MECHFI’S DIAGNOSTICS
Markets: Friday's reading on the inflation number was hotter than expected. This does reduce some of the bullishness before year-end. However, Wednesday's FOMC meeting will still be essential to give a clear insight into how far the bullishness will carry the market before the break. I expect the break to happen right at year-end or right after. I can’t imagine investors and fiduciaries not repositioning, which is part of the cause of the downward trend into earnings season (which will probably carry the market further down). I expect a 50 basis point adjustment by them in December.
Economics: I read an interesting tweet shared by Sam Ro, CEO/Founder of TKer LLC. A similar but far more robust newsletter shares perspectives on key charts that are often never discussed. The tweet below highlights a loose quote by the JPM investment team simply stating that because of the rhetoric about inflation, people are adjusting their spending. They are being forward-looking and mindful about their spending and amortizing it over a longer time horizon, and therefore a less robust tail-end of ‘23, with a less steep decline at the front of the year. In technical terms, less seasonality.
The Fed increased rates fastest in history, which is bound to break critical economic processes. It hasn’t been done yet, but I expect we are getting close to the snap. Investors should know more like last week, mid-first to the mid-second quarter, sentiment about the market will and should seem different.
Six months away? I’m afraid so. Even then, something geopolitical could happen.
REAL WORLD MECHANICS (Anecdotes are some of the most important pieces of data to interpret. )
Positive Currents:
Last week, I spoke about Facebook and its efforts to clean toxic content. I want to add another reasonable effort that Facebook and other social media platforms are making to compete with Tiktok. They are adjusting their algo to target good quality and creative content for more viewer attention. They want to gear users toward information where many people received value; and where it was clear a production process took place.
For me, economics sits here. I think it will form a race for better content. And from that, there will be a lot fewer negative connotations around social media.
References:
Facebook’s Most Popular Posts Were Trash. Here is How it Cleaned Up - Jeff Horwitz - Nov. 22, 2022
Negative Currents:
The culture of suing things - people or companies - is still alive and kicking. Apparently, one cookie company in Utah is suing another, claiming - to paraphrase - for copying their process and design too much.
This is ridiculous.
This isn't a productive use of time and a distraction from both businesses. Although the article highlights that the company being sued is taking the assault with humor by including it in their marketing campaign, everyone has to agree this is completely stupid.
Compete. Don’t be scared.
References:
‘Cookies So Good We’re Being Sued.’ Welcome to Utah’s Bakery Wars - James Fanelli - Dec. 6, 2022.
Firm Updates:
- Mechanicalfinancial.com has a few updates. Soon I will be adding my newsletter content to the website. So Mechfi will have it available in two locations - website and substack.
This Week’s Favorite Reads/Beats:
- Tax Loss Harvesting Comes With Hidden Risks - Lori Poannou - Dec. 2, 2022
- Trae Young Is the Buyer Behind $20 Million Deal for Clay Matthews’ Calabasas Home - Katherine Clarke Dec. 7, 2022
- The Weapon World Cup Managers Don’t Use Enough: Substitutions - Andrew Beaton - Dec. 7, 2022
- ‘Cookies So Good We’re Being Sued.’ Welcome to Utah’s Bakery Wars - James Fanelli - Dec. 6, 2022. (Recommended)
- The Secret Lives of MI6’s Top Female Spies - Helen Warrell - Dec. 7, 2022. (Extra, Extra Recommended)