Meaning Of the Bond Mkt Inversion..

[Superman]

jyl is continuing to make good sense here. Hyperbole is fun and exciting, but the world may not suddenly collapse into dystopia. As some folks seem to be predicting. Here is what we know with certainty: Markets will fluctuate. This is what they do. Manage your investments accordingly.

Then again, I know a drummer who is expecting a wholesale restructuring of markets, of our federal government and even our entire social structure. Very soon, he says.

[fintstone]

Originally Posted by KC911

Thank you John and everyone.... interesting thread and perspectives by all! Personal situations vary, but what's the downside to buying long term CDs or Corp. bonds and locking into pretty decent returns over several years... assuming you're not broke, debt free, and have a pretty nice cushion against some long term inflation? The Fed might tighten a bit more, but I don't see it staying that way for years either .... moving back to 3.5-ish territory. I hope we NEVER return to the .25 Fed rates we had for almost two decades either.

Cheap credit - the opiate of the masses

Cold turkey is a beotch and here we are...

....and life is still good

I guess the only problem with this is that most Americans are not in the situation that you are...and how they behave will affect those that are.

A period of wild inflation can help people in the right circumstances build wealth. Especially if relatively short and followed by low inflation. It can pretty much destroy those that are not in the proper situation.

[KFC911]

Originally Posted by Superman

jyl is continuing to make good sense here. Hyperbole is fun and exciting, but the world may not suddenly collapse into dystopia. As some folks seem to be predicting. Here is what we know with certainty: Markets will fluctuate. This is what they do. Manage your investments accordingly.

Then again, I know a drummer who is expecting a wholesale restructuring of markets, of our federal government and even our entire social structure. Very soon, he says.

I knew a local drummer (owned a small body shop) years ago. His house was packed, every bedroom, hallways, etc. with vintage drum kits, properly stored. Dozens of them....

That was his retirement strategy ....

Another guy I worked with had dozens of vintage, restored farm tractors .... his retirement fund also.

Whaddaya call a drummer with no current girlfriend?

A: Homeless

Both guys were no dummies.... just sticking with what they knew best...

[Superman]

Vintage drum sets are crap, IMHO. At least...the hardware certainly is/was.

I too have a friend who collected and restored antique tractors. John Deere.

What's the difference between a drummer and a family size pizza?

The pizza can feed a family of four.

What are the members of a typical rock band?

Three musicians and a drummer.

[pwd72s]

Funny...many of those old jokes can use "Pool player" instead of "drummer". A similarity there...many try to make it to the top...few do.

There are some who are doing the cruising of garage and estate sales and reselling on ebay. Gotta know your stuff though.

In the more legit markets...Tabs mentioned short term Treasuries. Probably the best move if looking for safety, which is what we oldsters should do. That's nothing new...when young, it's pretty safe to assume you'll have the time to ride out downturns...as you age that time span is diminished.

[tabs]

Originally Posted by jyl

If you want to get into the weeds, it’s not just the supply of money (M), it’s the velocity of money (V). In a recession, people and businesses get scared, stop spending, dollars sit hoarded in bank accounts instead of moving through the system buying things. So you can increase M in a recession without creating inflation, because V is collapsing . You’re actually trying to keep M * V stable, to avoid deflation. After the threat passes, and V odd picking up again, you reduce M.

As a practical matter, though, what really happened is that in a few weeks, 20% of Americans lost their jobs or were about to, more than 20% of American businesses were starting at collapse, the US Treasury market was about to collapse, the same was happening around the world, and inflation was the least of anyone’s worries.

The US government threw $4TR at the real economy to keep people eating, housed, in business, not doing a Grapes of Wrath Depression remake. Remember that a large percent of Americans don’t have even two months of expenses in savings, and that a large percent of American businesses have large amounts of debt that has to be rolled over every year or more often.

The Federal Reserve threw $4TR at the financial system to keep it from blowing up. Remember that funds, companies don’t keep that much cash around, when they need cash they sell Treasuries or similar safe securities, and when everyone in the world is trying to sell and no-one is trying to buy, even US Treasuries go no-bid, prices plunge in big gap falls, and falls in prices make more funds and companies desperate if not insolvent, triggers massive margin calls, and the whole thing goes into a death spiral.

Almost every rich country - US, Europe, Canada, etc - that had the means to do the same did so. In the poorest countries, people went hungry. China and much of Asia resorted to intense lockdowns (what we called a lockdown in the US was amateur hour in comparison). The US and other Western countries are rich in money but not in social control, so we went the money route.

It worked. There wasn’t a global Great Depression, the financial system survived, most companies and businesses survived, etc. Maybe the dose given was too high, who knows, but the patient lives.

So now we have to deal with the after effects (over dose?), one of which is inflation. M went way up, V recovered, now M has to be pulled down.

The US govt is not really able to take back money it has given out, and even though the federal tap has been mostly shut off, a bunch of that money went to the states who are still handing it out. Things like China locking down and its effect on the supply chain, Russia invading Ukraine, have complicated things. Politics gets involved - it was involved in pouring the money in (remember Trump wanting his signature on the initial stimmy checks, to help with his re-election? and then Biden wanted his share of credit too?) as well. But the pandemic-driven excess in household bank amounts is being drawn down, it will probably be gone by mid-2023.

The Federal Reserve has a lot more ability to take back money. Driving the Fed funds rate from zero to 4% in less than a year pulls a lot of money out - house prices falling, bond and stock prices falling (something like $10 TR in stock market value lost in 2022, and a much larger amount in bond market value), companies less able to borrow, stupid crap like crypto and SPACs and NFTs imploding, now companies starting to layoff and freeze projects - and about $80BN/mo (about $1TR/yr rate) is also being pulled out via balance sheet run-off.

At this point, I’m not sure the money injections in 2020/21 are the most stubborn driver of inflation. They certainly drove house prices and rents up, but that is reversing quickly. The stubborn part now is labor shortages and rising wages. Some of that is people retiring early because their stocks went up or to trade crypto, but there’s other things going on.

I’m rambling, sorry, and phone battery about to die. Pick this up tmrw.

Edited: typos

Very eloquently put...you could be a Biden econ adviser...

According to FRED....the Velocity of money slid down a cliff in 08 and never recovered... and fell off a cliff in 20 and has stayed there, at the beginning of 2022 the V was at 1.14 and with inflation is a stellar 1.19 on 11/30/22...so all of this inflation has resulted in a 0.05 increase in the velocity of money...the earth is trembling with anticipation of a robust econ with that one..

I want some of what JYL is smoking.

Money has become ever more stagnant since 08...more USD applied has not moved the needle...Money is hardly moving...

Now that the FED is taking money off the table what is going to prop up the econ? They delayed taking it off for as long as they could...but were forced to raise rates...and decrease the Balance sheet because........the USD and Bonds had lost credibility globally.

As Walmart has explained their revenues are up, but electronics, sports equip, apparel prices are declining because of excess inventory...it is not selling... low margin stuff like food and essentials is what is driving Walmarts revenues.. so you are seeing DEMAND DESTRUCTION for consumer goods while food etc is still in inflation mode...

The American consumer is using the credit card to make ends meet and NO LONGER HAS THE DISCRETIONARY INCOME TO BUY STUFF..that means factory jobs are going to be lost...and no job means no money to buy food.

That is why China is in big dodo...and is probably why you have not heard about Taiwan lately.

The shipping rates from China for Sept were down 90% to the west coast and 78% to the est coast...year over year...that means less ships with less stuff on board...no one is buying..

I would think that there are going to be some wicked sales after the holidays as retailers are gona want to move the merch real bad.. after the merch is moved it won't be replaced with as much...empty shelf space..and if that new merch doesn't move...that means the Chinese guy aint gotta job no more..

The age of ABUNDANCE and seeming prosperity is over, gone, done, Kaput. Now it is a grm reality of down to the bone..

[tabs]

What do ya Boyz make of Jeff Bezos coming out and saying that Americans should hold back on buying new TV's and keep that money in their pockets or at least off their cards..for a rainy day....so why would a guy who makes his living by selling TV's tell you to hold off on buying that TV from him?

