Thursday, November 09, 2006
The Dow continues to set new highs despite the inverted curve. TIMING THE MARKET points out that troop call-ups such as the one last Aug. 22 signal major investment opportunities. (See blog comment on Aug. 24.) It is well known that war stimulates the economy, and investors react to this news very quickly. You may want to stay with high-quality stocks until the curve narmalizes.
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11 comments:
In my opinion, the stock market action currently has little to do with the war, which to many, is old news already...and much more to do with Democratics retaking a congressional majority. The curve is very inverted, and the market is dangerous..in my opinion. I think people are now thinking..end of war. Given that the curve is inverted and that Tobin's Q is still high suggesting overvaluation, I'd be market wary. Problem is..the coming year is supposed to be the good part of the presidential cycle for the stock market..so we have a conflict. Also, yields are low and get lower as the market advances. So, what I am doing...is this... I have put the bulk of my savings into 6 month treasuries (which appears to be the sweet spot on the yield curve rate-wise)..and using interest generated to buy higher yielding but more risky stocks and other diversifying elements. It is slow going..but rather to be slow and on the plus side in this market scenario. Investor0329
If a troop drawdown does begin based on the democrats wishes in 6 or 8 months, what will this mean? Is the inverse of troop call ups being bullish true? I’m thinking that a pullout would lead to an economic slowdown.
I think the markets keep moving up for the simple reason that the Fed keeps printing money. Monetary inflation = stock market inflation. One day all those foreigners who lend us money to the tune of $2B a day and keep us afloat will wise up . .
HMMM...
Inverted yield curve would predict lower interest rates going forward..and you know the saying..when interest rates are low, stocks will grow...
I notice that divvy stocks are doing well...
An inverted yield curve predicts a recession first. Corporate earnings fall, PEs collapse and markets correct on average 20-30%. *THEN* the low interest rates help stocks take off. But I don't think I'd jump in before the risk of that recession thing dissipates . .
Conclusion: The yield curve seems to
be too murky a predictor to be useful.
As I understand it, every significant yield curve inversion has been followed by a serious slowdown/recession. So it doesn't seem that murky to me.
Tom,
Not so. Every serious downturn has followed a yield curve inversion BUT not every yield curve inversion has been followed by a downturn. Big difference!!
The 90 day average of the difference between the yield of the 3 month and the 10 year currently suggests a greater than 30 percent chance of a recession 4 quarters from now.
...david...
Put call ratio getting kinda bearish..is it not?
Come back Deborah - we're missing you. :-(
Dear Friends,
I'm back from vacation in sunny CA. I enjoyed seeing you talk among yourselves during my absence!
Deb
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