Is The Bottom Almost Here?

[mattee2264]

Are yield curve signals valid when the Fed is manipulating Treasury note and bond prices to a large extent first by making massive purchases and now by starting to unload those purchases?

[Spekulatius]

30 minutes ago, mattee2264 said:

Are yield curve signals valid when the Fed is manipulating Treasury note and bond prices to a large extent first by making massive purchases and now by starting to unload those purchases?

I think the thought is that it does not matter why the yield curve is inverted, it only matters that it is inverted.

There are always different reasons why the yield curve is inverted and while the Fed is a player in this, they don’t necessarily control the bond market. However regardless of the reason , so far the yield curve inversion always has predicted a recession so far.

Edited February 10, 2023 by Spekulatius

[Gregmal]

Why is it that in the finance world, the word recession is like the ultimate punchline/gotcha/drop your jaw and say oh no! situation? Haven’t we lived through tons of them? I’m personally just kind of in the camp that recessions are part or life and subsequently investing and that great companies at good enough prices tend to come out stronger through each cycle. 

[dealraker]

Lower quotes are old age; you become invisible.  Avoid at all costs!  LOL, but you can't no matter what the effort.

[TwoCitiesCapital]

4 hours ago, mattee2264 said:

Are yield curve signals valid when the Fed is manipulating Treasury note and bond prices to a large extent first by making massive purchases and now by starting to unload those purchases?

 

Is there ever a time the Fed ISN'T manipulating the bond market with rate management and/or balance sheet expansion/contraction? 

 

Plus, right now they're contracting the balance sheet by NOT buying bonds and letting maturities/coupons rolls off. That should typically steepen the yield curve, not invert it, as it removed the biggest buyer from the system. So the yield curve inversion happened despite the Feds best efforts to steepen the curve with balance sheet management. 

 

4 hours ago, Spekulatius said:

I think the thought is that it does not matter why the yield curve is inverted, it only matters that it is inverted.

There are always different reasons why the yield curve is inverted and while the Fed is a player in this, they don’t necessarily control the bond market. However regardless of the reason , so far the yield curve inversion always has predicted a recession so far.

+1

 

The inverted yield curve strangles credit creation. That's what slows the economy. It hardly matters WHY or that it's the Fed who is manipulating it - it slows credit extension and the flow of dollars through the economy leading to economic slowdowns. It's probably not just a predictor of recessions - it's probably partly causal to them which is why it has a 100% track record of success. 

Edited February 10, 2023 by TwoCitiesCapital

[mattee2264]

How much of the disinflation and better-than-expected economic data can be attributed to falling energy prices? Early in 2022 the energy crisis was the talk of the town and was projected to plunge Europe into a deep recession and exacerbate the cost of living crisis. That doesn't seem to have materialised. But with zero COVID ending and US running out of strategic reserves to drain a soft landing could sow the seeds for its destruction by pushing energy prices to uncomfortably high levels. 

[changegonnacome]

2 hours ago, mattee2264 said:

But with zero COVID ending and US running out of strategic reserves to drain a soft landing could sow the seeds for its destruction by pushing energy prices to uncomfortably high levels. 

 

Sure taking oil for granted at these levels feels kind of foolhardy...............before Russia drops the 'big one' when its finally finally out of military options in the Ukraine/NATO war......why wouldn't it play havoc with global oil markets by turning off the pumps for a little while and see how the world likes oil at  $140.......it is the worlds 2nd/3rd largest oil producer.........yeah it would suck for their economy and they like those petro-dollars......but at the end of the day its 'war time' in Russia and sacrifice is part of war!

 

Its an unlikely move.......but I wouldn't put the probability of it happening in the outlandish camp.......it represents a genuine escalation path for them to attempt to break Western solidarity with Ukraine.

[Parsad]

8 hours ago, Gregmal said:

Why is it that in the finance world, the word recession is like the ultimate punchline/gotcha/drop your jaw and say oh no! situation? Haven’t we lived through tons of them? I’m personally just kind of in the camp that recessions are part or life and subsequently investing and that great companies at good enough prices tend to come out stronger through each cycle. 

 

+1!  That's the right attitude...I'm just saying a recession is coming.  Investors should maintain a strong balance sheet and live within their means whether there is a recession or not...just means being even a bit more careful if there is one.  Cheers!

[Parsad]

6 hours ago, TwoCitiesCapital said:

 

The inverted yield curve strangles credit creation. That's what slows the economy. It hardly matters WHY or that it's the Fed who is manipulating it - it slows credit extension and the flow of dollars through the economy leading to economic slowdowns. It's probably not just a predictor of recessions - it's probably partly causal to them which is why it has a 100% track record of success. 

 

+1!  Fully agree.  That lack of credit leads to failures. 

 

The first to fall in Vancouver...more to come around North America.

 

https://biv.com/article/2023/02/major-vancouver-condo-developer-seeks-creditor-protection?utm_source=BIV+Newsletters%2C+effective+July+1%2C+2017&utm_campaign=ca05f066ac-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_16cfea3308-f66769357a-[LIST_EMAIL_ID]

 

Cheers!

[CorpRaider]

6 hours ago, TwoCitiesCapital said:

 

I

 

+1

 

The inverted yield curve strangles credit creation. That's what slows the economy. It hardly matters WHY or that it's the Fed who is manipulating it - it slows credit extension and the flow of dollars through the economy leading to economic slowdowns. It's probably not just a predictor of recessions - it's probably partly causal to them which is why it has a 100% track record of success. 

 

Yeah I can't even get no more positive carry going with capital from my friend Peterffy.  Now I understand why the yield curve inversions slam on the brakes.

