From Insider NJ:
Murphy Unlocks the Nuclear Launch Codes
Skipping over the preliminaries — meetings, discussions, negotiations or compromises with legislative leaders — Gov. Phil Murphy went directly to the nuclear option— shutting down state government on July 1 if the Legislature sends him a fiscal 2024 budget that includes extending the corporate tax surcharge to finance a new broad property tax reduction program targeted at senior citizens.
Within 24 hours of Senate President Nick Scutari’s (D-Union) favorable comments in support of a proposal floated by Assembly Speaker Craig Coughlin (D-Middlesex) to target property tax relief to senior citizens, the Murphy Administration — in a rare public outburst of intra-party disagreement — dared the leaders to move ahead against his wishes and risk bringing state government to a halt.
In a stern “don’t call my bluff” warning, the governor said he would veto any budget provisions to continue the five-year-old surcharge and if the Legislature failed to agree by the July 1 constitutional deadline for a new spending plan, government operations would come to a halt.
Driving home his seriousness, Murphy said he’s already ordered contingency plans drawn up for a government shutdown while continuing to provide essential services.
The 2.5 percent surcharge on businesses with over $1 million a year in taxable income will expire at the end of this year and Murphy has made it clear that he stands firm in his view that when it was enacted in 2018 a specific sunset provision was included and government is obligated to abide by it.
Its’ expiration is estimated to result in a loss of $332 million for the remainder of the current fiscal year and $1 billion by fiscal 2025.
While details of Coughlin’s plan are scarce, Murphy criticized it as unfair by singling out a segment of property owners — senior citizens — regardless of financial circumstances and without means testing.
Moreover, the governor has questioned the wisdom of enacting a major multi-billion dollar program at a time of economic uncertainty. Any downturn or revenue loss in the outyears will likely result in scaling back or eliminating the relief program.
First
2nd again !
Murphy does not want to give seniors a break , they were driving force that almost cost him his re-election. All of this in a true Democratic state.
Even the Anchor program was the Republicans brainstorm. Murphy wants to spend all the extra pandemic money on his projects, like brand new vehicles for his entourage.
He wants to build up his maverick credentials for his presidential run. 😂
“Murphy does not want to give seniors a break”
Why should seniors (who tend to be on the wealthier end of the spectrum) get a break on their property taxes??
Easy to understand why digital nomads like Medellin. I am in Medellin right now. Climate is wonderful and everything is inexpensive. Took a group of 6 friends to dinner with 2 bottles of wine. Check including gratuity in upscale restaurant was under $100. Luxury boutique hotel under $100 a night.
There are thresholds and income limits to the Senior Freeze (Partial Property Tax Reimbursement). $99,735 Annual income, 65 years or older and collecting social security etc and have to have lived here in NJ for 10 years are more etc.
It’s not as many as you might think there are currently 160,000 eligible recipients for the program today. There was talk about changing it.. We shall see.
Cartagena is beautiful as well.
Will be leaving for Cartagena on Saturday.
These cities in Colombia are not high crime areas nor targets for Americans?
Eddie, if you are foolish and flash money and don’t keep an eye on your phone, you will attract predators. Otherwise the people are friendly, the surroundings are beautiful, weather is great and everything is half the price of home. We have walked through very busy parts of the city without a guide without any difficulty.
Okay. Who would have thought Colombia was on the radar? Hope the weather stays nice for the remainder of your trip.
True of travel really anywhere tourist are subject to petty crimes, stealing cell phones, pickpockets etc. Paris and Rome come to mind. Heck someone tried to steal my phone one time from an NYC restaurant.
I don’t think they kidnap as much anymore, unless you are an oil executive or something.
Another house went under contract in less than a week, looking at zillow there are only 5 homes in our town listed and the longest to be on the market is 10 days.
Ukraine upping their drone game, they just sent more than 25 drones to Moscow, some were able to hit targets. Plan has been for the last year to develop cheap long range drones in quantities were they can make the Moscow and it’s suburbs feel the same fear that they do every day in Ukraine. Try to destabilize the center of gravity of power for Russia, which relies on a perceived immunity from the effects via distance from the actual war.
