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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

#451

Post by jjwhitaker »

kkotak wrote: post #185
elamje wrote: post #160

A very useful caveat from the insightful, and cautious, Howard Marks - > In that regard, the Financial Times noted on June 1 that “the [yield curve] has ‘inverted’ before every US recession in 50 years.” (Note, however, that this is different from saying every inversion has been followed by a recession.) https://www.oaktreecapital.com/docs/default-source/memos/thi...

Akin to - "It always rains on my birthday. It's raining today - it must be my birthday."

It's more like:

"It only rains on my birthday. It's raining today - it must be my birthday."

At least I'm not aware of any inversions of the 10-2 bond yield curve in the last 50 years that was not followed by a recession, however minor.

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

#452

Post by throw0101a »

chillacy wrote: post #273
sxcurry wrote: post #171

Earlier quoted context omitted.

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

Paul Krugman also said the internet was a fad, why is he worth quoting?

Besides the batting average comment, he said that in 1998 for a particular reason:

> First, look at the whole piece. It was a thing for the Times magazine's 100th anniversary, written as if by someone looking back from 2098, so the point was to be fun and provocative, not to engage in careful forecasting; I mean, there are lines in there about St. Petersburg having more skyscrapers than New York, which was not a prediction, just a thought-provoker.

* https://www.businessinsider.com/paul-krugman-responds-to-int...

That was the year Apple was still on the ropes (Microsoft's investment was in 1997), Google was just kicked off by a $100K cheque by Bechtolsheim, Amazon was four years old, and Facebook didn't even exist.

Give it a rest, it's been over twenty years:

> I must have tossed it off quickly (at the time I was mainly focused on the Asian financial crisis!), then later conflated it in my memory with the NYT piece. Anyway, I was clearly trying to be provocative, and got it wrong, which happens to all of us sometimes.

* https://www.snopes.com/fact-check/paul-krugman-internets-eff...

How wise were you when you were twenty years younger than you are now? Sheesh.

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

#453

Post by jjwhitaker »

cletus wrote: post #82
apo wrote: post #33

Key recession indicator is flashing red. Unlike the stock market, which is both backward- and forward-looking, the bond market is myopically forward-looking. When the yield between the 10-year and 2-year US treasury inverts, a recession is months away. This chart, showing the difference between the yield (or spread), shows recessions in grey: https://journal.firsttuesday.us/using-the-yield-spread-to-fo... Notice how…

I'd just like to point out that the yield curve inverted in 2018 [1] yet here we are. > Prepare for the inevitable recession. It's not different this time. This point is tautological. Of course there will eventually be a recession. No one can say when. There are different factors in every cycle. The QE period is essentially unprecedented. The rise of tech stocks in the last 20 years is a once-in-a-century type struct…

A recession will follow in 12-24 months, based on my understanding of the bond yield curve and close following of it in recent years. We can check in mid 2020 and see if that timeline holds.

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

#454

Post by cheschire »

40acres wrote: post #387

The forward looking indicators indicate recession, the backwards looking indicators indicate recession, and the general pattern of the yield curve suggests a downturn within ~20 months. Question is; what's a normal personal investor to do? Knowing that expectations are baked into the price and timing the market is a fools errand, what can normal people do to shield themselves? I've been 90/10 asset allocation since e…

The balanced portfolio is a 60/40 stock/fixed income (government bonds, etc) split. If you're running hot (a 90/10 balance seems quite toasty) then perhaps you could consider pulling back to a more moderate position until you feel we're approaching the bottom, and then return to your aggressive split.

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

#455

Post by usefulcat »

throw0101a wrote: post #415
xiphias2 wrote: post #404

Earlier quoted context omitted.

I agree with you that passive investment would have got the same gains, but it's much easier to see in hindsight, it was not that easy to see beforehand. He made money by burning other people and companies, but he came out quite well from it.

Not being able to actively beat the market has been known since about 1973: * https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street Bogle started Vanguard in 1975: * https://en.wikipedia.org/wiki/The_Vanguard_Group * https://en.wikipedia.org/wiki/Index_fund#Origins

"Known", yes, though probably not widely so. As I understand it, passive investing was generally considered a bad or at least risky idea at the time Vanguard was created.

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

#456

Post by Nasrudith »

batmansmk wrote: post #300
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 heard a few key thinkers predicting a larger recession due to our inability of getting more energy out. GDP and energy seemed to be correlated so far, as if our growth is directly or indirectly fueled by the cheap labor of machines and automation. Gas and electricity production reached a peak which can only go down in a finite world. With a constrained energy supply, GDP should go down. At least that's what happene…

That model seems incomplete given the lack of efficiency as a variable. Home energy usage went down in spite of growth in electronics and power mainly due to better lighting efficiency alone. While it can help it doesn't drive all.

One common mistake in economic growth modeling is thinking only in terms of bulk. We are far richer than bronze age herdsmen but very few of us have tens of thousands of livestock.

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

#457

Post by StonyBrook84 »

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…

Got some reading time? Keep your cash but offset with leveraged ETFs. See here for how it works and why warnings of "decay" are overstated:

https://www.gyroscopicinvesting.com/forum/viewtopic.php?f=10...

Example:

75% short term treasuries; 8.33% S&P 500 3x; 8.33% long term treasuries 3x; 8.33% gold 3x

E.g:

75% SCHO; 8.33% UPRO; 8.33% TMF; 8.33% UGLD

Rebalance quarterly. Steer clear from the advice in the thread to buy volatility (XIV).

Good luck.

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

#458

Post by leereeves »

xiphias2 wrote: post #318
SkyBelow wrote: post #234

Earlier quoted context omitted.

Why should the number of bankruptcies matter if the person is still rich? It shows that they are using it as a tool, which might inform us we need to consider how bankruptcies work, but that doesn't make someone incompetent. If you want to see someone who is incompetent with money, look at lottery winners who within 5 years end up worse than before they won.

He used it as a tool, the companies became bankrupt, he got rich. I imagine he will get rich even if U.S. goes through a bankrupcy.

He started 500 businesses, 6 went bankrupt.

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

#459

Post by gridlockd »

taf2 wrote: post #174
throwaway5752 wrote: post #147

Earlier quoted context omitted.

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

Corporate cash is $1.8 trillion, but that's against $2 trillion of debt maturing in the next five years and $15 trillion total. I'm worried... he's probably worried as well https://www.bloomberg.com/news/articles/2019-05-09/corporate...

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

#460

Post by davinic »

techntoke wrote: post #70
voidfunc wrote: post #45

I don't want the economy to tank anymore than the next guy but if it blows up before the 2020 elections and kills President Trump's chance of re-election that would be a fantastic silver lining.

I'm calling it now, but you won't actually see a recession until after he leaves office. The rich and powerful control the market and it has no actual real indicator to the effects a majority of people are seeing in their personal lives.

The rich and powerful will continue to do what they always do: act in their own personal interest. If they decide they can make more by divesting from the market, you can bey they will. There is no monolith.
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