anybody smell smoke?

[retiredunder50]

Quote:

Originally Posted by Chuckanut What has felt funny to me is 8 years of very low interest rates, lower than I have seen in my lifetime.

Agreed! The winners were those taking advantage of crazy low loan interest rates. I would have killed for a mortgage in the high 2/low 3% range. Of course, since most of us on this board don't match the general population's save/borrow profile, I suspect most of us suffered as a result. I just don't want to go back to high savings interest rates being coupled with spiraling inflation.

[bobandsherry]

Quote:

Originally Posted by retiredunder50 Agreed! The winners were those taking advantage of crazy low loan interest rates. I would have killed for a mortgage in the high 2/low 3% range. Of course, since most of us on this board don't match the general population's save/borrow profile, I suspect most of us suffered as a result. I just don't want to go back to high savings interest rates being coupled with spiraling inflation.

I took advantage of low rates, did so by getting mortgage just before retired. Don't regret it. Has allowed me to stay invested for past 30 months, earning about 15% overall annually on my investments, while paying just over 3% on my mortgage. I therefore made $75,000 by keeping my money invested and paid $20,000 in interest. Having $55k more in my pocket as a result isn't too bad. I also remain liquid enough should any emergency or disaster come up, saved on what would have been a big tax bill due to gains. I have cash available to pay off my mortgage if the time should come that it makes sense to do so.

[youbet]

Quote:

Originally Posted by retiredunder50 Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

[retiredunder50]

Quote:

Originally Posted by youbet But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

The S&P 500 didn't set the world on fire in the 1st 6 months. GDP was 2% for the first quarter. (Higher) deficit spending is back in vogue. Consumer savings rate is dropping as credit debt numbers are growing. The full impact of rising tariffs has yet to hit us but it's just around the corner. Rising energy costs and inflation are not helping. Retail sales numbers look good, we are pert near full employment, & home construction numbers came up in May. Throw in yield curve and industrial production data and consumer sentiment info AND everybody will argue a recession is coming or it's not. Just like the talking heads, I also don't know when, but I do know that smoking is not how I would describe the current status; maybe smoldering? If only we had access to jawboning rhetoric before it's delivered, geopolitical event planning, early info on the timing&duration&magnitude of the market swings, a prediction tool for natural disaster events, raw material availability...

[njhowie]

Quote:

Originally Posted by youbet But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

Considering the top 10 companies comprising the S&P500 and their weighting in the index, you might want to reconsider your statement/belief.

[Oz investor]

Quote:

Originally Posted by youbet But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

it is a little difficult to get US financial information , but i look at the traditional bellwethers and mid-caps and then commodity prices

and i am not that inspired by what i see ESPECIALLY with super low interest rates one might expect a credit squeeze to hit them hardest

[brett]

I am very concerned about the trade war. IMHO the tariffs are ill advised and will increase inflation, reduce employment, and negatively impact the markets. They are essentially a tax increase that will trickle down at a much faster velocity than tax cuts.

The auto industry has already rung the alarm bells but no one seems to be listening. Some agricultural commodities are already seeing price declines. Not good.

[VanWinkle]

You can't reset the trade imbalance without some pain. We shouldn't do it if it's just too hard? From what I have read, we have been getting porked for years by most of our trading partners. I am for a fair deal, just not sure when a fair deal has been reached.

Remember when we were being led into nuclear war? That has turned out better so far. There are no miracles, just hard work and patience. I will be patient for a while longer.

VW

[NYEXPAT]

Quote:

Originally Posted by retiredunder50 The S&P 500 didn't set the world on fire in the 1st 6 months. GDP was 2% for the first quarter. (Higher) deficit spending is back in vogue. Consumer savings rate is dropping as credit debt numbers are growing. The full impact of rising tariffs has yet to hit us but it's just around the corner. Rising energy costs and inflation are not helping. Retail sales numbers look good, we are pert near full employment, & home construction numbers came up in May. Throw in yield curve and industrial production data and consumer sentiment info AND everybody will argue a recession is coming or it's not. Just like the talking heads, I also don't know when, but I do know that smoking is not how I would describe the current status; maybe smoldering? If only we had access to jawboning rhetoric before it's delivered, geopolitical event planning, early info on the timing&duration&magnitude of the market swings, a prediction tool for natural disaster events, raw material availability...

I am a fan of the Baltic Dry Index!

[Circles]

Quote:

Originally Posted by Spock Had an odd feeling this morning. I've been watching short term brokered CD rates and bank savings rate climb steadily... Oct 2017 a 1yr CD was 1.5%, today its 2.4%... .1% increase a month on average. As a ratio, thats a pretty steep climb. Since everything is interconnected, something else has got to be starting to crack. I'll admit to a significant bias to an implosion. If things were so great, central banks would not be printing money and propping up the stock market with the funds. But... today something just feels "funny". Anybody else smell smoke?

Just the result of the Fed raising interest rates.

[Leo1277]

While increasing CD rates in themselves are not necessarily a problem, there is one thing that really smells of smoke: we are quickly heading towards an inverted yield curve, which means that short term yields (as from CDs) get near or exceed long term yields. This has been one of the most reliable predictors of an expected recession, as it expresses a lack of confidence in the long-term market. Google it and you will find many comments about it.

[Oz investor]

Quote:

Originally Posted by Leo1277 While increasing CD rates in themselves are not necessarily a problem, there is one thing that really smells of smoke: we are quickly heading towards an inverted yield curve, which means that short term yields (as from CDs) get near or exceed long term yields. This has been one of the most reliable predictors of an expected recession, as it expresses a lack of confidence in the long-term market. Google it and you will find many comments about it.

welcome to posting ,

indeed the yield curve ( and implied confidence ) is a gloomy omen ( except , if you believe the pundits , in Australia .... maybe we just twist the figures better over here )

[njhowie]

Quote:

Originally Posted by Leo1277 While increasing CD rates in themselves are not necessarily a problem, there is one thing that really smells of smoke: we are quickly heading towards an inverted yield curve, which means that short term yields (as from CDs) get near or exceed long term yields. This has been one of the most reliable predictors of an expected recession, as it expresses a lack of confidence in the long-term market. Google it and you will find many comments about it.

Agreed.

It's all about consumer and investor sentiment and perception. It's why optimism leads to business and economic expansion. By the same token, when there is so much demand for longer term yields that the yield curve flattens, and then goes further to inversion, it is a clear indication of investor uncertainty, with a flight to safety - reducing risk, and less willingness to invest. Perception slowly changes, and the next thing you know, we're in a recession.

It's almost self-fulfilling at this point.

I personally nibble all along the yield curve when I'm offered what I believe are good rates of return for the maturity. It's certainly subjective, though I am heavier in shorter maturities. However, because of the uncertainty of where rates will go, along with where we've been, I don't have much issue picking up 5 year CDs, and even 10 year. A few weeks ago I picked up some strong 18 year municipal bonds that pay 5% after tax equivalent. Today I purchased some 5 year CDs for 3.51%. I can live just fine with these. If these rates continue to trend higher, not a problem - I have maturities monthly which I happily roll out for higher yields.

[copyright1997reloaded]

Quote:

Originally Posted by bobandsherry First DOW is such a narrow band of stocks, not sure that reflects the overall markets.... and let's not forget that DOW did have GE in the mix which dropped from $18/sh to $13 and change when it was finally dumped from the DOW as it wasn't reflective of the how US companies are doing. Guess it would be interesting to see how DOW performance would have been without GE.

The dow is a price measured index. GE @ $13.96 was approximately 96 points on the dow (using the divisor when GE was still a member). That is, a complete wipe out of GE in one instant would have dropped the dow jones index by only 96 points. Now Boeing on the other hand..over 2300 points.

[copyright1997reloaded]

Quote:

Originally Posted by njhowie Considering the top 10 companies comprising the S&P500 and their weighting in the index, you might want to reconsider your statement/belief.

Did you know IBM at one point had a considerably heavier weight in the SP500 than Apple does today? At one point (if I am remembering correctly), it was around 6.5% of the SP500 value. Apple is currently 3.96%. IBM has fallen to 40th place with a weight of 0.52%, and yet we've somehow survived.

Here's an interesting graphic: http://i0.wp.com/siblisresearch.com/...size=770%2C322

[njhowie]

Quote:

Originally Posted by copyright1997reloaded Did you know IBM at one point had a considerably heavier weight in the SP500 than Apple does today? At one point (if I am remembering correctly), it was around 6.5% of the SP500 value. Apple is currently 3.96%. IBM has fallen to 40th place with a weight of 0.52%, and yet we've somehow survived.

Please re-read the quote I was responding to.

It had nothing to do with survival. It had to do with the prior posters belief of the S&P being more useful/representative than "the megacaps" of the Dow. Those in the S&P top 10 which are not included in the Dow, are bigger megacaps than a good portion of those in the Dow. The top 10 of the S&P is bloated with technology representing 15% of the entire index.

My statement/point stands.

[morriss003]

A good judge of bad times ahead is the interest rate curve. Here is a link. https://www.treasury.gov/resource-ce...spx?data=yield

Starting from the left, each number should be lower than the number to the right. When it's not it's called "inverted." An inversion usually signals a recession.

[SnowBound]

How many people refuse to smell the smoke until they see the Inverted Bond Curve (or fire)?

And yes, I'm one of the above..

[meierlde]

Quote:

Originally Posted by copyright1997reloaded The dow is a price measured index. GE @ $13.96 was approximately 96 points on the dow (using the divisor when GE was still a member). That is, a complete wipe out of GE in one instant would have dropped the dow jones index by only 96 points. Now Boeing on the other hand..over 2300 points.

Indeed that is why the Dow thirty does not include Amazon because its per share price is to high. Just doing the divisor on Amazon is 9993 points on the dow. Alphabet would be 9700 points using the current divisor.

In any case way back when the dow 30 was industrials, there is a Transport index a Utilities index and a 65 stock index, all are price weighted because they came about long before computers.

[meierlde]

Quote:

Originally Posted by retiredunder50 Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

On July 10 the dow 30 closed at 24,919, so a bit ahead for the year.