I saw a post earlier about the yield curve inverting so I'll dive a bit deeper on the subject and its implications.
The yield curve is of particular usefulness because it accurately predicted recessions since about 1950 several quarters ahead so that you can plan your exit if you are not an investor who likes stupid preventable risks.
Since the 50s, the two most useful yield spreads - the 10y-2y and the 10y-3m - accurately forecast 9 recessions out of 10 signals, which makes this very simple indicator the most useful to the layman investor regarding the prospect of impending recessions.
When I say impending I mean with a 6m to 2y window after inversion of the spread as you can see in the pic related graph. It is a large window but it can save you some precious shekels if you use this information correctly by changing your investment policy in time.
As of today the 10y-3m yield inverted on march 22nd and the 10y-2y stayed positive so far. I would advise you to divest from stocks about 9 months after inversion of one of the two spreads, which you put the date to january 22nd 2020 if you want to be safe. You can play longer if you want but at our own risk. Then you simply wait for the recession to unfold and get the cheapies on the way down, but don't try to catch the knife too hard.
Personally I will put some of that money on government bonds and maybe some in alternative investments like precious metals and real estate (such as REITS).
Good job repeating what every single dumbfuck has said forever
Thats why the market is at all time highs and going higher because dumb money keeps selling. When recession actually hits I wouldnt be surprised if the markets barely drop considering all the money companies still make
You have no idea what you are talking about and it's really showing. Dumb money (retail) is actually balls deep in today's equity market whereas smart money started to lighten their bags for some time now, contrarily to what you wrote. Companies are still making money because interest rate is still low and they also got a generous tax cut. But then you look at the valuation metrics and they are out of the charts, every single ratio (or close). The number of dogshit IPOs recently is also a tell-tale sign of a sick market.
Henry Miller
Here a (You)
Lincoln Johnson
Why are you making shit up? Institutions have been buying up equity hard since the Tax Cuts. Retail has done nothing but scream "overvalued!" since 2015. If you think retail brought the market to all time highs youre confused.
>IPOs theyve been shitfests since the 90s, its not relevant to the Sp500 or nasdaq broad markets
Hunter Hill
The tax cut was almost 1.5y ago, things happened since then and the impact is withering. And no, funds are not flowing into developed market equities despite the all time highs, there is still some upside potential, it's simply time limited like I said in the initial post. The yield spreads are accurate at predicting recessions and consequently market downturns but you seem to just dismiss this. Is it because "this time it's different"? Don't worry thought, a lot of money managers think the same every time and have ben proven wrong time and time again, you won't be alone.
There was a time were the inversion did not lead to a recession
Oliver Clark
whats depressing to me is the trend of lower rates overall for 40 fucking years.
Ian Gray
Did you read the OP? I'm not saying I can pinpoint the day of the start of the bear market, simply that using tried and true data since the 50s you forecast downturns approximately, it's widely known. Just read any papers on yield curve and recession, the first ones are from the late 80s, it not new.
>Since the 50s, the two most useful yield spreads - the 10y-2y and the 10y-3m - accurately forecast 9 recessions out of 10 signals
It's not really depressing, it just means that inflation is lower and lower.
Alexander Morales
ah yes the low inflation meme, as long as you dont include college, medical care, housing, property taxes, financial assets, phones etc etc etc.
Gotta keep asset bubbles inflated and the rich wealthy, so inflation is whatever the fuck they say it is.
Jayden Wilson
ah shit we're fucked
Josiah Roberts
The disillusion of some burgers on here is astounding. I can only fathom that they are mostly millennials who can’t remember the last financial crisis.
Shits fucked. We are in the ‘everything’ bubble. We are coming to the end of a financial cycle like we haven’t see since the Great Depression. Boomers have risen the drawbridge on the younger generation in regards to real estate, salaries, pensions and cost of living so there’s no longer a foundation to prop up the house of cards. 2008 was postponed due to the QE bonanza, and cutting interest rates to zilch. That shits had its day and the Fed has painted itself into a corner and has no tricks left in the bag except negative interest rates which isn’t an option,
If you haven’t already, be sure to make the most of the current PM knock back as it’s the last chance you’ll get. Get a mix of physical, PM ETFs (some platinum, palladium and uranium too) and miners for leverage, if you’re a brainlet and can’t stockpick go for GDXJ and GDX.
Get some crypto, but no shitcoins, BTC, XMR, BCH etc - what’s actually used on the dark web.
Look for value in big, low debt, defensive, infrastructure dividend paying companies that are out of favour to the FAANGS in the last decade. Energy (silver plays a big role in clean energy) agriculture, transport, military, telecommunications companies.
Get you ducks in a row, shits coming sooner that you think.
I don't know shit about imners ETF but that looks like a shitshow to be honest. Also there is not many big defensive companies with low debt today to invest in, especially capital intensive ones live infrastructure and the like. Apart from that your post is correct.
Adrian Morris
Problem is the indicator is too forward leaning to be of any real use for trading and market timing. "1-2 years" is a long fucking time to be sitting on your ass out of the market; the market could very well go up 30% in that time and only drop 20%. Or worse, the 1/8 chance happens that the indicator doesn't predict the movement and you miss out on a golden bull run. Like all trading systems, it's best to have multiple indicators that measure the same thing. In the case of the yield curve, you're trying to measure real economic activity and the credit cycle. Fortunately, there's a lot of additional good indicators out there such as Real Retail Sales Growth (YoY) which do just that. Sales growth figures show weakness in end of Q4 2018 and start of Q1 2019, so the yield curve inversion in this instance has a much higher chance of being legit. I still wouldn't short the market just yet,, but it's certainly a good time to reduce risk exposure.
Grayson Fisher
Contrary to popular belief, the economy is not some sort of perpetual motion machine for generating value. The economy is a natural system and as such is subject to diminishing returns on all forms of input. The eventuality of any economic system is either an S-curve or a parabola; either a stable state economy (a unicorn) or an eventual collapse. Perpetual growth cannot be sustained due to physical system limitations on available labor, capital, land, energy.
As interest rate basically measures the value of money now as opposed to the value of money in the future, falling interest rates signal a more bleak future. At 0% interest, the value of a dollar today is worth the same as a value of tomorrow; because we expect that dollar to buy the same amount of value since there is no growth to be had.
Camden Flores
good. i hope it all burns and takes the US down for good. hope it sparks a communist revolt and all the rich fags and boomers get beheaded in the streets. this country needs a reset.
James Ward
>tfw 21 >tfw I never even stood a chance to make financial gains
