Here's what's amazing to me. I recognize that the economy is better than it has been at some periods in the last two years, but worse than others.
What matters though, when it comes to the need for Fed tightening that many are clamoring for, is that there's no boom in anything, nothing that has to be stopped by the Fed and nothing even on the horizon, for that matter.
Take, for example, the oft talked-about tech bubble. Have any of these people who see a tech bubble been on any of the conference calls this quarter? Where is the bubble? It's all about the cloud and rapid cloud adoption, perhaps one of the most deflationary trends I can recall.
Sure, there was one with tech, with the unicorns. But guess what? That's over. These companies have no access to the public markets. They can only hope to sell out to outfits like Action Alerts PLUS Cisco (CSCO), which bought Jasper in February, an internet-of-things company that would have gone out at probably four or five times the $1.4 billion that Cisco paid for it.
Or, they can do a deal like Square (SQ) did, one that came deep in the hole but at least it came, then it popped, and now it's pretty much back to where it was priced. Or they can fold. Airbnb and Uber are the only ones that anyone really wants a share of, anyway. And who knows, if we looked at Uber's finances, whether we would still want in.
There's certainly no bubble in any public tech companies. Sure, cyber security companies had been highly valued. But these days when they report good quarters, as CyberArk (CYBR), the best of the lot, did because it is extremely profitable, the quarter lands with a thud. The air keeps coming out of the tires of pretty much everything other than Facebook (FB), Growth Seeker portfolio name Amazon.com (AMZN), Salesforce (CRM) and Adobe (ADBE). FASA .
Biotech? Same deal. The valuations seem to dribble down pretty much by the week. A sporadic deal, and then nothing.
I just don't see any heinous valuations in the stock market. Big pharma's not taking the bait.
Real estate? Two markets have overheated: San Francisco and New York. The latter's already peaked and is coming down. The former? The longer the unicorns are shorn, the more likely that those $1.5 million starter houses aren't going to hold up in price. Go listen to my interview with Zillow's (Z) Spencer Rascoff. No booms at all.
The decline in bank profitability has already taken down Hampton's (HMPR) valuations 5-10%. I think that they have a lot to fall, but they aren't rising any more.
The bubble in bonds? I see some dangerous high yield, but you just can't help it. There's always going to be funds that say "hey, we buy high-yield debt and we don't care." You can't stop those rate chargers with Fed hikes. They are scorpions; it's in their nature.
Gold?
You raise rates again and gold gets hit hard.
Treasuries? Oh please; they are too high vs. those of the rest of the world.
Oil? Don't be funny.
Now, given the fact that the economy's not strong and there's a handful of commodities that are still going higher and medical care and rents are impervious to the Fed, isn't it a natural thing to ask, "why would we put our economy through what happened after the last rate hike, if we can avoid it?"
We had wholesale credit freezes, massive stock market corrections and the IPO market hasn't recovered.
Anyway, you don't roll back government-mandated higher minimum wages or higher overtime or higher medical payments. That's the government doing its thing to try to keep some inflation in the system against the power of automation and digitizing and globalization that's hammering wages like the Fed could only wish it could hammer. You put through a rate hike, and fewer businesses get started that can pay the minimum wage.
Who does a rate hike help?
Those who keep hollering for one? Those who want an extra quarter point on savings? Those who don't know how the new economy works? Those who are short stocks?
I say, wait to see more data and be quiet. There's nothing wrong with being considerate, given how horrendously jolting the first rate hike was.
And there aren't any bubbles anywhere in this country.
