The Inverted Yield Curve

[menzies]

Suspicious of what? I know someone who participates here and he sent me a link to this story via email. So you tell me why logically or for any other reason why my words must be considered suspicious. I do not follow your line of reasoning (or whatever emotions trigger you to say what you did). So this site shouldn't allow me to opine based on what?

Oh, do go away you silly little twit.

 

[Real Economy]

First and only boat was a 14 footer with a 75H engine I bought along with my dad's money at the age of 15/16. When my mother, the wonderful Bible reading, church attending, later platinum member of a casino Christian, kicked me out as she did to my other siblings including my sister which she never saw her grandchildren ever, my dad sold the boat and I didn't get my money back. I know a little about boats but I didn't come here for that.

I don't think what I just wrote above is helpful to the discussion at hand.

 

[Real Economy]

Is this the communication method you employ as an adult? Did your parents fail or was it the school system with grossly overpaid teachers?

 

[menzies]

Bye bye RE.

This is a serious boating community, not a play thing for you and your friends.

You will be gone, and any other member matching your IP.

 

[Boat]

Either paid to post or bots, who knows these days? Leading up to election I suspect artificial intelligence will spam us like we have never seen.

 

[Real Economy]

You have been reported for your childish name-calling. How could you even think you can continuously bully me? I said something that was about the economy, as an off topic subject. Read posts above about how it is parsed from boating. Look at others who address the economy - why don't they get your whimsical unreasonable treatment?

I did not come here to fight or to deal with such immaturity. I wanted to assist by posting what I did and no more. I didn't expect to encounter such immense immaturity. Is this what typical boaters are? Not insinuating a thing, I am asking a question. It's so strange to see such hateful childishness behavior in here.

 

[Real Economy]

Neither paid nor a bot. What's up with people here? It's like they feel an alien came in to invade them.

 

[BruceK]

Neither paid nor a bot. What's up with people here? It's like they feel an alien came in to invade them.

In a way that`s right, because it`s a community of boating people,of which you are not. Now please go away.

 

[BandB]

You have been reported for your childish name-calling. How could you even think you can continuously bully me? I said something that was about the economy, as an off topic subject. Read posts above about how it is parsed from boating. Look at others who address the economy - why don't they get your whimsical unreasonable treatment?

I did not come here to fight or to deal with such immaturity. I wanted to assist by posting what I did and no more. I didn't expect to encounter such immense immaturity. Is this what typical boaters are? Not insinuating a thing, I am asking a question. It's so strange to see such hateful childishness behavior in here.

Wifey B: If you don't like immaturity, then boo boo boo hiss you're so dumb. Is that enough to get you to leave? I can be more immature bubt I'm as expert in it as you are.

More smilies might help. Why is it still a smilie when it isn't smiling?

So you reported Menzies? Was he a bad boy and ruffled your feathers?

You pop in with no previous participation only to jump in on the economy. You even make your name to be that and only that. You really need to get a boat.

Others don't get our whimsical treatment as they've earned our respect, even if not our agreement. You haven't done so dear boy.

 

[Insequent]

Folks, the one forum rule that you need to remember and follow is 'be nice'.

I, or one of e other TF Site Team might need to do some clean up here or close this thread, but as I'd prefer to watch the AFL final I'm hoping that everyone has taken a Bex and had a good lie down in the meantime.

 

[BandB]

Folks, the one forum rule that you need to remember and follow is 'be nice'.

I, or one of e other TF Site Team might need to do some clean up here or close this thread, but as I'd prefer to watch the AFL final I'm hoping that everyone has taken a Bex and had a good lie down in the meantime.

Wifey B: Remove non boater economy dude's posts and I'd welcome you removing my responses.

But don't miss your game. Can you please translate "Bex" from Australian to American for me? Can't take what I don't know what is. But I'm about to go to bed and perhaps find something better than bex to exhaust me and put me to a peaceful, restful, sleep.

 

[Insequent]

https://en.wikipedia.org/wiki/Bex_(compound_analgesic)

 

[dhays]

Suspicious of what? I know someone who participates here and he sent me a link to this story via email. So you tell me why logically or for any other reason why my words must be considered suspicious. I do not follow your line of reasoning (or whatever emotions trigger you to say what you did). So this site shouldn't allow me to opine based on what?

OK Real, let me just say that I have carefully read what you posted and frankly it doesn’t make any rational sense to me. It sounds like you are a bit grumpy at losing money selling a bunch of put options. Now, I suppose that sometime there must be some crazy conspiracy theory that actually turns out to be true... but I don’t think this one is it.

However, I don’t have any formal education in economic theory. So, my understanding is limited to general business experience and a lot of experience in a particular economic sector. So maybe I am just another member of the blind and ignorant masses?

