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Yield Curves Invert in U.S., U.K

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Re: Yield Curves Invert in U.S., U.K

#141

Post by datpuz »

I asked this in a similar thread a couple of weeks ago, but I feel like the sentiment is a lot more pessimistic today than it was then. Anyway, I've been holding way too much cash for the last two years in anticipation of a recession. Everyone was telling me that trying to time the market is a bad idea and that I should just invest and forget about it, but given the current signals, might it be a good idea for me to hold out just a little longer?

I'm really on the fence about it, I know I've lost a lot to opportunity cost and inflation and I regret holding out, but given recent news, it's hard for not to want to keep waiting... just a little longer...

Re: Yield Curves Invert in U.S., U.K

#142

Post by dageshi »

tlogan wrote: post #116
throwaway5752 wrote: post #109

Everyone serious knew that a trade war would set a recession in motion, and that it would be a trade war the US would lose because of the directionality of the trade. The thought has always been that the president was using a high leverage negotiating strategy (see https://www.newyorker.com/news/news-desk/for-trump-diplomacy... , for example) to extract maximal concessions from PRC. But in the end, most of the people…

And things will be worse because China is also heading into recession. You know, you need sell all these products to somebody... And when US consumer stops buying new iPhones (or what ever) combined with recession then situation is going be really really tough. So this will be worse that 2008. Much worse. Back in 2008, China was growing and helping to ease the recession. I do not think China's economy will grow durin…

It certainly won't be worse than 2008. 2008 was a financial crisis, core parts of the banking system were suspect, nobody knew who they could trust or who was solvent and worse nobody had a clue how to solve it for a dangerously long period of time.

The financial system is not in that same position this time and as for China, China's growth is largely kept to china itself and guarded jealously, China did little or nothing to ease the 2008 financial crisis for the west.

Re: Yield Curves Invert in U.S., U.K

#143

Post by WarDores »

pushtheenvelope wrote: post #138
WarDores wrote: post #111

Earlier quoted context omitted.

The question is, what is the bubble? I'd argue the entire stock market is the bubble right now, with boomers throwing everything they have into the market to get some of that free money before they retire. Once they start pulling back it's going to be a sad day. Right now US household "wealth" is sitting at >500% of GDP. That's not sustainable.

Why is it not sustainable that household wealth is > 500% of GDP? In the parlance of company finances, GDP is like revenue and wealth is the valuation representing the present value of all future profits. So, it seems fine to me that the present value of future profits of the US is 5x the current revenue. I'm seeking to understand where this analogy may break down. Thanks :)

Traditionally, anything above ~350% has indicated a bubble. With the housing bubble, we saw a peak of 473%, and the dot-com bubble was 429% at its peak. Essentially, yes, wealth will be a multiple of GDP, but the multiple has been fairly constant historically, and it's diverging rapidly now. So either we're in an era where assets are significantly more valuable (and I'm not sure there's a good case for that given the multiplier), or we're in an asset bubble.

Re: Yield Curves Invert in U.S., U.K

#144

Post by tcbawo »

datpuz wrote: post #141

I asked this in a similar thread a couple of weeks ago, but I feel like the sentiment is a lot more pessimistic today than it was then. Anyway, I've been holding way too much cash for the last two years in anticipation of a recession. Everyone was telling me that trying to time the market is a bad idea and that I should just invest and forget about it, but given the current signals, might it be a good idea for me to…

Whatever you feel comfortable with. To own stocks means to accept upside and downside risk. If you can't afford to lose 40% in a year because you might need the money within 10 years, reexamine your risk profile. It's okay to have cash on hand that you might need for a down payment, wedding, car purchase. If you're talking about money you won't touch in 10+ years and you won't panic sell, then don't try to time the market.

Re: Yield Curves Invert in U.S., U.K

#145

Post by wtvanhest »

datpuz wrote: post #141

I asked this in a similar thread a couple of weeks ago, but I feel like the sentiment is a lot more pessimistic today than it was then. Anyway, I've been holding way too much cash for the last two years in anticipation of a recession. Everyone was telling me that trying to time the market is a bad idea and that I should just invest and forget about it, but given the current signals, might it be a good idea for me to…

This is not advice, but if I were 100% or even 50% in cash and had at least 20 years left of time horizon, with no immediate need for the cash, I'd probably put 5% back in the market each month until I had 100% allocation.

But... the US does feel heated up, so who knows?