The tech needed was not there before. Ukraine has no satellites and detailed topography. They seem to have acquired it now so they can load the drones with detailed terrain maps and can now program the drone to fly below radar etc as GPS is jammed heavily and Russian electronic countermeasure are formidable, so the only way in is to fly low.
I would expect they are getting lots of parts from alibaba and western suppliers.
Hope everyone had a great holiday and the pool owners had fun this weekend. I started Saturday and pool looking pretty blue but cold. My trip to Ocean State Job Lot for chemicals proved to me that inflation is still out of control. Pool shock was $3 back in 2020, jumped to $4 in 2021, $5 in 2022 and now $6 this year. Shocking, alright. Greed pricing is off charts. Ocean State actually black-marked the price tags on PH increaser and other products but instead put up a sign with $2 uptick to previous price. Will it ever stop? Glad I got 40% back from their promos to off-set this stuff but summer looking expensive with increased electricity pricing too. Place was crowded on Monday and I would say that Ocean State is not highest class store. We all continue to the corp profit beast I guess
Greed pricing is off charts.
I’m not sure if it’s corporate greed or people’s stupidity to whip out credit cards with reckless abandon and zero financial acumen or all of the above. Thursday night, went to a diner, two people; the spouse had some specialty burger with fries, I had chopped steak (a hamburger really) with potato and vegetable, two iced teas. Add in the tip, $60 total. That’s unacceptable. The pool stuff, too… really nuts. Everything is waaaayyy too expensive. I’m closer to a drastic downsizing much faster than I expected.
This is what inflation looks like guys. Get used to it.
I have to reset my expectations of what normal pricing is like. I remember back in 1993 I could buy a decent sit-down lunch with tip for about $10. 30 years later $10 is equivalent to $21. https://www.officialdata.org/us/inflation/1993?amount=10
Practically every business’ costs are up, materials, labor, rent, benefits. Get ready for more, helped further by “greenflation” anti-fossil-fuel energy policies. Attributing this to “corporate greed” is simply ignorant. Business prices are the messenger of inflation, not the cause, but politicians and bureaucrats are happy for you to blame business, not their policies and monetary system.
This guy’s channel is all over NJ. Amazing to watch.
https://youtu.be/FwhVpZwrCS0?t=619
Eddie,
If inflation was 9%, 8%, 5% then how could product be priced at 100% more than 3 years ago? I even saw Arm & Hammer shrink baking soda to 14oz from 16oz. It can only be greed. Sure, people are dumb but they are also trying to survive this insanity. When CC defaults pick up then companies will realize that went too far. Plus, the kid at the register worked Memorial day and said he does not get time and a half?? This country is so f-ed with allowing corps to sh&t on workers.
Bad monetary policy, yes. Bad government policies, yes. Bad energy policy, yes. Businesses taking advantage of the situation, yes that too.
No One says:
May 30, 2023 at 11:45 am
Practically every business’ costs are up, materials, labor, rent, benefits. Get ready for more, helped further by “greenflation” anti-fossil-fuel energy policies. Attributing this to “corporate greed” is simply ignorant. Business prices are the messenger of inflation, not the cause, but politicians and bureaucrats are happy for you to blame business, not their policies and monetary system.
No one,
Ignorant? This has nothing to do with green policies. Oil is 69 a barrel. Cmon now. This has everything to do with shooting for the moon to see what sticks.
Yeah eating out is expensive. We had 4 take out burritos over the weekend. It was $68 not including tip!
A chicken burrito and fountain soda drink costs $17.01 inc tax at Chipolte. Opps my bad that slathering of Guacamole was $2.85 so take that off and you can get it for $13.97 including tax. Then there is the tip which seems to be asking for every increasing percentages.
We rarely eat out. I make really good food at home for my kids, they don’t complain all that much. When we are on the road for a soccer tournament or other trip I’ll splurge otherwise we eat mostly at home.
If inflation was 9%, 8%, 5% then how could product be priced at 100% more than 3 years ago?
