Control Panel: Higher rates, overextended markets

The New York Times and Wall Street Journal both have articles about higher bond yields and an overextended stock market overweighted in tech stocks.

There’s little point quoting them since this has been the story for many weeks now. The entire Treasury yield curve is rising much faster than the fed funds rate. This will eventually pressure companies that need to refinance low-yield debt. Financially-sound companies with lots of cash actually benefit from the higher yields. (e.g. Microsoft).

The Fear and Greed Index is neutral, as is the risk panel. The markets expect one fed funds raise in 2023 and no cuts until well into 2024.

The METAR for next week is partly cloudy. Nothing is driving change at this point.


Two things

The rates are normal.

We face a shutdown.

The calculus is really bad. In a shutdown market rates would spike. Corporate bond valuations would drop hard. Equity values would tank.

All of this no matter what happens won’t be retrievable till we begin to get effective economies of scale in US manufacturing.

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Is this like the shutdown you were talking about 6 months ago?



Yes, but there is only one way out of it. I can not get into that here.

It won’t happen immediately.

@WendyBG It is important not to use economic data for daily or weekly trading. I am not trying to say exclusively but with a jaundiced eye.

The charts you also posted as of Friday are dangerous. The volume on Friday was an extreme that may follow through.

The odds people rush for the exits looking at a shutdown have to put everyone on edge.

This fits with your ‘bad August and September’ scenario (but so far we’re doing OK). In the last shutdown (December 2018) the S&P went down some 16% starting two weeks before (which would be now, more or less). The shutdown lasted 35 days and during that period the index actually rose 14%.


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Include the scary last shut down that went out with a whimper. Trying to assume that a shutdown is going to happen is a fools errand. I suspect there are more reasonable people than morons running around the capital.


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It was a triple-witching day, that’s why volume was high!


That is far from the truth but we can not discuss politics.

There is a very dumb wish for destruction.

Exactly what you said last time. Yawn. How many times are you going to be wrong before you admit it.


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If the government does not close down I will admit it.

If a close down is not very significant in the first month or two I will admit it.

I have no problem being wrong and admitting it. I am among the very rare people you will meet online who readily admit when he is wrong.

You are wrong right now. You want to admit it? Would you? Or would you go about your business as if your blank is good on the internet?

You are wrong because you do not know if I am wrong in the future.

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And yet there have been full or partial shutdowns under every single President since Carter.

The shutdown is a blunt instrument and involves a fair amount of brinksmanship. In that way it is like a strike between management and labor. Everybody hopes for some reasonable compromise before it happens, but … it often doesn’t happen.

Without bothering to look it up, I’d wager the market was not as overbought as it is today, and interest rates were still quite low, giving business confidence and investors conviction. I wouldn’t think the same psychology would be in effect today.


You have a rather vivid imagination sir. Or you are letting go of reality.

:rofl: :rofl: :rofl:

The issue was Y2K was coming up. The FED flooded dollars into the economy to expand the economy and pay for the date change. Computers in 1994 were based on the 286. This became an excuse to upgrade every corporate machine.

I like your control panels even though I am investing according to a longer, multi-year timeframe that largely ignores short term forecasts. I have a comparatively large cash position that earned roughly zero percent when I opened it in late 2021, now earns abou 3.2percent (fdic insured accounts).


You should be able to do far better than 3.2% in the current environment. I am routinely finding treasury bills in the 5.3-5.55% range, and lately have been finding numerous CDs in the 5.4-5.5% range. All backed by the treasury or FDIC.

For example, the 8-week bill I purchased this week yields 5.428%. The 26-week bill I purchased this week yields 5.537%. And a CD I purchased from UMPQUA bank yields 5.55%. These are all from this week (or late last week). I buy some every week to maintain a wide ladder of maturities out to a year or so. At this point, I’ve been doing this for a while and have money rolling over every week. So the bills/CDs that yielded 4.8-4.9% six months ago are being reinvested at ~5.5% yields today.


My IRA is still mostly equities. My accountant tells me how much I can take out at the end of the year to stop short of higher tax brackets and/or Medicare thresholds. That money now goes into a back door Roth. Mostly equities that will go up, down or sideways over the next decade or SS checks go into low cost equity etfs.none of this is based upon short term weather forecasts.

I have some relatively safe money in a 7 month cd paying 5 percent, I could earn a bit more elsewhere, but this is easy - local bank branch rolls the money in on a phone call and then sends me paperwork to sign. I spend little time or energy on investing in retirement.

Mostly just listen to your accountant. We are on the internut. You do not really need us. We are just the entertainment.

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That is 10 shutdowns in 40 years. So 30 years that we didn’t have a shut down? I am not going to go back and count them because obviously I think this is frivolous. But out of the 10 that we had maybe one really amounted to anything. Shutdowns are good for people that care to have drama or wring their hands but they never amount to anything. Everyone predicts a shutdown but they only were right 10 times in 40 years. That to me is not a great record.