[island911]

Interesting stuff tabs. -thanks

As for Jeff Bezos coming out and saying that Americans should hold back on buying new TV's and keep that money in their pockets I think he is 'in' on plans to soft land the pain. (I am not saying it will work)

Psychological Operations in motion. (Don't spook the herd.)

[tabs]

Originally Posted by island911

Interesting stuff tabs. -thanks

As for Jeff Bezos coming out and saying that Americans should hold back on buying new TV's and keep that money in their pockets I think he is 'in' on plans to soft land the pain. (I am not saying it will work)

Psychological Operations in motion. (Don't spook the herd.)

Ohhh geez that have been doing that for a long time..keep the flock happy don't spook the herd..

Jack Welch backin 12 was sayin that they were cookin the books..to make it appear that all was swell...but ifn you dug into those numbers well the pix was a dif story.

Now the media isn't tellin ya the whole story neither...cause they want you to keep on buyin them radials and drinkin that beer instead o becomin upset...nice lil sheep ba ba ba....

Good little sheep
Governments, royalty and big corporations,
Slowly over taking every nation,
Poison in the water,
Poison in the food,
It is no wonder we wake in a foul mood.
Follow us blindly like good little sheep, we steal your freedoms while you flutter and sleep,
Do not question, only repeat,
Follow our orders and gain our ****,
**** away blindly you silly little fools, you will not see us bend the nations rules.
This is our little bubble that you will not burst,
It is your freedoms that we thirst! Calleen 2020

And the funny thing is that most all of you have bought it.. you all think well it aint that bad, and opportunities will abound for the vigilant and smart...when it all blows over... Some might hold their cash, some might invest in commercial RE in LA some are just keepin their heads down while whistling past the grave yard at midnight...It is all gona come back cause it always has before..or so they tell ya on CNBC..

[McLovin]

Originally Posted by tabs

Very eloquently put...you could be a Biden econ adviser...

According to FRED....the Velocity of money slid down a cliff in 08 and never recovered... and fell off a cliff in 20 and has stayed there, at the beginning of 2022 the V was at 1.14 and with inflation is a stellar 1.19 on 11/30/22...so all of this inflation has resulted in a 0.05 increase in the velocity of money...the earth is trembling with anticipation of a robust econ with that one..

I want some of what JYL is smoking.

Money has become ever more stagnant since 08...more USD applied has not moved the needle...Money is hardly moving...

Now that the FED is taking money off the table what is going to prop up the econ? They delayed taking it off for as long as they could...but were forced to raise rates...and decrease the Balance sheet because........the USD and Bonds had lost credibility globally.

As Walmart has explained their revenues are up, but electronics, sports equip, apparel prices are declining because of excess inventory...it is not selling... low margin stuff like food and essentials is what is driving Walmarts revenues.. so you are seeing DEMAND DESTRUCTION for consumer goods while food etc is still in inflation mode...

The American consumer is using the credit card to make ends meet and NO LONGER HAS THE DISCRETIONARY INCOME TO BUY STUFF..that means factory jobs are going to be lost...and no job means no money to buy food.

That is why China is in big dodo...and is probably why you have not heard about Taiwan lately.

The shipping rates from China for Sept were down 90% to the west coast and 78% to the est coast...year over year...that means less ships with less stuff on board...no one is buying..

I would think that there are going to be some wicked sales after the holidays as retailers are gona want to move the merch real bad.. after the merch is moved it won't be replaced with as much...empty shelf space..and if that new merch doesn't move...that means the Chinese guy aint gotta job no more..

The age of ABUNDANCE and seeming prosperity is over, gone, done, Kaput. Now it is a grm reality of down to the bone..

That seems like a sound analysis to me.
The scenario where simply raising interest rates for a few months is going to make what has been done in the past 3 years “go away” - that doesn’t seem plausible.

[Eric Hahl]

Originally Posted by tabs

I would think that there are going to be some wicked sales after the holidays as retailers are gona want to move the merch real bad.. after the merch is moved it won't be replaced with as much...empty shelf space..and if that new merch doesn't move...that means the Chinese guy aint gotta job no more..

I think the Chinese will still have the jobs. They have a huge economy that is being stifled by their covid lock downs. Once they start opening up again their economy is going to be booming. Alibaba is bigger than Amazon and ebay combined.