As Joyce said, perhaps a bit of everything. I’m becoming more and more hesitant to get in the car to go anywhere. Every trip out results in dollars spent. I ran in a deli last week, got a 12 ounce energy drink (electrolyte something) and a small bag of pretzels, almost $7. I asked how much the drink was, store guy said $3.99. I should have put it back. Lesson learned. I’m done with it all. You would think stocks would be rising to the heavens but they’re not.
I cheated on my pool this year, no granular shock only concentrated liquid chlorine bleach to open my pool. I picked up the cheap stuff lots of it. I did need to add 5 lbs of CYA. Walmart has the best price on it Pool Mate brand 7 lb stabilizer for $33.
I run a salt system with chlorinator and test my water with a cheap kit I have. Pool is all nicely balanced now and should stay that way all season. I did crank the heater for a few hours this weekend to get it up to 75F. It was just ok as the wind chill yesterday was not much fun for swimming.
Bystander: an element of what you say is correct, but I mostly disagree with your opinion. We live in an economic system that is open (obviously there are distortions for various reasons). You underestimate the level of convenience you enjoy. If you rather not have inflation, then more likely than not you would experience shortages.
The simple explanation is that there is too much money sloshing around. Money from jobs, government programs, savings, foreign importation. It doesn’t matter. Don’t let your anger focus your need to assign blame. No One has a very broad view on the drivers in the economy. You don’t have to like what he says, but don’t reflexively dismiss him because you don’t appreciate his politics.
Bystander says:
May 30, 2023 at 11:53 am
Eddie,
If inflation was 9%, 8%, 5% then how could product be priced at 100% more than 3 years ago? I even saw Arm & Hammer shrink baking soda to 14oz from 16oz. It can only be greed. Sure, people are dumb but they are also trying to survive this insanity. When CC defaults pick up then companies will realize that went too far. Plus, the kid at the register worked Memorial day and said he does not get time and a half?? This country is so f-ed with allowing corps to sh&t on workers.
Inflation vs price gouging.
Two different animals.
California lawmakers on Monday approved the nation’s first penalty for gas price gouging, voting to give regulators the power to punish oil companies for profiting from the type of price spikes that hit Californians last summer.
The Democrats in charge of the state Legislature worked quickly to pass the bill on Monday, just one week after it was introduced. It was an unusually fast process for a controversial issue, especially one opposed by the powerful oil industry, which has spent millions of dollars to stop it.
Democratic Gov. Gavin Newsom used his political muscle to pass the bill, calling for a special legislative session last December to pass a new tax on oil company profits after the average price of gas in California hit a record high of $6.44 per gallon, according to AAA. Taking on the oil industry has been a major policy priority for Newsom, who is viewed as a potential future presidential candidate.
He is expected to sign the bill into law this week.
Ed,
I am sure it is a mixture but greed is the major item IMHO. Grim touched on this before as well. I would love to see price sheet for Austin’s pool shock sold to a major retailer and then see what the retailer is charging. I look at it another way, if you can still meet 70% of your normal sales volume with charging 100% more for product then you might be happy taking reduced sales with higher price. Certainly not expert but I would expect lots of consolidation/reduction across industries if this is the inflation model going forward. Markets should tank because interest rates are going higher. There is no stopping this on the horizon.
Is the Covid money gone? Some say it is, others say it is not. If it’s gone then perhaps that’s why credit card balances are at a record high, if the money is not gone then why are credit card balances at a record high?
As for inflation it’s still high, I don’t see any real decline in prices, and I don’t see how the Fed cannot raise again in June.
Fortune 500’s have record profits…
For retail it’s driven by a price-price spiral, meaning the retail mark ups are far higher than the input costs. Case in point Chipotle stock., it’s up 48% this year, Operating margin was 15.5%, an increase from 9.4%… They credit the benefit of “sales leverage”.
https://ir.chipotle.com/2023-04-25-CHIPOTLE-ANNOUNCES-FIRST-QUARTER-2023-RESULTS
As far as inflation goes we are not seeing it as much as Europe. People there are out on the streets every week holding up signs and protesting inflation.
Just look at the exchange rate. It’s has not been this cheap to travel to Europe in nearly 20 years.
