Should we fear the inversion?

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RYAN   By Guest Blogger Ryan Lewenza
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Investors, capital markets and the financial media are funny in how they hone in, almost obsess over one key factor/narrative at a specific moment in time. Sometimes it’s Greece, Covid, Evergrande to Jeremy Grantham. Currently the centre of attention among investors and the media is the recent ‘inversion’ of the yield curve.

Almost daily I’m reading or seeing something on TV or social media about this inversion and how it portends big trouble ahead for the economy and stock market. This week I explain what this is and why it’s something to monitor, but that it doesn’t mean the economy and stock market are doomed in the near-term.

First, what is this and what does it mean?

The yield curve is simply the difference in short and long term bond yields and it ‘inverts’ when the short-term yield rises above the long-term yield.

Specifically, we saw the 2s and 10s yield curve invert, which means the US 2-year government bond yield rose above the 10-year bond yield. Last Friday (April 1st) the US 10-year bond yield traded at 2.38% while the US 2-year yield traded at 2.44%, after a massive surge higher. Incredibly, the US 2-year bond yield has moved from 0.2% last fall to 2.5% today as the market prices in imminent Federal Reserve rate hikes. Subtracting the two bond yields equates to 0.06% or -6bps, which is the ‘inversion’ everyone is talking about it.

The reason this is getting a lot of attention is that an inverted yield curve often, but not always, occurs ahead of US recessions. When short-term yields are higher than long-term yields it signals that something is amiss and maybe the economic outlook is not as bright as we think. Basically, low long-term bond yields suggests storms ahead.

My view is that while this is concerning and begs monitoring closely given its track record, it doesn’t mean the economy and stock market are doomed in the near-term.

First, the 2s and 10s yield curve inverted but we have not seen the other key yield curve – the 90-day T-bill and US 10-year bond yield curve invert. I prefer the 90-day and 10s yield curve given its better track record. The 2s and 10s yield curve has provided two false signals since 1960 (1965 and 1998). So it’s good but not perfect.

Second, the 90-day T-bills and 10s yield spread remains high at +1.85 bps, so no yield curve inversion there yet. It would take over 2% of rate hikes to be above current levels on the US 10-year yield.

The chart below is interesting as I include both the 2s/10s and 90-day/10s yield curves and note how they both inverted in 2019 just ahead of the 2020 recession but this time they are giving conflicting signals. So my preferred yield curve measure is still not flashing red.

US Yield Curves – One’s Inverted, One’s Not

Source: Stockcharts, Turner Investments

Third, historically it takes anywhere from 7 to 19 months with an average of 14 months for recessions to occur after the yield curve inverts. So, if we do in fact experience a recession it could be more than a year off.

Fourth, with respect to the stock market, the inverted yield curve has little impact on the stock market over the next 12 months. Below is a table showing the past inversion dates going back to 1978 and you can see the stock market is generally positive over the next 12 month period. On average, the S&P 500 is up 13.7% 12 months after the yield curve inverts and is positive 78% of the time. So even if this inversion correctly predicts a future recession there is still a lot of time potentially left before we have to start worrying about a bear market.

S&P 500 Performance Following 2s/10s Yield Curve Inversions

Source: Credit Suisse

Lastly, the US economy is in great shape right now with the unemployment rate at 3.6%, the ISM Manufacturing Index at 57, and inflation potentially set to peak in the back half of the year, which could reduce pressure on Fed to hike as much as expected.

So in summary, because we haven’t seen the 90-day T-bills and 10-year yield curve invert and the US economy is currently in solid shape, we think it’s way too early to be talking about a US recession.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

 

70 comments ↓

#1 LewenzaCountry aka Prince Polo on 04.09.22 at 10:43 am

During COVID times, the 10yr yield got to ~0.5% and the Fed jawboned for several months (aka talking about talking about talking about raising rates). Meanwhile, the 10yr is now at 2.7%. Should we expect less rate hikes now that the market did some of the heavy lifting along the way? What is a realistic top for the 10yr yield? 4%? 5%?

#2 crowdedelevatorfartz on 04.09.22 at 10:53 am

Good explanation Ryan.
From a historical perspective.
Is the current short term rate rise considered unusually fast?
How often have we seen such a rapid interest rate rise or drop on short term bond yields?
1970’s? 2008?
I’m thinking 10 year bond yields don’t get bumped up or down as often as a short term bond so there’s bound to be bond rate overlap eventually.

#3 Grumpy Panda on 04.09.22 at 10:56 am

This winter it sometimes snowed on days I put on either a sweater or sweatshirt. I’m reluctant to put on such clothing during the summer to test this for fear of angering the gods.

#4 rampant inflation on 04.09.22 at 11:22 am

1. The 10 and 2 year inversion is less relevant than 10 year and 3 month inversion. which is very far away.

2. A 1-2 day inversion is meaningless. when yield curves invert, it’s weeks to months. Like May-Oct 2019 (6 months). Plenty of time to exit before covid collapse. Or July 2006-May 2007 (11months). plenty of warning before 2008 collapse. Or July 2000-Feb 2001 (8 months)

3. Should the Fed go ahead as planned and raise rates to 3% by year end, you’ll probably yet the desired inversion. But until that happens, the jury is out.

4. CPI will print at 9%+ this coming week. That is no small number. This is an inflationary shock that WILL NOT go away, but get MUCH worse. Especially if the FED fails to act forcefully.

5. The US economy according to Atlanta FED GDPnow is 1.1%, hardly strong.

6. The NYSE AD line has been falling since Nov. Same with Net New Highs.

7. The TSX has been making ATH with and AD line that peaked in Nov. A significant 5 month divergence where more stocks are dropping than going higher. Again, same with Net New Highs. More stocks making 52 week lows. Quite obviously a very poor sign. Not a healthy market.

