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Yield curve has officially inverted

Discussion in 'Too Hot for Swamp Gas' started by oragator1, Aug 14, 2019 at 8:56 AM.

  1. oragator1

    oragator1 Premium Member

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  2. WarDamnGator

    WarDamnGator GC Hall of Fame

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    This is actually the 3rd spread to invert. The 3 mo and 1 year, already did, this is the two year.

    I actually studied this quite a bit and it's the not the "going negative" that should worry people, althought they say we are usually in recession by 18 months later, it's when it reverses and starts to go back up that marks the end of the bull run, IMO. The stock market peaks about 22 weeks after the reversal, on average.

    Investors need to keep in mind that the stock market turns well before we are officially in recession, so the 18 months is kind of meaningless if your goal is to protect your gains.
     
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  3. gatorpa

    gatorpa GC Hall of Fame

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    Also some talk that the European negative rates is helping this along and thus not necessarily a true signal of an impending recession. It's happened many time before, heard one guy the other day comment Bulls don't die from old age, the Fed kills them. May get another rate cut after all.
     
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  4. NavyGator93

    NavyGator93 All American

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    Going to be a tough day in the market.
    I was one transfer away from topping off my youngest son's 529 plan. Thinking it will take a couple of more after today.
     
  5. gatorpa

    gatorpa GC Hall of Fame

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    Now is a great traders market
     
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  6. AgingGator

    AgingGator GC Hall of Fame

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    Agree. This one is looking more and more like its central bank driven rather than investor/market driven.

    No matter what, it’s always better to be safe than sorry. Central banks are now in a position where they have to protect their country’s from interest rate hikes on their massive debt. We are certainly no exception here in the US. We have been in a position for many years that USG can not possibly repay its debt obligations. The only way out for most governments is to inflate their way out of this and pay today’s obligations with inflated currency later. It won’t be fun being on a fixed income in about 10 years
     
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  7. gatorpa

    gatorpa GC Hall of Fame

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    Agree, got into debate with a friend about the inflate the debit away. That was his answer they will just push massive inflation to pay it down. Only issue is see is if rates do go up the %of GDP to service the debt has to go up also.

    Most industrialized countries are all in a similar pickle with debt to GDP increasing to scary ratios...

    So if they all flip it off what happens?
     
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  8. AgingGator

    AgingGator GC Hall of Fame

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    I think they are trying to avoid massive inflation spikes that spook markets and investors and instead let the inflation rate rise slowly but steadily over some time. The only way to make this work is to have the inflation be a little higher than the real growth, but both have to go together.
     
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  9. oragator1

    oragator1 Premium Member

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    Pretty much a perfect storm.

    A long overdue market for correction
    Brexit mess turning GB negative
    The tariff war
    Oil instability with Iran
    And lack of stability because no one knows what Trump will do next.

    As far as the US central bank, Greenspan taught us that artificially low rates to sustain a debt laden chugging economy isn’t the answer, and they need bullets for if a recession does come. They have done the right thing. Trump is going bat**** today looking for someone to blame, but he is only making things worse (as usual).
     
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  10. NavyGator93

    NavyGator93 All American

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    Trump is unloading on fed chair Powell via Twitter. Says we are winning against China.
     
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  11. channingcrowderhungry

    channingcrowderhungry Premium Member

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    No president has ever agreed with the fed chair, really. Which is why when Trump discussed firing him recently, and his sycophants all got on board with it, it was such an unprecedented and terrible idea. It is a nice separation of powers.
     
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  12. WarDamnGator

    WarDamnGator GC Hall of Fame

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    Just saw that. The bond rates are set by bidders ... not sure what he thinks Powell has to do with the inversion, but he's a super genius, so he probably knows something I don't know.
     
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  13. gator_lawyer

    gator_lawyer Premium Member

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    Bulls will die from old age. But we use hikes to kill them off before that so we have wiggle room when they die. We're in a bad, bad spot if the economy goes South right now.
     
  14. duchen

    duchen VIP Member

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    Inevitable that a tariff war between the strongest economy in the world and one of the other stronger economies would slow down the world economy. Tariffs hurt business. Prices go up. People buy less. Job growth slows. Etc. Etc. We have been saying this from day one.
     
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  15. Tjgators

    Tjgators Premium Member

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  16. oragator1

    oragator1 Premium Member

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    They have been moving there for decades, didn’t stop places like Naples and Miami from being among the the hardest hit nationwide for real estate prices a decade ago.

    Not saying that is happening now or where we are headed, only that fast population increases can sometimes make things more risky, not less - because it draws in a ton of speculative investment. Has happened many times over the years. Sometimes it’s better to be in quieter markets when volatility kicks up.
     
    Last edited: Aug 14, 2019 at 10:47 PM
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  17. gatorknights

    gatorknights GC Hall of Fame

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    Somebody tell that to the people in Interlachen, Marion (cr)Oaks, Lehigh Acres, Groveland and other places with price stagnation and gobs and gobs of vacant parcels that sit unsold after decades since they were initially developed.
     
    Last edited: Aug 15, 2019 at 2:44 AM
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  18. AgingGator

    AgingGator GC Hall of Fame

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    Theoretically, you are correct. In reality though most of the US Bonds that are bought domestically are purchased by banks and other financial institutions who are in bed with the Fed and the government.

    The real money these days is borrowing from the Fed at next to nothing and pushing credit cards at 25-30 percent
     
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  19. gatorpa

    gatorpa GC Hall of Fame

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    All 4 prior yield curve inversions came right before(during) huge economic issues, the 70's with massive inflation and fed raising rates, the mid 80's with big inflation and high rates, the Dot Com Bubble and the Mortgage Meltdown. It doesn't appear that there any such issues on the horizon.

    Sure a huge bear market will hurt sentiment, but PE's aren't at 27 like with the dot com bubble, the housing market isn't anything like it was 05/06.

    Do we get another 5-10% retrace maybe, the biggest thing overhanging is the trade issue. Europe has negative bond yields which is pushing investors here thus driving up the price of our bonds.

    The Fed has raised rates like 200 basis points in like 3 years, they pretty much over shot in December and are trying to correct that with looking like they are Trump's puppets.
     
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  20. tegator80

    tegator80 GC Hall of Fame

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    I think this is an old playbook. Not that this won't happen in the end but rather the steps right now are not in the horizon. I had to make a call yesterday (no, not THAT kind of a call) and decide whether I thought inflation or deflation was more likely right around the corner. Until further notice there is only one game afoot and that is "economy good, interest rates trend up, economy bad, interest rates go down as much as possible." Well, except for zero but you get my drift. And on top of it is "economy down, printing press UP."

    I foresee an economy whose opinions are "we have had too much of a good thing and time to find shelter." The Brexit and Tariff tiff are just icing on the cake. So using what I think is "modern wisdom" The Fed is prepared to crank up the printing press and therefore the interest rates will come down. That to me moves us to deflation in the near future. No one wants money anymore.

    Inflation to me is SO far away it isn't funny. We will just sink into a morass and wallow in it. Think Japan on steroids. JMHO
     
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