California lawmakers on Monday approved the nation’s first penalty for gas price gouging…
When I was in the San Fran area a few weeks ago, I stared at the price sign in front of a gas station. At $5 plus per gallon, I’m wondering how people are surviving. Then I searched on some of the house prices in the Fremont/Newark area and chuckled at the $1 million plus price tags for a 3/2, 1,100 sq. ft. ranch.
Deadly combination.
ExEx says:
May 30, 2023 at 12:37 pm
Inflation vs price gouging.
Two different animals.
Absurd…
https://www.trulia.com/p/ca/fremont/38840-argonaut-way-fremont-ca-94536–2083384303
re: Covid money gone.
For the average consumers yes, but not the government agencies No. New Jersey alone has $5 billion in unused Covid funds. Lots of aid the Govenor and his people have not given out.
There is even $100 million in there for a new flood wall, as well we all know Covid caused the flooding in Hoboken.
https://www.senatenj.com/uploads/state-auditor-report-4-13-2023.pdf
Problem is that greedflation is happening all along the supply chain.
Raw materials suppliers, manufacturers, wholesalers/distributors, shippers and retailers (oh, and all of their landlords too).
Supply shock during covid demonstrated to everyone that they had more pricing power than they thought they did, now they are all running with it.
In some of my own personal examples, you are seeing it at every single stage. Mark ups not only trickle through the supply chain, but everyone downstream takes the opportunity to add on their own increases as well.
So, it’s not entirely the retailers, don’t think that the retailers are making out like bandits. Sure, some might be, but others are simply passing along the two or three markups that happened before they even received inventory.
Retail is easy to pick on as we know the sales prices and well see it when we shop for food and drink etc.
How about top line? Walmart’s sales are up over 100 Billion a year since Covid hit. Did our economy grow that much or are people being driven to shop there for lower pricing?
It’s the lower pricing driving sales growth. Walmart has their own supply chain to streamline fulfillment and cut down on costs aka greedflation as Grim mentions in the supply chain.
Chi,
I agree that too much money around but simply put it is in a few hands otherwise total debt would not be up 3T in a few years. Not dismissing what No One said but simply calling it “green-flation” to absolve the horrible money printing schemes form Dumpy’s administration, insinuates that the Rs would have it under control. They would not. We know this is much more complicated. The Ds are spending recklessly too. Is D policy creating blockers for new business to compete? Perhaps but I would imagine that plenty of businesses are grandfathered and no change to their equipment bc of green policies. Plus, plenty of subsidies exist (as you said via govt programs) which absorbs much of the costs. Let’s face it, when gas was $5, plenty of inflation. Now it is $3.59 and we are still seeing 25% increases. I think the shortages are also due to businesses being very careful about over-producing and trying to balance inventory. It is often hard to know where consumer is headed. It can’t be in a good place.
12:50 Add up your monthly and see what the excessive taxation in NJ costs you.
You pay a huge monthly tax in NJ and that actually keeps a lid on some prices there.
Want low home prices and modest taxes? Move to Kentucky. Warning: there are no jobs there.
Case in point….
https://www.zillow.com/homedetails/7-Holden-Ln-Madison-NJ-07940/39439801_zpid/
NJ Monthly Outlay $10,423
Fremont, CA monthly cost:
$8,862
Want low home prices and modest taxes? Move to Kentucky. Warning: there are no jobs there.
I can remote from anywhere at anytime, all the time.
Where’s the house in Fremont? Did you forget the link? Show me a similar house in Fremont as that one in Madison.
12.5 % Chlorine liquid shock was $10.99 per gallon at Sun Pools on Rt 22 this weekend. No wonder they call it shock…
Ocean State at $5 .99 doesn’t look so bad in comparison.
I made my point poindexter.
Jeanette,
Biden’s policies are to blame for Sun charging $11 and Ocean State charging $6. All joking aside, honestly we are in sucker pricing environment. I had one dead tree to take down. Absolutely no complications. It was in front, alone with nothing around, away from house and lines. Plenty of space to let braches fall. I estimated 2 hour job max. Why did two MX landscapers come back with $2500 while established Irish immigrant owned company came back with 1400? Both use MX and South America labor too. Sorry there seems to be in enough suckers or rich money burners which is causing the grief for rest of us.
