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Post by FD1000 on Oct 19, 2022 21:00:15 GMT
As the U.S.10YR bond yield increases, its price decreases, so where are the buyers investing, but the stock market. Higher yields also make the U.S. dollar stronger. The above is my understanding. The FED has been raising its FED Fund rate and reducing its bond inventory, which contributes to what is happening to 10 yr yields and higher mortgage rates. It is in cash account - sweeping account mostly, waiting for the buying trend into the market. It is still profitable to remain in cash or bond CEFs or utility CEFs. Because, the utilities are making good money irrespective of the market trend. Here we go again. YTD, MM IS UP. CEFs are down. Simple math proves that anything with negative total return is worse than MM.
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Post by ECE Prof on Oct 19, 2022 21:14:55 GMT
Here we go again. YTD, MM IS UP. CEFs are down. Simple math proves that anything with negative total return is worse than MM. FD I know it. It is fine with me. It is ok to take some risk to make more money. After one or two years, the money lost can be easily made. By the time, it is very likely, people will start buying, and the prices will also go up. I am ready to wait. But, as far as equity is concerned, it is down right risky as the VIX is above 30. Even the 50-day MA of VIX has started moving up today. The red line of MACD is way up. I thought of shelling out some towards equity yesterday, but stopped. It is tempting, but the risk is too much.
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Post by Deleted on Oct 19, 2022 21:25:45 GMT
I agree about the market risk. It's like living near a dormant volcano not knowing when it will erupt. Some unknown will set it off sooner or later.
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Post by habsui on Oct 20, 2022 2:22:43 GMT
As the U.S.10YR bond yield increases, its price decreases, so where are the buyers investing, but the stock market. Higher yields also make the U.S. dollar stronger. The above is my understanding. The FED has been raising its FED Fund rate and reducing its bond inventory, which contributes to what is happening to 10 yr yields and higher mortgage rates. That is not completely correct. If you buy treasuries now, they yield over 4%. Thus, stocks are not as attractive. Further, stocks that have significant revenues outside the US get hurt by the strong dollar.
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Post by anitya on Oct 20, 2022 18:23:45 GMT
The longer a sideways or down trending equity market continues, many participants might start thinking one in hand (at 4.5%?) is a lot better than two (or many) in the bush! The only reason why this shift in thinking has not yet gained traction is the old habit of BTD. One of those Newton’s laws of physics. There have been precedences of 10-15 years of no gain in SPY.
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Post by FD1000 on Nov 2, 2022 20:39:22 GMT
Was anyone surprise by the Fed hike? Why? It was so predicted. MM pays 3+% 3 months treasuries = close to 4.3%
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Post by archer on Nov 2, 2022 21:50:49 GMT
I wasn't surprised about the hike today, but a little surprised by the market reaction. Why surprised? Because there was a sell off, indicating some holders were not expecting it. Or maybe they just wanted to wait until the last second.
Maybe the sell off had nothing to do with the hike, as it was pretty universally expected. While Powell didn't talk as tough as before about pain, he did say something that caught my ear, and perhaps fueled some selling. He said basically if they overshoot they can always fix their mistake by lowering rates. To me this means they will not concern themselves with lag time as he suggested. Instead they will remain aggressive until it's time to reverse rather than taper off or take a pause.
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mikes425
Commander
generally happy in semi-retirement and dividend income-land
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Post by mikes425 on Nov 3, 2022 2:03:20 GMT
Yes A little over a 1% down-in-one-day surprise here.
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Post by mozart522 on Nov 3, 2022 11:20:33 GMT
archer, A hawkish Fed Chairman Jerome Powell vowed to beat inflation and said the central bank may have to raise rates more than expected. As I heard this, the market went from up to 100bp down in about 15 seconds. Even higher rates than expected is about as hawkish as he could get. Don't be surprised if the next two days are brutal.
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Post by racqueteer on Nov 3, 2022 12:50:26 GMT
Don't be surprised if the next two days are brutal. Counting on it... The charts yesterday suggested to me that a short wasn't a terrible idea; so I bought some SQQQ, and I'm keeping an eye on it for a short (pardon the pun) trade.
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Post by FD1000 on Nov 3, 2022 13:10:45 GMT
As the OP, it still doesn't make sense to invest. Fed members are still hawkish. Interesting article( link): 1) Probably a mild recession (I don't care) 2) Another rate hike this year + possible small rates hikes in 2023... without rate cuts until 2024. ( link) looks like 0.5/0.75 at 50/50. So, if rates don't go down, it's not a surprise. 3) Valuation are lower but still are not a bargain at PE=19.5 4) In their Monthly Economic Outlook( link), Vanguard estimates that US large-cap equity returns will average a historically low 4.0% to 6.0% over the next decade. If correct, a five percent yield on US Treasuries is very attractive. In Figure #5, I used Vanguard’s mid-point estimate of 10-year returns and volatility to show returns versus volatility. The chart shows that Global Developed Markets have higher potential returns than US stocks which is due to valuations. FD: don't be fooled by valuation. LC value is attractive. SCHD( link) PE=13-14 is good. If LC make only 5-6% in the next decade, I prefer to own only bond OEFs. LT now sounds better. 5) Strategy: CTFAX, Vanguard Global Wellesley (VGYAX) Fidelity New Millennium (FMILX, FMIL). See ( article) Still in MM waiting for a good entrance. MM is catching very quickly to treasuries and give the flexibility to trade any day. MM paid me 30% more for Oct than Sep. Patience is the key. I haven't done a thing for months.
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Post by Chahta on Nov 3, 2022 13:29:51 GMT
It doesn't make sense; The violent rate reaction from the bond market after a planned rate hike. But it did move down a couple of days before.
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Post by Chahta on Nov 3, 2022 13:42:07 GMT
Don't be surprised if the next two days are brutal. Counting on it... The charts yesterday suggested to me that a short wasn't a terrible idea; so I bought some SQQQ, and I'm keeping an eye on it for a short (pardon the pun) trade. Not too bad....only UP 3.5%.
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Post by uncleharley on Nov 3, 2022 13:53:15 GMT
5.25% now.
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Post by racqueteer on Nov 3, 2022 14:16:01 GMT
Wish I'd bought more yesterday, but doubled up today to take a full position. Go Baby, go!
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Post by FD1000 on Nov 3, 2022 16:23:19 GMT
I don't like shorting, if you get it wrong, you lose twice. PQTIX may be a better choice. Cash is an easy choice. When the Fed raise rates, it means the following. The Dollar, UUP, has been good too. Shorting bonds, TBX, was also good. Both are now up 0.8%. I didn't do both.
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Post by mozart522 on Nov 3, 2022 22:19:41 GMT
It doesn't make sense; The violent rate reaction from the bond market after a planned rate hike. But it did move down a couple of days before. Well the reaction was to the chairman indicating that 5% may not be the terminal rate. Bond markets look forward.
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Post by Chahta on Nov 4, 2022 13:52:05 GMT
I hope ya'll got out yesterday.....
Nothing but the truth now.
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Post by racqueteer on Nov 4, 2022 15:27:36 GMT
I hope ya'll got out yesterday..... Unfortunately, no. Just about net flat on the trade, with the hope that my other holdings compensate to some degree. I thought we might get today out of it, and I'm somewhat surprised that a strong jobs number; meaning tightening for longer, would have made the market go the other way. Ah, well, best laid plans and all that...
Edit: Going the other way now; frigging market. Why can't it just be logical?!?
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Post by archer on Nov 4, 2022 15:43:40 GMT
It seems strange that employment would be so high over the past year or so amid lack of supply. I can see the service sector wouldn't be affected much, but what are folks on the assembly lines working with? Are there a bunch of guys standing around with their hands in their pockets asking "Where's the semmies"?
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Post by Mustang on Nov 4, 2022 15:51:51 GMT
The first thing to go is job openings. Next is short weeks. Then layoffs. A worker cannot file for unemployment if they are working short weeks. Unless the law has changed, to get unemployment the individual had to be actively looking for a job.
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Deleted
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Post by Deleted on Nov 4, 2022 16:14:11 GMT
The first thing to go is job openings. Next is short weeks. Then layoffs. A worker cannot file for unemployment if they are working short weeks. Unless the law has changed, to get unemployment the individual had to be actively looking for a job. Isn't the first thing to go the knees?
