Posted on 08/14/2019 7:11:42 AM PDT by Berlin_Freeper
The Dow slid more than 400 points Wednesday after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
(Excerpt) Read more at edition.cnn.com ...
Anyone remember how they played this game with Bush41?
I do.
I’m experiencing fahrvergnugnen.
Charles Payne reported this morning that money is pouring into US Government bonds so rapidly and in such quantity that yields are being driven down to 0.
America is the only place in the world to park money with any degree of safety. That influx is an indication of American strength rather than weakness in spite of the yield curve.
I’ll go with Charles.
(it’s August. The second and third strings are on the field)
What happens when they realize the million dollars they get back in 30 years won’t be enough to buy a rutabaga?
US population in 2000 was 282.2 million with a GDP OF $10.28 trillion. Today we have 327.16 million people with a GDP of $20.5 trillion. How does that come out to less productivity, even using your definition?
With negative interest rates appearing elsewhere in the world U.S. bonds look pretty good to lots of foreign investors. No question about that.
I think Morgan Stanley is predicting the Fed will cut rates two more times by year end. Taking rates to near zero.
It is my understanding that the return on American bonds is deemed greater than that of any other such governmnet issue.
Half a ruabaga is better than no rutabaga
(Since rutabaga’s are at the bottom of God’s creation of vegatables list, I don’t really believe that statement)
A retiree who gets an average Social Security check of $1,400 every month and spends every penny of it is "contributing" $16,800 to the nation's GDP this year but is producing nothing. This number has to be stripped out of the equation when the U.S. government is borrowing $1.2 trillion every year to keep this person's check coming every month.
I think Morgan Stanley is predicting the Fed will cut rates two more times by year end. Taking rates to near zero.
What worries me is that what will the Fed be able to do when we really do go into recession with interest rates already near zero?
So zero commission means I can make profits on tiny fluctuations like day traders do. The difference, or course, is that I can put in a tiny number of orders with small amounts of money. So, let's say I want an extra $70 to take my wife out someplace nice this week.
The short answer is yes. I can do it with a trading formula of 80% x (pervious week high minus previous week low) x 50% and put the result into buy at the low end of that range and sell at the high end of that range.
It works about 70-80% of the time because my order is so small the market won't react. The 20-30% of the time I lose, I will either cash out and take the loss or, if I think it is a good investment, hold the security.
There is nothing magical about the 80% x 50% x fluctuation rate formula. The 50% simply tries to peg the high and low; the 80% is because I am risk adverse. Those more risk adverse will do this in a narrower range; those less will use 100% or even more.
You can not sell short with IRAs, but you can buy gold and bear ETFs, which is the next best thing.
There are places which will advertise day trading courses and give you some incentive like an I-pad to attend. A small percent of those attendees will shell out $200 or so for a three day course, which is what I did. The three day course is a big infomercial for their full blown course which will cost you about $30,000 or so give or take. That's where I drew the line, so what I summarized is developed from the three day course.
There are places which don't advertise much, if any, who give you commission rates close to the 0% promotional rates which I am enjoying with Schwab. They may charge monthly subscription fees and/or require a minimum number of trades. But these are who most day traders use.
As you may know, the Feds charge a small tax (currently about a penny on ever $600 worth of securities sold) which Bernie Sanders would like to multiply by a factor of 100 or more to pay for all is grandiose socialist schemes. Currently, the nominal tax pays for SEC regulation and enforcement for the industry which I see as normal, appropriate and fair. But Bernie, like any good socialist, thinks the current level of trading activity would change very little if the tax rate was multiplied by 100 times or more.
So now you’re admitting that productivity has not declined, but you’re moving the goalposts by wanting to take government spending out of GDP to make a point other then a measure of productivity.
Guess that bothers them.
It bothers them a lot. Because when the unwashed masses make money slowly, the Davos crowd has a hard time accumulating political power and more wealth.
I highly recommend a book called Why We Want You to Be Rich co-authored in 2006 by Donald J. Trump and Robert Kiyosaki (of Rich Dad/Poor Dad fame).
A huge eye-opener in the book is just how much the Davos class rips off investors by taking up to 80% of their gains in fees, commissions and the like.
And if it doesn't happen, no one will recall.
I think the biggest risk right now is record high private and corporate AND GOV’T debt. Much bigger than in 2005. At that time main problem was only in one area...people borrowing on property equity increases. When that bubble popped, the main damage area was housing.
Right now, even a slight recession is deadly because people are drowning in debt and there is little wiggle room left.
Thank you for the reply. This is the kind of thing that reinforces my suspicion that the standard buy & hold advice is not very good advice. And in fact the really cynical part of me suspects that such advice serves mainly to herd average joes’ money into the markets so savvier investors can then nick it with formula trading on fluctuations and that sort of thing. This can only work if there are masses of set-and-forget money just sitting there not reacting.
OTOH, you mentioned that you’re winding down the speculative part of your portfolio. Why are you doing that if you’re consistently getting good returns? I would almost expect you to do the opposite — to increase the speculative part. Is this a strategy for retirement or something along those lines, where you’re needing minimum risk?
BTW, in doing small trades on fluctuations, do you run into the tax on “churning”, where if you buy and sell within a certain time period you pay a penalty. Or is that the tiny pennies/$600 tax you mentioned in your last paragraph?
Reducing rates with record high debt (US gov’t, corporations, students, consumers WORLDWIDE, Mortgages on inflated housing prices, etc is same as pouring gasoline on fire. It will encourage people to buy more and inflate the debt balloon bigger.
Look at the most recent GDP report from the U.S. government:
Bueau of Economic Analysis 2Q2019 Estimate (7/26/2019)
The highest number in the "2Q2019 %Change" column is the 15.9% growth in Federal non-defense spending.
This article is almost ten years old but it explains the issue perfectly:
The money quote (the highlighted item is my own):
Over the last two quarters, US real GDP grew at an annualized rate of 5.6% and 3.2% respectively. Wow. Over the last 3 and half years, US real GDP grew a total of about 1.5%. Not bad for the worst economy since the Great Depression. Unfortunately, the US government had to spend an incredible $4.1 trillion to produce this $200 billion in growth. Without this new government spending, real GDP would have shrunk 30% (if nothing else had changed). How should we think about this fiscal stimulus? Is it more accurate to say that GDP has grown 1.5% or shrunk 30%? I believe the latter is more accurate and will demonstrate why.
You can be damn sure every astute investors looks at these numbers, even if the U.S. government publishes figures on "non-farm productivity" that may be correct but do not paint a complete picture. These figures explain why we are seeing interest rate CUTS even though unemployment is effectively almost 0%.
Don’t take it lightly.
The media succeeded in creating a mild recession in 1992, just in time for the presidential election.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.