BREAKING NEWS
More than one quarter of homeowners in the United States are “house poor,” spending more than 30 percent of their income on housing costs, according to a new study.
Chamber of Commerce, a product research company for real estate agents and entrepreneurs, used numbers from the U.S. Census Bureau to analyze monthly housing costs and median household income in the 170 most populated U.S. cities. The company found that 27.4 percent of all homeowners are “cost-burdened” in its study.
Miami, Los Angeles and New York City have the highest number of “house poor” residents, with more than four in 10 homeowners in each city feeling stretched beyond their means by their housing bills. And with the exception of New York City, the top 10 cities in the United States for cost-burdened homeowners are all located in either California or Florida.
Why It Matters: Housing costs are on the rise nationwide
Mortgage interest rates, which dipped to historic lows at the beginning of the pandemic, climbed past 7 percent in 2022 — the highest numbers seen since 2002. And although rates slightly cooled in the early months of 2023, new homeowners today are still straddled with significantly higher monthly mortgage payments than neighbors who locked in a lower rate.
Add skyrocketing inflation and stagnating wages into the pot, and Americans owe trillions more than they did at the start of the pandemic. Higher housing costs means less set aside for savings, spending and emergencies.
It’s not just homeowners being squeezed, either: Rising housing costs push up rents, as well, meaning both renters and homeowners are feeling strapped.
I made my point poindexter.
No, I don’t think you did.
Slide 32 is beautiful. I can feel the electrical wave from here:
https://www.zillow.com/homedetails/4484-Doane-St-Fremont-CA-94538/25038862_zpid/?
Maybe New York isn’t so bad after all.
Beaches in sunny South Florida are experiencing “the perfect pathogen storm” of flesh-eating bacteria that are washing up on shore, according to new research from Florida Atlantic University.
It’s happening due to a brown and smelly algae known as sargassum, which is intertwining with plastic marine debris and a bacteria called Vibrio. FAU describes the latter as “the dominant cause of death in humans from the marine environment.”
“Our lab work showed that these Vibrio are extremely aggressive and can seek out and stick to plastic within minutes. We also found that there are attachment factors that microbes use to stick to plastics, and it is the same kind of mechanism that pathogens use,” said lead author Tracy Mincer.
“I don’t think at this point, anyone has really considered these microbes and their capability to cause infections.”
Since 2011 worry over sargassum has increased and FAU warns that there are now “unprecedented seaweed accumulation events on beaches.” Now, the research notes the plausibility of the algae, plastic and bacteria creating “an up to now undescribed group of microbes, some representing potential new species,” per the data.
Cases of Vibrio infections — worst when foodborne and when contracted into an open wound — already saw a rise in the area in wake of Hurricane Ian. It was particularly severe in the southwest’s Lee County, where eight of the 28 infected individuals died.
“Another interesting thing we discovered is a set of genes called ‘zot’ genes, which causes leaky gut syndrome,” Mincer said.
Was only a matter of time. Drug Dealers robbing drug dealers. Took all the cash (these businesses are unbanked) and product. Ayr Dispensary in Eatontown was hit by robbers, it’s literally one block from the Police station too.
https://www.nj.com/monmouth/2023/05/large-amount-of-weed-cash-taken-in-nj-cannabis-dispensary-robbery-cops-say.html
I live in Germany but was in NJ in April. Inflation here is also up but I found prices to be really high in NJ. I’ll be back in NJ in a couple of weeks and am looking forward to a good steak although it will be pricey I’m sure.
“So, it’s not entirely the retailers, don’t think that the retailers are making out like bandits. Sure, some might be, but others are simply passing along the two or three markups that happened before they even received inventory.”
Was going to say something similar…inflation throughout the supply chain is like a bad VAT, adding an excess % cost at each stage through which product moves….actually worse than a VAT as inflation affects labor as well, not just goods…
To Juice’s point following yours, yeah, it’s easy to get pissed at the retailer because that is the consumer intersection with these cumulative incremental costs…they don’t see and therefore can’t get pissed at the B2B….