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Post by Chahta on Nov 4, 2022 16:35:38 GMT
I hope ya'll got out yesterday..... Unfortunately, no. Just about net flat on the trade, with the hope that my other holdings compensate to some degree. I thought we might get today out of it, and I'm somewhat surprised that a strong jobs number; meaning tightening for longer, would have made the market go the other way. Ah, well, best laid plans and all that...
Edit: Going the other way now; frigging market. Why can't it just be logical?!?
I was jealous for a few minutes.....
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Post by Chahta on Nov 4, 2022 16:40:44 GMT
It seems strange that employment would be so high over the past year or so amid lack of supply. I can see the service sector wouldn't be affected much, but what are folks on the assembly lines working with? Are there a bunch of guys standing around with their hands in their pockets asking "Where's the semmies"? Employees are still hard to come by. So employers will not let go willingly until holding on to them becomes too expensive. Think coming recession.
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Post by FD1000 on Nov 4, 2022 20:47:27 GMT
Unfortunately, no. Just about net flat on the trade, with the hope that my other holdings compensate to some degree. I thought we might get today out of it, and I'm somewhat surprised that a strong jobs number; meaning tightening for longer, would have made the market go the other way. Ah, well, best laid plans and all that...
Edit: Going the other way now; frigging market. Why can't it just be logical?!?
I was jealous for a few minutes..... As I have been saying for months, the markets are tricky, unless you are really a good trader, stay out. Several trades I made YTD were in the 2-4% within days. That's enough for me.
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Post by FD1000 on Nov 4, 2022 23:30:59 GMT
BofA sees 'Big Low' coming next spring; looks to small caps as 2020s continue to resemble 1970s(link). "In a note to clients, BofA argued that the Federal Reserve will need to see the economy dip into recession before it can end its tightening cycle. At that point, equities can enter into a bull market. "It’s easy to pivot when unemployment 8% & inflation 3% ... much harder to pivot when inflation 8% & unemployment 3%," the firm stated.
FD: the above is coincide with CME FedWatch tool ( link). ============================== Hedge fund Elliott sees hyperinflation, bubble and maybe worst market since WWII(link)."Predictions of how much stock, bond and real estate prices are likely to fall, top to bottom, and whether a mild or severe recession is likely, miss the point. The point is that an extraordinary confluence of extremes and problems have made possible a set of outcomes that would be at or beyond the boundaries of the entire post-WWII period," hedge fund Elliott Management says.
In a letter to clients, Elliott said that while investors look for further easing of financial conditions with a Fed pivot, only a severe recession can cut inflation.
Elliott, founded by Paul Singer, says the "world is on the path to hyperinflation, which is the direct route to global societal collapse and civil or international strife. It is not baked, but that is the path that we are treading."
"Investors should not assume that they have 'seen everything' on account of experiencing the 1973 to 1974 bear market and oil embargo, the 1987 crash, the dot-com crash, or the 2007 to 2008 GFC," the fund said.
The surge in U.K. bond prices that sent the pound (FXB) plunging and yields surging demonstrates that real quantitative tightening is not possible, Elliott said."
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Post by habsui on Nov 5, 2022 0:02:54 GMT
I chose door 1..
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Post by Deleted on Nov 5, 2022 0:05:35 GMT
One thing I learned in 2008 is that none of the market experts have any clue whatsoever. They have to write client notes because clients expect those notes.
It is truly monkey throwing Dart.
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Post by FD1000 on Nov 5, 2022 3:28:01 GMT
+1. And as usual, I will just follow my analysis. Where were these 2 "experts" months ago when it was clear to me?
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Post by FD1000 on Nov 5, 2022 13:18:16 GMT
One thing I learned in 2008 is that none of the market experts have any clue whatsoever. They have to write client notes because clients expect those notes. It is truly monkey throwing Dart. +1, but if you noticed, I sold to cash very early, while most experts didn't tell you. I also posted that VALUE is better than growth in 01/2022. That's the beauty of my system. KISS=keep it "simple stupid". The charts+trends are your friend, they tell you in real time what works. This is how much I "love" the experts ( link).
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