Echo what "stuck in the middle" says on your note. A couple of comments. First on sentiment, we did get a 10% trough to peak bounce. Mark Hulbert noticed that generally when reversals are sustainable sentiment in his newsletters remains quite bearish during the initial stages and what he noticed was their was a fairly dramatic flipping. In addition, I would note that sentiment is important but not sufficient. It is terrible to use in calling tops, but is generally better at bottoms, but still not enough. I call it a pre-condition. That said, my final point is probably just obvious. Nobody understands inflation. Models are not working. The simplest model of inflation is for T1 is T0 + beta inflation expectations. So from that simple model if inflation is rising, there is momentum from last month. So if that is only model left to use, with all others of little use, then there seems to be a moment of throwing in the towel on inflation peak and path. This is frightening markets. Final point, I wonder if credit is being held up artificially by commodity sectors, or related ones, particularly energy. I continue to think oil is going to $70 not $170, but is only a theory that demand will collapse, and so far, shows no signs of materializing. Actually, one other point, it seems as if the still basic question is centers of path. Option 1 : liquidity squeeze, ISM to 40, and recession is dead certain. Option 2: Golidilocks 2.0, inflation peaks, Fed takes a chill pill post-Sept, and a supply side driven growth saves us from a US recession. I would watch the regional capex to confirm or reject this thesis. Does anyone find it strange that buybacks seem to be continuing, normally they would have been expected to recede as corps go into capital preservation mode, but maybe there is something in the composition of who is doing these buybacks that I don't quite understand.
Echo what "stuck in the middle" says on your note. A couple of comments. First on sentiment, we did get a 10% trough to peak bounce. Mark Hulbert noticed that generally when reversals are sustainable sentiment in his newsletters remains quite bearish during the initial stages and what he noticed was their was a fairly dramatic flipping. In addition, I would note that sentiment is important but not sufficient. It is terrible to use in calling tops, but is generally better at bottoms, but still not enough. I call it a pre-condition. That said, my final point is probably just obvious. Nobody understands inflation. Models are not working. The simplest model of inflation is for T1 is T0 + beta inflation expectations. So from that simple model if inflation is rising, there is momentum from last month. So if that is only model left to use, with all others of little use, then there seems to be a moment of throwing in the towel on inflation peak and path. This is frightening markets. Final point, I wonder if credit is being held up artificially by commodity sectors, or related ones, particularly energy. I continue to think oil is going to $70 not $170, but is only a theory that demand will collapse, and so far, shows no signs of materializing. Actually, one other point, it seems as if the still basic question is centers of path. Option 1 : liquidity squeeze, ISM to 40, and recession is dead certain. Option 2: Golidilocks 2.0, inflation peaks, Fed takes a chill pill post-Sept, and a supply side driven growth saves us from a US recession. I would watch the regional capex to confirm or reject this thesis. Does anyone find it strange that buybacks seem to be continuing, normally they would have been expected to recede as corps go into capital preservation mode, but maybe there is something in the composition of who is doing these buybacks that I don't quite understand.
good note, thank you. another good (better IMO) movie about Napa....Bottleshock
https://www.youtube.com/watch?v=hI2g8-7GnT8
enjoy, if you haven't already