Dow tumbles 400 points after bond market flashes a recession warning

edition.cnn.com ^ | August 14, 2019 | David Goldman

[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.

[entropy12]

Exactly correct reason why stocks are so inflated. It has been the only game in town to receive a decent yield on your money.

But there is never free lunch. The bad side of low interest rates is sky high debt everywhere...even students.

[Justa]

Reduced rates actually dis-incentivize banks from loaning money. The risk is still there but the reward is less.

[Vigilanteman]

Simple answer: I am still working a full time job and doing have much more time for market plays than a few minutes per day. I will probably be doing more once I retire.

The taxes on churning aren't much of an issue since the IRA (where I have most money) is getting most of the activity. The rest gets summarized on a 1098 form provided by Schwab before the next tax season.

The only penalty, so to speak, is that you pay taxes on 100% of your capital gains held for less than a calendar year, versus 60% of them if held longer. Again, not an issue if invested in an IRA where the taxes are only assessed when you withdraw. I used FIFO accounting on my IRAs and LIFO (to generate more long term capital gains) on the fully taxable brokerage accounts.

And, yes, there are some "buy and hold" type investments. If they consistently pay good dividends and appreciate as well, there is no real reason to get rid of them. Or if you do, just balance them from time to time by selling on upswings and buying back on dips. Utilities and REITs tend to fall in this category. Two of my favorites are POR and AEP (for utilities) and CLDT and O (for REITs).

[laplata]

“translation: The global elites are going to trigger a recession before the election”.

Exactly right. There are only a few of us on this thread who have stated the obvious.

[SoCal Pubbie]

That article is NINE years old! You’re telling me investors are skittish NOW, when non governmental GDP and factory productivity is on the rise? Really?

[Justa]

Expect Trump to really P them off by juicing the economy with more deregulation, particularly environmental regulations.

My pesonal favorite is declaring the Greenhouse Effect a hoax and AGW a fraud, then eliminating all carbon output restrictions, limitations and taxes. Back to coal fired everything. Enormous savings for consumers, companies and business sectors. Cheap energy fuels economic growth.

Dismantle the Leftist system of controlling the economy and stifiling growth to benefit politicians’ wallets who sell ‘exemptions and waivers’ to the highest bidder.

Leftism: it’s all about acquiring political power and control over others for personal gain and reward which cannot be earned in a free market economy. It’s Tyranny.

[Alberta's Child]

Investors aren't necessarily "skittish." They simply understand the intricacies of what is happening here.

So does the Fed, by the way ... which goes back to my point about why interest rates are near historic lows even as our economy is allegedly strong.

[SoCal Pubbie]

I thought your point was that productivity is down?

[RinaseaofDs]

Real Estate is a mess right now. It’s creeping into the heartland too.

[Vigilanteman]

They are certainly going to try and they may very well succeed. But they lack many of the tools which they had in 2005-2008, namely:

1. A housing market saturated with junk loans. Lenders don't loan to just anyone anymore.
   
2. A speculative market nationwide. Places like SE Florida, New York and the west coast still have hyper expensive real estate ripe for a crash, but markets like Pittsburgh, Columbus and Dallas may actually be undervalued. Other places such as Las Vegas, still haven't recovered from the last crash.
   
3. The stock market, because it is driven by fear and greed, may pull back even as much as 5000 points, but there is still far more realistic pricing than in 2008. Witness what has happened just this month-- every major pullback has followed by a recovery just a few days later, including the one yesterday which was substantially better than your normal dead cat bounce.
   
4. Investment tools such as ETFs have taken over much of what used to be invested in Mutual Funds. This means small investors (like you and I) can invest in countercyclical markets either for profit or simply as a hedge against down markets.
   
5. The handful of investment houses which were not out to screw their investors in 2008 (Scottrade, Schwab, Vanguard, others) had a lot fewer accounts then than they do now. The Davos crowd is weaker, not stronger as a result.

[Yardstick]

Got it, thanks for the explanations.

[laplata]

Very, very well put and right on! I couldn’t agree more. Thank you.

[laplata]

Excellent points and observations. You have a good handle on what’s going on. Thanks.

[Alberta's Child]

We have a labor force participation rate of 63% — which is higher than it has been in recent years but is in an unmistakable long-term downward trend. Do you think that has an implication for the productivity of our nation’s work force? You bet it does.

[combat_boots]

I know someone who used to practically tear off his shirt everyday after work about the illegal _ _ _ _ going on at the bank where he worked. No names

[minnesota_bound]

It took 2 weeks for the last drop to recover. I hope it does go back UP!

[kempster]

Isn’t this what the Federal Reserve is supposed to be preventing? I think Trump is right about Powell. I heard experts saying the he should have called an emergency meeting last week and lowered interest rates another quarter to half point.

[SueRae]

Bravo for the explanation here. I heard someone on Fox Biz explain it early this a.m. but you summed it up very well. :-)

I hope there is another cut. I am looking to refinance the home mortgage balance AND cut the term without increasing the payment. Fingers crossed.

[Maris Crane]

Powell had better make an announcement soon.

[minnesota_bound]

Try Robin Hood trading. I have heard from a few people about it. It allows you to day trade. You gave to buy in to play. I am not sure but it costs $25 to $30 thousand to open an account with them. It is still your money to trade with.