I do agree with you that the US debt is an important issue and a rather large millstone around the neck of the US economy. All in all though, I’d rather not face another recession, even if you think it meaningless. Furthermore, I don’t see your 24% unemployment. I’ve been trying to fill positions now for over a year with very little success. Too few workers seeking after too many jobs. It makes finding good and affordable employees difficult for small businesses.

Still waiting on the anchor question however.

 

[BruceK]

Wifey B:...Can you please translate "Bex" from Australian to American for me? Can't take what I don't know what is...

Originally,Bex was an kidney destructive analgesic over the counter compound in powder form, of aspirin phenacetin and caffeine. Along with a similar product(Vincents APC powder),it was removed from the market, years ago.Too late for those who enthusiastically followed the restorative suggestion of "A cup of tea, a Bex, and a good lie down"(possibly a line written for the satirical Phillip St Revue Playhouse), thereby ruining one or both kidneys.

The saying is still used to say:"calm down, take it easy", or"chill". Which is what I think Insequent is saying.

 

[BandB]

Originally,Bex was an kidney destructive analgesic over the counter compound in powder form, of aspirin phenacetin and caffeine. Along with a similar product(Vincents APC powder),it was removed from the market, years ago.Too late for those who enthusiastically followed the restorative suggestion of "A cup of tea, a Bex, and a good lie down"(possibly a line written for the satirical Phillip St Revue Playhouse), thereby ruining one or both kidneys.

The saying is still used to say:"calm down, take it easy", or"chill". Which is what I think Insequent is saying.

Wifey B: Wasn't very nice telling us to take something that is banned because it destroys kidneys. Could have understood had he said a valium or something. Thanks for explaining. We have outdated sayings that make no sense today as well.

 

[BruceK]

Wifey B: Wasn't very nice telling us to take something that is banned because it destroys kidneys. Could have understood had he said a valium or something. Thanks for explaining. We have outdated sayings that make no sense today as well.

Mmm..not what he was saying, APC "medication" as formulated, disappeared maybe 40 years ago but the saying persists. Beats suggesting a habit forming benzodiazepine originally designed to relieve muscle spasm especially in paraplegics.

Used in a sentence - "When thoughts of buying a 223 KW Jaguar XE occur have a cup of tea, a Bex, and a good lie down. If that doesn`t work, seek medical help".

 

[menzies]

Jeez, who can afford to buy a Jag with this Inverted Yield Curve!!

 

[BandB]

Jeez, who can afford to buy a Jag with this Inverted Yield Curve!!

Wifey B: Anyone with a cup of tea, a Bex, and a good lie

down.

 

[menzies]

Wifey B: Anyone with a cup of tea, a Bex, and a good lie

down.

Mr. BandB really is that good eh?

Oh, didn't see the next line....

 

[Bigsfish]

Or those invested in stocks.

 

[Baker]

Wifey B: Wasn't very nice telling us to take something that is banned because it destroys kidneys. Could have understood had he said a valium or something. Thanks for explaining. We have outdated sayings that make no sense today as well.

He's basically saying "take a chill pill"!!...a simple colloquial phrase....likely similar to the "take a BEX thing".

 

[BruceK]

Jeez, who can afford to buy a Jag with this Inverted Yield Curve!!

Articles by respected financial guys here still reserve judgement on what will happen. One observation is that while every recession has been preceded by an IYC, not every IYC has been followed by a recession.
The hangover from the GFC and the inventive actions to control and recover from it are a new phenomenon.
The more people stop spending and start hoarding money under the bed the more likely the economy is to go into reverse.
A good way to help avert a recession would be to restore world trade to what it was. If that or a reasonable adjustment doesn`t happen,whoever is forcing the changes will take a lot of the blame, along with their supporters. I can respect that sometimes nationalism triumphs over economic reason but there may be consequences. There is nothing I can do as a resident of a minnow country when the sharks go into battle.

I`ve owned 2 Jaguars,enough to dissuade me a third, no matter how attractive. But a "new to me boat" isn`t out of the question. Should TFers be selling their boats to reap cash before boat values are affected by recession?

 

[Insequent]

Don't overthink the IYC. I thought Kohler's comment (respected TV finance guy down here) the it just meant interest rates are expected to be low for a long time is about right. They have already been low for quite a while, and its basically the new normal for the foreseeable future.

Low interest rates could mean its a good time to buy assets with borrowed funds. A boat? Maybe, although I think cash purchase for a boat is better. A Jag? You must be joking!

 

[Bud]

I think that could be a trap. Low interest rates borrow more money, credit spreads widen then spending stops and recession begins. Low interest rates for to long can be a problem allthough its like sugar it tastes so good!!

 

[BandB]

I think that could be a trap. Low interest rates borrow more money, credit spreads widen then spending stops and recession begins. Low interest rates for to long can be a problem allthough its like sugar it tastes so good!!