8. Indices are being held up by fewer and fewer stocks. Leadership is in defensive stocks, commodity plays, utilities. Again. Not a sign of a healthy market.

9. Under these conditions, a 20-25% drop in the TSX without the yield curve inverting is quite likely. Same with the US markets. Tech stocks even more.

#5 Great Bear on 04.09.22 at 11:32 am

https://www.bnnbloomberg.ca/quebec-lng-backers-seek-eu-boost-to-revive-rejected-project-1.1749846?utm_campaign=trueAnthem+Manual&utm_medium=trueAnthem&utm_source=facebook

Look at these Trudeau eco-goons tread shitty water . It’s only green if it’s in a Liberal riding? If Western Canada doesn’t split soon it’ll be the death of them.

#6 Linda on 04.09.22 at 11:33 am

Ryan, the dog photo says it all. No need to panic, just chill:)

While it is always prudent to pay attention to lead indicators such as the yield curve inversion, the news headlines always strive to catch attention by maximizing the drama. So a bus always ‘plunges’ when going over the edge of a roadway; a collision is ‘catastrophic’ etc. All those cries of ‘wolf!’ lead to folks not taking stuff seriously when indicators really do signal that things are about to get dicey.

#7 Victor V on 04.09.22 at 12:04 pm

“which could reduce pressure on Fed to hike as much as expected.”

One of the main reasons I’m bullish on the markets this year.

#8 Quintilian on 04.09.22 at 12:09 pm

The inversion signifies that bond traders don’t believe that central bankers will implement the projected increases.

Given the history of central bankers since Greenspan, who can blame them.

However, inflation has gotten so out of hand, they might have to finally allow economics trump politics this time.

Also the inversion yield curve as a predictive tool, is as useless as technical analysis, same category as the horoscope.

#9 Paddy on 04.09.22 at 12:11 pm

“So even if this inversion correctly predicts a future recession there is still a lot of time potentially left before we have to start worrying about a bear market”.

Why be concerned about a bear market? That’s why we’re B&D right? If anything, it’ll be a buying opportunity.

#10 TurnerNation on 04.09.22 at 12:19 pm

Life in a Bulge Bracket firm — everyone is a VP. Where are the P’s. :)

The Nasduck index still is concerning.
https://finviz.com/quote.ashx?t=QQQ&p=w&tas=0



What is going on in Kanada? I’ve been recently told from those people back countries, that “Kovid does not exist” — in places like India, Croatia, and more.
Why are our Telescreens still beaming the fear, the numbers? Why are most people scared, off balance?

Because we — in a Former First World Country – are stil being “reset”, financially & socially.
All leaders are on board. Those that were not got quickly punted Jan 2021 over supposed “holiday travel/breaking the rules”. It was a classic purge. Check your history books.
Fact: contracts were signed for does into 2024, 25.

The trap has been set for the high interest rates. Unspeakable personal and mortgage debt level here.
We are looking at universal serfdom for the masses. The whole inorganic “We are the 99% movement” (recall that?) sold us on personal wealth being a threat. The soft coup into Communism, UBI, CERB in March 2020 only cemented this.
In USA the GFC made paupers of the overleveraged homeowners.

All banks are on board with this and “Climate Action”. In this context Climate means Control over our Feeding, Breeding, and Travel. Karbon taxes play a huge role in this. But we will have an amazing climate! World class, I bet.

#11 TurnerNation on 04.09.22 at 1:04 pm

Speaking of The 99%, not only am I a professional Blog Dog but a professional elsewhere. Total comp. ticks me just into the “Top 5%” level. However the next round of CPP/EI deduction hikes will joust me back into the10% grind zone.
You see life in Kanada? The more you earn the broker you become :(
To say nothing of the double digit inflation and Karbon taxes. We all are the 99%ers.

#12 Søren Angst on 04.09.22 at 1:17 pm

I’m good. Staying vested. After dividends not growth.

3 inversion Blogs, 1 by you, Doug and Garth.

The Inversion Triplets.

Trying so hard not to stoke fear, yet…

(Let the bullets fly)

#13 Søren Angst on 04.09.22 at 1:25 pm

PS:

and yet…

Fake dangling participles my first love in English Class.

#14 AK on 04.09.22 at 1:31 pm

Hard to really tell these days, cause The Fed has been manipulating the short end of the curve since 2009.

#15 HUNGRY BEAR on 04.09.22 at 1:55 pm

The greatest financial experiment has taken place since 2009 with the fed’s system of monopoly money.

There’s no telling which way this thing will go anymore. Trust is at a minimum.

All we can do now is follow all the insiders that work in Washington.

When they start bailling its time to grab the bat n ball and head home.

#16 B from Q on 04.09.22 at 1:58 pm

So, pandemic is over?

Order in Council P.C. 2022-320 and 2022-321 extended till May 31st 2022.
Worked so well so far, so let’s extend it to eternity…

https://orders-in-council.canada.ca/attachment.php?attach=41802&lang=en

https://orders-in-council.canada.ca/attachment.php?attach=41803&lang=en

#17 DON on 04.09.22 at 1:58 pm

Interesting morning read.

Good summary of all the articles I’ve read recently. The only thing is the talk of peak inflation shifting to longer rather than shorter among the experts in recent days. A couple of months ago inflation was expected to peak by Spring. I am also hearing that the affects of the Ukraine War has yet to be fully felt. It was supposed to be a short war. I do look forward to meeting Hindsight in the future and getting a debrief.

Thanks for the analysis.

