tyb/s
STFU
The Ghost Of 2001
Yield curve denial (Op-Ed)
By now you’ve probably read a gorillion-edit-opinions on the inverted yield curve and seen a ton of analogs being discussed. On the yield front the general bullish consensus seems to suggest to simply ignore it. Like everything else. On the analog front I see references to examples such as 2016 (the earnings recession will be temporary) and 1994 (the yield inversion is a fake out and it won’t matter) and similar. The general consensus: Ignore the inverted yield curve, buy stocks.
__________
(they ALWAYS say that- everything just fine and don't worry-it's your money. Do not let anyone tell you what to think or do with your money)
__________
My position remains: More open-mindedness and less certitude. How can anyone actually know what is to be ignored and what isn’t?
I suppose if the argument is simply that central banks are dovish and that is good enough then perhaps that is good enough:
No ECB rate hike in 2019.
Probably no rate hike here either, and a coin flip for a rate CUT.
China is stimulating like crazy.
Japan is Japan.
Brexit is a 2025 story. (disagree with this but no matter)
And perhaps it is. I don’t know. It’s worked for 10 years, maybe it will work again.
Maybe central banks can once again render all negatives moot.
(not this time) The macro wheels are turning.
So an inverted yield curve is bullish and you should buy every dip? Let me at least test this theory by looking at a case a lot less mentioned.
Last year I mentioned the 2000/2001 case quite a bit-see also Imbalance.
(also look up Long Term Capital Management or LTCM that habbened just before-it certainly played a role in the following example)
What was so interesting about 2000/2001? We had a blow-off top move in tech, markets made a major top, there were multiple 10% moves and an increase in volatility and then something unique happened: A yearly low in December. Sound familiar? It should as the ghost of 2001 is making appearances all over this market.
Back then I said, following this analog, we could see a multi-week rally emerge from the December lows and it did. This one here going even farther than back in 2001.
Let me say upfront here, I’m always cautious with analogs because no situation, economy or market is the same and things always change, hence nothing is like for like.
But in light of the similarities and the now found certitude that an inverted yield curve is something to ignore let’s take a quick peak here how conducive that yield curve inversion then was to buying stocks.
Here’s the current situation: Cap 2
We had a blast off in January 2018 followed by a 10% correction, a top in September, followed by a 20% correction and now a 21% rally for a, currently, lower high, all the while the yield curve flattening and now resulting in an inversion.
There was a little fake out inversion following the March 2000 top, but then the inversion really got started in July. Yes there were rallies even in the 2 months following the inversion, but as should be clear markets started trending down following a lower high. The recession officially started in March 2001, or a mere 8 months after the initial inversion and the rest is history as $SPX dropped 50% from its highs and didn’t bottom until late 2002.
In this scenario, where was the inversion of the yield curve bullish for equities? The answer is obvious: It wasn’t bullish for equities. Yes you had rallies, but they were opportunities to sell.
Now I’m the first to say I have no clue how this inversion here plays out. Maybe it’s an initial fake out as in April 2000 and that buys equity markets some more time in chopping around, and perhaps we get some more yield curve optimism as we apparently saw in the summer of 2000. Or maybe it all plays bullish as central banks are now dovish and that’s all there is to it.
And perhaps I’ll finish off with another little nugget here. Don’t forget we are at a point of cyclical low unemployment and, coincidental or not, personal interest payments are rising aggressively. Oddly enough that sudden acceleration in personal interest payments coinciding with a cyclical low in unemployment is precisely what we saw during the end phase of the previous two bull markets:
cap 3
(keep in mind that most FRB/Gov't data does not show what you , as anons, see/feel everyday rarely has it ever been accurate in predicting a recession lest they tell you what is really going on. When it does it is only for a short period of time-see leading up to and after the '08 crash)
Yield curve denial is the new climate change denial
https://www.zerohedge.com/news/2019-03-28/ghost-2001
Please see this link to learn about financial
terms that you may be unfamiliar with.
https://www.investopedia.com/
the "hardest", easiest thing here. Not that hard
Migrant ship capture: Maltese armed forces take control of hijacked tanker
Malta's armed forces have taken control of a tanker that was allegedly seized by migrants off Libya on Wednesday.
The tanker, Elhiblu 1, has docked in the Maltese capital Valletta. More than 100 migrants on board are expected to be handed over to police.
The migrants had been rescued by the ship but reportedly hijacked it after being told they would be returned to Libya.
They are said to have told the captain to head north towards Europe instead.
EU naval mission 'failed to end people smuggling'
Mediterranean migrant crossings 'deadlier than ever'
Sharp fall in illegal migration to EU. The man behind Italy's migrant drop
In a statement, the Armed Forces of Malta (AFM) said they had established communications with the captain of the ship when it was still heading towards Malta.
The captain said he was not in control of the vessel and that he and his crew were being forced and threatened by a number of migrants to sail to Malta.
A patrol vessel stopped the tanker from entering Maltese territorial waters, and a special operations unit team was dispatched to board and secure the vessel, the AFM said in a statement.
The team was backed up by several naval vessels and a helicopter.
The ship has now been handed over to the police for further investigations, the AFM said.
Malta's prime minister, Joseph Muscat, has said all international rules will be followed as police investigate the incident on the vessel.
It is not clear what will now happen to the migrants, but they've reached the destination they wanted, says the BBC's Southern Europe correspondent James Reynolds.
https://www.bbc.com/news/world-europe-47730693
probably bring that over anon. things a little hot now