Market Talk June 6-10

[Mike]

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The dollar rallied to 120 on the USD chart? :l

 

[TEUFEL HUNDEN]

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Ha! you got me, I had to check real quick. I did not look at the laughing face at the end of your sentence. US $ up .14%

 

[TEUFEL HUNDEN]

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this is all I can dig up, with no real explanation as to what is going on.

http://www.marketwatch.com/news/story.asp?guid=%7B36CF3502-D725-49F1-97FD-EB2AA036B052%7D&siteid=google

 

[teknobucks]

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YAAAAAAAAAAAAAAAAAAAAWWWWWWWWWN:?

this darn markert justs keeps grinding nowhere!

here is an interesting articlefrom 1996 on The Yield Curve as a Predictor of U.S. Recessions


http://www.sinc.sunysb.edu/Class/eco360/articles/Estrella%20Mishkin%20Yield.pdf

and another from 98 when we had a similar condition:


http://www.forbes.com/columnists/global/1998/0907/0111079a.html

The flat yield curve A. Gary Shilling, 09.07.98

The yield curve is flattening. Meaning that short-term and long-term interest rates are now converging. In 86% of the time in the postwar era the yield curve has been sloping upward, with short-term rates below long-term rates. The Fed, living in the shadow of the Depression, held down the short rates to fight unemployment and prolong business expansions. On the other end, bond investors wanted premiums to protect them against inflation. Put the two together and you had that upward sloping curve most people have come to regard as the natural state of things. Only when an inflation bulge was threatening to get out of control did the Fed push up short rates so rapidly that they were higher than long-term rates. Once that was over, the yield curve resumed its upward slope. In the early 1990s a steep yield curve persisted because the Fed held down short rates to help the ravaged banks rebuild capital, while long-term investors were still spooked by inflation fears. Therefore, people simply became accustomed to an upward sloping curve. They came to think it normal for long rates to be much higher than short rates. After all, you needed high rates on long-term securities in order to compensate for inflation. My advice is: Get used to a flat yield curve, with long rates and short rates about even. We are not far from it now, with 30-year Treasurys yielding 5.55% and three-month bills yielding just 50 basis points less. The idea that a positive yield curve is normal is born of the abnormal post-World War II experience. We're returning to the old world where deflation reigns in peacetime, even though it's a brand-new world to almost all of today's investors and businesspeople.

tekno

 

[Guest]

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Spaf wrote:

cowboy wrote:

HEY!!! Look at EFV on Yahoo it was showing big time down of .667% last I looked. Whats with that. If so I fund looks to have hit the dumper!!!!

Let me get through with this solitaire hand and I'll check yahoo! EFV ya say!

Spaf can I hire the cat to invest my TSP?

 

[Guest]

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teknobucks wrote:

YAAAAAAAAAAAAAAAAAAAAWWWWWWWWWN:?

Great articles Tekn$s.

Everyone should take the time to read them.

Good stuff. Economic cycles repeat, over and over and over again. Stay one step ahead and your investments will do well. Do not fight the fed or economic cycles.

Interesting: Greenspan like the Gold standard heis contridicting fed earlier writings (and his own) concerning the yield curve now and recession. He has said the yield curve can invert and the economy will be fine.

He is suppose to be neutral party. He is a political hack that likes to be stroked. All most like a lap cat. Fed should be abolished and rates should set themselves. That would be the best for all. Fed was established after the Great Depression. They are driving us into one now. Just my HO.

 

[Mike]

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The possibility exists that he could be right on that. Just because past inversions have preceded recessions doesn't meanall future ones will do likewise... particularly when there are so many variables involved (the money supply is a lot more loose now than it was in the inversions of 1998 and 2000, for example).

The 30 year mortgage rate hit 5.1% last week... :shock:

 

[Spaf]

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DMA wrote:

Spaf can I hire the cat to invest my TSP?

Sure DMA! ... ... In the morning he is ok!

However, in the afternoon he kind of returns to some old habits!

 

[Guest]

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Spaf wrote:

DMA wrote:

Spaf can I hire the cat to invest my TSP?

Sure DMA! ... ... In the morning he is ok!

However, in the afternoon he kind of returns to some old habits!

Even in that state he would probably beat us all in this market.

Pay: Beer and mouse burgers. I can handle that.

 

[Birchtree]

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Tekno,

If memory is correct I think Gary Shilling historically wears a bear coat, but I do agree about concern for deflation. That's why the Fed went to 1% previously, fear of potential deflation. If the fools don't pause they run the risk of putting us back there. We are looking at fixed income yield shortages - stocks will be one of the only asset class that can pay increased income in the form of dividends. What would life be like at Dow 13,000 or sp500 at 1700?

