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Golden Shower

Yield Curves Invert

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Ahhh - u beat me to it!

Have canned my post (I started, then went to make a cuppa) - added my post below

"As has been pointed out before, an inverted yield curve is virtually always a pre-cursor to recession. This afternoon, the US yield curve went belly up. Some 'analysts' are now saying IRs went up too fast too soon etc. However, we all know that recessionary pressures were not allowed to work themselves through the first time around. I suspect they will have another bash in 2006. Is there any reason why we shouldn't follow the USs lead?"

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are you sure????

2yr yields 0.01% less than 10yr

not exactly inverted yet is it??...I'd say flat.

granted it's getting mighty interesting....if the fed raises again then we could be looking at the yield curve either mildly inverting or breaking up as the dregs of the old bond bull market get flushed out.

I'm still in the "threat of inflation" camp which sends yields higher....along with IR's.

...if it's any use I heard that anheuser-busch(they make budweiser),are looking to crank up prices.

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I'm still in the "threat of inflation" camp which sends yields higher....along with IR's.

...if it's any use I heard that anheuser-busch(they make budweiser),are looking to crank up prices.

that's bad, things get depressing and the price of a beer goes up just when u need it!

the US yield curve did invert for the first time in this cycle this afternoon promting a sell-off in US equities - the significance is that every time this has happened previously (with 1 exception), recession has followed

i suspect our market will hold up until new year due to the usual desire to inflate bonuses and the mining stocks in the ftse but i wouldn't be surprised if we had a bit of a sell-off in january

warning - my past performance at financial analysis as detailed on this website is most likely a guide to future performance - anyone who puts my opinion into practice would probably be better off sending me a blank cheque - the result will be the same but it will be a lot quicker and less painful

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Some newspapers in Australia today are running a story which basically says the odds favour a recession and that present conditions are typical of those seen immediately before a recession.

Unfortunately it doesn't seem to be online so I can't link it. I take the timing of the article between Christmas and New Year as being a gentle way of letting the cat out of the bag and being able to say "told you so" in the future without too many people actually paying much attention to it right now and thus no short term impact on the stock market etc.

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I think in the times we now live in an education in the yield curve is essentail.

You have to realise whats behind the reason, why higher short term interest rates and lower long term interest rates - an inverted yield curve matters.

When longer duration loans like mortgages and other long term capital investments are higher than short term rates for short term borrowing, thats a normal situation as the real rate is higher when you have to tye your money up for long periods.

Notice that this normal sustained yield curve situation, gives banks the ability to collect money while paying little interest in short term rates, yet they can sell lots of mortgages at the higher interest rates, pocketing the interest rate difference! So the longer this normal situation goes on, the better the outcome for the banks.

Thus when this situation reverses, as a central bank wants to control inflation from all this extra money, the banks profits tend to drop, as higher short term rates kick in, and they have to pay higher interest on short term deposits, but receive lower interest in long term deposits. So they make less profit.

However, the inverted yield curve exception seems to be in inflationary economies where inflation is underreported, or delibrately negative, like S. America.

In these economies, the curve can often invert, but it seemingly has no effect. Thats because both real rates and real long rates are negative - i.e. below the level of real inflation, and thus, the demand for loans (and the banks nominal profits) is still very very strong and keeps surging, as, in this situation, loans are simply a way of transferring wealth from currency holders.

In these situations, more and more people cotton on to this fact, and the supply of money grows into the double digits, until there is a massive crisis.

Thats when being a police state is very handy.

(In 2008 the Uk will be the worlds most advanced police state.)

Edited by brainclamp

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I still think there's a lot of silly money in the bond market,leftover from the savvy "advice" that some of the building societies etc have given in the past couple of years.

I'm for yields to go higher...the effect of this is to leave financially un-savvy folks with a mis-sold investment as the price actually drops......just like property.

they won't catch on for a few years yet either,because they think bonds are really safe.

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I still think there's a lot of silly money in the bond market,leftover from the savvy "advice" that some of the building societies etc have given in the past couple of years.

I'm for yields to go higher...the effect of this is to leave financially un-savvy folks with a mis-sold investment as the price actually drops......just like property.

they won't catch on for a few years yet either,because they think bonds are really safe.

I know banks seem to be pushing bonds at the moment (and lots of people believe them) - clueless they are

Edited by lowrentyieldmakessense(honest!)

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  • 333 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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