Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : US Inflation and What To Do About It -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (917)	3/17/2019 7:01:55 PM
From: RetiredNow	Read Replies (1) \| Respond to of 1504

Well, I definitely think that this is a true phenomenon, but I think Maher doesn't represent fly over America the right now. They don't want to BE the Democrats. That's false. Most are disgusted by the Democrats and their loose and low values and questionable morals. I'd say they definitely feel screwed, that the system is rigged against them, and that the elites have done the rigging. They are right on all points. But they seem to be voting mostly for more Capitalism and less corruption, which is what Trump is trying to deliver to them. The Left has maybe diagnosed the problem...kind of...but then the solution they have proposed, which is moral ambiguity, legalization of pot. gender fluidity, and Socialism....well, it all just seems like a foreign planet to Les Deplorables. I personally wake up some mornings, turn on the TV, and don't recognize my country anymore. The Democrats have really gone off the deep end. So no, they don't have much chance to recolonize the Red States, as Maher put it. Rather, I think the Dems are losing the center. Centrists and Moderates don't recognize the nihilistic chaos that the Dems are proposing either. I think everyone is going to be surprised in 2020 when Trump gets an even bigger election win that the first time around. Then watch the wailing and gnashing of teeth among the left when that happens. The only chink in that prognostication is the timing of the recession. If it happens soon, then we can expect it to be short, sharp, and done, with a refreshing growth surge to give Trump a tailwind back into the Oval Office. If the recession happens next year, then that could be very bad for Trump. It also depends on what the Fed does. If they go dovish between now and Nov'20, then I'd bet Trump wins. If they go hawkish sometime later this year or early next year due to inflation concerns, then we'll see the recession in 2020 and maybe Trump doesn't get re-elected. Too many variables to see clearly right now. We'll have to re-assess closer to the middle of this year and see where we stand.

To: John Vosilla who wrote (917)	3/21/2019 4:38:29 PM
From: RetiredNow	Read Replies (1) \| Respond to of 1504

US Yields Could Still Have Quite A Bit More Downside Authored by Bryce Coward via Knowledge Leaders Capital blog, To the dismay of many observers, US treasury yields have been dead as a doorknob despite the 20% rally in stocks over the last three months. In fact, the US 10-year yield is on the verge of breaking below the 2.56% level it reached on January 4th when recession concerns were flaring. This obviously begs the question of what US yields are sniffing out that equities are not? It’s a fair question, but the answer isn’t necessarily one that results in a binary outcome of stocks up>rates up, stocks down>rates down. In other words, rates can perfectly well head lower even as stocks chug higher if the right mix of declining growth and inflation is commingled with accommodation monetary policy. Indeed, that is exactly what we got in early 2016 when 10-year rates fell from 2.32% to 1.36% over the span of six months while stocks rallied by 17% from the February ’16 lows into July of that year. That setup looks similar to today and several leading market indicators are telling us so. First on the docket is Chinese economic activity. Chinese economic activity is so important because changes in Chinese growth accounts for the bulk of the delta in global growth. China is also located towards the beginning of the global supply chain and so Chinese economic activity leads US economic activity by a good bit. Chinese economic activity is still falling and the most cyclical of leading indicators is saying growth in China will continue to wane for sometime. Here we show new Chinese export orders with a seven month lead overlaid against the US 10-year treasury yield. Much like 2016, this indicator is telling us that US growth, inflation, or both will be slowing for the foreseeable future and that dynamic could ultimately be reflected in much lower US rates. Cyclical indicators in the stock market are also telling us that US rates could head lower. Here we plot US yields against the relative performance of small cap vs large cap stocks. Small caps tend to be more sensitive to cyclical changes in the growth outlook than either large cap or interest rates. Thus, small cap relative performance to large caps often gives us a 3-4 month advanced tell on the direction of rates. Much like early 2016, small caps just can’t seem to find their footing here despite the substantial easing of forward guidance by the Fed. This suggests to us that rates could have considerable downside through the summertime at least. Finally, it’s useful to overlay econometric and market indicators against positioning. After all, if the whole market is on one side of the boat then the positioning effect alone could overwhelm more fundamental drivers of value. So, in the last chart we plot US yields against speculative options and futures positioning in the US 10-year note. The red line showing the net position of speculators is plotted on the right, inverted axis. We note that at major turning points in yields the speculators tend to have accumulated extreme levels of short or long positions. For example, as rates were peaking back in the middle of 2018, the speculators were net short US bonds (betting that rates would continue to rise) by the largest amount on record. At that time, the speculators were all on the same side of the boat and that helped put a cap on rates. In contrast, speculative positioning in bonds is currently neutral, suggesting rates could continue to fall for quite awhile until the broad market positions itself for even lower rates.