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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

#171

Post by sxcurry »

roymurdock wrote: post #151
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…

My question is what is the point of the trade war. What does trump get from initiating/escalating it, or who is directing him to do it. Seems to be a net negative for all sectors of the economy.

As Paul Krugman says, "What looks like raw ignorance and prejudice is, in fact, raw ignorance and prejudice".

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

#172

Post by nosestuff »

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…

I doubt the trade war has anything to do with that. That United States has been growing above potential for a long time, and that Europe has been unable to grow for many years, and that China has exhausted it's growth engines, have very little to do with threats of tariffs on a few electronics and grains.

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

#173

Post by astura »

kileywm wrote: post #146
chrstphrhrt wrote: post #117

Earlier quoted context omitted.

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.

You can hold CDs in an IRA; currently Navy Federal is offering a 5-Year CD at 3.50% APY available for IRAs with no maximum purchase amount. [1]

Earlier this year I opened up an IRA with them and I put $100 in a 3.680% APY 40 months CD. I did this because they were matching the first $100 on new IRAs, so I deposited $100 and they deposited $100.

[1] https://www.navyfederal.org/products-services/checking-savin...

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

#174

Post by taf2 »

throwaway5752 wrote: post #147
adventured wrote: post #133

Earlier quoted context omitted.

> 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.

Additionally, most of the corporations are cash rich right now and own much more of their own companies allowing them to both dip into those reserves and sell off more of their companies to stay strong through the recession. I'm not worried... he's not worried either: https://www.youtube.com/watch?v=NJodqhzqPKQ

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

#175

Post by DataGata »

xivzgrev wrote: post #81
dkrich wrote: post #58

I'm surprised that everyone blindly cites the inverted yield curve as a recession indicator without considering the "why". Seriously, if you were to ask ten people why an inverted curve predicts recession, you'd get ten completely different answers. I personally don't think this is necessarily the inversion that is going to be predictive of a recession because the inversion is occurring at the long end (the 10/30 yea…

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…

Of the two recessions you lived through, both were expected. Many people decried the tech boom. Many people thought there were warning signs pre-2008. The problem was that nobody knew the depth of the 2008 recession.

[1]https://money.cnn.com/2007/02/26/news/economy/greenspan/inde... [2]https://thinkprogress.org/alan-greenspan-warns-of-coming-rec... [3]http://www.marketoracle.co.uk/Article297.html

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

#176

Post by whateveryou381 »

dragontamer wrote: post #61
whateveryou381 wrote: post #13

Earlier quoted context omitted.

Why does low or negative yield bonds mean that you are going to be ok with govt bonds? This is exactly the problem, where bonds are no longer providing interest payments. I agree that being more conservative is probably necessary, however I think other than specific investments and... burying your cash might be the "conservative" options. Bonds were those, and no longer are now.

> 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…

Thanks for the reply, I was confusing negative yield curves[1] with negative yield bonds (in the EU) [2].

It seems like if you already have high yield bonds, the value will continue to rise, as people exhaust other low yield options... however isn't this total value capped by the yield+face value? I don't really know how bond pricing works, but if you bottom out the yeild, or anticipated yeild... you should only be able to make the face value back or someone is buying negative yields.

EDIT: I _guess_ the bond reaches "maturity" in a much shorter time, which is perhaps your point. "1.68%" over 10 years is shit compared to "1.68%" over 1 year.

EDITEDIT: Also assumes you are not going to be eaten by inflation, which could push you into negative yeilds.

[1] https://www.investopedia.com/terms/i/invertedyieldcurve.asp [2] https://qz.com/1647791/12-trillion-of-negative-yielding-bond...

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

#177

Post by dv_dt »

vpribish wrote: post #136
tlogan wrote: post #116

Earlier quoted context omitted.

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…

much worse than 2008 how? Global debt markets nearly collapsed and the single largest investment of american consumers crashed. You are making a really bold claim there and it looks like cheap catastrophizing.

If you read Ray Dalio, he seems think think the next recession will be a "debt supercycle" which could be worse than 2008. (this could be him plugging his hedge fund, but he's semi retired, and really has no more money needed to make personally) Note also that recessions have been growing longer each cycle. IMHO it's related to the bottom 99% having been getting paid smaller and smaller portions of wealth, and so a base resiliency of economies become weaker each cycle.

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

#179

Post by dragontamer »

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?

> normal liquid savings account that's paying 2.25%

Yes. That's what an inverted yield curve means. Liquid funds are "more expensive" than long-term funds. That's why things are inverted right now.

The long-term expectation (over the course of the next 10 years) is that savings accounts will drop. That's why people are willing to "only" be paid 1.6% for a 10-year, because its better to be paid 1.6% for 10 years... rather than 2.25% for this year (and then only 0.5% for the next 9 years).

In essence: the bankers are taking the opposite bet you're making. When the bankers are making a move, you probably should think about the future of money... bankers probably know more than you and I do.

EDIT: > Why would anyone buy a less-flexible product that pays less?

Because they have a pessimistic view of the next 5 to 10 years. When big-money starts to make these pessimistic bets, its a recession indicator.

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

#180

Post by api »

roymurdock wrote: post #151
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…

My question is what is the point of the trade war. What does trump get from initiating/escalating it, or who is directing him to do it. Seems to be a net negative for all sectors of the economy.

You are making the error people always make with personalities like Trump.

Assertive alpha signaling and mammalian dominance gestures tell the parts of our brain that haven't changed since we were small tree rats that "this person knows what they're talking about, trust them, follow them." These parts of the brain are primitive and emotional and can easily override the rational mind. This is why charisma tends to beat substance even with audiences that really do know better.

Trump is assertiveness and dominance gestures and nothing else. There is no "there" there. He has no special understanding, no strategy other than "assert dominance" which all he knows how to do, and no plan.

Our only salvation in this is that many of the leaders of other nations are similarly empty.

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