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Iwog was early and I might be too.
Rash... I know.
Otherwise, hold onto those DRIPs (& no, not GE or Heinz) because that 4% dividend will spike to 8-10%, which will nearly double one's equity holdings during the downturn.
Heraclitusstudent saysIwog was early and I might be too.
Of course you’re correct that such things are cyclical. And that timing is everything.
I missed the real estate bottom by a couple years because I was thinking pure economics. That particular person actually set me straight just in time to make some money in the market.
Just straight cash?
CBOEtrader saysJust straight cash?
Long treasuries and tax free municipal. Waiting for yields to bounce back a bit.
You might be right
Or you might be wrong and miss out on 15% gain this year lol
Careful there homie. Treasuries fall in value as rates rise.
When the Duck said cash, it meant bonds
0ba4 saysWhen the Duck said cash, it meant bonds
Not just bondz. CA TAX-FREE MUNI Bond FUNDZ! WITH LEVERAGE! Who can forget NAC? How soon they forget.
In all fairness, I believe he used NAC in the trusts he managed for generating cash.
Appendix A: In 7 out of 9 past times this indicator fell to 0, recession ensued.
10yr treasury rate will probably fall to low 1% in case of recession.
You are right, there is a risk. But remember: no one is paid not to take risks.
Overstaying the rally is a real risk too that becomes larger as the market climbs.
Even if there is a bounce back, it will likely not be for too long until the recession actually comes. So I lose a bit of upside: I say it becomes picking up pennies in front of the steamroller.
There just comes a time when you need to roll your dice.
Iwog did it. Turns out too early.
I do it now. We'll see.
talk about playing w fire, wow
CASH! is wonderful but by the end, the only currency anyone will care about will be belt-fed ammo and YAM!s.
The understated engine of this cycle has been the recovery of housing, driving a stock market obsessed with tech. Housing prices are now slowing. That fuel is spent.
Trees do not grow to the sky.
Trump's tax cut is spent too. Sugar high.
This situation is nearly unfixable, so when the house of cards comes down it will blow out spectacularly.
Appendix A: In 7 out of 9 past times this indicator fell to 0, recession ensued.
I dislike "technical analysis" but this is one chart is fucking ugly:
If anything, the bottom on this graph would indicate that there’s six months until the recovery.
As most readers of this article are probably aware, the 10-year minus 3-month US Treasury yield curve has recently "inverted." There has been a flood of commentary in the financial media (including over 20 articles on Seeking Alpha) with pundits claiming that this inversion "signal" portends an imminent recession in the US and that this forthcoming recession portends an associated major decline in the stock market.
At the very outset of this article, I want to make it clear that my detailed research suggests that the 10Y-3M yield curve is not a good predictor of recessions. Nor is it a good indicator of draw-down risk in an investment portfolio.
This signal extracted from this particular yield curve, based on inversion, generated some false positives in the mid-1960s, many false positives all throughout the 1980s and 1990s, and a false positive around 2005. Furthermore, using inversions of this yield curve as a "sell" signal in an asset allocation model would have produced many trading "whipsaws" and poor investment performance.
So which, if any, yield curve should be used for purposes of recession forecasting? Many different yield curves - there are hundreds of possible maturity combinations that can be used - could be used to extract a recession signal that is derived from inversion of that particular curve. As it turns out, researchers have discovered that inversion of the 10Y-3M yield curve has apparently been - and I use this term intentionally - a pretty good lead indicator of recessions.
Proponents of the 10Y-3M yield curve inversion signal frequently claim that this indicator has predicted 7 out of the last 7 recessions. While this statement is arguably accurate, it can be a bit misleading unless it is qualified. First of all, using daily price data, the 10Y-3M yield curve produced a false negative in the late 1950s. Second, as can be seen from Figure 2 above, the 10Y-3M yield curve inversion signal produced false positives in 1966, 1998, and early 2006. If these four failures were taken into account, the track record of the 10y-3M yield curve inversion signal would only be 4 of 8. Proponents of the 10Y-3M inversion signal generally suppress the latter two false positives by using monthly or quarterly data. Although this practice is questionable, for purposes of this article, we will go along with this assumption. Using these criteria, the 10Y-3M inversion signal has a track record of 6 out of 8 - and 6 out of the last 6. This seems like a reasonably good track record for a leading indicator, from a purely statistical point of view.