NYC can’t shelter them all, so they bus them out of town.
https://www.timesunion.com/news/article/albany-receives-first-asylum-seekers-new-york-city-18124573.php
Inflation doesn’t mean that all prices rise the same amount at the same time.
I don’t pay that much attention to US stocks, so I was surprised to see that WalMart’s net income peaked way back in 2013 at about $17b, and has recently been running under $14b. Controlling for inflation, it’s down even more. Even while revenue has gone to over $600b, showing that their costs have been rising faster than their sales for a decade. Their net margin is down to about 2%. Have they just become less “greedy” lately?
In contrast, Home Depot profits have moved from $4.5b in 2013 to about $17b while Sales have gone from $75b to $157b. Is it because HD is more “greedy” that their net margin has risen? Or maybe they’re just exposed to a different segment of the economy, managed their business differently, etc. Car prices rose faster than overall inflation in 2021 and 2022, but for most of the past 20 years, according to government data, car prices were rising less than overall CPI. After all those years, carmakers suddenly got “greedy” but now they’re starting to get less greedy again? Or maybe it was a confluence of economic events that temporarily gave them the opportunity. Just like the people selling eggs suddenly got “greedy” for a few months after a bunch of chickens died.
For decades, the government kept interest rates artificially low while going on a huge borrow and spend binge. And while that was going, inflation was surprisingly well controlled. During that time companies were being “greedy” by keeping their product prices lower thanks to offshoring more production to lower-cost locations. Greedy oil companies also massively increased US energy production thanks to some technological breakthroughs in fracking, and somehow their greed kept energy prices pretty low for a long time. Turns out, some of those low cost manufacturing countries might hate us, or their costs aren’t so low anymore, so some prices might start snapping back faster. The cost of green policies are yet to come for most of us. Ex Ex loves paying $6+/gal for that special green gas that California uses. He’s going to enjoy those special high rates for “green” electricity that shuts down every so often. That’s a preview for the rest of the country. Wait till all the green transportation mandates eventually kick in and drive up the price of your cars, the cost of transporting everything to your stores. Wait till the prices of your flights to Vegas double because they decide to mandate “green” (and very expensive to produce) aviation fuel.
No One…. thank you….. I forget to reference history, as the ZIRP, the en masse offshoring to China pre-2008, and the iPhone in 2007 have provided a unique experiment and economic mix. Toss in the COVID stimulus as an exclamation point, and we effectively set off a bomb.
In a lot of ways, we need many years of unwinding this situation. We are still sitting in the shockwave of the bomb.
FINANCE
Why Are Markets So Calm? It’s Revenge of the Quant Funds
Firms that use computers to determine buy and sell signals have been loading up while other investors sit back
By Caitlin McCabe
Updated May 29, 2023 11:15 am ET
The U.S. stock market is surprisingly calm right now, especially in the face of the debt-ceiling fight. A key reason: a growing divide between mainstream investors, who have largely been sitting out the 2023 stock rally, and the machines whose buying has been driving it.
Only days remain until the U.S. blows past its debt-ceiling deadline. On Saturday, President Biden and Republican House Speaker Kevin McCarthy reached a tentative agreement to prevent a destabilizing default. But passage of the plan, which could face some opposition in the House or Senate, isn’t yet assured and procedural hurdles could delay final legislation even if they don’t scupper it.
Despite the political uncertainty, the rebounding stock market has barely gotten nicked, with the S&P 500 finishing 0.3% higher last week. Over recent months, stocks have handily overcome stress in the banking system, stubborn inflation and interest-rate hikes. Last year, those kinds of issues repeatedly torpedoed stocks. This year, markets have met such events with a shrug.
The market’s steady rise has puzzled analysts and portfolio managers as the S&P 500 has churned more than 9% higher this year (and the technology-focused Nasdaq Composite has risen 24%). One explanation: Quant funds, or those relying on computer models and automated trading, have been doubling down on equity markets as other investors have stepped back, citing high valuations and concerns about the likely course of the U.S. economy.
Quant-fund buying has pushed these funds’ net exposure to U.S. stocks to the highest level since December 2021, according to data from Deutsche Bank. Mainstream investors, in contrast, have been pulling cash from stock funds and pouring it into money markets.
