Finimize - 🛁 Are we still in a bubble, Ray Dalio?

Yup, US prices are still high | Toyota needs more fuel |

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Today's big stories

  1. US consumer price rises barely slowed down last month
  2. Our analyst has looked into whether you should buy the dip based on Ray Dalio’s “bubble indicator” – Read Now
  3. Toyota gave a grim outlook for this year

Emo Trip

Emo Trip

What’s Going On Here?

Data out on Wednesday showed that US consumer prices rose more than expected last month, even though the Federal Reserve thought this “doom and gloom” thing was just a phase.

What Does This Mean?

Not to bring you down or anything, but woe is us: airfares surged 33% last month from the same time last year, food by 9%, and shelter by 5%. That all contributed to a higher-than-expected increase in overall consumer prices of 8.3%. And sure, this marks a slowdown from March’s 8.5%, which has some economists arguing that we’re probably past peak inflation. But equally, it highlights that any dropoff in prices is bound to happen painfully slowly. And we’re going to feel every bit of it, with inflation-adjusted wages falling 2.6% last month from the same time in 2021. Existence is meaningless.

Why Should I Care?

For markets: Are US stocks falling out of favor?
Investors have already had to deal with one of the worst starts to the year for stocks since 1939, but this bleak data suggests things could get much worse. It might force the Federal Reserve to raise interest rates quicker than expected to make more of a dent in inflation – even if it comes at the expense of economic growth. That might be why some traders are now betting on a fourth-straight hike of 0.5% in September, and why some analysts reckon the US stock market – down 17% so far this year – could fall as much as 20% further.

Zooming out: Are Chinese stocks back in favor?
America stands in stark contrast to China, where consumer prices only rose 2.1% last month compared to the same time in 2021. That could leave room for its central bank to, say, slash interest rates, which should encourage spending and boost economic growth. And with Covid cases showing signs of tailing off, investors seem to see value in the country once again: its stock market rallied on Wednesday.

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Analyst Take

Is Ray Dalio’s “Bubble Indicator” Telling You To Buy The Dip?

Is Ray Dalio’s “Bubble Indicator” Telling You To Buy The Dip?
Photo of Reda Farran

Reda Farran, Analyst

What’s Going On Here?

Ray Dalio – the billionaire founder of the world’s biggest hedge fund – is known for many things.

But his “bubble indicator” might be his masterpiece: it’s based on six questions that help establish whether we’re in an environment of unsustainably high prices.

It was sounding the alarm about US stocks early last year, but here’s the good news: it’s now suggesting we’re not in a bubble anymore.

As for whether that means we should all scramble to buy the dip, that’s a different matter entirely.

So that’s today’s Insight: why the bubble indicator says we’re not in a bubble, and whether you should buy the dip because of it.

Read or listen to the Insight here

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Ah Nuts

Ah Nuts

What’s Going On Here?

Toyota announced on Wednesday that it had sold a near-record number of cars in its past year, but the carmaker will need those acorns of success to get through the bitter winter ahead.

What Does This Mean?

Toyota’s sales have gone through the automatic roof, with the company selling a near-record 9.5 million cars in the past financial year. It posted the highest-ever operating profit for a Japanese company too, thanks to a rival-beating formula of cost-cutting measures. But the past is the past: the carmaker now reckons raw material prices will double this year from last, when they were already at an all-time high. That, the carmaker said, will drag its profit down by 20%, even as it expects to sell 13% more cars and continue to benefit from a weaker yen. And while Toyota is known for giving conservative forecasts, this one was outright Republican: investors sent its stock down 6%.

Why Should I Care?

The bigger picture: Everyone’s agreed, then.
Toyota’s acute pessimism is mirrored by industry analysts, who have been warning about the risks to carmakers in the next 12 months. Market research firm IHS Markit has downgraded its forecast for global vehicle production twice in as many months, based on things like the war in Europe, the fallout from Chinese lockdowns, and the languishing microchip recovery. Jefferies’ analysts, meanwhile, argue that still-high inflation and an impending slowdown in global economic growth might put would-be car buyers off altogether.

Zooming out: Shut up and don’t drive.
There are already signs that China’s drivers are stepping away: data out this week showed that car sales in the world’s biggest market fell 36% last month from the same time in 2021 (tweet this). That’ll happen when you lock down carmaking hubs like Shanghai, bringing production to a halt and keeping buyers out of showrooms…

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💬 Quote of the day

“If you can imagine it, you can achieve it. If you can dream it, you can become it.”

– William Arthur Ward (an American motivational writer)
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🎉 Coming Up This Week

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📚 How To Go From Ideas To Execution: 5pm, May 12th
💻 How To Invest In The Up And Coming Tech Landscape: 5pm, May 13th
📈 How To Identify High Growth Metaverse Stocks: 12pm, May 16th
🙌 How To Invest In Community-Led Projects: 5pm, May 16th
🌎 How To Invest In The Global Chip Shortage: 5pm, May 17th
🏡 How To Buy A Digital Condo: 12pm, May 18th
🚗 The Leaders Of The EV Revolution: 5pm, May 19th

💪 And Then After That…

♻️ How To Pick Winning ESG Stocks: 5pm, May 20th
📈 How To Invest Thematically: 12pm, May 24th

🎯 On Our Radar

  1. The ocean has deep secrets. Even scientists have no idea what lurks beneath the surface.
  2. Folks are changing their faces. And their partners haven’t even noticed.
  3. Canoe Man got famous for faking his death. There might be an even darker side to the tale.
  4. Can’t stop staring at yourself on Zoom? You might be getting FaceHate.
  5. Starbucks wants to take over the world. Maybe NFTs will help.
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