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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (155359)	8/12/2011 5:28:19 PM
From: ChanceIs	5 Recommendations Read Replies (2) \| Respond to of 206085

>>>2. yield curve flattening; with ST rates at nil, the recent radical fall in LT rates is reducing the difference between them. This is a proven recession indicator. I'm guessing we don't get an inverted yield curve before the next recession, just because LT rates can't go negative<<< Several thoughts; 1) I think that the shape of the yield curve is as close to a foolproof indicator as can be found on the firmament. Others disagree. I haven't looked at this chart in a long while - and shame on me. It is StockChart's dynamic yield curve. Drag your cursor on the S&P chart on the right and watch the yield curve change on the left: stockcharts.com Noticing the flattening and slight inversion in mid-'06. It stayed that way for a long time, until the young investing community started saying that yield curves didn't matter anymore. Then ....bam. Bam. Bam. Bam. 2) Note that the LT rates are much lower today than in '06. That may or may not mean much (#3 below argues that it does). But the argument that they can't get much lower is hard to refute. Can Bernanke take ST rates below nil , and the 30 yr below....say...3.5%. Nah. BB is boxed in a corner. No more room to cut. The dynamic yield curve makes this clear. Just look at the drop in the short term rates when the market crashed in '08. Note that they haven't moved up one iota since then. Notice at the far right on the right graph that the S&P has crashed again. Do you see any room to push those ST rates lower??? Go back to '07 and see how much room there was to lower. Then go back to today and see how much room there is. Do this three or four times to make the point sink in or so you see it in your dreams. 3) The kicker. The curve is already inverted, and has been for a while. Those negative ST real rates are not real. That is to say that if Bernanke stopped his insane machinations today, ST rates would pop up to about 5%. And then the curve would literally be inverted. Edit: Another way to look at this is to see that perhaps six months before the '08 crash LT rates started to drop. Think of the yield curve as two separate indicators - the ST and LT rates. LT rates dropping is a strong enough indicator in and of itself to forecast a recession - and man are they dropping. It would nice to have confirmation with the ST rates, but BB is screwing with them - so we will just be allowed to use one canary in this coal mine. 4) The banks are hosed - again. Actually, they never became unhosed. The banks have been living off of the unnaturally shaped and steepened yield curve courtesy of the Fed. The difficulty for the banks is that all of those high yield assets have/are maturing, and they can't be replaced with relatively high yielding LT assets. This is especially true after the last two weeks. The Fed for sure can't make ST rates lower. So this source of profit for the banks is vanishing like so many grains of sand through the hourglass. And don't let's discuss all of the naked CDS the TBTFs sold to the French and German banks against their holdings of Greek sovereign debt. One of those large banks is charging its big institutional clients to hold their money. They can't make any money loaning it out so they may as well just suck off of the depositors. Query of Ben Bernanke: What does it feel like to push on a string all day long for five years? Do you get repetitive stress injuries from that?

To: Jacob Snyder who wrote (155359)	8/12/2011 6:42:35 PM
From: Keith J	Respond to of 206085

I saw the briefing.com writeup on this "death cross" today where it seems like based on previous experience there is about a 50-50 chance of stabilization here or significant decline yet. Which will it be this time? KJ

To: Jacob Snyder who wrote (155359)	8/13/2011 5:07:33 PM
From: Jacob Snyder	4 Recommendations Read Replies (1) \| Respond to of 206085

recession watch: LT PE vs. rates: (Anyone who thinks valuations are now low, needs to reframe. Even after 11 years of falling stock valuations, we are still at the top of the LT range of 10-20.) news: Investors pulled the most money from global stock funds since 2008 in the past week bloomberg.com More executives at Standard & Poor’s 500 Index companies are buying their stock than any time since the depths of the credit crisis... ...Sixty-six insiders at 50 companies bought shares between Aug. 3 and Aug. 9, the most since the five days ended March 9, 2009, when the benchmark index for U.S. equities reached a 12- year low bloomberg.com This Time, Maybe the U.S. Is Japan: It is an analogy others have tried to apply before, but traders and investors say the similarities between the two countries have never been more apparent... ...William O'Donnell, chief Treasurys strategist at RBS Securities...now forecasts U.S. 10-year rates to reach 1.70% by the middle of 2012. online.wsj.com Following the Federal Reserve's dim outlook on the U.S. economy, investors have pushed risk premiums on high-yield, or "junk," debt in the secondary market to an average of 7.39 percentage points above comparable Treasury yields. ..."the market is pricing in a decent chance of a recession," said Michael Anderson, a high-yield strategist at Citigroup.By way of comparison, during the previous recession in 2001, risk premiums ranged between eight and 10 percentage points... online.wsj.com Americans saved 5.4 percent of their disposable income in June, the Commerce Department said this month.... It was 1.5 percent in 2005 bloomberg.com Confidence among U.S. consumers plunged in August to the lowest level since May 1980 bloomberg.com