Tag Archives: Recession

Hong Kong falls into recession

The freedom-fighters continue to protest against the Communists in China, but it isn`t cheap. The Hong Kong economy shrank 2,9 percent YoY in the third quarter of 2019. They`re on the way down to recession for the first time since the third quarter of 2009.

The economy is declining while the government spending are growing at a faster pace. What a toxic mix. Government spending increased 5,3 percent while fixed investment declined 16,3 percent. Private consumption shrank 3,5 percent and exports of goods fell 7 percent.

The freedom-fighters in Hong Kong have used masks for months now, but today they celebrated Halloween. But the Hong Kong police fired tear gas into the crowd of masked Halloween protersters.

People in Hong Kong need to know that the rest of the world is supporting them, and everybody in this world must ask themselves what the value of money is compared to freedom? Readers of Shinebull.com know that money is worthless. Freedom isn`t.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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The wide spread between the 2-year note and the 10-year note is around 10 basis points which is the flattest since 2007

The stock marked plummeted on Tuesday with Nasdaq down near 4 percent. This is scary for many investors around the world. More scary is a quick look at the 2-year note that dropped more than 26 percent.

The wide spread between the 2-year note and the 10-year note is around 10 basis points which is the flattest since 2007. Bond prices move in the opposite direction of yields, and the spread between the 3-year note and the 5-year note have already inverted. 1-year note and 10-year isn`t near at all.

In a normal situation, the short-term bills yields less than the long-term bills, which means that investors expect a lower return when their money is tied up for a shorter period like 1,2 or 3-year notes. Investors require a higher yield to give them more return on a long-term investment.

If investors have little confidence in the near-term economy, the yield curve inverts. Investors demand more yield for a short-term investment than for a long-term one. They belive the near-term as riskier than the long-term.

In a situation like that, investors would prefer to buy long-term bonds and tie up their money for years in the long run even though they receive lower yields. The reason why investors do that is because they believe the economy is getting worse in the near-term.

An inverted yield curve is most worrying when it occurs with Treasury yields and that`s when yields on short-term Treasury bills, notes and bonds are higher than long-term yields. During healthy economic growth, the yield on a 30-year bond will be three pints higher than the yield on a three-month bill.

The reason why the short-term bill decline and makes an inverted yield curve is that investors believe they will make more by holding onto a longer-term bill than a short one. They think they need to reinvest in a short-term bill a few months any way.

If investors think that the economy is slowing and the recession is coming, they expect the value of the short-term bills to plunge in a short period of time. When the economy slows down, the FED lowers the Fed funds rate, and the short-term Treasury bill yields track the fed funds rate.

It is when the demand for long-term bills goes up that the demand for the short-terms bills goes down. Then the yield for short-terms bills goes up while the yield for the long-term bills goes down, and that`s whats happening now.

For example,when the yield on short-term Treasury’s rises higher than the yield on long-term bonds is where the yield curve inverts. The Treasury yield curve inverted for the first time since the recession. The 3-year note was higher than the 5-year note. Investors are saying that the economy is better in five years than in three years.

President Trump is disappointed when it comes to the FED`s descision to raise the rates which is going to raise to about 3,5 percent in 2020. Mr Trump and investors are worried it could trigger an economic slowdown in three years if the rates is too high.

This small inversion is probably temporary, but if it continues to grow bigger, we can be thrown into a recession. The current fed funds rate determines the outlook of the U.S economy, and people should never ignore an inverted yield curve. Just take a look at the history.

In June 2007, the yield curve was on the brink and went back and forth, between inverted and flat yield curve. The Fed reacted too late and lowered the fed funds rate ten times until it reached zero by the end of 2008.

The yield curve was no longer inverted but it was too late, and we know the rest of the story; The economy went into the worst recession since the Great Depression. This is just a reminder.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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Recession and Depression

RonaldR

 

asphalt

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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We are 1% from a bear market

I started day one this year with this simple words: «And now we welcome the new year. Full of things that have never been». We are finished with just one month of the year 2016, and so far we have seen a lot of things that have never been. Is it more to come?

Yes, I think so. I think 2016 will be full of surprises. The start of the new year have been brutal, but we are not in a bear market yet. Nasdaq slid -1,82% on Monday and we are now about 1% from entering a bear market.

Warningbear

The stock market need to fall more than 20% to be called a bear market. Otherwise it is just a correction. S&P 500 and the Dow peaked in May last year. Nasdaq peaked in July 2015, so it`s long time since the top. The spread has warned us in months.

As you may know, we are now entering a critical moment. But what`s holding the market up is the blue chips. Big companies can go up while many small companies can go down at the same time, and that can make the index go up.

The Dow consist of thirty leading companies, and are a price-weighted index. Stocks with high prices count for more than stocks with low prices. The index goes up if stocks with high prices are doing it better than stocks with low prices.

It`s different with Nasdaq, which consist of a hundreds of stocks and most of them are in the tech sector. Nasdaq is not price-weighted, but a capitalization-weighted index, which means the most valued companies like Alphabet and Apple count for more than smaller companies.

It`s easy to be blind if you only look at growth-stocks like Alphabet and Facebook. They are both big, but if you look at the Russel 2000 index, which is an index of small-cap and medium-cap stocks, it is different. That market is more nervous, because small and medium-cap stocks is more risky than blue chips.

Bullish investors argue that most of the bad news is already baked into the market, and if the carnage we have seen so far this year is a correction, we will se the market bounce back very soon. I will follow the oil price, what happens in China and the Fed the coming days. Fed Chair Yellen testifies on Wednesday and Thursday.

We are not in a recession and many institutional investors are closely watching the economy for any sign of negative GDP. We are not there now, but we are close. What we see is a decline in companies earnings. Big buyers are patient and will jump in once the correction is over. If not they will hit the panic-button.

2016 will be the year of change.

wallboard

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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