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Offline King Wenceslas

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Resession Indicator Triggered
« on: March 26, 2019, 03:44:39 PM »
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    If the bond market is correct, the U.S. economy is definitely heading into a recession.  Over the past 50 years, there have been six previous occasions when the yield on three-month Treasury bonds has risen above the yield on ten-year Treasury bonds, and in each of those instances a recession has followed.  Now it has happened again, and this comes at a time when a whole host of other economic indicators are screaming that a recession is coming.  Of course we have seen recession indicators triggered at other times in recent years, and the Federal Reserve was able to intervene and successfully extend this cycle on multiple occasions.  But now that the global economy is clearly the weakest it has been since the last recession, have we finally reached a breaking point?


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    Short-term government fixed income yields are now ahead of the longer part of the curve, delivering a strong recession indication that hasn’t happened since 2007.

    The spread, or yield curve, between the 3-month and 10-year Treasury notes just broke the longest streak ever of being above 10 basis points, or 0.1 percentage point. The two maturities were last below that level in September 2007, a run of 3,009 trading days, according to Bespoke Investment Group.

    3,009 trading days is a very, very long time.


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    Why is the inversion of the 3 Month-10 Year curve – the first since 2007 – such a momentous occasion? Because not only is said inversion the most accurate recession leading indicator, having correctly “predicted” the last 6 recessions with no false positives, most recently inverting in 1989, in 2000 and in 2006, with recessions prompting starting in 1990, 2001 and 2008….

    … it also feeds directly into every Wall Street recession model: the more inverted it is, the higher the odds of a recession.
     
    During the coming recession (if it occurs) communities all over America, especially the more economically-depressed ones, are going to start looking really bleak as the number of empty buildings continues to rise.  The Federal governments deficit is already at over $1 trillion. The coming recession will push the deficit to well over $1.5 trillion. National bankruptcy is looming.

    Offline King Wenceslas

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    Re: Resession Indicator Triggered
    « Reply #1 on: April 12, 2019, 11:54:21 AM »
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  • Another market observer:


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    Henrich: "A Tragedy Is Unfolding In The Stock Market That Should Worry Both Bulls & Bears"

    In the U.S. stock market, it’s all going to end badly. Even some ardent bulls will freely admit to it. The question is how, when and where.

    Frankly, a tragedy is unfolding, and discerning eyes can see it. Since the December lows, the stock market has taken the scripted route higher, salivating at the prospect of dovish central bankers once again levitating asset prices higher. It’s a Pavlovian response learned over the past 10 years. Record corporate buybacks keep flushing through the market, and cheap-money days are here again as yields have dropped markedly since their peak last fall.

    But investors may sooner or later learn the hard way that this sudden capitulation by central bankers is not a positive sign, but rather a sign of desperation.

    Fact is, central banks are hopelessly trapped:

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    10 years after the financial crisis is there any conceivable scenario under which central banks will ever normalize balance sheets to pre-crisis levels?
     Anyone? pic.twitter.com/aFw5dltGTg
    — Sven Henrich (@NorthmanTrader) April 10, 2019

    The capitulation is as complete as it is global, and 10 years after the financial crisis, there is not a single central bank on the planet that has an exit plan. As this week’s Federal Reserve minutes again highlighted: No interest-rate increases in 2019 while the tech sector is making a new all-time high. What an absurdity — a slowing economy ignored by the market as cheap money dominates.

    So great is the fear of falling markets and a slowing economy that the grand central bank experiment has ended in utter failure. But at least the Fed tried for a little bit before capitulating.

    Yet, in their desperation, central banks may have set a combustion process in motion that they can’t stop, one that may bring about even more ghastly consequences than the market troubles they sought to avert in the first place.

    It’s a blow-off topping scenario driven by several factors: All-in dovish central banks, a renewed desperate hunt for yield, FOMO, a U.S.-China trade deal, record buybacks, trillion-dollar deficits ($1.1 trillion for 2019, to be exact, and rising) and a White House administration preoccupied with managing stock market levels with the expressed goal to keep prices elevated for the 2020 U.S. election.

    Trump’s dangerous game

    The latter point is not lost on Wall Street. This is from Morgan Stanley’s chief global strategist of investment management: Trump’s dangerous obsession with the markets.

    Quote
    “Mr. Trump’s willingness to bend policy to please the markets is now clear — and it’s risky. In recent years, the stock markets have grown larger than the economy, and they are now big enough to take the economy down with them when they deflate.”

    So the Federal Reserve is now full in on extend and pretend. So the stock market bubble is becoming more and more the economy.

    When a stock market blow off does occur it will take everything with it (if it is allowed to occur. We might just become another Zombie nation like Japan).

    It might be better to set the next election out and give everything to the Democrats so when everything falls they get the blame.


    Offline Stubborn

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    Re: Resession Indicator Triggered
    « Reply #2 on: April 12, 2019, 03:10:05 PM »
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  • All I know is there is one thing that is consistent, some people actually time the market by it successfully. That's when the so called experts start predicting or painting the picture of a coming doom, it's safe to believe the opposite is the real truth. The markets nearly always climb "the wall of worry".

    The other thing that's consistent, is when the experts start spouting that the markets are booming, and they're all saying  nothing but great things are coming for the markets, that's the time to be concerned - many people use that as a good indicator to cash out.
    For a small gain they travel far; for eternal life many will scarcely lift a foot from the ground. - Thomas A Kempis

     

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