While providing a tailwind for stocks, these funds could also pose a risk should, say, the debt-ceiling deal unravel.
“If you do have concentrated positioning, it does create the risk of unwinds in the case of a negative shock,” said Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs. “And the risk you face with them is not just that they might have bought some equities because volatility has gone down—they might have levered up.”
The market has started to see early signs of eroding tranquility. Last week, the Cboe Volatility Index—the VIX, or Wall Street’s fear gauge—on Wednesday briefly settled above 20 for the first time in about three weeks as simmering debt-ceiling anxieties surfaced. Typically, anything higher than 20 indicates fear is starting to rise.
For now, though, the continuing demand from quants has provided a lifeline for the stock market. Combined with robust corporate buybacks, their buying has helped counteract selling pressure and led to placid moves. The S&P 500, for example, has moved less than 1% in either direction for 36 of the last 46 sessions, according to Dow Jones Market Data, the quietest 46-day stretch since December 2021.
“We have seen them sort of balance each other out for the last six or seven weeks now,” said Parag Thatte, a strategist at Deutsche Bank. He estimates that systematic and fundamental investors haven’t been this divergently positioned since 2019.
Driving the quant funds is a self-reinforcing dynamic. When market volatility drops, they pile in more. Big stock-market moves subsided this spring after regulators rushed to stem the banking crisis and the Federal Reserve signaled it might stop raising interest rates soon.
So-called vol-control and risk-parity funds, which tend to automatically load up on riskier assets during calmer periods, ramped up equity exposure, according to the Deutsche Bank data, available through May 18. Other quants, such as trend-following CTAs, or commodity trading advisers, have similarly piled in.
The dominance of quants has helped explain previous periods of calm trading, including long stretches in 2017 and 2018. Those periods were punctured by rapid selloffs, including the 2018 selloff dubbed “Volmageddon” when the dynamics exerting calm on the market suddenly went away. Some warn a repeat could be ahead.
Treasury Secretary Janet Yellen has said the U.S. could start missing payments on its obligations as early as June 5 if Congress doesn’t act. While investors have so far said they aren’t viewing the event as a key risk to stocks, other areas have been showing signs of worry. Investors have ditched short-term Treasury bills that could be at risk of missed payments, with yields on some bills maturing in early June topping 7% at one point last week.
Karl Rogers, chief investment officer at Elkstone, a Dublin-based investment firm, is among the non-quant investors who have been hesitant to jump back into the market. “We always thought 2023 was going to be quite volatile,” he said.
Rogers doesn’t believe inflation or interest rates will recede as quickly as investors expect, and thinks stocks will fall again as the economy worsens. Other investors are similarly worried about a possible recession, with a May survey from BofA Global Research showing that fund managers view it as the biggest tail risk for markets.
“The people who are really just looking at fundamentals, they are having a really hard time getting excited about this market,” said Patrick Ghali, co-founder of Sussex Partners, which advises institutional investors on hedge-fund investments.
Computer-driven trading isn’t new, and its influence has ebbed and flowed over recent years. A strong performance by quants last year has put them back on investors’ radar. At the end of March, quant-focused hedge funds held about $1.13 trillion in assets, according to research firm HFR, hovering just below last year’s record high. That represents about 29% of all hedge-fund assets.
Systematic investors’ foothold—combined with their tendency to move in lockstep—has often made them a target of ire. When markets unravel, investors are usually quick to blame the quants, whether justified or not.
“It’s rules-based trading,” said Charlie McElligott, a managing director at Nomura Securities International. “There’s no emotion involved.”
Data from McElligott shows quants tend to move together quickly when volatility strikes. Take, for example, the stock market selloff of May 2019, when the S&P 500 slid some 7% as investors panicked about U.S.-China trade tensions. McElligott estimates that CTAs unloaded $35 billion worth of equities over the course of a month.
