Hi all,
see attached cover story introduction of The Economist.
Does anybody have a time series of short term against long term interest rates and its relation to previous recessions?
The 2-yr and 10-yr rates have not inverted. Look at the Forward-Rate-Ratio which has formed a trough and the yield curve is steepening again. So no recession signal from this indicator yet.
Here’s another article; https://today.duke.edu/2019/07/its-official-yield-curve-triggered-does-recession-loom-horizon
I have an indicator that uses bond yield. I’ll look for it over the weekend.
Let me lay out my #secularbullmarketUSA Thesis for the US and why I only invest in the US! (I called it in 2016!)
I am not saying it’s all good, everything I lay out is based on a relative view from the rest
of the world, e.g. for example the fed is not perfect but in relative Terms to the rest of the world its the best CB!
I do understand that a lot of US citizens do not see this, its harder to see it if your are within it.
- Your Money is safe
It might surprise you, but in big parts of the rest of the world your Money is not save!
Why: Inflation in EM countries (Venezuela, etc.) and just look what happened in greece (belongs to europe!)
The US has (in relative) Terms the best monetary System and everybody is Bashing the FED but they
know what they are doing, and they are doing a good Job!
I you trade with an US based broker, Regulation is very, very good, as soon as you have bought
a stock the Money is not in the Hands of the broker anymore.
And the monetary System is backed by
the strongest Military power in the world. The Dollar has not failed once! In EM Countries
currencies fail very 10-20 Years and also Europe is not save the next 50 Years bc the Euro is
badly designed (only northern countries and esp. Germany Profit from it, so in the Long
run the Euro is going to break up!)
- Elites know how to and actually manage a Crisis
I know I am going to get a lot of heat on that Point, but how the 2008 Crisis was managed was good.
The world was at the brink of a huge Crisis, but Leaders came together and put together a good
plan to pull out of the crisis. That gives me a lot of trust that the next Crisis will be managed as well.
also the US was a role Modell for the rest of the world, there was not one step of the EU or on step
in Germany that was taken before the US Elites have made their steps!
- Innovation / VC System
Yes, Germany and Japan are manufacturing powerhouses but look where the Innovation takes place first!
China is a 100% copycat. And if there is an invention somewhere else (like the WWW at the CERN)
who builds on it first? The US! Best VC System in the world, Leaders do something with their Money
and reinvest. there are a lot of Leaders I know that retire with 45 on the Bahamas, in the US
that is usually not what Leaders do, they Keep working and reinvest their Money. They love the game!
- Demographics
The best of the G20! Gen y and Gen Z are going to be bigger than the Boomers.
That creates demand and that will generate inflationary pressures that will
Offset (not 100%) deflationary pressures coming from Innovation (Internet etc.)
And it will create Demand!!!
-
Geographics
North Border is fine, some issues at the south border but it’s very unlikely that
the US will be occupied by another Nation.
the US has great rivers (very important for cheap Transportation), places to grow Food
and a lot of space that ca be developed -
Pro Business
the US is at the heart of capitalism, it’s very good understood and the US
is pro-Business. Peoples knowledge on a relative Basis to the rest of the world
when it Comes to Business orientation is spectacular. Talk to Spain or French and
you know what I am talking About! Tons of Kids in Germany think that if they graduate
from the “Hauptschule” (9 Years of School) they can go to University and be a medical doctor.
Thank god we have farmers in Germany that can calculate! -
Competition / Level of Knowledge / tolerance for opinions and nerds / Curiosity / Attraction for talent
I have to say it, but I almost cannot find anybody here in Germany that
I can talk to on the following subjects: Quant investing, Business Cycle, demographics,
middle class pressure (and why this is the reason Trump was elected and will
be elected again [That does not mean I endorse him])
OK, I got a PhD in economics, but even other PHDs do not have the
interest to get to the Level I can find in the US. This board here at P123 is proof enough,
you will not find this somewhere else.
Just look at my Twitter community and I tell you 95% of very fine experts
come from the US or from People that came to the US from the rest of the world.
you will have a very hard time to find this Level of Expertise in the rest of the world.
One example: I analyzed the math of clima models, and I came to the conclusion that
they are based on assumptions (they use the normal Distribution assumption, autsch!!!)
that are at least discussable. Talk to this to Mainstream German and you will
be crushed, just because you do not walk the line of Consensus.
Consensus Thinking is bigger outside of the US and it’s a bad Thing for Innovation!
- Pessimism High / Innovation dividend
We are at a 20 Year pessimism high, we had the optimism high from 1998 - 2000.
Usually a good spot to be optimistic for the next 20 Years.
Combined with the Innovations dividend that lies before us:
IT
Internet
Biotechnology
Digital Business Models
Green Energy (we just started!)
Energy (yes US OIl, who would have thought that the US is an Oil and GAS exporter)
Converging of industries (IT, Transportation: Uber etc.)
etc.
etc.
Look at the industrial revolutions. Its dividends did not Play out in 20 years, It played out
in 200 Years!
In Terms of a Soccer game (90 Min), we only Play 7 Minutes in this wave
of innovation. The sky is the Limit for the world and especially for the US
bc its the best positioned nation!
Short term there might be a shallow recession in the Cards, but I could not care less.
BC the next 20 Years are going to be great!
Optimism is a state of competence and the above reasoning give me enough
to be optimistic.
Add a great Platform like p123 in it and a very robust trading System and live
transforming Returns are in front of us.
Best Regards
Andreas
Thanks gents, very insightful!
'Merica!
Georg, what do you think?
“Consumer Confidence Index (CCI) is a contrarian market indicator: high values are bearish for stocks and low values are bullish.”
Great post, Andreas.
The only real thing to watch is Item 6, the Pro Business thing.
I’m not sure how closely you are able to follow political developments here from Germany, but the rise of Socialist sentiment is very real and probably bigger than at any time since the 1930s, when it might have succeeded but for FDR and the New Deal. The issue this time around is that it’s not being led by outsiders and dissidents; its now being touted by an increasing number of elected officials. And it didn’t cone from nowhere: for years I’ve been commenting on plunging monetary velocity numbers that I saw as symptomatic of problems being missed by the broad-brush GDP numbers. I don’t think we’re over the edge at this point. But if we do slip into recession in the next few years, political sentiment coupled with the fact that we now lack the monetary tools to do anything about it could unravel #6 and potentially launch a chain reaction that unravels many other points. Even short of out-and-out socialism, grass roots anti business sentiment is definitely on the rise.
This is what the “Northman Trader” has to say about the present market:
The Yield Curve inverts.
U.S. 10 Year Treasury = 1.60%
U.S. 2 Year Treasury =1.60%
It has also been inverted for a while against the 3mo bill