#18 Ponzius Pilatus on 04.09.22 at 2:40 pm

#2 crowdedelevatorfartz on 04.09.22 at 10:53 am
Good explanation Ryan.
From a historical perspective.
Is the current short term rate rise considered unusually fast?
How often have we seen such a rapid interest rate rise or drop on short term bond yields?
1970’s? 2008?
I’m thinking 10 year bond yields don’t get bumped up or down as often as a short term bond so there’s bound to be bond rate overlap eventually.
——————-
Yeah,
The Great Bond Rate Overlap.
Historically happens just before the Fat Lady sings.

#19 Keith on 04.09.22 at 2:50 pm

The Evergrande story was a great example of how media and social media can create a false narrative. People saw it as a tipping point for everything from the Vancouver real estate market to the global economy. It was a classic misinterpretation predicting that an event would turn into a process.

Thanks dog there are a few sources that you can trust for realistic perspective, I was lucky to find this blog years ago. The information on the macro picture here is great for keeping a long term view on the markets.

#20 Summertime on 04.09.22 at 3:02 pm

Recessions do not matter any more. Even milder depression does not.

What we are talking about is the ultimate destruction of the currency and the trust in it with CPI 8-10 % and inflation double that while rates are at 0.5 and will most likely top at 2 % resulting in a severe inflationary depression that has already started and will destroy the remains of our standard of living.

Very bad outlook for food and energy prices.
Better learn to reduce eating and commuting, heating.

#21 Ryan Lewenza on 04.09.22 at 3:39 pm

LewenzaCountry aka Prince Polo “During COVID times, the 10yr yield got to ~0.5% and the Fed jawboned for several months (aka talking about talking about talking about raising rates). Meanwhile, the 10yr is now at 2.7%. Should we expect less rate hikes now that the market did some of the heavy lifting along the way? What is a realistic top for the 10yr yield? 4%? 5%?”

I would agree with this. The Fed typically hikes 2-2.50% so that would put a peak around 2.50%. I see rates going higher but they should remain low from a historical perspective so I could see a max of 4-5%. There’s so much debt in the world which should help to anchor rates. – Ryan L

#22 Ryan Lewenza on 04.09.22 at 3:46 pm

Summertime “ Recessions do not matter any more. Even milder depression does not.

What we are talking about is the ultimate destruction of the currency and the trust in it with CPI 8-10 % and inflation double that while rates are at 0.5 and will most likely top at 2 % resulting in a severe inflationary depression that has already started and will destroy the remains of our standard of living.”

You strike me as a glass half empty person. I’ve heard these doom and gloom calls forever and they rarely pan out. – Ryan L

#23 Spelling countz on 04.09.22 at 3:50 pm

Doug,

As always … thanks for the anal cyst.
Bluddy spellcheck!

#24 Overheardyou on 04.09.22 at 4:15 pm

Hi Mr. Lewenza,
If there is a bear market, would you change the weighting in a balanced portfolio or stay the course?

#25 Penny Henny on 04.09.22 at 4:30 pm

Ryan your chart clearly shows that the 2/10 and 90/10 yield curves tracking each other quite closely up until about Oct of 2021. Why do you think they diverged at that point?

#26 DON on 04.09.22 at 4:58 pm

#23 Spelling countz on 04.09.22 at 3:50 pm
Doug,

As always … thanks for the anal cyst.
Bluddy spellcheck

*********
Content and context count…sprlling is secodary.

#27 DON on 04.09.22 at 5:02 pm

#19 Keith on 04.09.22 at 2:50 pm
The Evergrande story was a great example of how media and social media can create a false narrative. People saw it as a tipping point for everything from the Vancouver real estate market to the global economy. It was a classic misinterpretation predicting that an event would turn into a process.

Thanks dog there are a few sources that you can trust for realistic perspective, I was lucky to find this blog years ago. The information on the macro picture here is great for keeping a long term view on the markets.

*********

China’s housing market is still fealing the affects of not just Evergrand…the media has moved on…much like Afghanistan and slowly the Ukraine. Covid apparently has been fully milked.

#28 Oracle of Ottawa on 04.09.22 at 5:12 pm

Hi Ryan. I noticed preferred shares etf (ZPR) has been on a downward trend for awhile now, even though rates are supposed to go up in the next couple years. Is this because they think the rates won’t go as high as they thought? Is this a good buying opportunity?

#29 Warren-the-lagging_indicator on 04.09.22 at 5:16 pm

Very interesting Ryan, especially the divergence between the yield curves. I imagine that has to do with the huge footprint of the Fed keeping the 10y artificially depressed and out of sync with market fundamentals. I figure we are going to go over 4% to cool this sucker down.

#30 Penny Henny on 04.09.22 at 6:07 pm

Some more in depth talk about yield curves. (And with extra charts!!)

http://scottgrannis.blogspot.com/

#31 Flop… on 04.09.22 at 6:08 pm

Rhino, your boss said he was taking bets in his post on Wednesday.

I clowned around, as usual, came back for seconds on Thursday featuring yourself again because I knew it was your turn to post this weekend.

It was partly just my way of predicting Cameron Smith would win the Masters, and wanted it on record before the tournament started instead of sprouting off on Saturday after the cut.

As I write the guy I joked about betting on at 16/1 is in second position and the gap is closing.

Been thinking about buying a new vehicle, my dated ride has been playing up and workplace peer pressure to get rid of her has had me looking elsewhere.

When my TFSA was up and running and I started getting reasonable returns for not much risk I talked my wife into opening one up as well.

She had a lot of contribution room, I had money in a savings account collecting dust, so I gifted her some money with only one condition.

The money stays in there, no handbags, no holidays, no granite.

The other day my ride went back to the mechanics, she said maybe I should move on.

I said how about you gift the money back that I used to fill up your TFSA?