DMA,

Stop stressing about that I fund - join me in the C fund - at least you will know what you are standing in. I personally have never, ever liked the Federal Reserve - they have screwed up more lives and businesses over the years than most folks can imagine - and they may be on the verge of doing it again. We finally have some agreement. Did you short the ETF Diamonds today? Take care .

Dennis - permabull #2

 

[Guest]

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Mike wrote:

The possibility exists that he could be right on that. Just because past inversions have preceded recessions doesn't meanall future ones will do likewise... particularly when there are so many variables involved (the money supply is a lot more loose now than it was in the inversions of 1998 and 2000, for example).

The 30 year mortgage rate hit 5.1% last week... :shock:

"Greenspan" and "right on" do not belong in the same sentence.

Tech bubble? Did not see it either. Four days prior to the melt down. Economy is on solid footing, corporations are healthy. :shock: Four days prior to the meltdown.

 

[Mike]

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Most corporations were healthy (save for the dot-bombs). It was the stock market (overly-speculative/over-heated) that was anything but healthy.

Note I did not say an inverted curve + solid economy is a *likely* scenario - just that it is a possibility. It wouldn't make much sense, though (then again, few things about humanity make any sense ).

 

[Guest]

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[Guest]

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[Guest]

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Birchtree wrote:

DMA,

Stop stressing about that I fund - join me in the C fund - at least you will know what you are standing in. I personally have never, ever liked the Federal Reserve - they have screwed up more lives and businesses over the years than most folks can imagine - and they may be on the verge of doing it again. We finally have some agreement. Did you short the ETF Diamonds today? Take care .

Dennis - permabull #2

I agree with you on the fed. They organized 2000-2002 with their "policies". Who else can lose 10 of trillions of dollars and still be held up as the Maestro?

Covered on the open ahead of Greenspan. Went short again at 1.

Since he is a political hack I knew he wouldusehis words to strokestocks to move. Private accounts do not look good when the NASDAQ was down 15. Looking better now for the sheeps.

Neutral, unbiased the fed??

Like the point man for the Administrations policies.

 

[Guest]

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Mike wrote:

Most corporations were healthy (save for the dot-bombs). It was the stock market (overly-speculative/over-heated) that was anything but healthy.

Note I did not say an inverted curve + solid economy is a *likely* scenario - just that it is a possibility. It wouldn't make much sense, though (then again, few things about humanity make any sense ).

Needed to aggressively move rates after the dividend tax cuts in March 2003.

That has caused a bubble in stocks and a major bubble in housing.

Dividend tax cuts and we are at emergency rates of 1%????

Economic stupidity.

Good luck. Housing bubble is going to be 15xs worse then the tech bubble.

Because money was taken out of the home equity to use to consume. Consumer debt 366% of GDP. :shock::shock: What happens when housing prices and yields go the other way???

Pretty easy to figure out. Look at the early 1990s for your answer.

Actually hard to figure out. Old record for consumer debt to GDP WAS 180 or so prior to the Great Depression.

This is uncharted waters.

 

[Spaf]

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The Fed is the Third Horseman! Rates, I mean Rats

 

[Mike]

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You're too doom and gloom for me. My main concern isn't so much that, though. It's more along the lines of this: you say it so often and take it to such lengths that I'm sure a lot of people simply stopped paying attention to what you say. That probably isn't a good thing, since your bearish sentiment will be needed at times.

I'd recommend dialing it back a bit and being a bit more selective in your battles.

As for our long-term economic health, I simply don't know, and nobody else does, either. Based on all the debt out there, I would have thought we'd have been hit hard by the collection / default issue years ago, but that hasn't materialized. Who knows... people could just extend this stuff out in perpetuity, die, and then pass the burden to their heirs. :shock:

 

[Guest]

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Today for the first time in our history interest only and ARMs loans are the majority of mortgages. 51% and counting.

When the 10 year goes to its historic average, lights out.

Amazing. Mortgage rates are near 50 year record lows and people are taking out interest only mortgages.

Kind of feels tech bubblish?

 

[Mike]

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As long as the gov't doesn't bail out these idiots, I won't care too much about it.

The only thing that bothers me is that the 5.1% rate isn't hitting3 years from now when I can actually afford to go buy a house or something. As for now, 5% or no 5%, I'm not going to shoulder another $200,000 in debt. Renting is just easier (but very tax disadvantaged :shock.