patrick.net

1.64% print right now on 10's

We have not be able to close under 1.64% for years and haven't been able to break 1.60% since Europe 2012 scare..

Here is the big test today

Here once again! 1.64% close

No where to run, next week is going to be the real deal

That kind of didn't work out

The yields are falling, but I would attribute this to the notion that pretty much everybody around the world had come to terms with the fact that every single important world economy and their leaders have embarked on a ZIRP or even NIRP policy for the foreseeable future together with their central banks, by any means necessary. Once you accept that, it is likely that the market can extend for quite a while and until you see severe credit defaults and bankruptcies en masse, yields will not rise (why should they if central banks lend at practically 0%?). Also, credit card debt has been on the rise again, so the appetite is there, maybe not as large as back then, but it will continue to accumulate. It is incredibly easy for somebody with a decent income to get combined credit lines of 50K-100K, and a lot of that can be rolled over at 0% APR for quite a while. What's not that easy is to stay away from the temptation.

How much bad debt can the central banks disappear?

Blurtman says

How much bad debt can the central banks disappear?

a lot. They started doing it in 2011 by increasing duration of their balance sheets.

Strategist says

Love it. Stocks go up too.

Not necessary. It did not happen on Friday. Yields went down. Stocks wend down. If 10 years go to 1%, S&P will have a 20% correction.

tr6 says

a lot. They started doing it in 2011 by increasing duration of their balance sheets.

It is also reported that China's central bank is eating up bad private debt. While this may offend free market purists, what is wrong with this approach?

tr6 says

If 10 years go to 1%, S&P will have a 20% correction.

Then banks will get hit, S&P falling 20% with oil back up will be difficult

Logan Mohtashami says

S&P falling 20% with oil back up will be difficult

Who said that the oil will not go back down to 30s if 10 years are at 1%?

Logan Mohtashami says

S&P falling 20% with oil back up will be difficult

Oil at 49 is at 2004-2005 level. Chevron was trading in 50s, not 100 in those days.

tr6 says

Back to yields discussion. It's not all income inequality and too much in the hands of the few. By your logic, rich people would only put money in real estate and not in bonds. So who's buying bonds? The central banks are a big part of it. So how does the Fed not matter which is your other argument?

It does matter - he knows it, just not willing to make an admission, the Fed is just there for your pure entertainment and not to influence yields.. You don't have to be Keynesian or Austrian to see the impact the Fed has.

Blurtman says

While this may offend free market purists, what is wrong with this approach?

You have to do what you have to do. We did it here, and everyone is copying the approach. It does increase income inequality.

tr6 says

Oil at 49 is at 2004-2005 level. Chevron was trading in 50s, not 100 in those days.

That's not what I am talking about

Energy declines in the energy sector where the big drag on the S&P earnings, with oil back up to $50 the bleeding Q4 2016 and Q1 2017 comps will be easy to beat as long as oil stays up here.

We have to respect the trend that most of the bearish people in this cycle have had the worst 8 years we have ever seen in 100 years of market tops or economic crashes.

I have never seen so many people badly wrong in my life...

Once you pull the curtain away you can see why

First it was Europe, Then It was China, Then It was Russia & Brazil, Then It was Greece and now its Bretexit

Oh those silly kids in those other countries, America always had to hold the world up.

Logan Mohtashami says

Energy declines in the energy sector where the big drag on the S&P earnings, with oil back up to $50 the bleeding Q4 2016 and Q1 2017 comps will be easy to beat as long as oil stays up here.

That may be true. I would like to see what happens to gas prices. Chevron was still charging 2.25-2.50 for gas in California when oil was below 30 in Q1. I guess if they are allowed to rip us off for the next few years then their earnings should be better year over year.

tr6 says

That may be true. I would like to see what happens to gas prices.

