Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Soybean Price Hits 9 Year Low Due to Trade War - 24th Jun 18
Small Cap Stocks, Technology and Pharma To Drive A Renewed Market Rally - 24th Jun 18
Gerald Celente: Why You Still Need Guns, Gold, and a Getaway Plan... - 23rd Jun 18
Cheap Gold Stocks Bottom Basing - 23rd Jun 18
A Trade War Won’t Be Good for the US Dollar - 23rd Jun 18
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Yield Curve, 2016 Predictions - “There is No Wizard Behind the Curtain!”

Stock-Markets / Financial Markets 2016 Jan 23, 2016 - 12:54 PM GMT

By: Gordon_T_Long

Stock-Markets

FRA Co-Founder Gordon T. Long discusses with Global Macro CME Floor Trader Yra Harris, the difficulties of investing in the currently suppressed global market. Yra has been a member of the CME since 1977 and is a well-known global macro trader. Yra currently works with Vine Street trading.


YIELD CURVE

Yra distinguishes the 5/30 UST as much more of speculators curve, and the 2/10 UST, an investors curve, meaning people with a longer term horizon.

Regarding the flattening of the yield curve line: Yra references Paul Samuelson saying the stock marketing having predicted the past 9 of the 5 recessions, however the same cannot be said for the yield curve.

“When the yield curve starts to flatten, to ultimately invert, trouble looms”.

Yra believes that central banks eventually error one way or another, and ultimately cause the curve to flatten.

2016 PREDICTIONS

The market anticipates slowing growth, if not negative growth resulting in recession. The last time this was seen was 2006-2007. When the Fed was raising rates, driving the rate to 5.5% on the federal fund rate, the yield curve was flattening, and within 6-9 months later, the curve had inverted.

Yra combats the notion that the yield curve is a bad indicator by saying, “It is only a bad indicator because I cannot time for you, what the market’s reaction to it will be”

Yra mentions Stanley fisher saying that going to negative yields in the United states would be very difficult because of their money market funds.

“If the Federal Reserve of the United states went to negative yields it would be a catastrophic statement that they had panicked, indicating they have nothing left.”

Yra brings up Stanley Fisher saying the four rate increases are a probability.

“I’m going to watch what the metals market is doing. If the gold rallies while the curve flattens, it will be telling me that the market is getting fearful…meaning the central banks are losing control”

“The optimal control function is a myth. Economic analysis is not rocket science. Good science is the ability to continuously replicate an experiment and get the same results, this is not the case.”

Yra believes that central banks are not concerned about inflation, because banks have learned they can slay inflation, by raising rates high enough to stop it, which will and has caused the yield curve to invert in the past. Systems built on borrowing, such as China, would rather endure periods of inflation than deflation, deflation is 30% unemployment, everything stops. “run inflation hotter, because that’s the greatest thing to remove the overhang of debt”

“If you can’t restructure, and if you can’t write it off, because you’re worried about the banks, you have to create some inflation, and their fear is that they’ve been unable to.”

GEO POLITICAL TENSION — OIL & CHINESE MARKETS

Demand is contracting because the world economies are slowing down. The Saudis have built their structure based on that they felt comfortable that the United States and the six fleet would always be there to support them.

“Saudis are sending a message that they’re upset with the United states about a shift of policy, as they see it. We are at a critical junction, and I think oil is all part of it. All of a sudden the Saudis are going to do an IPO of Aramco, which will bring significant implications, they’ve never gone that route, why now?”

There is word that they’re short of capital, however it’s cheaper to raise capital in an equity capital than a bond market. Saudi reserves are not the collateral for those bonds. This is all tied into the price of crude oil.

“China is a great story, from an academic sense, but from a market sense I don’t trust anything that I read out of China”

Yra’s tongue and cheek example is Google not being allowed to be used freely, restricting the free flow of information.

“It’s amazing to me that this country, that does not allow free flow of information and data, can meet market projections at so many of their data releases. I don’t trust the (Chinese) data enough to trade.”

One thing that has always scared the Chinese authorities is losing control of the employment situation. Michael Pettis has talked about how the Chinese leadership has financially repressed the middle class, because they’ve kept the Yuan too cheap in order to build a vast pool of reserves. When a country wants to buy imports, they have to pay a greater price but the goal was to drive the export engine. When trying to make the shift from export oriented to a more domestic oriented economy, then a stronger Yuan is more desirable, which would make for cheaper imports.  Yra states,

“If you’re really trying to empower your citizenry, let the currency go higher.”

“China is still a totalitarian government, and they can inspire fear, which is what a totalitarian regime operates on”

THE FOCUS FOR INVESTORS

“We don’t have the play out of fundamentals that we used to. They will eventually play out because fundamentals will ultimately drive the market, they have to.”

Yra says that the equity markets are so linked and tell a global story, but believes that linkage is a false correlation.

“Monetary policy and financial acumen is still not rocket science” – It brings with it much uncertainty.

Gordon T. Long
Publisher - LONGWave

Signup for notification of the next MACRO INSIGHTS

Request your FREE TWO MONTH TRIAL subscription of the Market Analytics and Technical Analysis (MATA) Report. No Obligations. No Credit Card.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments. © Copyright 2013 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from him.

Copyright © 2010-2016 Gordon T. Long

Gordon T Long Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules