Is there a way to see NY times articles? Hn links to NY times always brings up a pay wall.
Here's a plugin for FF and Chrome:
‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
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Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#52So it's probably a good idea to have some investments that aren't tied to USD right now, yeah?
Global markets have at least .5 correlation with each other. Doesn't matter which country or money you buy investments in. If you want to avoid market risk then just stick to short term bonds(arguably the safest investment).
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#53An article from 2005 with the same prediction: http://money.cnn.com/2005/12/27/news/economy/inverted_yield_... The recession didn't happen until 2-3 years after that, making me question the utility of such predictions. "A recession will happen - eventually" is about as useful as predicting your own eventual demise.
To be fair, the economy was still fairly strong by that point. It wasn’t until 06-07 that the subprime lending really got out of hand, and even though 07 was technically when the recession started, it didn’t become a full-blown panic until 2008 when Lehman Brothers and Bear Sterns collapsed.
The yield curve is like seeing upturned leaves in the wind: a storm may coming, but it’s not clear when.
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#54Why do central banks still want to drive down long-term interest rates?
They don't. QE ended many years ago.
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#55Earlier quoted context omitted.
The Fed is reducing its budget sheet which will have a significant effect on the yield curve. Inviting comparisons between the yield curve now versus any other point in history is foolish. These are probably the same people who predicted a recession when Trump was elected, after Brexit, and at least once a month for the last decade
What does that mean "reducing budget sheet?" Also, what is meant by long and short term interest? I thought the fed only set one universal interest target.
GP meant "reducing balance sheet". When the fed buys long term bonds it issues short term debt thus increasing its balance sheet and incidentally reducing long term rates. During the great financial crisis, the fed bought a lot of long term debt increasing its balance sheet to levels not seen since World War 2. It is currently in the process of reducing its balance sheet which should have the effect of increasing long term rates, but they aren't responding as much as predicted. This is why some people fear a recession.
There are many other factors, but it should be noted that this is the longest time of a financial expansion (time since the last recession) in modern history. In the 70s and early 80s there were 4 recessions in a 12 year period.
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#56Earlier quoted context omitted.
Short and long term interest rates in this case are for US Treasury Bonds that mature at different lengths of time. Short term bonds tend to have lower interest rates since you're taking less risk that your money will be tied up when the economy grows at a faster pace. If you invest in long term bonds and the economy hits a growth spurt, your money is stuck for a much longer period of time earning less interest than…
What is the goal of essentially reducing the amount of money in the economy?
To reduce the heat in what could be an overheated economy. Many economists look at the employment rate as being too low which could signal inflation.
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#57An article from 2005 with the same prediction: http://money.cnn.com/2005/12/27/news/economy/inverted_yield_... The recession didn't happen until 2-3 years after that, making me question the utility of such predictions. "A recession will happen - eventually" is about as useful as predicting your own eventual demise.
The S&P on roughly that date was 1268. In the depths of the recession, it reached as low as 684.
Then a year after the lows it was back over 1200, and it's basically been straight up since then. Unless you timed things very accurately you were better off simply holding.
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#58> The so-called yield curve is perilously close to predicting a recession — something it has done before with surprising accuracy — and it’s become a big topic on Wall Street. > The yield curve is basically the difference between interest rates on short-term United States government bonds, say, two-year Treasury notes, and long-term government bonds, like 10-year Treasury notes. > Typically, when an economy seems in…
Historical correlations from before 2008 cannot be taken as predictive for the current environment.
Long term rates are low because the market expects that any economic weakness will be met with quantitative easing and that long term global interest rates will be negative.
The market is not predicting recession. It is predicting more interventionist economic policy to prevent recessions, which is a good prediction.
Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#59Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention
#60Earlier quoted context omitted.
What does that mean "reducing budget sheet?" Also, what is meant by long and short term interest? I thought the fed only set one universal interest target.
GP meant "reducing balance sheet". When the fed buys long term bonds it issues short term debt thus increasing its balance sheet and incidentally reducing long term rates. During the great financial crisis, the fed bought a lot of long term debt increasing its balance sheet to levels not seen since World War 2. It is currently in the process of reducing its balance sheet which should have the effect of increasing lon…
> When the fed buys long term bonds it issues short term debt
No. When the Fed buys bonds it issues MONEY.