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01-13-2022, 10:14 AM
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#41
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Yes, bank stocks have been rallying. I noticed because I have a few.
The effect does not help their customers. I have more stocks outside the financial sector, and this is of more concern to me.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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01-14-2022, 05:50 AM
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#42
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Recycles dryer sheets
Join Date: May 2016
Posts: 313
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Quote:
Originally Posted by Lsbcal
I personally use the 3month, 10 year values.
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Quote:
Originally Posted by FREE866
The fed funds rate is much more applicable than the 2 year and here is why:
Banks borrow at the shorter rate not the 2 year rate. Fed funds are still at .25 and with the 10 year rising the yield curve is actually steepening, which helps banks tremendously. So even a few rate hikes by the FED has them in a good position.
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I think I'm missing a source of information? I've heard the 2 year and 10 year used to determine if the yield curve will invert. For yield inversions, I've never heard of using a 3 mo or 6 mo rate.
Some banks get the Fed funds rate, other relatively smaller banks have to pay a bit more. But when that effect reaches bonds, it's not always linear.
Right now the 10 year is increasing faster than the 2 year (and other shorter terms?), so no immediate concern over a yield inversion. The next two events of interest would be the March meeting of the Fed (FOMC), where they are expected to raise interest rates. And the Fed predicts inflation will subside in the first 6 months of 2022, so it will be interesting to see how CPI inflation (Fed's primary measure) changes over 2022.
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01-14-2022, 07:29 AM
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#43
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Posts: 1,335
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Quote:
Originally Posted by OverThinkMuch
I think I'm missing a source of information? I've heard the 2 year and 10 year used to determine if the yield curve will invert. For yield inversions, I've never heard of using a 3 mo or 6 mo rate.
Some banks get the Fed funds rate, other relatively smaller banks have to pay a bit more. But when that effect reaches bonds, it's not always linear.
Right now the 10 year is increasing faster than the 2 year (and other shorter terms?), so no immediate concern over a yield inversion. The next two events of interest would be the March meeting of the Fed (FOMC), where they are expected to raise interest rates. And the Fed predicts inflation will subside in the first 6 months of 2022, so it will be interesting to see how CPI inflation (Fed's primary measure) changes over 2022.
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The notion that banks borrow at the 2 year rate is a false narrative. Don't know what else to say. The 2 year rate does not correspond to banks business models or propensity to lend. That is why the yield curve is important. They borrow at fed funds.
As previously stated we can handle a few fed hikes before we have risk of inversion. And even after inversion historically stocks do well for a year or so after.
__________________
Retired 1/6/2017 at 50 years old
Immensely grateful
“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
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01-14-2022, 08:14 AM
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#44
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,809
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Quote:
Originally Posted by OverThinkMuch
I think I'm missing a source of information? I've heard the 2 year and 10 year used to determine if the yield curve will invert. For yield inversions, I've never heard of using a 3 mo or 6 mo rate.
Some banks get the Fed funds rate, other relatively smaller banks have to pay a bit more. But when that effect reaches bonds, it's not always linear.
Right now the 10 year is increasing faster than the 2 year (and other shorter terms?), so no immediate concern over a yield inversion. The next two events of interest would be the March meeting of the Fed (FOMC), where they are expected to raise interest rates. And the Fed predicts inflation will subside in the first 6 months of 2022, so it will be interesting to see how CPI inflation (Fed's primary measure) changes over 2022.
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There is a paper or two from the Fed on the yield curve as a leading indicator of recessions and uses the 3mo 10year data
Link: https://www.newyorkfed.org/research/...html#/overview
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01-14-2022, 03:52 PM
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#45
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Dryer sheet wannabe
Join Date: Dec 2008
Location: Brick
Posts: 16
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One of the first things I learned about the stock market was the phrase "It's better to be out of the market wishing you were in than being in the market wishing you were out". Currently things are orderly, folks rebalancing, etc. Things will get dicey when panic sets in and margin calls commence. Thats when you are more focused on seeing the return OF your money as opposed to the return ON your money.
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01-14-2022, 04:21 PM
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#46
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,985
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Quote:
Originally Posted by FREE866
The notion that banks borrow at the 2 year rate is a false narrative.
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Where did the poster OverThinkMuch state this?
__________________
Took SS at 62 and hope I live long enough to regret the decision.
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01-14-2022, 04:34 PM
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#47
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Posts: 1,335
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In post above he said " I've heard the 2 year and 10 year used to determine if the yield curve will invert."
I've heard it from others too...again, it's a false narrative that people tend to repeat. If banks did most of their borrowing at the 2 year rate it would have validity, but they don't
__________________
Retired 1/6/2017 at 50 years old
Immensely grateful
“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
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01-14-2022, 04:45 PM
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#48
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,809
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Yield curve inversion is a negative signal for stocks but it is not enough in itself as other factors enter into a recession scenario unfolding and stocks selling off. Some of those factors are unemployment rates going up, having stocks trending downward, stocks having hit high PE's etc. The time between inversion and big equity declines is quite variable.
Timing equity selling to avoid a recession decline is very hard because of the irregular nature of all those factors.
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01-15-2022, 04:09 PM
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#49
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Recycles dryer sheets
Join Date: Jul 2021
Location: Clermont
Posts: 164
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Normal
Stocks go up; stocks go down. Has been happening since Day One. At 30 years old I bought when there was blood in the streets, because I thought "long-term". Now 45 years later I don't buy green bananas, and don't buy stocks that don't pay dividends or raise them each year. I really don't care about the price, just keep paying me. And they do. I only spend income, never capital.
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01-17-2022, 02:34 PM
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#50
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,674
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Z-Z-Z-Z-Z wake me when the big explosion is just about to happen. In the meantime my 45/45/10 AA will continue to roll along...
__________________
Part-Owner of Texas
Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx
In dire need of: faster horses, younger woman, older whiskey, more money.
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01-17-2022, 02:39 PM
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#51
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,809
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