We now have an inverted yield curve

El Capitan

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Jul 9, 2014
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What does this mean for our economy? Last time we saw this was 2005. Yield on 2-year bond greater than yield on 10-year. Cash migration into US dollar.
Reason is negative yield on foreign bonds.

Markets down 500 already this morning.

WTF?
 
I'm no expert about these types of things but I do understand that the pundits make a living expressing their opinions. The status quo is boring so they need to pick things apart and look for stuff that they can talk about. Sooner or later their opinions become self fulfilling. Even a broken clock is right twice a day.
 
there was an article yesterday afternoon... The firm's latest fund manager survey showed that 34% of investors think a recession is likely in the next 12 months, while 64% still think one is unlikely. That brings the overall recession probability to the highest since 2011, according to BAML's survey, which consists of 171 panelists managing a total of $455 billion.
 
Reading this all morning there seems to be a lot of emotional speculation surrounding trade wars, China’s tanking economy in spite of their devaluing their currency, and global slowdown BUT the US economic indicators are still strong.

This has something to do with a low tide lowers all boats dynamic.

Commonly there’s a 2 year spread between inversion of yields to an actual slowdown.

I’m interested in what the Fed does.
 
Not my words, but:
“One small note of non-panic over bond yields: the 10-year has fallen in half, but it's still a bit higher than it was in much of 2016, when it didn't presage recession. The reason we have a yield curve inversion is that the Fed raised short-term rates
That now looks like a clear mistake — partly bc the Fed misjudged the labor market, partly bc it gave too much credence to stimulus from tax cut. But I think this story makes the yield curve inversion less ominous than it might otherwise seem.”

Of course, if you are in retirement or close and have a bunch of money in the stock market you plan on pulling out in the near future, that will probably not ease your mind.
 
I’m not a doomsayer and I don’t agree w are headed for recession in 2020 however the EU and China are in toilet and that hurts us.

We need a fiscal stimulus like infrastructure but them Dems won’t play nice.
 
Global economics are highly complex and cyclical. A downturn was looming because economies cannot stay in high gear indefinitely. Money supply and interest rates and currencies are all in some degree of balance and things tend to move slowly, but the cyclical downturns and corrections in markets do and will happen.

The 2008/2009 financial crisis was caused by similar issues with the end of a long boom cycle looming, and the financial engineers structuring things to keep the money train rolling without good checks and balances. High risk loans and mortgage money continued to flow, but banks packaged up the crap and consolidated risk and sold it off, or synthetically re-characterized it. Shoved the big fat lump of smelly risk under the carpets around the world and hoped it would go away.

At least that is not going on now (we should hope), but the fact is that the financial markets see the downturn coming and inverted yield curves and the threat of negative (yes negative) interest rates on safe financial investments in some economies is a strong negative signal of storm clouds overhead (not on the horizon). All of this is pointing to the smart money seeing a significant recession as a high probability. Volatile and disruptive trade policies around the world make that all worse. But that genie is far out of the bottle it is virtually impossible to stuff it back in. Lets just hope that the recession is not as bad as the financial gurus are hedging that it will be. An economic downturn now, with rising imported goods prices as a result of trade wars and tariffs and related uncertainty, could be very devastating.
 
Judging by the way our bond portfolio is skyrocketing, and our stock portfolio is tanking, I’d say a lot of folks think things are going to go south pretty soon.

H

And the flight to gold is also on and has been for the last month or so.
 
IMG_4230.JPG
Not my words, but:
“One small note of non-panic over bond yields: the 10-year has fallen in half, but it's still a bit higher than it was in much of 2016, when it didn't presage recession. The reason we have a yield curve inversion is that the Fed raised short-term rates
That now looks like a clear mistake — partly bc the Fed misjudged the labor market, partly bc it gave too much credence to stimulus from tax cut. But I think this story makes the yield curve inversion less ominous than it might otherwise seem.”

Of course, if you are in retirement or close and have a bunch of money in the stock market you plan on pulling out in the near future, that will probably not ease your mind.
If you are retired, rebalance your portfolio on a regular basis, and are properly diversified, you will be fine. Paper losses don't hurt unless you sell. The dividends keep coming in and the bond coupons still can be clipped as long as the fundamentals are strong. Most businesses are doing quite well.
 
3 european and 2 asian countries, from the top 20 countries are showing little to no growth for more than a quarter. One of them may already be in a recession. This could mean we are not far behind in a global economy.
 
It's the wonderful thing about markets. They go up, down, up, down, up,down, and then they actually go up, and back down.
Roku at 30. I'm not so concerned today. Might be tomorrow, but I don't have that kind of time.
David Muer is apparently telling me why I should worry, and right now.
Stable minds will persevere. 500 points was the "CRASH" of 1985 Today, it's a blip. When the HELL does football start?!!!
 
3 european and 2 asian countries, from the top 20 countries are showing little to no growth for more than a quarter. One of them may already be in a recession. This could mean we are not far behind in a global economy.
Not to worry, the tariffs are working...….. ;)
 
Completely agree. My point was aimed at the unusual inversion which is not a guarantee of a recession.

Lots of media talking heads selling doom and gloom for obvious political reasons.

If you an investor the stock downturn is a buying opportunity. If you’re a trader you took a haircut.

Short sellers made a bundle.

As far as the economy, it is often commingled w the stock market volatility which is an unreliable predictor.

Fact is nobody knows if or when a recession is in the near term. Of course there’s one in the future simply because there always has been and will be.

I knew the media would make this political-but it’s not a political issue in and of itself.

I’m buying.
 
I know you can’t and shouldn’t time the market, but I sold my home last year and I have been too chicken to buy now, because I keep saying there has to be an adjustment, because there always has been - Generally every decade. Well, it’s been a decade and I am second guessing myself. But, I will wait a wee longer. The fact that I am not buying is a sure bet that you all should be buying. I am not proud of this, but I am the Yin Yang of finance.
Make money - good Grow money - bad
 
Spoke to my broker just before the market closed. I’m an investor, not a trader.
Told him that I want to keep an eye on things and pick up some bargains when we get somewhere near the bottom. Always nice to get a good sale on some good stuff!
 
Completely agree. My point was aimed at the unusual inversion which is not a guarantee of a recession.

Lots of media talking heads selling doom and gloom for obvious political reasons.

If you an investor the stock downturn is a buying opportunity. If you’re a trader you took a haircut.

Short sellers made a bundle.

As far as the economy, it is often commingled w the stock market volatility which is an unreliable predictor.

Fact is nobody knows if or when a recession is in the near term. Of course there’s one in the future simply because there always has been and will be.

I knew the media would make this political-but it’s not a political issue in and of itself.

I’m buying.

I’m not buying yet.
 
There are a lot of people cheering for a recession because they believe it is the only thing that can cause Trump to lose in 2020.
 

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