional on a series of deeply divisive reforms.
Following a staff visit to Beirut last week, the fund said
that Lebanon has been “very slow” to enact the changes that have
been negotiated, with most yet to be implemented.

[robertbb]

They'll just blame a certain small country to the South, maybe even pick a small fight, and it's business as usual.

[HenryA]

This didn’t take long.

WSJ Oct 3:

“LONDON—U.K. Chancellor of the Exchequer Kwasi Kwarteng on Monday ditched a plan to cut the 45% top rate of income tax, scrapping a key economic policy after turmoil in the country’s financial markets, an intervention by the Bank of England and the threat of large scale rebellion by Conservative Party lawmakers.”

The question remains whether a 45% tax rate is good policy. Cutting it certainly was not politically feasible.

[Ozz]

Originally Posted by HenryA

This didn’t take long.

...

The question remains whether a 45% tax rate is good policy. Cutting it certainly was not politically feasible.

You fund a government with either taxes or debt....the first ticks off voters, the second is not sustainable in the long run. Which one do you think the people who get elected will choose?

No free lunch.....

[Tony T]

I like to look at “On This Day” from Wikipedia, and today included:

Oct 03 2008 - The Emergency Economic Stabilization Act of 2008, establishing the Troubled Asset Relief Program, commonly referred to as a bailout of the U.S. financial system, was enacted.
https://en.wikipedia.org/wiki/Troubl...Relief_Program

[Tony T]

DOW up 800+ (again).
5% in 2 days.

[echappist]

Could someone enlighten me on why a decent looking job report would have the effect of driving down equity prices? Does it have anything to do with the perception that an additional ~250k jobs added signals that current Fed rate hike is insufficient to cool the economy, thereby portending additional rate hike(s)?

[bigbill]

Originally Posted by echappist

Could someone enlighten me on why a decent looking job report would have the effect of driving down equity prices? Does it have anything to do with the perception that an additional ~250k jobs added signals that current Fed rate hike is insufficient to cool the economy, thereby portending additional rate hike(s)?

I think it's more about the rate hikes being successful, and they should continue.

[verticaldoug]

Originally Posted by echappist

Could someone enlighten me on why a decent looking job report would have the effect of driving down equity prices? Does it have anything to do with the perception that an additional ~250k jobs added signals that current Fed rate hike is insufficient to cool the economy, thereby portending additional rate hike(s)?

Because the FED doesn't look at the same number as the dumb dumbs on CNBC.

Inside the NFP, the two numbers of importance are average hourly earnings growth which remains strong and unemployment rate. Hourly earnings are still growing at 5% , and unemployment declined to 3.5%. Both of these are very strong and show continued strength in the labor market. Wage growth = continued inflation

Next week everything will react to CPI, but the last real FED number will be PCE which comes out 10/28. The FED prefers PCE as opposed to CPI since it has no housing.

For the time being, good news is bad news since it means continued economic strength which means inflation will not cool to the 2% trend FED is targeting.

[redir]

It's kind of a sick twisted double edged sword. The FED is really attempting to increase unemployment so that inflation cools off. And when people are more employed the stock market reacts negatively because 'it' thinks the FED will increase interest rates.

[verticaldoug]

Originally Posted by redir

It's kind of a sick twisted double edged sword. The FED is really attempting to increase unemployment so that inflation cools off. And when people are more employed the stock market reacts negatively because 'it' thinks the FED will increase interest rates.

Actually 5 Fed Governors spoke Thursday. They all had the same talking point- growth continues to be strong, we do not yet see inflation coming down to trend, and we will continue to hike.

The market had talked itself into thinking the FED was going to pivot and slow interest rate hikes which is part of the two big back to back rally days.

The market wanted to believe the FED put is close because of the problems the UK had the week before..... this is the proverbial moral hazard everyone spoke about back in 2008 when the banks were bailed out. . . It is all twisted.

[likebikes]

djia down 630.

[username]

If you're heavily invested and don't have immediate short-term financial need, there's nothing better to do than wait it out. If you're not heavily invested, it's probably a good time to buy into the market. If it doesn't go back back up at some point, we'll probably have bigger problems on our hands than a stagnant market.

[veloduffer]

Originally Posted by echappist

Could someone enlighten me on why a decent looking job report would have the effect of driving down equity prices? Does it have anything to do with the perception that an additional ~250k jobs added signals that current Fed rate hike is insufficient to cool the economy, thereby portending additional rate hike(s)?

We are in a situation in which good economic news is bad news as it stokes continued inflation fears. Thus bad for equities and bonds; usually these diverge but interest rates are rising sharply and the yield curve is inverted (short term rates higher than long term rates), so bond prices are falling.

With higher bond yields, this may be helpful in the long term for retirees looking for fixed income. This will also cool equity markets going forward as investors now have an alternative to equities for returns (which had been low with interest rates near nil).

What will be interesting is how higher interest rates affect govt spending, which is the biggest driver of GDP growth. The deficit is very high and our treasury debt is very short with average maturity of about 7 yrs, which will need to be refinanced at 3x-4x the cost from the past decade.

It wasn't too long ago when folks were postulating the low interest rates were forever and could easily fund spending as real rates were negative (Modern Monetary Theory). Complete hogwash....