Edited February 10, 2023 by CorpRaider

[TwoCitiesCapital]

David Rosenberg on Twitter

 

If this were us looking in the rear view mirror, would it be obvious that a soft landing were coming? 

Edited February 14, 2023 by TwoCitiesCapital

[Gregmal]

 What’s the CPI print gonna be? What’s the Fed gonna say? Who friggin cares. Go fish.

 

[CorpRaider]

Thurston over here starting out on his three-hour tour.

[drzola]

Gregmai if your actual picture here, what type of boat our you running there?  Looks sweet and very nice? My father was a Fisheries and Water Sciences Biologist and a fishaholic.  He psased on a decade ago this spring.  Fished over 150 days a year easily in his prime.

[Castanza]

28 minutes ago, CorpRaider said:

Thurston over here starting out on his three-hour tour.

[Gregmal]

17 minutes ago, drzola said:

Gregmai if your actual picture here, what type of boat our you running there?  Looks sweet and very nice? My father was a Fisheries and Water Sciences Biologist and a fishaholic.  He psased on a decade ago this spring.  Fished over 150 days a year easily in his prime.

 

Try to fish with Paul every year when Im down in the Keys.

 

https://www.budnmarys.com/boats/relentless/

 

My dad used to have a boat like that. However much fun they are, theyre 10x the work. Can't beat the fishing though. In NJ I have a low maintenance Lund. 

Edited February 14, 2023 by Gregmal

[changegonnacome]

As they FinTwit meme says -

CPI ex-life continues to trend down 

 

If you've got a pulse, like eating food and want a roof over your head and consume services on a daily basis......it ain't over unfortunately.......and we are only now beginning to hit the inflation that doesn't get on a shipping container in China (thats gone and accounts for the 9% to 6% 'easy' fall)......but rather its the inflation thats Made in America and the result of manufacturing too much paper money to chase a finite and relatively fixed amount of domestic goods & services.

 

SPY earnings for Q4 continue to disappoint and we are getting close to a final accounting on these............there's a reasonably strong argument emerging that on a go forward basis SPY @ 4100 is now more expensive, relative to earnings multiple and risk free alternatives, than it was @ 4800.

[Spekulatius]

48 minutes ago, changegonnacome said:

As they FinTwit meme says -

CPI ex-life continues to trend down 

 

If you've got a pulse, like eating food and want a roof over your head and consume services on a daily basis......it ain't over unfortunately.......and we are only now beginning to hit the inflation that doesn't get on a shipping container in China (thats gone and accounts for the 9% to 6% 'easy' fall)......but rather its the inflation thats Made in America and the result of manufacturing too much paper money to chase a finite and relatively fixed amount of domestic goods & services.

 

SPY earnings for Q4 continue to disappoint and we are getting close to a final accounting on these............there's a reasonably strong argument emerging that on a go forward basis SPY @ 4100 is now more expensive, relative to earnings multiple and risk free alternatives, than it was @ 4800.

I think the bond market can forget about H2 2023 rate cuts. This will become obvious over the next few month.

[changegonnacome]

15 minutes ago, Spekulatius said:

1 hour ago, changegonnacome said:

 

I think the bond market can forget about H2 2023 rate cuts. This will become obvious over the next few month.

Totally - and heaven forbid the relatively benign energy tailwind we’ve had goes away…..China is 100% back at the trough of global energy consumption plus some games at the margins by Russia married to the SPR piggy-bank being raided a few too many times by a President on an election cycle and you could so easily flare up energy prices again.

[Gregmal]

Agree. There’s an awful lot of people who seem to be trying to make something out of nothing. Get on with your lives folks. 

[dealraker]

Yawl jest let me know's when's ta sell my Berkshire and AJ Gallagher...heer?  Otherwise I's 'a jest readin' stuff in dis heer one-upin'-one-another doomsday bragging contest on COBF.  

 

Actually I'm reading all you guys, trying to come up with some sort of a vote contest to post up so we can look back and see which one, and of course who (that person that gets 10 years of COBF boasting/expert time) gets it right.

 

Remember though, the certainty of it all: This inflation/recession time?  It is simply one ahead of next time.  Hell, if you are going to worry about this recession - then go ahead and worry about the next few too.

 

They are, after all, absolutely part of the intrinsic value of our favorite stocks here like Alphabet... right?   If, of course, that business even still exists "then"... yet something else we m-u-s-t worry about!!!

 

Meanwhile, on the Berkshire/Fairfax "crypto" (really???) forum it seems Bitcoin is a unanimous buy.  Ahh, the safety zone!

 

Being silly, nothing but silly.

 

 

 

 

 

 

[Intelligent_Investor]

Housing is gonna be a real pain for CPI prints. House prices are inelastic and won't come down unless its significantly cheaper to rent, but due to low supply, rental occupancies are high and so are rental prices due to lack of supply. I don't see a setup where the fed can hike out of supply shortages on the housing front.

[Gregmal]

Check @wabuffo updates. It’s all coming down and now they’ll grasp for OER to keep the gig going. It’s remarkable 

[nafregnum]

On 2/8/2023 at 7:30 AM, StevieV said:

 

I should clarify - I'm not asking for myself.  I'm just curious if there are career paths people have taken that they'd recommend.  The most common refrain from people seems to be: "don't become a ________".  I'd love to hear opposite examples.

 

You might like this -- the "least regretted" chart from this post:

 

 

[changegonnacome]

59 minutes ago, Gregmal said:

Check @wabuffo updates. It’s all coming down and now they’ll grasp for OER to keep the gig going. It’s remarkable 

 

Difference between coming down and it being at target - is I'm afraid night and day.

 

I mean I'm trending upwards towards being a billionaire........but I'm not signing the giving pledge next week......ya know what I mean!