Hello r/Superstonk, I hope everyone is enjoying their weekend! This is going to be an attempt at tying a bunch of posts together in one spot. Please let me know if this is something you would like to continue and see or if you feel it off the mark for the community? Thanks!
While I have you here, please consider dropping by https://www.reddit.com/r/Superstonk/comments/y2an0w/sec_reopens_comments_for_several_rulemaking/ to make sure your voice is heard.
Monday, Oct. 10
|Chicago Fed President Charles Evans speaks at NABE||speech_by_fed_governor|
|Fed Vice Chair Lael Brainard speaks at NABE||vice_chair_lael_brainard|
Recap and Analysis:
Reducing inflation to a level consistent with the Fed’s 2 percent objective will require a period of restrictive financial conditions to restore better balance between supply and demand economy-wide. This will generate below-trend growth and some softening of labor market conditions. But ensuring low and stable inflation is a prerequisite for achieving the sustained strong labor market outcomes that bring benefits to everyone in our society.
These broad contours are demonstrated in the FOMC’s latest Summary of Economic Projections (SEP), which this audience is undoubtedly familiar with. The SEP dot plot shows that most FOMC participants are looking at something like another 100 to 125 basis points of rate increases this calendar year, with the median projection for the federal funds rate then rising a bit further to 4.6 percent at the end of next year.
The unemployment rate is projected to rise to 4.4 percent by late next year and then remain near that level in 2024 and 2025.
Initial jobless claims for week of October 8th:
So my baseline forecast sees the combination of further supply-side repair, a steeper Phillips curve, and anchored long-run inflation expectations moving inflation back to target without having to generate an inordinate amount of slack in the economy.
This mechanism does, however, require reducing the heat in labor and product markets as well as maintaining a downward pull from inflation expectations. This is where tighter monetary policy comes into play.
Another risk is that inflation expectations could become unanchored. Inflation will be much more difficult to rein in if households and businesses start thinking outsized increases in wages and prices are the new norm and incorporate those expectations into their decision-making.
July FOMC Minutes: 'Apparent absence of a wage-price spiral.'
This week's FOMC minutes: 'A number of participants commented that a wage–price spiral had not yet developed but cited its possible emergence as a risk.'
In macroeconomics, a wage-price spiral is a proposed explanation for inflation, in which wage increases cause price increases which in turn cause wage increases, in a positive feedback loop.
The public and markets appear to believe we will be successful. But it is up to us to follow through and do our job.
Umm, even the 'public' is seeing through this ruse, as the UMich 5-year inflation expectations (early) showed on Friday.
The moderation in demand due to monetary policy tightening is only partly realized so far. The transmission of tighter policy is most evident in highly interest-sensitive sectors like housing, where mortgage rates have more than doubled year to date and house price appreciation has fallen sharply over recent months and is on track to soon be flat. In other sectors, lags in transmission mean that policy actions to date will have their full effect on activity in coming quarters, and the effect on price setting may take longer. The moderation in demand should be reinforced by the concurrent rapid global tightening of monetary policy.
Although it is well above levels consistent with 2 percent inflation, wage growth has been running below current inflation.
Strong wage growth along with high rental and housing costs mean that inflation from core services is expected to ease only slowly from currently elevated levels.
Monetary policy tightening is also proceeding rapidly abroad. Many central banks in large economies have raised rates by 125 basis points or more in the past six months, and yields on 10-year sovereign debt in Canada, the United Kingdom, and the largest euro area economies have seen increases on the order of 190 to 360 basis points this year.
The combined effect of concurrent global tightening is larger than the sum of its parts. The Federal Reserve takes into account the spillovers of higher interest rates, a stronger dollar, and weaker demand from foreign economies into the United States, as well as in the reverse direction.
a sharp decrease in risk sentiment or other risk event that may be difficult to anticipate could be amplified, especially given fragile liquidity in core financial markets.
TUESDAY, OCT. 11
|NFIB small-business index||Sept.||91.8||92.1||nfib_small_business|
|NY Fed 5-year inflation expectations||Oct.||2.0%||2.2%||inflation_expectations_rose|
|Cleveland Fed President Loretta Mester speaks at Economic Club of NY||cleveland_fed_president|
|Paul Munter, SEC Acting Chief Accountant The Auditor’s Responsibility for Fraud Detection||sec_acting_chief|
|Bank of Korea Pivots Back to Outsized Hike (up half-percentage point to a 10-year high of 3%)||bank_of_korea_pivots_back_to|
Recap and Analysis:
The net percent of owners reporting inventory increases improved four points to a net negative 2%, Sixteen percent of owners reported increases in stocks and 17% reported reductions as solid sales reduced inventories at many firms.