Re: Yield Curves Invert in U.S., U.K

#146

Post by kileywm »

chrstphrhrt wrote: post #117
dragontamer wrote: post #61

Earlier quoted context omitted.

> This is exactly the problem, where bonds are no longer providing interest payments. If interest rates drop even more, the value of bonds go up. Right now, a 1.68% 10-year bond looks like it sucks. But next year, a 1.68% 9-year bond will beat the pants off of a 1.3% 10-year. You can sell a 1.68% 9-year bond for a lot more money when everyone else only has 1.3% 10-year bonds. If the 10-year drops to 1%, you'll make e…

I know nothing of finance, but I have a normal liquid savings account that's paying 2.25%, apparently "permanently". Why would anyone buy a less-flexible product that pays less?

That high yield savings account is (likely) unavailable to their tax-advantaged account(s) such as 401k. In that case, their choices may be limited to stocks or bonds.

Re: Yield Curves Invert in U.S., U.K

#147

Post by throwaway5752 »

adventured wrote: post #133
throwaway5752 wrote: post #125

Earlier quoted context omitted.

The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. The leadership on either side of the 2008 transition was much better at every level. Also, 2008 was a balance sheet depression that was more tractable to fix with monetary approaches. What is happening, right now, is literally what happened in the Great Depression (with the concurrent reemergence of nationalism) and is what…

> The Fed does not have the tools at its disposal that it did in 2008, they have been exhausted. That hasn't been exhausted even in the slightest. The Fed has the exact same tool at its disposal as it did in 2008: it controls the global reserve currency and can run an annual trillion dollar QE program for years as necessary, forcing the rest of the world to partially foot the bill of that QE program to the benefit of…

Maybe I'm a crazy for taking the state of the fed funds rate, the budget deficit, and the Fed's balance sheet into account? We can print money, but so far the USD hasn't reflected any sort of consequence for that. They can do a QE program, but will other actors accept the implicit loss on their treasury holdings? I can think of one major player there that is a lot less likely to do so now.

Re: Yield Curves Invert in U.S., U.K

#148

Post by WarDores »

jbattle wrote: post #140
WarDores wrote: post #111

Earlier quoted context omitted.

The question is, what is the bubble? I'd argue the entire stock market is the bubble right now, with boomers throwing everything they have into the market to get some of that free money before they retire. Once they start pulling back it's going to be a sad day. Right now US household "wealth" is sitting at >500% of GDP. That's not sustainable.

Wouldn't the boomers be heavily allocated in bonds at this point? Even the youngest of them are basically at or nearly at retirement age (at least the ones with enough resources to hold much in stocks)

Anecdotally -- take my experience for what it's worth, small sample size warning -- some/a lot of boomers are behind in saving for retirement, and are trying to catch up by riding the asset boom.

Re: Yield Curves Invert in U.S., U.K

#149

Post by apo »

datpuz wrote: post #141

I asked this in a similar thread a couple of weeks ago, but I feel like the sentiment is a lot more pessimistic today than it was then. Anyway, I've been holding way too much cash for the last two years in anticipation of a recession. Everyone was telling me that trying to time the market is a bad idea and that I should just invest and forget about it, but given the current signals, might it be a good idea for me to…

What would you turn the cash into if you weren't holding it?

Re: Yield Curves Invert in U.S., U.K

#150

Post by kart23 »

WarDores wrote: post #111
xivzgrev wrote: post #81

Earlier quoted context omitted.

I agree. For the two recessions I’ve lived through, we didn’t arrive at them with everyone well aware it was going to happen. They snuck up and took the country by surprise. The tech bubble burst, and the real estate subprime bubble burst. We may go into a slump because everyone is expecting a splump to happen because it’s been 10 or so years of a bull run. But I don’t see a full-on recession without a large bubble b…

The question is, what is the bubble? I'd argue the entire stock market is the bubble right now, with boomers throwing everything they have into the market to get some of that free money before they retire. Once they start pulling back it's going to be a sad day. Right now US household "wealth" is sitting at >500% of GDP. That's not sustainable.

Not just boomers. Robinhood has made it so you can buy stock on your iphone in a couple minutes. Everyone has stock, and I think the market is crazy overvalued right now. I think everything's a bubble right now.

People are in loads of debt, more regular americans invest in the stock market, driving prices higher, all we need is a spark to get the fire going. Could come in the form of china and Hong Kong, could be the collapse of Deutsche bank, or very high valued startups failing, or something completely unforseen. Theres a lot of uncertainty right now, and any big event could crash it all.

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