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Where do you feel we are in the US equity cycle?

Nerdyblop wrote:

nice. thx for sharing. 

That NY real estate graph is one of the reasons OZRK is depressed,FYI

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igor555 wrote:

https://www.facebook.com/266790296879/posts/10156809908766880/

I attended an industry conference early last week where a well know economist on the street spoke on macro conditions and he seems to think that with inflation expectations at 2 percent that would put us at nominal GDP of 5 percent meaning short term rates would need to rise to that number and exceed it first before the yield curve inverts. At that point, the average time for when the yield curve inverts to the beginning of recession  historically is around 19 months (with the only exceptions being the 2000 tech bubble and one other, cant remember off the top of my head, which happened pretty much immediately after inversion). 

The economist’s name is Brian Wesbury, and although he seemed to think we aren’t anywhere close to recession considering rate hikes will put us at short term rates of 3.75 percent through 2019, who really knows. The main issue in my opinion is inflation. What if the 2 percent expectation turns out to be wrong sooner than later and the fed has to get even more aggressive, and earlier with rate hikes? It’s all a guessing game. 

NSDQ getting pummeled, S&P Negative. Brace yourselves, Winter is coming… 

.....woof

its important to note that earnings are still popping and surprising everyone. but stocks are getting punished for anything! there is a definite multiple rerating occuring and a flight to safety.

I love my cheese. I got to have my cheddar.

Yea I agree with people getting more defensive. It looks like investors are heading into the staples and metals and mining industry as of late (M&M up about +6% vs the S&P up about +1.7% from its late Oct lows) which usually suggest late cycle. What contradicts late cycle are the October numbers. They looked pretty good with unemployment staying low and wages increasing at a historically high rate (Real average weekly earnings up 0.9% over the month, up 3.4% over the year - bls.gov). Still growth is under pressure, credit is tightening and companies seem to be giving more conservative outlooks. I think we are now getting into late cycle. I’m not sure how long this late stage will last but until i’m seeing actual earnings slowing down then we aren’t heading into a recession yet and we still have some time.

federal reserve thots:

fed basically said there is a potential downward spiral for these reasons:

1. prices are high historically, 

2. lots of uncertainty (trade war), 

3. lotta corp debt (potential future funding issues due to rising rates), 

market prolly went up because people think fed will raise rates much less than previously expected.

The central bank chief’s proclamation that interest rates are “just below” what would be considered a “neutral” level represents a definite change in verbiage from his October “a long way from neutral” assessment. 

https://www.cnbc.com/2018/11/28/fed-warns-that-particularly-large-plunge-in-asset-prices-is-possible-if-risks-materialize.html

In a lengthy first-time report on the banking system and corporate and business debt, the Fed warned of “generally elevated” asset prices that “appear high relative to their historical ranges.”  

In addition, the central bank said ongoing trade tensions, which are running high between the U.S. and China, coupled with an uncertain geopolitical environment could combine with the high asset prices to provide a notable shock.  

“An escalation in trade tensions, geopolitical uncertainty, or other adverse shocks could lead to a decline in investor appetite for risks in general,” the report said. “The resulting drop in asset prices might be particularly large, given that valuations appear elevated relative to historical levels.”  

The drop in asset prices would make it more difficult for companies to get funding, “putting pressure on a sector where leverage is already high,” the report said.  

On the bright side, banks and other financial institutions are seen as well capitalized and thus in a good position to absorb shocks. 

For businesses, though, there could be issues, particularly among those that have added to already high debt levels.  

“High leverage has historically been linked to elevated financial distress and retrenchment by businesses in economic downturns,” the report said. “Given the valuation pressures associated with business debt … such an increase in financial distress, should it transpire, could trigger a broad adjustment in prices of business debt.“  

The Fed noted that the share of investment-grade debt classified at the low end of the range has “reached near-record levels” of $2.25 trillion, or about 35 percent of the total corporate bonds.  

I love my cheese. I got to have my cheddar.

Bond King Confirmation:

https://www.cnbc.com/2018/12/04/bond-king-gundlach-says-inverted-yield-c...

DoubleLine CEO Jeffrey Gundlach believes that the recent inversion of the U.S. Treasury yield curve is a signal that the economy is set to weaken.

As of Tuesday morning, the yield on the benchmark 2-year Treasury note hovered at 2.821 percent, above the yield on the 5-year note at 2.811 percent.

The closely followed spread between the 2-year Treasury note yield and the 10-year Treasury note yield remains positive.

I love my cheese. I got to have my cheddar.

Buy the dip at 2x leverage and HODL

Nerdyblop wrote:

Bond King Confirmation:

https://www.cnbc.com/2018/12/04/bond-king-gundlach-says-inverted-yield-c...

DoubleLine CEO Jeffrey Gundlach believes that the recent inversion of the U.S. Treasury yield curve is a signal that the economy is set to weaken.

As of Tuesday morning, the yield on the benchmark 2-year Treasury note hovered at 2.821 percent, above the yield on the 5-year note at 2.811 percent.

The closely followed spread between the 2-year Treasury note yield and the 10-year Treasury note yield remains positive.

I’ve heard the argument that the 10 year has been artificially affected by QE though and should not be paid attention to as closely as even further dated ones. Either way, the inversion of 3 and 5 year notes isn’t a good omen historically. 

an inverted yield curve predicts recessions! and as an investor, recessions are the best, as they are typically the best time to buy. it wipes out the excess fat in the economy, and kills ****tiest companies earnigns wise or debt wise. everything falls like crazy so its a bit hard to overpay for ****. and even if you are doing well  fundamentally, your prices will still fall so there is a large disconnect between value and price. the best part is, recessions arent declared until the recession is close to ending and prices are pretty near bottom.

anyways here is a quick example”

jan 2006 10-2 yield curve invert

mar 2007 yield curve goes positive.

oct 2007 price peaks

dec 2007 great recession starts (hindsight)

dec 2008 recession is declared

mar 2009 prices bottomed

it’s been 10 years since our last recessions. the longest expansionary period was roughly around 10 years too 1990 to 2000.  anyways those are my thots!

I love my cheese. I got to have my cheddar.