ARE YOU READY FOR #LONGTERM #INVERTED #YIELD CURVE?

 SEEKING ALPHA

Is an inverted yield curve here to stay and what does that mean?

The yield curve between the 2-year and 10-year Treasury notes has inverted again to start Friday’s session, a closely watched indicator that has historically been associated with eventual recessions.

While the curve has now flirted back and forth with inversion over the last several days, investors are looking to see what the dynamic signals and whether the condition is likely to persist over a meaningful period of time.

At the moment, the U.S. 10-year Treasury yield is up five basis points to 2.39%, whereas the U.S. 2-year Treasury yield is up twelve basis points to 2.45%.

Inversion describes a situation where the longer-duration bond has a lower yield than the shorter-duration one. This represents the opposite condition than usual, as investors typically ask for additional return when locking up their cash for a longer period of time. Thus, under normal conditions, long-duration bonds generally have higher rates than those with shorter durations.

The concern surrounding inversion centers around the idea of a potential future recession.

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THE SIGN THAT PREDICTS RECESSIONS

Chinese Stock Massacre Continues, & Top Insights

Chinese stock markets plunge over fears share prices are unsustainable

China’s Shanghai composite index falls more than 7% in mass sell-off after six months of frenetic buying driven by a state clampdown on property investment

Chinese stock markets plunged on Friday as investors rushed to sell over fears that frenzied buying in recent months had sent share prices to unsustainable levels.

The Shanghai composite index, which reached a post-crash record of 5,166 earlier this month, has since lost nearly 1,000 points, down more than 7% at the last session to 4,193. The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 7.9%. 

Greece Shuts Banks to Avert Collapse

 After ECB Freezes Support

Banks will remain shut until at least after a July 5 referendum called by Prime Minister Alexis Tsipras on whether to accept austerity in exchange for a European bailout, Kathemerini newspaper reported, citing unnamed sources.

Paul Craig Roberts: Bond Bubble in Big 

Trouble 

Paul Craig Roberts joins the show today to discuss Greece’s possible credit default and its implications, the ongoing tensions between Russia and America, and the U.S. bond market bubble

Greece's Future in Balance as Creditors

 Reject Aid Extension 

"The Greek authorities have asked for a month extension. But in that month there can be no disbursements," he said. "How does the Greek government think that it will survive and deal with its problems in that period? I do not know," Dijsselbloem said.

China Cuts Interest Rates After Market 

Plunge 

Previous sharp drops in the stock markets this year have been quickly countered by optimistic statements in state-controlled media. But Saturday’s moves, which included the fourth reduction in interest rates since last November, were unusual in so closely following a stock market nose-dive.

US Overtakes Russia Top Oil And Gas

 Producer

The BP report also shows China’s energy demand is growing at the slowest pace since the Asian Financial Crisis in the 1990s as the communist nation suffers a slowing of its economy and tries to reduce its reliance on heavy industry, Bloomberg reported

Collapse, Part 5: Things Fall Apart

It is impossible to wean an economy that relies on debt and leverage for its "growth" of excessive debt and leverage.

The phrase famously appears in William Butler Yeats' 1919 poem, The Second Coming:

Turning and turning in the widening gyre

The falcon cannot hear the falconer;

Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world,

The blood-dimmed tide is loosed, and everywhere

The ceremony of innocence is drowned;

The best lack all conviction, while the worst

Are full of passionate intensity.

More Leading Global Headlines

China stocks plunge 7%, slide toward bear territory

Europe’s Credit Boom Has Handed Investors Worst Losses Since ’06

CalPERS returns likely to fall short of 7.5% target, official says

New Jersey’s Growing Pension Gap 
Threatens Taxpayers

Nature Rebounds

ISIS Plans To Launch Terror Attacks Across India

Top Weekly Ideas and Insights

"Peak Everything"

Cornell University

Fed Tightening Can Trigger Market Crash - No Kidding

 



Don't Be Surprised

 If This Is The Start Of A 

Stock Market Crash ...

 

Business Insider

 


Stocks are tanking again. 

The sudden dives in recent weeks have taken the tech-heavy Nasdaq down 7% from its highs and the S&P and Dow about 3% from their highs.

Drops like that are no big deal. 

But some signs suggest that this pullback — or another one sometime soon — could get much more severe.

Why?

Three basic reasons:

• Stocks are still very expensive
• Corporate profit margins are at record highs
• The Fed is now tightening
•  

Let's take those one at a time.

First, price.

Even after the recent drops, stocks appear to be very 
expensive.

The chart below is from Yale professor Robert Shiller. It shows the cyclically adjusted price-earnings ratio of the S&P 500 for the last 130 years. As you can see, today's P/E ratio of 25X is miles above the long-term average of 15X. In fact, it's higher than at any point in the 20th century with the exception of the peaks of 1929 and 2000 (you know what happened after those).

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Lots of Talk Out There

 

PIMCO: No Fears Emerging Markets???

World's top fund manager: relax about emerging markets

By Frik Els 

Francesc Balcells and Anton Dombrovsky of PIMCO, the world's largest money manager with an eye-watering $2 trillion in assets across its various funds, on Tuesday provided insights into the state of emerging markets.

More specifically, the authors ask: With troubles in Ukraine, Turkey, Argentina, Egypt, Thailand, China and elsewhere are we headed into a 1997–1998 style emerging market meltdown?

The current turmoil is not unprecedented: "Every time the Fed has removed monetary accommodation in the past, it has been followed by some form of emerging market turbulence," argues Balcells.

The same scenario played out in the early 1980s and mid-1990s, and again in the early 2000s.

There is something different this time around however: "The increased importance of growth in China to other emerging markets has introduced a new phenomenon: For the first time, a recovery in the developed markets, albeit tepid and not uniform, is not spurring a recovery in emerging markets."

Q: Should investors expect a repetition of an emerging-market-wide crisis? And if not, why?

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While more scientific thinking point to big troubles Soon!

In the end we take the side of science and logic. These countries are basket-cases and there is no hope that they will ever recover as there just won't be the energy and material available to pump into these marginal economies. Start looking for the higher ground.

Investors' Insights
March 27, 2014