Quants’ growing equity exposure could leave stocks similarly vulnerable going forward, McElligott said. However, he noted another possibility: Fundamental investors’ might instead increasingly chase a market that has gotten away from them. Already, there is evidence of increased buying from mainstream investors, according to flow data from major U.S. banks.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
Check out this raw sewage seeping out of the mouth of this entitled brat. Being granted a degree in a publicly funded education institution in all places New York City. Note, the student body CHOSE to have her up there. She has a right to say this stuff, but there was no censure or sanction. Only today did CUNY come out to issue a public declaration, after 18 days.
https://youtu.be/2RpvTrB9P_M?t=4827
Chi – Quant Funds?
Cliff Asness and Immaculate Deflation
https://www.bloomberg.com/news/articles/2023-05-30/us-recession-impact-on-stocks-would-be-scary-says-billionaire-cliff-asness#xj4y7vzkg
No one and left,
I get it. Greedflation exists in the supply chain and causes lots of parts to escalate in price before product reaches the end customer. I was speaking about extensive greed existing in process, not blaming the big retailers alone. No one, I think some of your argument sets aside issues like wages falling below inflation for decades as well, worse than cars, thereby limiting the prices that people can afford to pay. It also fails to show how car manufacturers used car financing as revenue generator, subsidized by savers and tax payer with low rates. Fracking died in Dec 2019 when huge govt subsidies ended as well. In other words, we all payed for the “greed” in a different way by govt tax breaks, govt subsidies. Well, now if you want high product costs, high financing costs, high govt subsidies but not paying higher wages. They are balking on that now…greed. Let them govt bail the consumer out. Put on the card.
This is crazy:
“Tara Reade, who accused Joe Biden of sexual assault, defects to Russia”
https://www.theguardian.com/us-news/2023/may/30/tara-reade-defects-russia-biden
Here is a good one. They doubled supply charges in Jan, causing bills to go up 80 mo. on avg. Lo and behold, inflation is over, war in Ukraine is over..or did their greed suddenly become politically unpopular with high usage summer months approaching?
Electric prices for Connecticut residents likely to drop dramatically during the second half of 2023
After three months of paying dramatically higher electric rates, there may be some relief coming this summer for a majority of Connecticut electric customers.
The state’s two largest electric distribution companies, Eversource Energy and The United Illuminating Co., are in the midst of procuring electricity for their standard offer service customers to use during the second half of this year. And although the procurement process won’t be completed for several more weeks and new rates won’t take effect until July 1, officials with the companies and a spokesman for Connecticut’s utility regulators have said they expect significantly lower electric rates than what most people are paying now.
“We should also be seeing a lowering of prices this summer,” said Jim Shuckerow, Eversource Energy’s director of electric supply. “We had a winter pricing problem, not a summer pricing problem.”
Well, my fear is coming to fruit. DNA bottomed and will likely never see those lows again. DNA looks like it is ready to blow up. Just saying. Glad I bought a ton in the 1.20s to bring my avg down to $1.90.
All those conviction buys when the sky was black and it was pouring…almost doubled my money in 2 months.
Stuff of legend in time…“hey, we bought DNA stock when it was below $2!”-legend
And when next pull back happens in the market…buy it up. Def due for one, but market is not based on logic.
Ginkgo Bioworks Holdings Inc. (NYSE:DNA) has seen a significant surge in short interest during the month of May, according to reports. It was noted that as of May 15th, the total number of shares deemed as short interest reached a figure of 202,240,000 shares – marking a rise of 7.5% from April’s total of 188,130,000 shares. This activity suggests that a bearish attitude by investors is forming towards Ginkgo Bioworks. The real question is what could have led to this market sentiment and how it will impact the company’s progress.
The sale of the stock by Reshma P. Shetty has also caught the attention of analysts and investors alike trying to interpret the implications for Ginkgo Bioworks’ future financial prospects. Shetty sold 37,650 shares at $1.56 per share on May 24th; therefore receiving a transaction worth $58,734. Following this transaction Shetty still held 13,504,054 shares in the firm which are valued at approximately $21,066,324.
Well, my fear is coming to fruit. DNA bottomed and will likely never see those lows again. DNA looks like it is ready to blow up. Just saying. Glad I bought a ton in the 1.20s to bring my avg down to $1.90.
All those conviction buys when the sky was black and it was pouring…almost doubled my money in 2 months.
Is this counting the purchases above $10?