Just my humble, somewhat uninformed opinion.

[McLovin]

https://www.msn.com/en-us/money/markets/blackrock-says-get-ready-for-a-recession-unlike-any-other-and-what-worked-in-the-past-wont-work-now/ar-AA153c35?li=BBnb7Kz

[McLovin]

I think I’m going to move some money out of stocks and into cash, hopefully we have a rally I can sell into.

[island911]

Originally Posted by McLovin

https://www.msn.com/en-us/money/markets/blackrock-says-get-ready-for-a-recession-unlike-any-other-and-what-worked-in-the-past-wont-work-now/ar-AA153c35?li=BBnb7Kz

The way I read that is, Blackrock wants to set your expectations so that you don't become competition in their on-going purchases.

Cynical thinking, I know. But BlackRock's fear-porn is focused on the short-term, and they want people focused on that which can be made most scary. - Volatility, uncertainty... like never before... Yeah, well it feels exactly like times before.

Obviously they continue to play the long game.

[cstreit]

I’ve been on this forum for, what, like 20 years? Tabs predicts complete economic meltdowns every year to my knowledge.

Eventually you’ll be right buddy…. …but I hope not.

[KFC911]

Originally Posted by cstreit

I’ve been on this forum for, what, like 20 years? Tabs predicts complete economic meltdowns every year to my knowledge.

Eventually you’ll be right buddy…. …but I hope not.

To be fair, we have had a couple of them .

Be we pulled our draggin' azz jeans back up tight and here we are ...

[McLovin]

Originally Posted by cstreit

I’ve been on this forum for, what, like 20 years? Tabs predicts complete economic meltdowns every year to my knowledge.

Eventually you’ll be right buddy…. …but I hope not.

Tabs has occasionally prognosticated on when meltdowns may occur, but generally stays away from specific timeframes. There’s been a few, though. I don’t recall how accurate they were. I think they were mostly ok.

But mostly tabs describes a general arc of history, and in that regard, he is correct. History has proven that 100% of the time.

There’s been 6 or so world currencies over the past 6 or 7 centuries, the holder of the world currency is always holds the world credit card and is thus the economic superpower. The world can never imagine that the World Order will ever change, but it always does, and it always follows the same pattern.

The arc is always the same. The emerging power leads in innovation, productivity, technology, culture, education, financial markets etc.

They over extend, get complacent, lose competitiveness, increasing wealth gaps, etc., while the next power starts to rise.

Finally on the downside the power always incurs large debts, starts printing huge amounts of money, has inflation (a fun early example is Rome started watering down its coins with cheap metals), has weak leadership, increasing internal conflicts, loss of world currency status and eventually an upheaval, either by economic conquest, war, civil war or revolution.

A new power (I.e. a new world order) arises to fill the void and a new arc of history begins.

This has been the now predictable pattern for hundreds of years, Spain, Portugal, France, Netherlands, UK, US, etc.

If you lay tabs’ posts over that framework, you’ll see that he knows and learns from history and is correct. When you look at the arc and factors set forth above, what’s gone on in the US the last 70 years or so, and what’s happening now, you see history merely repeating itself. And tabs is prescient and is and will be correct (just on a bit of a longer timeline than most think in).

[McLovin]

The outgoing power of course always survives, so the “doom and gloom” isn’t that we’re going to cease to exist.

But what does happen, on the human level, is a much reduced standard of living for the majority. The Age of Prosperity for a huge middle class is kaput.

[McLovin]

The interesting question, and one I’ve asked many times over the years, is assuming the above is true, what can you do? As I recall (and I may be wrong), tabs’ answer to that is basically either there’s nothing much you can do, or to acquire things that you can use to protect yourself (spoons) or provide for yourself “off the grid.”
Looking at history, imo the answer has been clear - immigrate to the new up and coming superpower. That’s why much of Europe and the world came to the US post WWII - and that was a very wise move.
I don’t think this time around that option is going to be available to very many, though.

[cstreit]

Originally Posted by KC911

To be fair, we have had a couple of them .

Be we pulled our draggin' azz jeans back up tight and here we are ...

We've had corrections.

..but I recall advice to buy silver and ammunition. We've never been there. I hope his record of being wrong continues.