She said she can’t, I asked why not?

Because the money has to stay in there, she stated…

M47BC

————————————————-

#58 Flop… on 04.06.22 at 7:48 pm

O.k since you’re taking bets, I’ve got one for you.

I’ve been trying to fundraise for a new car and my brightest new idea involves Ryan Lewenza.

He puts his Porsche up as collateral, we place a bet that Cameron Smith wins this weekend at The Masters golf tournament at odds of 16/1.

If we win, I get a new car and Rhino gets whatever is leftover after I buy my first car from this century.

If we lose, Ryan can simply drive the other Porsche…

M47BC

————————————————

Early days of the Ryan Lewenza puts one of his Porsche’s up as collateral on my Masters bet to get a new car.

Our boy Cameron Smith is currently in second place after a solid start.

Garth, make sure he keeps the betting ticket somewhere safe, like the vault in Lunenberg.

I said I’d like to buy a car from this century, but then I realized I was getting greedy as I’ve never even owned a car made in the 90’s.

Yet.

Swing Low, Sweet Chariot…

M47BC

#32 Ryan Lewenza on 04.09.22 at 6:25 pm

Oracle of Ottawa “Hi Ryan. I noticed preferred shares etf (ZPR) has been on a downward trend for awhile now, even though rates are supposed to go up in the next couple years. Is this because they think the rates won’t go as high as they thought? Is this a good buying opportunity?”

Credit spreads have widened a bit so this weighs on corporate bonds and preferred shares. Prefs had a great year last year in part due to the rise in rates. This year we’re expecting a more moderate return but we still like that dividend yield and they provide a hedge to our bonds. – Ryan L

#33 Ponzius Pilatus on 04.09.22 at 6:28 pm

First, the 2s and 10s yield curve inverted but we have not seen the other key yield curve – the 90-day T-bill and US 10-year bond yield curve invert. I prefer the 90-day and 10s yield curve given its better track record. The 2s and 10s yield curve has provided two false signals since 1960 (1965 and 1998). So it’s good but not perfect.

Second, the 90-day T-bills and 10s yield spread remains high at +1.85 bps, so no yield curve inversion there yet. It would take over 2% of rate hikes to be above current levels on the US 10-year yield.

The chart below is interesting as I include both the 2s/10s and 90-day/10s yield curves and note how they both inverted in 2019 just ahead of the 2020 recession but this time they are giving conflicting signals. So my preferred yield curve measure is still not flashing red.
————
See Grasshoppers.
That’s why Garth’s boys make the big bucks and drive Porsches.
Very impressive, Ryan.
Your post should come with the caveat:
Don’t try this at home.
Professional driver on a closed course.

#34 Ryan Lewenza on 04.09.22 at 6:30 pm

Penny Henny “Ryan your chart clearly shows that the 2/10 and 90/10 yield curves tracking each other quite closely up until about Oct of 2021. Why do you think they diverged at that point?”

The 90 day yield is anchored to the Fed funds rate which has only increased 25 bps so far. The 2 year bond yield rises as it prices in the future rate hikes. Basically the Fed controls short-term interest rates with longer term yields like the 2, 5 and 10 year yields being driven by the market. – Ryan L

#35 Sail Away on 04.09.22 at 6:31 pm

#26 DON on 04.09.22 at 4:58 pm
#23 Spelling countz on 04.09.22 at 3:50 pm
Doug,

As always … thanks for the anal cyst.
Bluddy spellcheck

———-

Content and context count…sprlling is secodary.

———-

Agreed. As I wrote to my best clients the other day:

‘We understand you feel the additional work should be included as incidental; however, our interpretation of the contract language supports the contractor’s claim that this is legitimate extra work.

Retards,
Sail Away’

#36 Sail Away on 04.09.22 at 6:34 pm

Welcome back, Penny Henny!

#37 Meh on 04.09.22 at 6:55 pm

Don’t worry blog dogs, if we see a recession and asset downturn, Powell and his reptilian cohorts will engineer a 2 week bear market with real inflation ripping up to 50 percent.

Can’t have normal crashes and corrections don’t ya know. The elite can’t stomach losses, not even for 2 months let alone 2 years.

#38 KOOLAID on 04.09.22 at 8:01 pm

Bond inversion is only part of the story, more concerning is the fast retreating liquidity. Inflation is like a consumption tax, it seriously dampens productivity. The FED is stuck here, I suspect a soft landing is not possible, we require a neutral interest rate environment for any chance of price stability. The coming interest rate actions has been well telegraphed, US currency hegemony is being challenged, I suspect much higher rates for longer is the remedy.

#39 Stealth on 04.09.22 at 8:07 pm

Thank you Ryan,

When inevitable recession does start to materialize (no one knows when) would you be able to perhaps do a post on how various asset classes perform and what has been the best strategy historically to weather it?

Have a good evening

#40 Quintilian on 04.09.22 at 8:28 pm

“All banks are on board with this and “Climate Action”. In this context Climate means Control over our Feeding, Breeding, and Travel.

Of course, it means all that you say, and more.

We can’t fix this mess without an all-inclusive package.
Social Justice, economic inequality, the environment, and human evolution requires control of a multifaceted apparatus.

Change is happening.

Resistance if futile.

#41 Summertime on 04.09.22 at 10:03 pm

You strike me as a glass half empty person. I’ve heard these doom and gloom calls forever and they rarely pan out. – Ryan L

——————————-

Energy and food prices agree with me.
House prices agree with me for over 2 decades when compared to income.

If you did not get at least 15-20 % salary increase in 2021 you got a pay cut. This year is worse.

The undisputed reality is that after long years of ‘growth’ in markets and economy it takes more and more in terms of percentage of income in order to get basic necessities like housing, food, gas.
So the standard of living is deteriorating.

