Forum : Stock: [CAPITALA]: CAPITAL A BERHAD

Critically, as Jim Grant noted recently, the spread between the 10-year and three-month yields is an important indicator, James Bianco, president and eponym of Bianco Research LLC notes today. On six occasions over the past 50 years when the three-month yield exceeded that of the 10-year, economic recession invariably followed, commencing an average of 311 days after the initial signal.

Finally, Joseph Carson, former Director of Global Economic Research, Alliance Bernstein, notes that recessions are far from being alike and their symptoms and causes differ over time. Despite its many shapes and sizes the historical regularity that an inverted Treasury yield curve has coincided with recession has raised concern now that yields on longer-dated Treasuries have fallen been below shorter-term yields for several months running.

The power of the term spread to predict or anticipate economic recessions needs to be respected, but there are several new domestic and global factors that are present today, suggesting that the signaling effect from changes in the Treasury yield curve directly to the economy's future performance might not be as robust as it was past periods.

First, this is the first economic cycle that involved a bond-buying program by the Federal Reserve. The quantitative bond-buying program produced a technical anchoring effect at the long-end of the bond market that was not present in prior cycles. While this program did not cause a yield curve inversion by itself it did result in a flatter yield curve than what otherwise would have been the case, and as a result, it would not take much force from other factors to trigger an inversion in the term spread of yields.

Second, given the increased globalization of the financial markets the appeal and demand of long-dated US Treasury securities is often based on the yields available in other major economies. Long bond yields in a number of major economies (such Germany, Japan and France) are negative and many others (including the UK, Spain and Australia) are below 1% and that has led to an increase in global demand for long-dated US Treasury securities since yields in the US are in some cases 100 to 200 basis points over the yields of comparable maturities in other economies. That increased global demand for US securities is a new technical factor and unrelated to the performance of the US economy.

Third, this is the first time the inversion of the Treasury curve occurred with nominal yields at the short and long end that were well below the growth in nominal income and GDP (or the economy's yield curve). Why is that important? There is a direct negative consequence to the economy's performance when the cost of borrowing exceeds the growth in nominal income. At that point, the cost of new borrowing starts to become too costly, leading to a slowdown or a decline in credit use, and a weaker economy.

Although it is often overlooked, all of the Treasury yield curve inversions that have preceded recessions have coincided with an inversion in the economy's yield curve, or when short and long-term nominal rates were above the growth in nominal income and GDP. The fact that the Treasury yield curve has inverted at relatively low nominal yields, suggests that the interest rate channel is not producing the restrictive influences on the economy as it did during prior inversions and instead is actually providing a cushion (or stimulus) to the economy. Policymakers should take note of this unusual occurrence and not rush to ease policy further, saving its interest rate powder for another time.

If the Treasury curve inversion is not producing a restrictive influence on the economy as it did in the past can the US still experience a recession? Yes, but it would come from different channels.

The biggest recession risk today centers around the trade dispute between the US and China. Trade disputes have the potential to be very disruptive and contractionary and can operate through a number of channels, such as trade volumes and production, currencies and prices and asset markets.

Of all of these channels, the biggest vulnerability for the US is the equity channel since the market value of equities relative to income and GDP is at record highs, providing consumers with vast sums of liquidity and wealth. If the imposition of new tariffs and the uncertainty over what may follow triggers a de-risking and rush to exit, sparking a sustained 25% to 30% correction in the equity market that by itself could trigger a recession as it would deal a substantial blow to consumer liquidity and wealth, and an abrupt and sharp decline in spending and confidence.

That is not a forecast or a prediction but merely an observation that all recessions have been caused by some form of a demand shock, and the inverted yield curve merely highlighted the vulnerability of the economy to a potential bad outcome.

flexibt

461 posts

Posted by flexibt > 2019-08-15 05:21 | Report Abuse

Dow tumbles 800 points after bond market flashes a recession warning

https://edition.cnn.com/2019/08/14/investing/dow-stock-market-today/index.html

JN88

11,670 posts

Posted by JN88 > 2019-08-15 05:56 | Report Abuse

Recession your head la....your eyes is blind si bor?look at the DOw still at 25k point.......drop till 18 k point only let me know...

1675875085772982

339 posts

Posted by 1675875085772982 > 2019-08-15 07:01 | Report Abuse

Down Jones Drop -800.49! Stay tune 9am KLSE! Inikalilah

Flyinghorse

3,657 posts

Posted by Flyinghorse > 2019-08-15 08:29 | Report Abuse

Fire sales starting soon.......

salman

1,554 posts

Posted by salman > 2019-08-15 08:45 | Report Abuse

WARNING SELL!! bad Q result is coming.........

