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Yield curve getting flatter, and flatter
Old 03-15-2019, 02:45 PM   #1
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Yield curve getting flatter, and flatter

Today the difference between the 10 year and the 3 month Treasury yields is only 0.14% or 14 basis points. The average since 1954 is 142 basis points and the median is 140 bp.

FWIW, my modeling of equity returns gets a big warning sign when it goes below 10 basis points. Which if it happens means the next 12 months is a period to watch for further weakness in the SP500. Also if coupled with rising unemployment (which briefly happened in December and January) this could be a really bad signal.

So not nose bleed territory yet but getting worrisome to me.

Here is the Fed link to the yield curve: https://www.treasury.gov/resource-ce...spx?data=yield

Thoughts?
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Old 03-15-2019, 02:48 PM   #2
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Can't worry about what has not happened.

But, you can be prepared.


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Old 03-15-2019, 02:53 PM   #3
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Can't worry about what has not happened.

But, you can be prepared.


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Old 03-15-2019, 02:53 PM   #4
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Stick with AA and ride it through if necessary.
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Old 03-15-2019, 03:17 PM   #5
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I have been extending my bond durations modestly.
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Old 03-15-2019, 03:22 PM   #6
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FWIW, unfilled job openings are at an all time high (data released today I think for the month of January).
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Old 03-15-2019, 03:27 PM   #7
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I heard a new word a few months ago: measurbating.

I suppose it must be a pleasurable activity that doesn't produce useful results.
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Old 03-15-2019, 03:33 PM   #8
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I heard a new word a few months ago: measurbating.

I suppose it must be a pleasurable activity that doesn't produce useful results.
lots of measurbaters on this site for sure lol
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Old 03-15-2019, 03:47 PM   #9
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The title of this forum site "Stock Picking and Market Strategy" implies that multiple market views are tolerated. Otherwise why have a forum at all?

I can find plenty of intolerance on other sites. If you have something to say that is informative fine, but just being snarky is boring.
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Old 03-15-2019, 04:59 PM   #10
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... Thoughts?
Well, don't ask then.
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Old 03-15-2019, 05:04 PM   #11
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Hmmm - yes I see the 10yr and 5 yr have dropped quite a lot this week.

Interesting as the market has rallied pretty strongly this week.

Fed meeting next week?
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Old 03-15-2019, 05:12 PM   #12
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Interest. Some very smart people here, I will be watching and hoping for the best.
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Old 03-15-2019, 05:38 PM   #13
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Hmmm - yes I see the 10yr and 5 yr have dropped quite a lot this week.

Interesting as the market has rallied pretty strongly this week.

Fed meeting next week?
I donít know much about the theory of why fattening or inversions cause reduced business activity. There has been a significant correlation between the yield curve and market declines even going back to the 1929 period. But there can be delays in the timing so not easy to pinpoint.
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Old 03-15-2019, 05:43 PM   #14
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The title of this forum site "Stock Picking and Market Strategy" implies that multiple market views are tolerated. Otherwise why have a forum at all?

I can find plenty of intolerance on other sites. If you have something to say that is informative fine, but just being snarky is boring.

a sign of increasing 'herd mentality ' , perhaps ??

i take notice of this because i am a contrarian at heart .

i am avoiding buying extra interest-bearing securities ( in Australia ) as there is definite trend to reducing the security of the offerings ( often relying on the borrower's name to offset the poor returns on offer , while issuing 'junk debt ' )

good luck those still investing in this part of the market
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Old 03-15-2019, 05:48 PM   #15
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I like this chart:

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Old 03-15-2019, 06:52 PM   #16
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I like this chart:

The market peaked strongly the last few times the yield curve flattened, then inverted. Then, all hell broke loose a bit more than 1 year later.

I think much has been talked about this, including on this forum. Somehow, people do not believe in this.

You would think everyone would be selling, but perhaps people are hanging on for a few percent more.
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Old 03-15-2019, 06:53 PM   #17
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FWIW, unfilled job openings are at an all time high (data released today I think for the month of January).
I haven't looked at this data but if I did I'd look for whether this was a leading indicator or a lagging indicator for stock market performance.

In the case of unemployment, if one looks at the monthly data and specifically whether the last month is above or below say a 12 month moving average then it appears the unemployment is a leading indicator. In other words, there is a good correlation between when unemployment trends up and the beginnings of SP500 declines.
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Old 03-16-2019, 02:46 AM   #18
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Stick with AA and ride it through if necessary.

That's just about the only thing I (and many here) can do. My ER strategy is based on riding the market out, good and bad.
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Old 03-16-2019, 05:58 AM   #19
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Why prefer 10yr/2yr to 10yr/3mo? Or some other?
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Old 03-16-2019, 06:12 AM   #20
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I donít know much about the theory of why fattening or inversions cause reduced business activity. There has been a significant correlation between the yield curve and market declines even going back to the 1929 period. But there can be delays in the timing so not easy to pinpoint.
Inversions are not a cause, theyíre the result of declining or expected declines in business activity. Bond investors see a decline ahead and extend durations, which pressures longer term yields down while the Fed hikes short term rates.

To be a meaningful signal, the inversion needs to continue for some period of time and be confirmed by other economic indicators. It looks like we are heading into a economic slowdown over the summer.
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