And I was looking for my rose-colored glasses but could not find it. Then I saw the latest grocery prices.

Do you really believe that ‘inflation’ is 6 %?

Hope itself is a bad strategy/but delusion is even worse.
Yes, investment is part a protection portfolio but let’s be realists – market is currently only driven by monetary policies.

IMHO we have seen nothing in terms of real inflation yet. With the prices of fertilizers tripling and quadrupling we most likely will see very different food prices/much higher prices/ starting in the late fall/winter and for sure next year.

Current price crises could look like a walk in the park.
And rates will not rise significantly, that is a given.

So with roaring inflation of necessities, rising food prices and capped incomes where exactly is the positive part? Markets? How could that be with bankrupt and stretched consumers?

And we are at peak debt that only inflation, combined with low rates for a long time can ‘cure’.

Last time I checked inflationary depression is:
1. unconstraint inflation – check
2. reduced consumption that shrinks the real economy – check.

Employment is irrelevant as real incomes are stagnating and nominal salaries are capped, far lagging the inflation.

My definition of standard of living is what you can afford, not that everything is expensive and you can not afford much.

#42 Nonplused on 04.09.22 at 10:05 pm

Wait, what? We’ve got fertilizer shortages, fuel shortages, food shortages, supply constraints up the wazoo, a war in Europe, a war in the Middle East, and our leaders only think about wokeness and solar powered cars. And we are worried about the yield curve? I think the yield curve is not indicating anything. It is manipulated. It is “behind the curve”. Inflation and starvation is the order of the day.

https://mishtalk.com/economics/theres-looting-in-shanghai-sri-lanka-and-peru-over-food-shortages-what-country-is-next

And we thought things couldn’t get any worse than covid. Ha, ha, “hold my beer and watch this”, says 2022.

Buy all the things. Trust me, whatever you’ve got, it won’t be enough. Your money won’t be any good when what you need isn’t available.

#43 Stone on 04.09.22 at 10:21 pm

Nothing to stop the Fed from selling bonds on their balance sheet all along the yield curve. This will in turn create a demand for higher yields from bond purchasers. And if the Fed is decreasing the size of their balance sheet, then there’s nothing to get in the way for bond yields all along the duration spectrum to continue to pop upwards.

#44 C'mon That's Just Dumb on 04.10.22 at 12:36 am

#40 Quintilian on 04.09.22 at 8:28 pm
“All banks are on board with this and “Climate Action”. In this context Climate means Control over our Feeding, Breeding, and Travel.

Of course, it means all that you say, and more.

We can’t fix this mess without an all-inclusive package.
Social Justice, economic inequality, the environment, and human evolution requires control of a multifaceted apparatus.

Change is happening.

Resistance if futile.

==============================================

Ah yes. Canada, with it’s way awesome LibDP part, and it’s 0.48% of the world’s population, will lead the way to a shiny new utopian future.

Has anyone informed the Chinese or the Indians of this?

Canada = Irrelevant.

Sorry.

#45 Tom from Mississauga on 04.10.22 at 2:03 am

States supply chain collapse (Russia war, China no MRNA) will drive inflation and low growth. Bond durations 2 to 10 will trade tight as yields rise, oceans of capital flow to the US.

Real problems start in Q4 with global agriculture trade disruption, ie. Brazil doesn’t receive Russian potash.

#46 willworkforpickles on 04.10.22 at 5:16 am

#42 Nonplused

“And we are worried about the yield curve? I think the yield curve is not indicating anything. It is manipulated. It is “behind the curve”
””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””’

FINALLY ! Finally somebody around here is actually starting to get it.
Inflation is the true nemesis of the bond market , but skewed inflation figures under report actual yield curve data that translates to a recession. And in this case one should be around the bend in more like about 6 months from now and not a year out.
You don’t even need yield curve data to project a coming recession when you understand manipulated GDP figures associated with skewed inflation numbers.
The more skewed real inflation numbers actually are to the downside the higher the falsified non real GDP numbers you get.
With two negative quarters of real GDP growth, you’re into a recession.
The fixed yield curve not the true yield curve, is lock step in sync with posted GDP not real GDP – as the real GDP is manipulated higher by rigged lower inflation figures.
All in a bubble economy built on debt propped by illusion to keep the markets artificially afloat.
The Fed is running out of time and won’t be able to hide behind the economic illusion/s they have created much longer.

…Why do small business owners all say… they’re telling us the economy is doing better , so why is my business taking a beating like we are in a recession?

…Try to tell consumers that inflation isn’t that bad until they go to the check-out and its much much worse than they are led to believe.

…And why is it all much worse than we are led to believe?

Because the Fed would rather have us all believe these illusions they have created through the manipulation they do to hide their own corruption as being reality instead.

The Fed can and will take it only so far before the gullible duped and misguided begin to see through the lies and manipulation they create .
Its already too late to fix it.
So it won’t matter in time to fix anything when the duped masses finally do catch up with the reality the Fed has lied to them as the economy devolves and breaks down further before they get a clue.

The clock is ticking. The Fed has about another 6 to 9 months to hide behind their facade.

#47 short horses on 04.10.22 at 5:20 am

Economists have used yield curve inversion data to predict nine of the last three major recessions.

#48 IHCTD9 on 04.10.22 at 5:58 am

You might find this NFB doc. interesting Fartz.

Vancouver’s East side circa 1975:

https://www.youtube.com/watch?v=YeA-OMH57No

#49 rampant inflation on 04.10.22 at 7:30 am

#41 Summertime on 04.09.22 at 10:03 pm
#42 Nonplused on 04.09.22 at 10:05 pm
_________________________________________

these gentlemen are completely correct.

anybody know why sanctions don’t work?

The Backdoor That Keeps Russian Oil Flowing Into Europe
https://www.bloomberg.com/opinion/articles/2022-04-08/ukraine-war-this-backdoor-keeps-russian-oil-flowing-into-europe?sref=vuYGislZ

we will see shortages here. there is already an issue with baby formula in the US. just google it. slowly but surely, we’ll see more like this.

Costco was short on lettuce yesterday. None to be had. No packaged lettuce, or greens in Scarborough Costco.

no need to press the panic button yet. just wait until everything falls apart first.

Russia isn’t leaving the Ukraine either. These people are used to long and bloody wars. They are still in Syria propping up the government there. They are in Africa. They spent 10 years fighting a bloody war in Chechnya.

You ain’t moving the Russians out. And Sanctions don’t work. so, the situation isn’t going to improve and millions upon millions will starve this year. Governments will be overthrown. Spheres of influence will shift.

this isn’t the same move as the last 40 years. wake up

#50 Tom from Mississauga on 04.10.22 at 7:30 am

One thing is though the S&P 500 does look like a head and shoulders

#51 IHCTD9 on 04.10.22 at 7:43 am

Is this classic or what?

https://www.cbc.ca/news/politics/women-budget-2022-gender-inequity-1.6414178

Kinda the same thing that happened after Trudeau said “the budget will balance itself”.

Yes I realize the progressive wokester extremists among us will never acknowledge something progressive and woke has ever been accomplished. Hopefully Trudeau is learning something here…

Anyway, more popcorn and beer please.

#52 Ryan Lewenza on 04.10.22 at 9:03 am

Stealth “Thank you Ryan, When inevitable recession does start to materialize (no one knows when) would you be able to perhaps do a post on how various asset classes perform and what has been the best strategy historically to weather it? Have a good evening.”

Will do. Good suggestion. – Ryan L

#53 crowdedelevatorfartz on 04.10.22 at 9:16 am

@#49 Rampant
“Sanctions don’t work. so, the situation isn’t going to improve and millions upon millions will starve this year. Governments will be overthrown. Spheres of influence will shift.”

+++

Yep.
Putin doesn’t care about pathetic “half” sanctions.
He’s worth billions and couldnt care less about his own people.
His country is still earning about $1 billon per day in oil and nat gas revenues. ( Europe, China, Middle east).
The time tested Russian strategy for battle is simple.

Pound the cities to dust. 10,000 dead. 100,000. 1,000,000.
Putin couldn’t care less. He has his own neck to worry about and the West will clean up his mess while huffing and puffing threats.

The big question will be the millions that may starve next winter.
Our fertilizer addicted crops won’t get nitrogen from Russian nat gas production or Russian potash.

Canada should do okay in the short term trying to ramp up production
The world will see a drastic shortage of Wheat, barley etc since Russia is banned from selling and Ukraine is burning.

The Middle East and Africa wont get the millions of tons of wheat it needs ( Keep an eye on Egypt where fuel and wheat are heavily subsidized. 110 million pissed off and hungry people tend to gather in BIG crowds).
I’m sure more than a few dictators in the “Fertile Crescent” are a tad nervous.
This will have a ripple effect felt around the globe in extreme prices or shortages.
People tend to ignore their “leaders” ( feminist or otherwise) promises when there’s no food to eat.

$7 bread? $10 bread?
Buy some flour now.
Meat prices will increase due to feed shortages(corn loves fertilizer). Corn syrup shortages for food ingredients?

Plague, War , Famine, what comes after that?
A super volcano eruption or a nuclear winter?

Apologies to Apocalypse Now for stealing his thunder.

#54 IHCTD9 on 04.10.22 at 9:20 am

#44 C’mon That’s Just Dumb on 04.10.22 at 12:36 am
#40 Quintilian on 04.09.22 at 8:28 pm
“All banks are on board with this and “Climate Action”. In this context Climate means Control over our Feeding, Breeding, and Travel.

Of course, it means all that you say, and more.

We can’t fix this mess without an all-inclusive package.
Social Justice, economic inequality, the environment, and human evolution requires control of a multifaceted apparatus.

Change is happening.

Resistance if futile.

==============================================

Ah yes. Canada, with it’s way awesome LibDP part, and it’s 0.48% of the world’s population, will lead the way to a shiny new utopian future.

———

It’s definitely going to be shiny and utopian for my bank account the way things are shaping up.

#55 crowdedelevatorfartz on 04.10.22 at 9:35 am

@#48 IHCTD9

Yeah I saw that a year or so ago.

It was interesting because they mentioned the cops beat was “the two blocks of drug addicts, rubby dubs, pimps and thieves.”

The sidewalk was filled with people of all types going about their business.
A quaint view of times long past.
It was very similar when I first moved to the city in 1981. An eclectic crowd of people but safe to walk.
Now?
With our “progressive” politicians in charge….it’s now ten blocks and no one BUT drug addicts and thieves staggering down the blocks in a drug addled haze.

The “random assaults” by “stranger on stranger” have exploded all over the downtown core in the last year.

https://vancouversun.com/news/crime/police-worry-about-rise-of-stranger-assaults-whats-happening-to-vancouver

Cruise ship season has just started for the first time in almost 2.5 years and all those fat, juicy targets ( er tourists) will be loading and unloading from the ships a mere 2 blocks blocks from Hastings “zoo”.

https://dailyhive.com/vancouver/vancouver-first-cruise-ship-arrival-2022-holland-america-koningsdam

The muggings and thefts should be another black eye in the cesspool of Woke City Hall management blunders.
The Mayor ( Political Scientist Professor, author, former NDP MP Kennedy Stewart) has openly spoken about the Vancouver Police “systemic racism” and “defunding”.

No love lost between the VPD and Hizzoner and if mugged tourists become a political football before this Fall’s civic election…..so be it.

#56 I don’t know on 04.10.22 at 9:57 am

#49 rampant inflation on 04.10.22 at 7:30 am

Inflation is not “rampant”, it’s just higher than it’s been for decades. We’ve been here before. You just don’t know what rampant inflation is.

Re Ukraine: this is different. Ukraine is not Syria, or Chechnya. It’s a highly visible, highly important country in world affairs. It’s also at NATO’s doorstep. The Ukrainian army is well armed, well funded, and well trained.

Russian losses are far greater than any of those other conflicts you mentioned combined. This coupled with the sanctions (which absolutely work) renders the operation hard to sustain. Peace must prevail.

This war is completely pointless and tragic for all involved.

Spheres of influences and power will shift alright…to the west. Inflation will fall, although probably stay elevated from where it has been for 2 decades, which is on the extremely low side. We are actually normalizing (as will interest rates).

IDK

#57 crowdedelevatorfartz on 04.10.22 at 10:04 am

An article on the Russian propaganda machine.

https://thetyee.ca/Analysis/2022/04/08/Inside-Banality-Putin-Evil/

Propaganda that rationalizes the invasion of Ukraine and the liquidation of its people.

Putin accuses Ukraine’s leadership of being Nazi’s when he is acting and sounding more and more like Hitler.

#58 Sail Away on 04.10.22 at 10:15 am

#49 rampant inflation on 04.10.22 at 7:30 am

no need to press the panic button yet. just wait until everything falls apart first

———-

Ok. Whew, glad I can dial it back.

#59 Dharma Bum on 04.10.22 at 10:21 am

#51 IHCTD9

“Is this classic or what?”
———————————————————————————————-

https://www.louderwithcrowder.com/monty-pythons-woke-babies

#60 Dharma Bum on 04.10.22 at 10:47 am

#48 IHCTD9

That’s a great little documentary.

Classic west coast Canadian cops. Uneducated lowlife thugs. Slobs. Bums.

Hard to distinguish the cops from the criminals.

Those old school Vancouver cops remind me of the Droogs in “A Clockwork Orange” who became cops and then took Alex out to the woods one day and beat the living crap out of him.

https://www.youtube.com/watch?v=GeRGTXZIJTI

Vancouver cops. Unkempt bullies. Like the corrupt cops of 70s New York City. NYPD’s finest.

I was in Vancouver once (over 10 years ago) when the Canucks won a quarter finals play off game. All hell broke loose in the streets – a party verging on a riot.

I watched from 3 feet away as the thuggish long haired porn mustachioed hick cops wrestled innocent revellers to the ground and smashed their faces into the cement.

Vancouver is a scary place. Especially around the Hastings ghetto.

That NFB doc is a gem.

#61 Ponzius Pilatus on 04.10.22 at 10:56 am

#58 Sail Away on 04.10.22 at 10:15 am
#49 rampant inflation on 04.10.22 at 7:30 am

no need to press the panic button yet. just wait until everything falls apart first

———-

Ok. Whew, glad I can dial it back.
—————————
That’s the problem.
Most people act after the fact.
Always have a plan A, and a plan B, just in case.

#62 crowdedelevatorfartz on 04.10.22 at 11:45 am

@#60 Dharma Bum
“I watched from 3 feet away as the thuggish long haired porn mustachioed hick cops wrestled innocent revellers to the ground and smashed their faces into the cement.”

0 +0 = 0
Sometimes you need thugs in uniforms to clean out the thugs in mackinaws.
I managed several office towers in the downtown core during the riots.
We all knew something bad was going to happen ( except, apparently the Vancouver City Police Chief who was nowhere to be found that night until far far too late).
We moved all the heavy concrete ashtrays, garbage cans, benches and bike racks inside the locked lobbies so they could be used as battering rams.
Security sat in the lobby and were instructed no to go outside . Just observe and record.

We saw this coming from a mile away.
Previous Stanley Cup home games in Vancouver were progressively more lawless and this was Game 7.

Skytrain ( dubbed Crimetrain by some wags) delivered thugs and drunks downtown for hours as the final Stanley Cup game played out. Tens of thousands of people from the suburbs (with the anonymity that a crowd allows) didnt mind creating havoc in a city core that wasn’t theirs.
Anarchists with masks and gasoline started lighting fires in dumpsters, burning cars, etc.
The geniuses at City Hall allowed bars and booze sales from 11am that morning until 10pm when the fighting and rioting really started growing …they panicked…. and closed all the bars and forced angry people out onto the streets to join in the lawless stupidity.

The very unpopular( with his own police officers), politically appointed, VPD police chief stood in it’s midst gaping at everything, barely able to speak, with zero instructions for his troops, surrounded by cops, reporters and politicians.
He was toast not too long after that. A one term wonder, way out of his depth.

The result at my buildings?
3 office towers and zero damage. No broken windows. No theft. Unlike the rest of the buildings in the neighborhood.
The guards were unable to breathe in the lobby’s due to tear gas wafting like fog through the downtown streets. They moved to the second floors to watch the gong show.
The police stopped one carload of drunks surfing on the hood and roof of a chevy. Arrested them. Smashed all their booze and threw it back inside the car and eventually towed it.
Robson st was an apocalypse of broken shop windows and looted stores.
Everything was back to normal by about 4am.

The resulting 1000’s of videos and photos of crimes ended up on the slow motion treadmill that is our “justice” system and many charges were dropped due to ” the right to a speedy trial”.

#63 Quintilian on 04.10.22 at 11:52 am

C’mon That’s Just Dumb, IHCTD9:

My observation is that the conservative nuters tend to have a thin outer veneer of self-righteousness, self-avowed reliance, a light sprinkling of religiosity, obsessed with law and order, and fervent supporters of property rights.
They complain to the point of exhaustion about taxation, but quickly claim their grants, and benefits.

Beneath the fairly innocuous thin veneer; there is a more sinister and putrid thick layer of greed, xenophobia, sardonic and misanthropic bent.

They are so self-absorbed they miss the fact that we are all guests just floating around this galaxy, on a piece of mud called Earth, and we have to take care of it because it is not theirs, regardless what the land deed says.

Please respect mother nature you hypocrites.

#64 Chris on 04.10.22 at 11:53 am

Can Garth, Ryan or somebody explain tax changes in regards to dividend stocks for canadian residents. I saw some changes that need to be translated for regular peoples in regards to stocks that pay dividends outside registered accounts where also you can hedge.

Thank you,
Chris

#65 Satori on 04.10.22 at 11:59 am

#55 crowdedelevatorfartz on 04.10.22 at 9:35 am
#48 IHCTD9
#60 Dharma Bum on 04.10.22 at 10:47 am

Vancouver is a scary place. Especially around the Hastings ghetto.
——————————————————-
The last time I walked down Robson Street, it was Hastings.

The population of homeless, mental health, druggies, dealers, thieves has exploded and fanned out. You cannot walk a block down Robson without seeing atleast 3 examples of drug psychosis, 2 junk piles of bedding and cardboard signs….and you are lucky if you don’t get approached. Its scary!

Use to be a ‘Safe’ place you could get a coffee, people watch, shop, eat….not now. Sit outdoors for a coffee and six people come to every table asking for money. One guy swearing almost fought a customer. Another guy kicking and smashing city rental bikes, the street smells like a lavatory. Very unsafe place to be.

#66 Sail Away on 04.10.22 at 12:18 pm

#63 Quintilian on 04.10.22 at 11:52 am

C’mon That’s Just Dumb, IHCTD9:

My observation is that the conservative nuters tend to have a thin outer veneer of self-righteousness, self-avowed reliance, a light sprinkling of religiosity, obsessed with law and order, and fervent supporters of property rights.

Beneath the fairly innocuous thin veneer; there is a more sinister and putrid thick layer of greed, xenophobia, sardonic and misanthropic bent.

———-

Ahh. It’s so pleasant to see such open-minded tolerance and acceptance of differing opinions. And expressed in a way that reflects so well on the commenter.

#67 IHCTD9 on 04.10.22 at 12:22 pm

#63 Quintilian on 04.10.22 at 11:52 am
C’mon That’s Just Dumb, IHCTD9:

My observation is that the conservative nuters tend to have a thin outer veneer of self-righteousness, self-avowed reliance, a light sprinkling of religiosity, obsessed with law and order, and fervent supporters of property rights.
They complain to the point of exhaustion about taxation, but quickly claim their grants, and benefits.

Beneath the fairly innocuous thin veneer; there is a more sinister and putrid thick layer of greed, xenophobia, sardonic and misanthropic bent.

They are so self-absorbed they miss the fact that we are all guests just floating around this galaxy, on a piece of mud called Earth, and we have to take care of it because it is not theirs, regardless what the land deed says.

Please respect mother nature you hypocrites
——-

I think you’re replying to stuff I never wrote.

All I said is that the “all-inclusive package” was going to be good for my bank account.

#68 Charity on 04.10.22 at 12:47 pm

Ryan
I’ve held preferred and bond etfs for 6 years now and added when rebalancing and well they are worth less then my book cost pretty poor performance imo

Why did I add? Because my portfolio grew so I followed the 60/40. Just a little dismayed that they are worth less and I noticed that with etfs one can say juicy dividend, sure but 5% of a smaller stock price is a smaller dividend. These are not necessarily the panacea they are proclaimed to be.

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#70 DON on 04.10.22 at 7:12 pm

#56 I don’t know on 04.10.22 at 9:57 am
#49 rampant inflation on 04.10.22 at 7:30 am

Inflation is not “rampant”, it’s just higher than it’s been for decades. We’ve been here before. You just don’t know what rampant inflation is.

Re Ukraine: this is different. Ukraine is not Syria, or Chechnya. It’s a highly visible, highly important country in world affairs. It’s also at NATO’s doorstep. The Ukrainian army is well armed, well funded, and well trained.

Russian losses are far greater than any of those other conflicts you mentioned combined. This coupled with the sanctions (which absolutely work) renders the operation hard to sustain. Peace must prevail.

This war is completely pointless and tragic for all involved.

Spheres of influences and power will shift alright…to the west. Inflation will fall, although probably stay elevated from where it has been for 2 decades, which is on the extremely low side. We are actually normalizing (as will interest rates).

IDK

***********

You might want to update your opinions based on the latest revealings. You should discern the news a tad bit more.

Your slight of hand comments appear to be balanced but there is a line of cognitive dissonance to fit your narrative. Maybe you could go read up on how bubbles burst and lecture us on your findings.

But I do agree there are innocent people suffering in Ukraine, Syria, Yemen, Iraq, and the abandoned folk in Afghanistan. Afghanistan had a western reprieve for 20 years then back to the old days. Now u must have a beard or you can’t be a civil servant. Hell the Taliban is talking about banning the poppy farming…?

This is a great time for you to buy an investment property is it not? What are you waiting for? The last time rates were 21% an really nice executive house was $250 K and average houses were less.

Now a mere 2%-3% increase is dagger to the average million dollar house. Rates normalizing is a tad bit higher. I had a student loan for 7%.