KAQ4468

21,497 posts

Posted by KAQ4468 > 2019-08-15 08:56 | Report Abuse

kepitttttttt teloqqqqqqqqqqqqqqqq

toto

1,421 posts

Posted by toto > 2019-08-15 08:59 | Report Abuse

Break 1.80

KAQ4468

21,497 posts

Posted by KAQ4468 > 2019-08-15 09:05 | Report Abuse

break 1.80 aku tak takut ....kepittttt teloqqqqqq

break 1.7 aku goyang ......teloqqqqq goyangggggg
break 1.6 aku kecut .......teloqqqq sentot masuk dalam
break 1.5 aku mampuih .... teloqqq hilang

prince4

1,459 posts

Posted by prince4 > 2019-08-15 09:34 | Report Abuse

US-CHINA Trade War market uncertain, local and foreign funds money would not flow in big cap and mid cap stock because everybody scare buy high losses money . In this few month expect Funds manager money would flow out in bigcap and midcap stocks and will short selling midcap stocks for make money so now no prospects cannot buy and hold .
TOP volume all low prices stocks.This is a opportunity ,markets money now flows in cheaper stocks. sharks now start goreng lows price stock at bottom..

salman

1,554 posts

Posted by salman > 2019-08-15 09:46 | Report Abuse

WARNING SELL!! bad Q result is coming.........

KAQ4468

21,497 posts

Posted by KAQ4468 > 2019-08-15 10:05 | Report Abuse

so far so good

layannnnnnn

jgb349000

492 posts

Posted by jgb349000 > 2019-08-15 10:08 | Report Abuse

Salman is the greatest instigator..if u wana sell,pls go ahead.

ikshvaakar

3 posts

Posted by ikshvaakar > 2019-08-15 10:46 | Report Abuse

Guys,my trade attaché source said the China-US situation is worsening and no solution is possible at present. China will not yield to any unequal demand of the US especially matters concerning its internal affairs and domestic laws and regulations. China thru it's new UN ambassador has delivered to Trump that if the US want to talk, China will talk and if the US want trade war, currency war, hot war or whatever war China will go to war. China does not fear war and will fight to the very end to defend its sovereignty and core interest. China will not surrender and will retaliate for every unjust policy or measure that is imposed on the country.

Moreover, with regard to the South China Sea, China told the US new hawkish Defence Secretary that any unjust move by the US will be thwarted including sinking of all enemy vessels.

The above statement is precise and clear. It reinforces China readiness to go to war with America once it's core interests are violated. China's UN ambassador has made it clear to Washington that China will not budge an inch. And with that warning China-US relation turns stern and frosty.

My source cautioned me that China has acknowledged that trade, commerce, finance, technology etc. are mere disguises to contain and destroy China progress and world leadership.

China is now preparing for a possible war next year or latest in 2021 over Taiwan. China is working very hard to explain to all her friends and partners the US evil plan to destroy the world to remain the sole hegemon. On this score over 60 countries posted their support to stand together with China.

Next month China will raise the aforementioned matters at the Shanghai Cooperation Organisation summit and lead a coalition of allies to stop the US from tormenting trouble around the world.

Already the Saudi and UAE have ignored their master and chief defender by selling their oil to China in RMB totalling over 3+ Billions. The sale proceeds are kept in Shanghai banks. The US is hopping mad and will throw the Saudi under the bus.

China, Russia and Iran and now now with Qatar, Saudi and UAE have cracked the foundation of king Dollar. A very significant quantity of oil payments are now made in RMB and at the next meeting of OPEC Russia will take over control and make oil payments payable in other sovereign currencies. King Dollar will surely face formidable crisis by early 2020.

The MAGA slogan is just another fantasy. And Orange man will preside over America's bankruptcy and become another 3rd World country.

Watch patiently, my friend.

Just sharing...

MK4872

252 posts

Posted by MK4872 > 2019-08-15 11:01 | Report Abuse

salman is the king of "sell"....thats more or less all he have to say about every corner in i3. I think if he can sell his mother....he may also sell. Just a troll in the forum. Those here long enough will know who are genuine and who are troll.

laofuzi123

124 posts

Posted by laofuzi123 > 2019-08-15 11:04 | Report Abuse

Everyday same trick endless selling at 1.88 q. 86 before today 1.82 endless selling point again add 1000 queue and so on

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