Thread: The five root causes of a BEAR MARKET are caged for now!

Inverted yield curve.

Robo,

I must say I agree with your assessment of the future. There will be no inverted yield curve - the Fed has paused already - just not saying anything. I believe the market in its' prescient wisdom will begin to discount the rosy future and provide some formidable fireworks to the up side. Once it starts there may be very few roll backs for people to get aboard - international money may play a larger roll this time around - looking for opportunity. The Chinese are hurting the Euro zone economies and they don't quite know how to handle the competition from trade. Regards,

Dennis

Yield curve is all ready inverting.

Overnight 3%

6 Month 2.98.

Spread between overnight and 10 year is .97%

100% of the time inverted yield curve has led to recession.

DMA,

You are correct about the possibility of a recession - if the yield curve inverts. But we are a long way from that point yet. I don't think AG has any plans to ruin his legacy by instigating a recession - if anything he may become concerned about the possibility of inflation going to zero - rather like the Bank of Japan. The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

I don't mind seeing folks trapped in the shelter of the G fund, but I certainly would not like to see them trapped in their homes. That is the risk of the current real estate market - you can get in, but may not be able to get out - the liquidity may dry up if AG is persistant. I don't think he wants to hurt the country or the econnomy.

Now I know that Yogi and Smokey have different ideas - but they can run - they just can't hide. OK?

Birchtree wrote:

The Chinese are hurting the Euro zone economies and they don't quite know how to handle the competition from trade. Regards,

Dennis

Keep in mind that as our dollar gains strength, so too does the Yuan.

Birchtree wrote

The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

Real year-over-year growth of M-2 is (0.8%), versus 0.8%lastmonth.

M-2May 2005 May 2004 Y-O-Y Changes Real Y-O-Y Changes

6,460.1 6,289.8 +2.7% - 0.8%

Data in Billions


Real changes adjusted for the consumer price index increase of 3.5% for the 12-month period through April 30, 2005.

The Masestro will not let us down........................

Birchtree wrote:

You are correct about the possibility of a recession - if the yield curve inverts. But we are a long way from that point yet. I don't think AG has any plans to ruin his legacy by instigating a recession - if anything he may become concerned about the possibility of inflation going to zero - rather like the Bank of Japan. The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

Birch,

I agree with you in part. Remember in Feb when Greenspan was worried about the condundrum? It is worse now.

What is going to happen next week with the 5 and 10 year auction the yield will spike on the 10 year and stocks will fall.

G fund is best right now as a wait and see vehicle.

We may have a bounce on Monday and Tuesday due to light economic news. I amnot sure about the trade balance report. But the five year auction is at 2pm.

This is a good week to be in the shelter. Will get .01 on Monday and wait and see.

I believe they are going to extend Greenspan until private accounts are established.

We just have to be patient and keep communicating.

Good day. DMA

robo wrote:

Birchtree wrote

The Fed has done their job and now should rest and admire their work. The M2 supply has been trending down since they began raising rates and is about ready to go negative.

Real year-over-year growth of M-2 is (0.8%), versus 0.8%lastmonth.

M-2May 2005 May 2004 Y-O-Y Changes Real Y-O-Y Changes

6,460.1 6,289.8 +2.7% - 0.8%

Data in Billions


Real changes adjusted for the consumer price index increase of 3.5% for the 12-month period through April 30, 2005.

The Masestro will not let us down........................

Keep in mind everyone is purchasing U.S. treasuries further pushing the yield down.

Who wants to own Euro bunds right now?

Japan 10 year bond is 1.21%

You get to go after the yield for retirement accounts.

DMA

DMA,

I can see clearly now, the rain has gone. Honestly, the problem is that we are most likely heading for a yield shortage - where no one can make money in the fixed account markets. The only casino in town open for a better return will be the stock market - where dividends will be increasing - and capital gains will be available.

I remember in the early 80s when you could have bought a 30 year Treasury bond for $50 with a yield of 15%. That 15% was good for a life time - the long bond went to 105 or there abouts. Inflation was at 13% - and no one thought it would ever change. Enter Paul Volker to ruin your business and put you into serious chapter 11

Greenspan does not want to hurt you, especially if you own a mortgage with a variable rate financing that comes due in spring 2006. 60% of the mortgage money lent in the last 2 years has been variable rates. A house like the shelter does not produce income unless you are a landlord. Your costs only increase as the taxes go up. Smart money will use any built up equity with a variable interest rate that also happens to be tax deuctible, to take out an equity loan to buy income producing stocks. This is not speculation - only good money management. Interest rates have paused- let them eat the 3.98% bond all the way down to 3.5%.

I cannot fathom why anyone would cling to one piece of data (a yield curve) and use that and that alone to determine whether or not we are heading into recession.

:%

Mike because 100% of the time of yield curve inversion we have had a recession.

Remember the birth/death rate for the job created 207K with a job report of 78K that means a next lose of 132K.

You will not hear that on CNBS.

Hedious accounting that has started since 2000 is covering up a lot of the rotten core of this economy.