Thread: Getting Nervous

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  1. #1
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    Getting Nervous

    The more I keep reading the less comfortable I feel about this economy. 10 year yield collapsing, a prolonged trade war and it seems to me that the economic decisions are being made for the purpose of fighting a trade war and winning an election. I think these short term policies are going to come back and bite us but there doesn't seem to be any asset class that is safe. I really hope we don't follow Europe right down the toilet.

  2. Stocks/Investments Moderator boneil's Avatar
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    #2
    I'm nervous about China and whats happening in Hong Kong. Can our economy not go into recession if China goes to crap.
    Thanos was the hero

  3. Stocks/Investments Moderator boneil's Avatar
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    #3
    Thanos was the hero

  4. Stocks/Investments Moderator boneil's Avatar
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    #4
    I don't know much but I think this is more about China and Hong Kong. If there is another Tienanmen square incident there will have to be a global response with sanctions, which would give us a global recession.
    Thanos was the hero

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    #5
    I would argue the global growth slowdown we are seeing will doom us before china will.

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    #6
    Quote Originally Posted by janky View Post
    I would argue the global growth slowdown we are seeing will doom us before china will.
    I agree. Seems hard to imagine growth in a global economy of which we are a part, when the global economy is slowing. Going to be a lot of empty high end condos in Miami soon as the foreign buyers dry up

  7. Stocks/Investments Moderator boneil's Avatar
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    #7
    I don't think a recession has ever been caused by worries of a recession.
    Thanos was the hero

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    #8
    The way I look at it is in the past when we had the inversion it was because we were struggling domestically and people were selling equities and buying bonds. This time I believe it is because the global money is coming here and buying debt, because we are relatively strong compared to everyone else. So, basically a flight to safety but internationally instead of domestically.
    Last edited by janky; 08-14-2019 at 03:49 PM.

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    #9
    Quote Originally Posted by janky View Post
    The way I look at it is in the past when we had the inversion it was because we were struggling domestically and people were selling equities and buying bonds. This time I believe it is because the global money is coming here and buying debt because we are relatively strong compared to everyone else. So, basically a flight to safety but internationally instead of domestically.
    The collateral issue though is why lend long on a mortgage when you can buy a 2 year note that pays more? Does this cause credit creation to contract?

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    #10
    Unfortunately I broke my crystal ball in 1974 and it has not worked correctly ever since. I do feel that the economy is in the contraction phase of this business cycle. I was a steel mill finance guy at the end of my working career (2016). I got to read many analysts predictions of economic growth (we used this data for long term forecasting). Many projected an extended economic recovery due in part to the extended downturn in 2008/09 but also because of the retirement of baby boomers along with other factors.

    Some analysts talked about the economic slowdown being extended because the huge population of baby boomers nearing retirement were making a last minute push to increase their retirement savings versus spending it. Likewise the recovery would be extended on the upswing as baby boomer worker replacements would be spending more in theory because they succeeded the higher earning baby boomer and they preferred spending over saving.

    One has to wonder if this spending curve has started to flatten for those baby boomer replacement workers.

    China is a huge concern that is a two edge sword. At my old company, Chinese steel on some product lines (but not all as southern US non Union steel mills were the largest threat to us on both price and volume) was a huge downside liability to our business. However on the other side of the sword, companies from China were our largest customers in tonnage and price on other product lines. With 1.4 billion people and closing in on 20% of the earths population, China will always be an economic factor.

    Business cycles are called cycles for a reason. Each phase of the business cycle doesn't last forever. So maybe, just maybe we are in the contraction phase. I maintain contact with some senior guys at my old company and they are saying they are seeing signs of a downturn.

    May I add, replacing those retiring baby boomers was one of our largest business threats to us and we did extensive succession planning to avoid serious problems. I was the plant manager at a smaller mill. Since the 1980's, the workforce was contracting for a bunch of reasons. But roughly 75% of the employees were hired in 1972-1975. So we were frightened on what would happen when they reached 40 years of service.


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    #11
    Quote Originally Posted by NitroZ7 View Post
    The collateral issue though is why lend long on a mortgage when you can buy a 2 year note that pays more? Does this cause credit creation to contract?

    I would agree. Banks cannot make money under the current spreads. That is why the xlf was hit extremely hard today in my opinion. We inverted for around 15 minutes and everyone is acting like a recession is a given. Former Fed Chairman Yellen sad she does not see a recession any time soon.

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    #12
    Quote Originally Posted by Chautauquanuy View Post
    Unfortunately I broke my crystal ball in 1974 and it has not worked correctly ever since.
    Need to hear that story sometime. The stories of before '74 and then how it broke.
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    #13
    Quote Originally Posted by boneil View Post
    I don't think a recession has ever been caused by worries of a recession.
    This has been my thoughts for a while. If everyone is thinking doom and gloom is coming, isn't that in fact partially preventing it (a large market drop?)

    People are more educated from past events, and with how information is spread and shared much easier now, it changes things.

    Look at how many people have been calling for a huge drop in the market for the past 5 years.

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    #14
    We will be in a recession in two months based on a recession gauge I follow closely. It is the scratch off index. When I went to gas station tonight every parking spot was filled up and the store was empty. Everyone in their car was busy scratching off their tickets. Was unbelievable.

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    #15
    . I do something similar. When I see multiple threads about how bad it is I know we are close to a bottom.

  16. Stocks/Investments Moderator boneil's Avatar
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    #16
    I see there is a lounge post about a recession and the markets. Between that and the CNBC markets in turmoil special tonight the bottom is probably in.
    Thanos was the hero

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    #17
    I just hope I can buy Boeing at around 250-260. The cash secured puts on Amazon are looking interesting also. Around 18.50 per contract at 1600 for the September 20 puts. I think that may still be a good buy long term if it gets assigned.

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    #18
    My dad called me asking my thoughts on the recession. I asked “what recession?” He said, “the one they are talking about on the news.” My word.

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    #19
    Unfortunately watching the ‘Talking Heads’ on TV helps to drive people into making poor financial decisions. These people don’t have more correct information than you, or I as to where the market is going. We are now in a time where algorithms have more control over the markets than anything. You hear a lot of talk about where a stock or fund has been, but where a stock is going it what we need, but who can tell that? A simple tweet on a Sunday night can send the market tumbling to oblivion.

    I think that a CFP who is fee based on your results, has your interests at heart, is the best guide through the turbulent markets that we deal with today.

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    #20
    This trade war is certainly heating up. I don’t think this thing gets worked out until after the election.

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