In 2009 crude got to 33, in 2016 to 25. Gas prices go to 1.61 and 1.72. Gas should have been below 1.50

Logan Mohtashami says

America always had to hold the world up

America has the luxury to be fairly isolated from global events, and it also has natural resources if necessary as well as innovation to tap into. I agree with you it's not a bad place to be, otherwise I wouldn't be here. However with these extended extraordinarily low rates people's mindset has shifted long ago from 'how much does that house/car cost' to 'how much is my monthly payment', and I have no doubt that many have over-leveraged themselves - even with fixed low payments - and will start to get foreclosed upon when the layoffs are starting again. Many heavily depend on sustained, i.e. 30 years of dual income to sustain their payments, which is simply unpredictable. Hiring is still good in the bay area, albeit slowing down, and venture capital has been drying up significantly. I maintain we will come in roughly sideways YTD (as it is right now), with a more interesting 2017 to follow.

mell says

America has the luxury to be fairly isolated from global events

100 million plus domestic workers that only work from domestic demand curves, not what happens in China, Europe, Russia or Brazil... that's the big key I think people missed

mell says

and I have no doubt that many have over-leveraged themselves

Up this away in the Seattle area, homeowners are loving it as the RE market is very hot. Bidding wars, escalation clauses, they're back. A lot of buyers are from China. In my hood, it is not unusual to see older and younger Chinese residents strolling around the hood at dusk. A lot of Indians (form India) buying homes as well, often with extended families as well. My question is - will HELOC debt get out of control again? I am starting to think this may be a rhetorical question, but if bank lending standards are on the conservative side, perhaps things can be managed. This time is different! It all goes to shit no matter what in a huge WW economic downturn.

Logan,

Do you agree that rich people should be buying real estate instead of bonds if rental properties are yielding 5% and 30 year is yielding 2.4%? If, yes then show is buying the bonds?

tr6 says

Logan,

Do you agree that rich people should be buying real estate instead of bonds if rental properties are yielding 5% and 30 year is yielding 2.4%? If, yes then show is buying the bonds?

They have and they're still doing show, cash buyers are still 15% above their historical norms. A lot of that rolls with the distress supply and we had a lot of them in this cycle, so it's not out of line to still have cash buyers this high still

tr6 says

If, yes then show is buying the bonds?

Damn auto correct. Who is buying the bonds?

One of the reasons why we have over 154 million working Americans and the highest job openings today ever recorded by any modern day mature economy is that we have grown our economy to a service sector while maintaining as the 2nd biggest manufacturing.

Some technology new creation jobs create a lot more jobs than other new tech sectors. So no boat is the same.

However, we don't dig with a spoon because a spoon while employing a lot people, would take us forever to do a dig...

We are going to be ok here in the U.S.

And with a little more federal stimulus, it just makes the cake taste even better

#USA

Well we are here!

Logan Mohtashami says

Well we are here!

It helps Microsoft finance their LinkedIn acquisition. LinkedIn CEO is super smart. He got Microsoft to bail them out right before their revenues start declining.

Sharingmyintelligencewiththedumbasses says

Will this time be different? hard to say!

154 million working

5.8 Million Job openings in America today in all sectors

Historical all time high for a mature country

Even manufacturing has hit a cycle high

The best is watching Rich Santelll you I know nothing on CNBC make an ass of himself for the last 7 years.

He doesn't know what he is even arguing anymore!

1.58

:o

errc says

1.58

:o

We actually were under 1.50% earlier in the year but that was intra day action and then it spiked back up.

Watch for the close and follow through, as long as this Bret Exit story is out there, it favors yields going down, but we are over bought short term

We look back what created the down their in yields

2012 = Spain default Fear
2015 = China turmoil
2016 = Bret Exit

2015 and 2016 is the most interesting because this is happening with rising inflation and ECI wage inflation hit a cycle high today at 3.5%

So, the world and negative rates are running the show and I would argue that this 1.60% is more telling on the world that the previous ones as inflation has picked up and oil has moved off the bottom 26

All Fun stuff!!!! :-)

One thing I have noticed live today at 1.61% 10's right now lenders are already changing pricing

Still no break, if it doesn't break down in the next 5 trading days, look for a reversal to happen and keep an eye out on big intraday moves that tends to happen at this level.

So far it's been orderly

def maybeRateHike: Option[RateHike] = { Janet.announce("rate hike soon!"); None }

For my buddy Logan:

NuttBoxer says

For my buddy Logan:

I believe cash balance is at a high not seen for some time or since a real major crisis