The Unstoppable Force of Mean Reversion: How Bubble Symmetry is About to Rock the Market.
The Unstoppable Force of Mean Reversion: How Bubble Symmetry is About to Rock the Market.
What is Dovish vs Hawkish Monetary Policy?
Here is what we will be getting into today:
Stock Market Bubble Symmetry.
Political Influence On Commodity Cycles & US Energy Sector.
Dovish vs Hawkish Monetary Policy Explained.
Understanding Employment For People With Disabilities.
Let's Dive In!
Website: Of Two Minds
Title: What Goes Up Also Comes Down: The Heavy Hand Of Bubble Symmetry
Link: http://charleshughsmith.blogspot.com/2023/01/what-goes-up-also-comes-down-heavy-hand.html
Here are the key highlights:
Bubble symmetry is the theory that bubbles will retrace in roughly the same time frame as it took for them to expand. This was seen in the dot-com stock market bubble of 1995-2003.
The key feature of bubble symmetry is that the entire bubble will usually collapse within a similar time frame. While nobody can see bubble symmetry coming, it is a natural occurrence due to mean reversion. This is the principle that unsustainable things will eventually collapse. This includes speculative manias, credit bubbles, asset bubbles, and projections of endless expansion.
There is a well-worn psychological path that people follow during the collapse of a bubble. This path generally follows the Kubler-Ross phases of denial, anger, bargaining, depression, and acceptance. However, there are often repeated spikes of false hope that the bubble is starting to reflate. This pattern usually repeats until the speculative fever finally breaks and all those betting on a resumption of the bubble mania finally give up.
If bubble symmetry plays out in the current stock market bubble, we can anticipate a steep 45% drop to pre-bubble levels, followed by another leg down as the speculative frenzy is slowly extinguished. Housing bubbles are notoriously “sticky” when it comes to price declines, but if symmetry plays out we can anticipate a relatively steep drop of about 30% to pre-mania levels.
Such declines are of course “impossible”. There are always endless reasons why bubbles can't possibly pop and why 60% declines are impossible, even as history tells us that 60% declines are inevitable and rather modest.
Website: Capital Flows and Asset Markets
Title: All Hail Texas Socialism
Link: https://www.russell-clark.com/p/all-hail-texas-socialism
Here are the key highlights:
The US energy sector has experienced increased activity as a result of political change and expectations of a typical commodity cycle.
The reduction in drilled uncompleted wells (DUCs) was viewed positively, but completed wells quickly returned to pre-Covid levels, causing natural gas production to rise and leading to negative pricing in the Permian region.
It was believed that market consolidation would result in more capex discipline, but drillers have continued to increase production without raising capex, leading to outperformances by companies like Texas Pacific Land (TPL), compared to leading Permian producer Pioneer Resources (PXD).
Long-dated natural gas futures have stalled after a run up in 2022, which is reasonable given the fall in DUCs and improved market structure, but there is a risk of entering a bear market. The weakness in natural gas pricing has coincided with a strong stock market, leading some to question if US markets are being propped up by the shale industry.
Newsletter: Analyst's Digest
Title: Monetary birds.
Link: https://analystsdigest.substack.com/p/monetary-birds
Here are the key highlights:
Central bank policies are generally categorized as either Dovish or Hawkish.
Dovish monetary policy prioritizes promoting economic growth and reducing unemployment over controlling inflation.
Central banks with a dovish stance usually keep interest rates low and implement easing measures such as purchasing government bonds to increase the money supply and stimulate economic activity.
This policy is considered dovish because it is more accommodating towards economic growth and less focused on controlling inflation. The central bank is being gentle on the economy by creating policies that are more conducive to business growth and prosperity.
Hawkish monetary policy prioritizes controlling inflation over promoting economic growth and reducing unemployment.
Central banks with a hawkish stance typically raise interest rates and implement tightening measures to reduce the money supply and slow down economic activity.
This policy is considered "hawkish" because it is less accommodating to economic growth and more focused on controlling inflation. An example of this can be seen in the recent increase in interest rates in the American economy, where the Federal Reserve has continued to raise interest rates to control inflation.
Although the increased interest rate may be for the greater good of reducing inflation, it has affected companies as seen in recent earnings seasons. The Federal Reserve's tight monetary policy may slow down economic growth but it helps to control inflation and stabilize the economy.
Website: Wolf Street
Title: Employment of People with a Disability Spiked in Hot Labor Market. Applications for Disability Benefits Fell to 20-Year Low
Link: https://wolfstreet.com/2023/02/03/employment-of-people-with-a-disability-spiked-to-record-in-hot-labor-market-applications-for-disability-benefits-fell-to-20-year-low/
Here are the key highlights:
The tight labor market over the past two years has had a positive impact on the employment status of people with disabilities. According to the Bureau of Labor Statistics, there has been an increase of 1.55 million people with disabilities working and 1.62 million in the labor force, compared to January 2020, with an overall increase of 27% and 26% respectively.
The Social Security Administration also reports a drop in the number of people who applied for and received disability benefits, reaching the lowest levels in many years.
There were an estimated 32.6 million people with disabilities aged 16 and over in January, according to the Bureau of Labor Statistics.
People with disabilities may have a wide range of impairments, including vision loss, physical disabilities resulting from war or disease, or disabilities that come with aging.
Others may not be in the labor force due to factors such as being retired, unable to work due to their disability, receiving disability benefits, being wealthy, or being full-time students.
The record number of job openings and the new flexibility by employers regarding remote work were likely significant contributors to this increase. A total of 7.85 million people with a disability were in the labor force in January, which was up 24% or 1.62 million from January 2020.
Companies faced with difficulties in hiring people began opening doors to people with a disability in this tight labor market. The unemployment rate for people with a disability dropped to a record low of 5.0% in December, but rose to 7.1% in January due to the end of seasonal jobs in the retail industry.
Despite the decrease, the unemployment rate for people with a disability remains far higher than for the overall labor force, highlighting the difficulties faced by people with a disability in finding employment, even in a strong job market.
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