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Jesse Livermore Profile picture
@Jesse_Livermore
Sep 2, 2020 • 4 tweets • 1 min read • Read on X
It's a bit passé to bring up valuation in this environment, but here's an update on two metrics, with SPX at 3563 (commentary in subsequent tweet): Image
From '11-'13, CAPE was making mkt look more expensive relative to past, bc it had bad fortune of 2 big recessions in its 10 yr average earnings window. Well, NOW, the situation is reversed. CAPE is understating things, bc it has no recessions (yet) in its trailing 10 yr window.
P/IE ratio is basically the ratio of price to all of the index's trailing retained earnings back to pseudo-inception (1871), adjusted for CPI. It avoids distortion of measuring value based on luck of what gets included in the trailing 10 yr window. ~7% off Tech Bubble peak.
Given the large shift in monetary policy bias, everything is up for grabs, so 7% off Tech Bubble peak may not be a problem. That said, I've missed the driver of all this, preferring intl and value. If it continues, I'm going to keep missing it, w/ zero regrets ;-)

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More from @Jesse_Livermore

Jesse Livermore Profile picture
Nov 17, 2023
"Transitory" is a term that the Fed introduced. It was the basis for their initial view that the post-Covid inflation was not the kind of inflation that warranted a monetary response.

🧵below...
The reason that the Fed stayed the course on QE/ZIRP when monthly core PCE ran past target in early-mid 2021 was that they thought it would soon subside, and that pushing against it would jeopardize employment while delivering no meaningful benefit to price stability.
Their sensitivities at the time were informed by the experience of late 2018, where, in their view, they overtightened and almost caused a recession. They didn't want to repeat that episode, especially after a traumatic societal experience like Covid.
Read 7 tweets
Jesse Livermore Profile picture
Mar 24, 2023
🧵Charts of real foreign exchange rates of various foreign indices. High value = expensive currency, low value = cheap currency, measured wrt real purchasing power:

(1) EAFE (INTL DM) LG:
(2) JAPAN LG:
(3) EUROZONE LG:
Read 10 tweets
Jesse Livermore Profile picture
Mar 15, 2023
🧵"Banks create money out of thin air."

There's obviously a sense in which this statement is true, but it relies on a definition of money that can be unnecessarily broad and confusing IMO, particularly when trying to understand the constraints faced by a bank.
If it's true that, by issuing loans, banks can create money out of thin air, then why wasn't SVB able to save itself with this power? Why didn't it just lend money to itself & use that money to pay off its depositors?
It's better IMO to think of money as *base* money--in a fiat system, balances w/ the issuing entity (e.g., the Fed), and in a physical monetary system, the physical thing itself (e.g., in a gold-based system, the actual gold).
Read 7 tweets
Jesse Livermore Profile picture
Oct 22, 2022
On the idea of using lawsuits to stop a president's illegal fiscal actions, Ari raises a reasonable concern. 🧵with response below.
There are already mechanisms, outside of standing, for dealing w/ a large pool of potential plaintiffs. There have to be for the system to function, since, even under the current test, it's possible for an extremely large number of people to have standing on a given issue.
Look at Obergefell (gay marriage) as an example. With over a million US same-sex couples, how many discrimination cases could have been constructed similar to that case? There were, in fact, several cases--the court just grouped them together. No reason that couldn't happen here.
Read 10 tweets
Jesse Livermore Profile picture
Jun 11, 2022
Of all arguments against rate hikes, the Erdogan-style "rate hikes constrict supply" argument is by far the weakest. Can't speak to the empirical evidence for it, b/c there is no evidence, anywhere, in any economy. But analytically, it's just sloppy.
Companies that are producing into critical shortages have the tailwinds of pricing power & elevated profit at their backs. Of all potential borrowers, they are the least threatened by increases in funding costs, which are a small side consideration relative to their windfalls.
What may constrain them, as w/ O&G at the current moment, is confidence that the current pricing power and level of profitability will be sustained over the necessary term. But that's a different matter, not primarily contingent on interest rates.
Read 6 tweets
Jesse Livermore Profile picture
May 9, 2022
Proposal to make MMT symmetrically-credible wrt aggregate demand management:

Retirement funds for all citizens. 100% in I-bonds. Fed specifies what % of monthly income gets paid into it, by bracket. Crucially, not a tax. Rather, "Mandatory Saving."
Funds can only be withdrawn under the following circumstances:

(1) 10K per year after age 67, or if disabled.

(2) Qualifying Medical Emergency.
Remaining funds bequeathed. Idea is to make people want to get money out of it if they can. For stimulus, Fed can release specific amounts of it for discretionary use (eg, $1K check). Fed can also cut % to zero, or set negative by putting own profit or treasury funding into it.
Read 7 tweets

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