Folks are still spending, which feeds into inflation.
A net 45% of owners reported raising compensation, down one point from August. A net 23% of owners plan to raise compensation in the next three months, down three points from August but historically still very high. Ten percent of owners cited labor costs as their top business problem and 22% said that labor quality was their top business problem.
Wages increasing is also going to feed into inflation which is a sign the Fed speakers from this week have used as one of the reasons to keep raising rates.
3yr inflation expectations rose to 2.9 percent from 2.8 percent in August, while median five-year-ahead inflation expectations, which have been included in the monthly SCE core survey on an ad-hoc basis since the beginning of this year, increased to 2.2 percent from 2.0 percent.
Remember, all the Fed speakers and JPow are saying the goal is 2% inflation. Well, even their own 5-year expectations are becoming unanchored from that number.
Given the current level of inflation, its broad-based nature, and its persistence, I believe monetary policy will need to become more restrictive in order to put inflation on a sustainable downward path to 2 percent.
There's that 2% number again...
I anticipate that the return to price stability will entail a period of output growth that is well below trend over the next two years. This below-trend growth will lead to slower employment growth, with the unemployment rate moving up to 4-1/2 percent by the end of next year and up a bit more in 2024. We are likely to experience higher-than-normal levels of financial market volatility as well.
It is about to get painful.
None of this is painless, but the high inflation we are experiencing is already inflicting pain on many people. The necessary costs incurred now for the economy to transition back to price stability are much lower than the costs borne later were inflation to become embedded in the economy, influencing wage- and price-setting behavior, investment decisions, and longer-term productivity growth.
Sounds like more wage-spiral concerns.
In order to put inflation on a sustained downward trajectory to 2 percent, policy will need to move into a restrictive stance. That means that short-term interest rates adjusted for expected inflation, that is, real interest rates, will need to move into positive territory and remain there for some time.
Because I see more persistence in inflation than the median SEP projection, the funds rate path I submitted for the September SEP was a bit higher over the next year than the median path, and I do not anticipate any cuts in the fed funds target range next year.
Paul Munter, SEC Acting Chief Accountant: The Auditor’s Responsibility for Fraud Detection
The Association of Certified Fraud Examiners (“ACFE”) estimates that organizations lose 5% of revenue to fraud each year, an estimated loss of $4.7 trillion on a global scale
PCAOB inspections consistently identify areas of concern involving auditors’ application of due professional care and professional skepticism when considering fraud or where the audit response to fraud risks and red flags was insufficient. PCAOB inspection examples of auditor’s deficiencies include auditors not performing substantive procedures that were specifically responsive to fraud risks (e.g., not performing tests of details, or only performing inquiries, performing insufficient journal entry testing, failing to assess and/or identify revenue recognition as a potential fraud risk, and not communicating fraud risks to audit committees.
Recent Commission enforcement actions against audit firms and their personnel continue to highlight instances of improper professional conduct by auditors with respect to fraud risks. In these enforcement actions, the Commission alleged that auditors failed to comply with PCAOB standards by, among other things, ignoring red flags and contradictory information and failing to obtain sufficient and appropriate audit evidence.
Through OCA’s discussions with stakeholders we have heard particularly troubling feedback that auditors many times frame the discussion of their responsibilities related to fraud by describing what is beyond the auditor’s responsibilities and what auditors are not required to do.
The auditors are getting thrown under the bus?
One sign folks are looking for is the big players to 'turn on each other' when the music has stopped.
Another sign (that I believe and am curious in) is what are the government agencies saying/doing? Presumably, they will be brought before congress in the future and asked about this time period and why they didn't see it or do anything.
The worry for policymakers is that rising consumer prices will spur workers to demand higher pay, potentially unleashing a wage-price spiral. At the same time, continued resilience in consumption and low unemployment are among factors giving the BOK confidence that the economy can withstand more rate hikes.
Still, the BOK has been concerned that higher rates may increase the strains on households that have built up a record amount of debt and tip the economy into recession.
The BOK is the latest central bank to respond to the Fed’s doubling down on large rate hikes to try and tame inflation.
The BOK had already increased its rate by a half-point in July, before going small with a quarter-point move in August as concerns over the impact of larger rate hikes on the wider economy.
