Category Archives: Uncategorized

Why the Stock Market’s Inflation Worries Don’t Make Sense

We’ve been seeing some scary inflation numbers recently.

The consumer price index rose 8.6% from last year in the latest report. These eyewatering levels have gone on for months, spooking consumers and markets.

The S&P 500 is down 20% for the year, largely due to worries about inflation.

But strangely, bond markets are actually predicting lower levels of inflation now then when the S&P 500 was at its peak!


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The key number to look at is the 5 year breakeven inflation rate. This figure measures the difference between yields on inflation-protected Treasuries and yields of Treasuries without that protection.

The difference between those bond yields shows how much inflation investors expect.

Markets peaked at the end of 2021. At that time, investors expected inflation of about 2.9% a year over the next five years.

Now, investors expect inflation of just 2.6% through 2027.

The stock market is freaking out about inflation. But the much larger bond market actually predicts falling levels of inflation.

Perhaps what’s really causing the turmoil in stocks today is psychology. People are terrified of losing their money.

That’s a legitimate fear, but it doesn’t have anything to do with the realities of the inflation rate.

I suspect inflation will moderate in the coming few quarters, in line with the bond market’s expectations. And as that happens, I expect stock markets to rise.

Until then, I’m holding my stocks.

What do you think is next for stocks and inflation? Leave a comment at the bottom and let me know!

There will be no blog on Monday for the holiday. I’ll see you on Tuesday.

Have a great holiday weekend everyone! 👋

More on markets:

Hedge Fund Giant D1 Loses $7 Billion in 2022

The End of Celsius — the Beginning of Crypto Regulation

Hedge Fund Tiger Global Losing $136 Million a Day, Down 52%

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Photo: Federal Reserve Chair Jerome Powell

Correction to Prior Article

About an hour ago, I posted an article about a Melvin Capital position in GameStop Corp. A very astute reader pointed out to me that the SEC filing on which it relied was from a prior year, so the information was no longer up-to-date.

Fortunately, thanks to the reader’s help, I was able to confirm the error and remove the post within about 1 hour.

I apologize for this oversight. 🙏

Unfortunately, that old report came up as the first result in a Google search I did for SEC data, and I neglected to confirm the date. I’ll be watching those dates like a hawk in the future! 🙂

I appreciate your understanding and look forward to digging into financial markets and more with you in the future!

Hedge Funds Hit Hard by Meme Stock Losses, Badly Behind S&P 500

Losses betting against meme stocks have hit hedge funds hard this year. The latest data from Barclay Hedge shows year-to-date gains for equity long/short funds of 8.51%. (This is the type of fund that would typically take short positions in stocks.)

Meanwhile, the S&P 500 has returned 18%.

One of the largest sources of losses for hedge funds this year is short positions in AMC Entertainment Holdings, Inc. Its shares are up more than 18 fold this year, inflicting billions in losses on short sellers. Other meme stocks like GameStop Corp. have also produced large losses.

This continues a pattern of long term underperformance for this strategy:

Investors are losing patience and rapidly withdrawing their money.

If you’re an investor in a fund with a losing strategy, a weak track record, and a habit of betting against the hottest stocks in the market, I ask you: why not try an index fund?

More on hedge funds and AMC:

SHORT SELLERS LOSE $44 BILLION IN 30 DAYS

HOW AMC IS BLOWING UP THE HEDGE FUND INDUSTRY

NEW DATA SHOWS BIG DROP IN AMC FAILS TO DELIVER

Photo: “the Great Hedge Fund Hei$t” by eyewashdesign: A. Golden is licensed under CC BY-NC-ND 2.0

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I Listened to Sammy “The Bull” Gravano’s New Podcast

It’s awesome! Sammy “The Bull” Gravano, Gambino crime family underboss turned government witness, released the first episode of his new podcast today. It’s called “Our Thing” and you can see it here.

I found it very engaging. The style is spare and fast-paced. The first episode covers the planning of a hit on Genovese family boss Vincent “The Chin” Gigante and also Gravano’s later arrest and cooperation with the federal government.

This episode includes interviews with both Gravano and the FBI agents who caught him, so you get a reality check on what could have otherwise been a self-serving narrative.

I found the sound effects really enhanced the story, which is rare in podcasts, where I find they generally detract. Give it a listen! The next episode in this series, which took two years to develop, should come out in the first days of 2021.