My Conversation With Mr. Bond
Hello Mr. Bond. You just cannot seem to stay away from 2.0%.
We missed you. Welcome back. Will this be a longer visit? Are you calling for a recession?
Unfortunately, Mr. Bond did not answer. He just winked.
Yield Curve Inversions
Treasury Curve Details
- There is now a solid wall of inversions. Every Treasury Note and bill from three-year down is inverted with the next lower duration.
- The 10-year yield is inverted with 6-month and shorter durations.
- The 30-year long bond dipped below 2.0% for the third time and is just 6 basis points from a record low.
Bond yields at the long end fell substantially today as Equities Hammered in Coronavirus Bull Trap Sea of Red.
Mike “Mish” Shedlock
Mish: Good evening, my name is Mish Shedlock, how can I help you?
Bond: Good evening, my name is Bond, Long Bond. I would like to make my market more interesting.
Mish: How would you like your market?
Bond: Shaken. And stirred.
Basic question I have:
If the economy is growing at a rate of $100 a month but the government is running deficits at $150 per month how is that not recognized as a functional recession? I know it isnt a literal one by definition but wouldnt it be by all common sense measures??
Because “recession” has no economic relevance at all.
It’s just another made up excuse for incompetent ruling Juntas, to confiscate more of superior people’s value add, by way of debasement.
Producing something which adds X value, is in no way any “better” for “the economy,” than ceasing production of something which destroys the same X. Force feeding ever more malinvestment in the pet projects of incompetent dilletantes with regime connections, in absolutely no way whatsoever, create any benefit.
More generally, economic “activity,” taken independently and in and of itself, is entirely orthogonal to economic growth.
Also, government spending counts toward the GDP, so in your example the “economy” would be growing at $250 a month, and the Fed monetizes it, so no problems.. move along now…nothing to see…
“Unfortunately, Mr. Bond did not answer. He just winked.”
…
Yeah, he’s coy with a multitude of head fakes.
But I got him loosened up years ago (a good bottle of wine will do that) and he confided yield will hit 1% (or lower?) before he’s through.
“It’s getting really old.”
Then leave. I don’t care one bit.
It’s curious that these idiots don’t understand they live in a ‘free’ world.
Unless you’re a ‘progressive’ of course, in which case, you need to adhere to the ‘manifesto’.
“It’s getting really old.”
…
I guess I missed something.
Mish, I have strong disagreement with you in several areas, but you are still far better than most economic bloggers. Keep up the good work.
I ended up deleting the “this is getting old” message. It was from Wagoner or Wagoner-like troll after reviewing that person’s replies. I deleted a mess of them.
I am going to do another post, but this is an important discussion from many standpoints. One of the few investment-related threads in long time.
Feel free to keep this chain going even after my next post.
I will give you another “black swan” sort of.
I get mocked for this but I firmly believe Trump is going to lose the election. I have a post of 10 reasons why, already written for over a week, but got distracted by coronavirus.
I am also tired of this TDS nonsense. All my anti-Trump posts cost me readership. I do them anyway, but there is only so much I can do before I have to stop for a while.
And I did vote for him over Hillary and would do so again.
I see the democrat side coming down to Biden v Sanders or Bloomberg v Sanders. I think it will be a tight race between Biden/Bloomberg v Trump. Trump supporters will show up and vote. Sanders voters won’t show up for Biden/Bloomberg, making it a tight race. I actually think Sanders can beat Trump if he tacks a little more to the center after the nomination. Otherwise it will be a tight race again when Biden/Bloomberg voters don’t show up.
I see the market shrugging if Trump or Biden/Bloomberg win. Maybe even a big bounce for Biden/Bloomberg. Both very pro finance industry with a greater measure of political stability.
Sanders wins and the market tanks. But maybe providing a good entry point.
Those interested in Medixall MDXL can find out about it here
It is illiquid so do not try to buy shares.
In short, the idea is based on delivering competitive bidding to the market starting with things like MRIs, Dental, etc. I like the concept and eventually made a big bet on it.
Thanks Truthseeker.
I cannot explain why, but I latched onto this one right from the beginning. I dissed the bird flu stuff big time.
I am in some illiquid plays right now. I mean extremely illiquid. Private placement stuff only for accredited investors. One is medical, the other CBD related.
They both may become liquid within months. Here is one of them: MDXL. In at a dime. It goes many days without trading a share so any price you see is not likely to be be accurate. Entire float locked up by private placement accredited investors.
The S1 is finally filed after 3 years of waiting, but not yet approved by the SEC. I am one of the largest shareholders. You can find my name.
Those shares are are at a dime,
That is one of two very big (for me) bets and I believe both will pan out.
Looking globally, I strongly suggest outside the US. I like Japan.
I am in Japan now, some yen-hedged and some not.
To the extent any equities should be acquired at current valuations, HEWJ is at a relatively good entry point. Since mid-Dec it has significantly underperformed US broad markets.
Sechel is correct on a key point. Real rates are hugely negative and have been for some time. I have some charts to prove it. Depends on what one thinks inflation is. But my charts fully explain the bubbles.
Thinking about sending it to the WSJ but they have ignored a half-dozen articles if not more of my previous attempts.
WSJ is a mouth piece of WALL ST. Mostly they let more bullish comments go thru compared to bearish/negative ones. I have to constantly challenge why my comments are delayed/held up. some times it works and some time not.
I do post your some of the comments at WSJ with acknowledgment to mish talk. Thank you for your insight observation and articles!
Treasury yields have been manipulated artificially lower by QE which has created a sort of risk safety net so they’ve been in a bubble as well. As the bear market sets in, significant upward pressure on rates & yields seems unlikely. However if equities fall substantially people will have had enough and will begin to disinvest from their funds. This might make those funds forced sellers, & some of their holdings will be in fixed income, so they’d have to sell bonds as well. They couldn’t just sell equities because their weighting’s would get out of alignment. Something to watch maybe, what do you think?
There is a perfect STORM forming for over a year!
Record amount debts – auto loans(over 1 trillion)along with defaults. Same with record Student loans over 1.6 Trillion, revolving credit over 1 Trillion with default starting
Deficit 1T yearly DEBT over 23 Trillions
Macro Economic indicators all flashing RED – Baltic index, train shipments, PMI etc
European Banks are insolvent – check out the chart of EUFN and DB?
Chinese DEBT is almost out of control but no one to admit it!
Famous Bufett’s market inducator MKT cap to GDP over 150%
marketwatch.com/story/do-not-buy-the-dip-warns-investor-who-says-a-brutal-bear-market-looms-2020-01-30
Yeh the Corona virus – BLACK SWAN wasn’t on any one’s 2 weeks before!
This is an interesting article too.
I do not believe US treasuries are in a bubble. Watch what happens to yields when recession hits.
OTOH: Japan bonds are a bug in search of a windshield. That will be an amazing bet at some point, but it has been a graveyard for years.
Yes I agree with you regarding yields and recessions, more often than not. However , its not unheard of for both bonds & stocks to fall together. In the early 1970s there was a bear market in both, although circumstances were very different then. Even if there isn’t a US Treasury bubble now, the Feds actions have resulted in them being lower than otherwise. Don’t misunderstand me, I’m not suggesting treasuries will fall as well this time, it’s just me pondering different scenarios.
“I do not believe US treasuries are in a bubble. Watch what happens to yields when recession hits.”
…
+1000
Asking Wall St to listen to an outsider is like thinking you can submit your own original work for consideration of a Grammy. It’s their system, owned by them, run by them for their benefit.