Returning to a faster pace of tightening underscores the urgency to counter capital outflows that have sent the won to its lowest levels in 13 years since the Fed made clear it will raise rates higher and for longer.
US rates were a full percentage point below the policy rate in Korea back in early March, but are now higher even after the latest move.
WEDNESDAY, OCT. 12
Recap and Analysis:
The Producer Price Index for final demand increased 0.4 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices declined 0.2 percent in August and 0.4 percent in July.
On an unadjusted basis, the index for final demand advanced 8.5 percent for the 12 months ended in September.
Inflation is still very much in the production pipeline and business aren't going to eat all this, additional price hikes can be expected to reach the consumer (us). The Fed has more work to do if they want to get a handle on this inflation.
Only been able to find a video of the townhall so far and have not had time to watch all the way yet.
The Board is working with our colleagues at the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to ensure that crypto-asset-related activities banks may become involved in are well regulated and supervised, to protect both customers and the financial system.
Stablecoins linked to the dollar are of particular interest to the Federal Reserve. As Chair Powell said the other day, a central bank is and will always be the main source of trust behind money. Stablecoins borrow that trust, so we have an abiding interest in a strong federal prudential framework for their use.
- A number of participants commented that a wage–price spiral had not yet developed but cited its possible emergence as a risk.
- Many participants noted that, with inflation well above the Committee’s 2 percent objective and showing little sign so far of abating,
- Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.
My general point is that inflation is much too high, and the outlook for inflation remains significantly uncertain.
Looking back, one might reasonably argue that during that time the Committee's explicit forward guidance for both the federal funds rate and asset purchases contributed to a situation where the stance of monetary policy remained too accommodative for too long—even as inflation was rising and showing signs of becoming more broad-based than previously thought. The facts on the ground were changing quickly and significantly, but the communication of our policy stance was not keeping pace, which meant that our policy stance was not keeping pace.
Securities and Exchange Commission Chair Gary Gensler — a former Goldman Sachs partner turned progressive icon — is set to launch a regulatory broadside in the coming weeks against brokerage and trading giants including Charles Schwab, Robinhood and GOP megadonor Ken Griffin’s Citadel Securities, according to interviews with more than a dozen executives, lawmakers, regulators and investor advocates.
The rules that Gensler is spearheading would revamp the stock market’s plumbing, partly in response to the 2021 meme stock saga in which Robinhood and other brokerages attracted scrutiny after they were overwhelmed by trading in shares of companies such as GameStop.
He is expected to crack down on the complex web of payments and fees that exchanges, brokerages and trading firms share when processing investors’ stock trades.
While the proposals have yet to be released, industry executives have already begun talking about suing the SEC over the plans.
THURSDAY, OCT. 13
|Consumer price index||Sept.||.1%||.4%|
|Core CPI (three-month SAAR)||Sept.||6.5%||6.0%|
|Core CPI (year-on-year)||Sept.||6.3%||6.6%|
|Initial jobless claims||Oct. 8||219,000||228,000|
|Continuing jobless claims||Oct. 1||1.37 million||1.37 million|
FRIDAY, OCT. 14
Recap and Analysis:
Advance estimates of U.S. retail and food services sales for September 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $684.0 billion, virtually unchanged (±0.5 percent)* from the previous month, but 8.2 percent (±0.7 percent) above September 2021. Total sales for the July 2022 through September 2022 period were up 9.2 percent (±0.5 percent) from the same period a year ago. The July 2022 to August 2022 percent change was revised from up 0.3% (±0.5 percent)* to up 0.4 percent (±0.2 percent).
Of note to this community, Sales at e-commerce and other “nonstore retailers” were 0.5% to a new record of $109 billion (seasonally adjusted) an increase of 11.6% year-over-year. It is a good thing our 'dYiNg BrIcK-aNd-MoRtAr has gotten the memo and worked relentlessly to build out its e-commerce platform(s):
The median expected year-ahead inflation rate rose to 5.1%, with increases reported across age, income, and education. Last month, long run inflation expectations fell below the narrow 2.9-3.1% range for the first time since July 2021, but since then expectations have returned to that range at 2.9%. After 3 months of expecting minimal increases in gas prices in the year ahead, both short and longer run expectations rebounded in October.
SATURDAY, OCT. 15
|Time (ET)||Report/Speech||Superstonk Coverage:|
|1:15pm||St. Louis Fed President James Bullard speaks on inflation|