Fed Funds 5.25%
Two Year Treasury 5.17%
Ten Year Treasury 5.17%
30 Year Treasury 5.22%
OK, too much time with this curve could be a problem. An inverted curve is something I have been concerned with and writing about for a while. We have had minor inversions a couple of times and the consequence is not yet known (maybe there is no consequence coming) but an inverted curve that represents a deeper inversion for a longer period of time is a threat. This is something to stay in touch with. The history of this is not good. Nothing is certain but no matter how bullish you may be you need to always assess potential problems.
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9 comments:
If the inversion was large I would agree with you, but this minor technical inversion .08% is not a problem.
The Fed has been stable, predictable, and have not inverted the curve to cause a recession.
This comment left is not looking forward. I do not know what the yield curve will do from here, get sicker or healthier but that is the point, staying in touch with what it does in the future.
Keep in mind that if it stays exactly as it is right here for a year, that makes lending money unprofitable for banks.
Hussman's hedge fund was flat yesterday. Makes me wonder if periodic modifications in a cash position can accomplish the same purpose, namely to smoothe out the ride. If he was flat yesterday with a mega broad move up, he would probably be flat with the inverse??
looking forward this could be as bad as the curve gets or it could invert. It has not been determined yet.
My bet is this rather predictable fed sticks to 0.25% increases and only continues them if the market accomadates the fed rise (no inversion). If it looks like an inversion will occur they just will not raise rates.
If I'm wrong - sell. But right now I would not be surprised by new highs in the Dow.
Roger - are you still looking to hedge your holdings via short funds in light of this rally above the 200 ma?
Do note, this was fully inverted for the last 2 weeks. (30 year under the 2 year).
I have close to 20% in cash as is. Hedging with a short fund is not off the table. I think panicing higher would be a better scenario to add short funds but I am hoping the delayed double short ETFs from proshares come soon. 5% would reduce net exposure by 10% with out causing portfolio havoc. if we drift higher I am less inclined (right or wrong).
I'll post what I do, if anything.
An inverted curve, in the times it has mattered has taken months to have an impact. The whole thing is lending money becomes unprofitable. That takes a while to work its way in.
re Hussman
he has been saying he is fully hedged. I would imagine he would be flat today if the market crashed. Per his commentary he wants to sit out the market right now and just draw dividends/interest.
re Hussman...your comments on his resignation to sit out the mkt, tips my difficult decision...going into long weekend, it's going to be 75 percent cash..as you say, right or wrong...a great few days in exactly the right place and I better show some appreaciation.
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