One thing that often gets diminished is that we don't all work in unison. We think of economic factors and then act like everyone will move as one. Yet, there are so many different groups of people impacted.

Just look at individuals first. We talk about investments and them shifting their investment habits. Well, most people do not have investments and, of those who do, many don't make decisions based on the markets but do so based on their personal preferences. There are those who will never stop investing in CD's regardless of how little they pay. Others who have never bought a municipal bond.

Low interest rates are only relevant to those who borrow and then only those who have discretionary borrowing. The individual with no debt isn't impacted. But also the person who has a home mortgage and loans on cars often isn't impacted. They trade cars when they need to and keep their home.

Now to businesses. Business is even less rational. Many today are motivated by their own stock performance over everything else and the mood of the market seems to control them. Others fall in the "Frank Borman Syndrome" of must be the biggest regardless of profits or losses. There are even a minority of us business owners who base decisions simply on good business. We're not going to buy or open more based on interest rates. We will determine what path to follow based on the mood of the buying public.

I see major companies influenced by what they read or here more sometimes than what is actually going on. I look at our own businesses as we were just doing some preliminary forecasting for 2020. In retail, all our trends are up. Should we pay attention to them or should we react to what economists or wall street is saying. In wholesale, the same, trends very favorable. Now, do we react to the economists and market there or should we fear our customers might. We have the odd conundrum of customers who are fearful their businesses will experience trouble and the analysts have negative forecasts for them, but their orders from us continue to rise and their inventories of our products are not high, but where they should be.

I see so many major companies only interested in what the analysts say. I see so many carrying debt that I find ridiculous in good or bad times. As a businessman, I don't understand the companies and the metrics they use. I don't understand Uber or Lyft but then I could never fit in Amazon where they've built something incredible without profits and are now starting to realize profits but not from their traditional business. They don't make money on what they sell, which messes up the entire market. They make money on their computer services and they make money on what others now sell on their site. Problem is many of those others make no money but Amazon doesn't care. So, retail is now led by a loss leader philosophy.

A lot of our population doesn't even follow economists or market forecasts or pay attention to anything like inverted curves or prognostications. We measure our economy by the stock market and yet most people have no stocks. Their economy is more influenced by the price of food and clothing and by rental prices as many of them are not home owners. Are they impacted more by the stock market or by tariffs raising the price of their Christmas shopping in Walmart? Or by their employers pay philosophies. A simple example is when larger companies get tax breaks, the average worker only cares if some of it gets passed on to them. If I'm making minimum wage, then the only economic factor relevant to my income is whether minimum wage is changed.

Now, as FDR said, "The only thing we have to fear is fear itself" there is still so much truth to that. If the population as a whole gets fearful over the economy, whether justified or not, then we will see problems. Buying will slow down in every segment of the market. Economics won't matter, but emotions will rule. I think of a President a few decades ago whose economics were the worst thought out ever and the laughing stock of comedians everywhere, but he could make one speech, one televised chat, and everything improved, people felt better and responded positively.

I feel like a recession is coming and I am 100% right. One will come. Some day. The problem is none of us know when. What goes up must come down. Isaac Newton knew that, Blood Sweat and Tears knew it. If I toss a ball in the air, I even know when it will come down and could calculate if so motivated how fast. When it comes to the economy, I don't know. That's where I differ from experts as they think they do know. Some will actually be right. I can predict rain every day until it rains and then stand up and scream I was right while ignoring all the other days. Everything every one posting here says about what is going to happen will be right. Some day.

 

[BruceK]

Don't overthink the IYC. I thought Kohler's comment (respected TV finance guy down here) the it just meant interest rates are expected to be low for a long time is about right. They have already been low for quite a while, and its basically the new normal for the foreseeable future.

Low interest rates could mean its a good time to buy assets with borrowed funds. A boat? Maybe, although I think cash purchase for a boat is better. A Jag? You must be joking!

I agree,Alan Kohler makes a lot of sense.
Some of us contributing here have been through several recessions, but not a 1929 type full on Depression, though maybe 2009 was way worse elsewhere than Aussies realize. There is something recession like in our retail and building areas, they certainly show dampened activity. But,many of us have "too much stuff", and the building industry slowdown follows a period of frenetic construction, especially of questionable build quality apartments,which may generate a building repair/rectification boom of sorts.
Contrast "watch and wait" vs "panic sell everything". Some people are good predictors, years ago a canny business partner sold his house near the harbour during a real estate boom and bought a waterfront property during the real estate "recession" which followed and still made money. Wish I had that skill.

