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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

#281

Post by quotemstr »

throwaway5752 wrote: post #125
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…

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 great depression was after one of those wars. I think you can make a case that the global economic and social excesses of the 1920s led to a hard crash, the rise of aggressive ideological movements, and, eventually, the second world war. The first world war was something else entirely, the last gasp of the old "Concert of Europe" balance of power stuff. After the first world war, the world was a completely different place and different rules applied.

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

#282

Post by paganel »

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 wonder how the investors will model Matteo Salvini’s actions once he grabs full power in Italy. Afaik he had proposed a practically speaking parallel currency to the Euro a couple of months ago, which if it were to become true would practically kill the European currency. Italy is also too big to fail for the UE and they have one of the largest debs in the developed world (compared to GDP), not exactly the same as Japan’s but pretty consistent nonetheless.

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

#283

Post by scott00 »

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?

It's not actually permanent. Your bank almost certainly has the right to change it daily, and once their asset acquisition goals are met, they probably will.

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

#284

Post by [deleted] »

roymurdock wrote: post #227
jonny_eh wrote: post #207

Earlier quoted context omitted.

Would it have been wrong to call King George III mad?

We don't live in medieval times. Trump is not a good human being, I don't like him one bit, but he's sane (I would go as far as to call him cunning) and democratically elected. Comparing him to insane kings from the 18th century just gets people to chuckle and move on, sweeping deeper critical thought under the rug. To call him stupid or mad ends any line of further inquiry into why he does the things he does, and th…

[deleted]

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

#285

Post by SketchySeaBeast »

ummonk wrote: post #248
strenholme wrote: post #221

I remember the dot-com crash of 2001 and seeing companies close so fast, they didn’t their employees a final paychecks; I remember one day, after the dot-com collapse a position I was qualified for got filled within three hours. As someone who has seen this before, things are looking ominous: The stock market drop of late 2018 reminded me of the stock market drop we had in 2000, about a year before everything fell ap…

I think the difference this time around is that the largest tech companies (Apple, Google, Facebook, Microsoft, to a lesser extent Amazon) are generating healthy profits. So while there is likely an issue with a lot of the unprofitable unicorns, the industry as a whole won't collapse.

While they will survive, there's a ton more people in the rest of tech, and if they don't have jobs and are desperate that's going to change the lives of Google employees.

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

#287

Post by mattdeboard »

elicash wrote: post #79
Godel_unicode wrote: post #71

Earlier quoted context omitted.

That's absolutely not the case The Yield Curve is now talked about on nightly news shows and it used to be only known about by economists and people in finance. It's completely legitimate to question whether this increase in publicity for this one metric might be causing it to be less useful.

I just went and fact-checked myself via Google Trends. It does seem like the term had similar amount of web search traffic in late-2005 across all categories, compared to now. I didn't expect that at all. However, "News Search" only goes back to January 2008, so it's difficult to tell if 2005 also had similar news coverage. But the graph since 2008 definitely shows a massive increase: https://trends.google.com/trends…

You were asking a totally reasonable question and I gave a needlessly curt & unhelpful response. Especially considering I heard "yield inversion" and its variations literally like an hour before I commented.

Sorry.

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

#288

Post by quotemstr »

dageshi wrote: post #142
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…

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 no…

I'm in the "worse than 2008" camp, mostly due to the reasons the OP gives. Another consideration is that our current expansion has been a very long one, and the longer an expansion goes on, the more fraudulent cruft accumulates, the cruft beings things like assets not marked to actual market value, money-losing businesses subsidized in various ways, and sometimes outright Madoff-like fraud. This cruft appears financially viable from the outside but collapses when stressed, and nobody really knows how much of it is out there.

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

#289

Post by losteric »

ummonk wrote: post #248
strenholme wrote: post #221

I remember the dot-com crash of 2001 and seeing companies close so fast, they didn’t their employees a final paychecks; I remember one day, after the dot-com collapse a position I was qualified for got filled within three hours. As someone who has seen this before, things are looking ominous: The stock market drop of late 2018 reminded me of the stock market drop we had in 2000, about a year before everything fell ap…

I think the difference this time around is that the largest tech companies (Apple, Google, Facebook, Microsoft, to a lesser extent Amazon) are generating healthy profits. So while there is likely an issue with a lot of the unprofitable unicorns, the industry as a whole won't collapse.

However, the collapse of unprofitable unicorns will propagate across tech. Reduced investments in start-ups and tech companies with risky ventures translates to increased labor supply, which means downward pressure on compensation across the industry (even at the healthy big-5 tech).

Housing prices near tech hubs will also pop. Here in Seattle, housing prices are propped up by tech-couple mortgages with high stock-based compensation - which will suffer even at companies with healthy fundamentals. SFO housing is further inflated by IPO speculation.

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

#290

Post by ethbro »

ummonk wrote: post #248
strenholme wrote: post #221

I remember the dot-com crash of 2001 and seeing companies close so fast, they didn’t their employees a final paychecks; I remember one day, after the dot-com collapse a position I was qualified for got filled within three hours. As someone who has seen this before, things are looking ominous: The stock market drop of late 2018 reminded me of the stock market drop we had in 2000, about a year before everything fell ap…

I think the difference this time around is that the largest tech companies (Apple, Google, Facebook, Microsoft, to a lesser extent Amazon) are generating healthy profits. So while there is likely an issue with a lot of the unprofitable unicorns, the industry as a whole won't collapse.

It seems like one of the key characteristics in a crash is a domino effect. Whereby companies' financials that previously looked solid are suddenly cast as untenable in a new economic light. Usually because of an underappreciated correlation with a substantially removed market.

E.g. most recently, banks and leveraged junk mortgages

As you noted though, the biggest tech companies today aren't really externally dependent. They generate substantial cash flow, have relatively modest debt loads (better than heavier industry!), and don't have easy substitutes.

The strongest case I could make for a tech crash: retail activity substantially slows and/or freezes (Apple & Amazon), advertising follows suit as advertising budgets plummet (Google & Facebook)

But it's hard to see that happening with any rapidity in the US with unemployment where it is.

(I can't see a strategic corporate debt crisis as long as the Fed keeps rates low?)

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