But there is a critical question that is rarely if ever asked: Is there any solid theoretical or conceptual basis for using the 10Y-3M yield curve to forecast recessions? Is there any solid theoretical or conceptual basis for preferring this yield curve to any other yield curve? The answer to this question is: No, there isn't. As I will be discussing at length in Successful Portfolio Strategy in the next few days and weeks, from a conceptual point of view, there is very little theoretical or conceptual support for using yield curves at all to predict recessions. Furthermore, to the extent that yield curves are used at all for predicting recessions, there is definitely good conceptual reasons to use yield curves other than the 10Y-3M.
[...]
What Has Historically Happened to The Economy and Stocks After the 10Y-3M Yield Curve Inverts?
Although there is little or conceptual justification for using the 10Y-3M yield curve as a basis for predicting recessions within a 6-to-18-month timeframe, we will play dumb for now and simply take this indicator at face value in the way that it is employed by most of its proponents - i.e. as a leading indicator of recessions. What has historically happened in each of the last 8 business cycles after the first inversion of the 10Y-3M yield curve? Note that we use monthly data in Figure 3 below in order to filter out false positives in 1998 and early 2006.
Let's first look at what has historically occurred to the economy after the 10Y-3M yield curve has registered its first inversion of the business cycle. The first thing to note is that the range of outcomes is quite wide. From the date of the first yield curve inversion in a cycle until recession, the time elapsed ranges from 4 years to 6 months. Including only the past 6 cycles, the range is 17 to 6 months.
Now, let's look at what has historically occurred to stocks during this time. The first thing to observe is that cyclically-associated bull markets tend to continue trend higher for some time after the inversion of the 10Y-3M yield curve. The median time from the inversion until the end of the cyclically-associated bull market (and the start of a cyclically-associated major drawdown) was about 11 months. The median upside of the S&P 500 until the peak of the cyclically-associated bull market cycle is reached was 16.03% (not including dividends).
The implication that can be derived from this analysis of the historical data is that a yield curve inversion does not signal an immediate end to the US economic expansion. Most importantly, the inversion does not signal an immediate end of an ongoing cyclically-associated bull market. Indeed, historical precedent suggests that after an inversion of the 10Y-3M yield curve, the S&P 500 is likely to register fairly significant upside until the peak of the cyclically-associated bull market is reached.
[...]
However, if one believed that the 10Y-3M inversion signal was significant, and took it at face value, this is how I would go about thinking about how to apply it to the present situation:
The data on yield curve inversions is divided into two categories: A) Yield curve inversions that happened before major cyclically-associated drawdowns; B) Yield curve inversions that happened after major cyclically-associated drawdowns. As stated earlier, major cyclically associated drawdowns have always occurred after the 10y-3M yield curve has inverted - unless there has been a major macroeconomically significant shock which has imperiled the economic expansion.
[...]
Relating this to present circumstances, it should be noted that there have been no major macroeconomically significant shocks that have imperiled the ongoing business cycle (and which the yield curve failed to properly discount). Therefore, the current situation of the US stock market most likely falls under the first category of yield curve inversions - the US stock market is in a situation in which the end of the cyclically associated bull market is likely to occur significantly after the 10Y-3M yield curve has inverted.
How much after the inversion of the 10Y-3M can we expect the current cyclically associated bull market to end? Based only on the historical experiences with yield curve inversions, a reasonable expectation would be about 11 months, with a pretty wide margin of error.
[...]
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I think the best we can hope at this point is 1 year of slow growth and a volatile market before some kind of recession.