 

[BandB]

I agree,Alan Kohler makes a lot of sense.
Some of us contributing here have been through several recessions, but not a 1929 type full on Depression, though maybe 2009 was way worse elsewhere than Aussies realize. There is something recession like in our retail and building areas, they certainly show dampened activity. But,many of us have "too much stuff", and the building industry slowdown follows a period of frenetic construction, especially of questionable build quality apartments,which may generate a building repair/rectification boom of sorts.
Contrast "watch and wait" vs "panic sell everything". Some people are good predictors, years ago a canny business partner sold his house near the harbour during a real estate boom and bought a waterfront property during the real estate "recession" which followed and still made money. Wish I had that skill.

It's hard to even define recession. However, I suspect the 2007-2009 was more severe than might have been thought while still not approaching 1945 and prior. The 2007-2009 recession lasted 18 months, we reached 10% unemployment and the GDP dropped 5.1%. That was the biggest drop since 1945. During the Great Depression of 1929-1933 which lasted 43 months, we reached 24.9% unemployment and the GDP dropped 26.7%. Then in 1937-1938 we had a recession for 13 months, 19% unemployment and 18.2% drop in GDP and in 1945 it was 8 months, only 5.2% unemployment and 12.7% drop in GDP.

So to those alive in the 30's and 40's, 2007-2009 was nothing, but it was greater than anything since 1945. It included a total collapse of the mortgage industry and of the housing market in the US. Major financial institutions failed. The automobile industry collapsed. It was such a basic belief that real estate appreciated year after year and suddenly houses were worth far less than paid for them and less than was owed on them. That was contrary to everything most had been taught. The banking bailout was $700 billion and the stimulus package was $787 billion. There were also many other industries not considered as crucial hurt badly. Boats and RV's and Motorhomes didn't sell. Those industries were definitely not prepared. All those peripheral industries that are tied to the housing market suffered severely. Most Americans had never had reason to lose confidence in banks and insurers before or to worry about their homes and their value. I think it was worse to the mood of the country than the actual numbers represented too. Everyone knew someone or some company hurt badly so felt the pain.

To anyone younger than 62, nothing like it had happened in their lifetime and all those under 72 had been 10 or younger the previous time. There had been ten recessions since 1945 but none nearly as severe as this one. I think many had gotten a bit cocky and just didn't believe anything like that could happen. Everyone could get a mortgage and car loan, regardless of their financial situation and many thought that was normal.

 

[Bigsfish]

BandB. Concerning your fears of a recession, I would say you have been successful with your business (according to what you’ve said) so keep doing things the way you have been.

You stated “ we measure the economy by the stock market yet most people have no stocks”. I disagree, some people measure the economy by the stock market as it’s easy to measure, I’m not sure most is correct. I also think many people own stocks through stock retirement plans (IRA, 402c, ect), employment plans, inherited stocks, mutual funds, direct investment, ect. Many don’t even realize it. When I went to school GNP was the measure, today politicians have manipulated the input so those standards don’t have the same meaning they once did.

 

[BandB]

You stated “ we measure the economy by the stock market yet most people have no stocks”. .

I should correct that slightly. Counting both direct and indirect ownership, the Federal Reserve Board says 51.9% own stocks. Still a lousy way to judge the economy. I think any single method is weak, but don't know how to combine and weight them. Recessions are judged by decrease in GDP over an extended period. For many unemployment is the key number. I'd add into that all the employed who don't earn enough for a reasonable life, to be out of poverty or near poverty. Some use to judge on the basis of trade deficit.

One of the challenges is that the economy can be great for a limited group of people and horrible for others.

I wouldn't say I fear a recession as much as I believe one is ahead, because they always have been. Perhaps the real key is how well we do moderating one.

 

[BruceK]

...You ( B & B) stated “ we measure the economy by the stock market yet most people have no stocks”. I disagree, some people measure the economy by the stock market as it’s easy to measure, I’m not sure most is correct. I also think many people own stocks through stock retirement plans (IRA, 402c, etc), employment plans, inherited stocks, mutual funds, direct investment, etc. Many don’t even realize it...

Money goes where the returns are. When interest rates are low, money goes to the stock market, or anywhere with better yield. Competition raises stock prices to levels not necessarily related to the value of the corporation. Look at PE ratios(price to earnings) do they make sense or are stock prices in a bubble. Money may also flow to real estate. Are stock prices a good measure of the economy? Maybe,but they can be just a reflection of other parts of the economy.
2007-2009 had a specific cause, the extraordinary mess of home lending and associated securities in USA, banking dishonesty and greed, leading to multiple failures. Contagion spread here to a lesser extent,and took years for the stock market to recover.
The IYC is a symptom, not a cause, unless we choose to make it one. It`s what is happening that will cause a recession, if we get one. I suspect talking about it a lot encourages it. What are the underlying causes?
The GFC hangover swept under the carpet? Brexit? US wars on China,Iran,etc, trade,cold, political or otherwise? European financial instability? Domestic indebtedness? Balance of Payments? Country indebtedness? Or are these just things we`ve had for years?