How many times have you heard that over the past few years?
Profunds offers a way to make money on rising interest rates. The Profunds
Rising Rates Opportunity Fund. YTD it's down -8.87%. For the year ended
6/30/05 it's down -21.95%.
It's 3 year AATR for the period ending 6/30/05 is -14.29%.
Ed wrote:
> How many times have you heard that over the past few years?
Times change.
Right now, I would say short-term interest rates have nowhere to go but
DOWN.
If Greenspan keeps jacking up short-term interest rates past 4%, he's
going to drive this economy back into a recession. As the Fed Funds
rate keeps rising, it's catching up to the longer term rates on the
10-year and 30-year Treasuries. That's always bad news for the economy
and the stock market.
Remember what happened the last time we had an inverted yield curve, in
late 2000-early 2001? The economy slowed, and the stock market went
into a bear market. The 9-11 terrorist attack only accelerated that
process, it didn't start it.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
"Steven L." <> wrote
> Remember what happened the last time we had an inverted yield curve, in
> late 2000-early 2001? The economy slowed, and the stock market went into
> a bear market. The 9-11 terrorist attack only accelerated that process,
> it didn't start it.
I think the bear market was driven by extremely high valuations that were
nothing short of speculation. The market went from extreme overvaluation
back to something closer to 'normal'. I viewed this more as an adjustment
than a bear market.
Ed wrote:
> "Steven L." <> wrote
>
>
>>Remember what happened the last time we had an inverted yield curve, in
>>late 2000-early 2001? The economy slowed, and the stock market went into
>>a bear market. The 9-11 terrorist attack only accelerated that process,
>>it didn't start it.
>
>
> I think the bear market was driven by extremely high valuations that were
> nothing short of speculation. The market went from extreme overvaluation
> back to something closer to 'normal'. I viewed this more as an adjustment
> than a bear market.
The S&P 500 declined nearly 50% peak-to-trough, and the NASDAQ declined
some 75% peak-to-trough. That's some "adjustment." Overvaluation does
not automatically trigger a bear market. The market was way overvalued
in the entire period of the late 1990's but it still kept rising--till
we ended up with an inverted yield curve in December 2000.
If earnings had increased steadily in 2000-2003, valuations could have
become more reasonable without the S&P 500 needing to decline by 50%.
But Greenspan raised interest rates too much for that. Of course, he
couldn't have foreseen the 9-11 terrorist attack, which administered the
coup de grace to the U.S. economy and stock market.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
"Steven L." <> wrote
> If earnings had increased steadily in 2000-2003, valuations could have
> become more reasonable without the S&P 500 needing to decline by 50%. But
> Greenspan raised interest rates too much for that. Of course, he couldn't
> have foreseen the 9-11 terrorist attack, which administered the coup de
> grace to the U.S. economy and stock market.
There was no way that earnings reports were going to improve. Many of the
companies (new then) are gone now, they were instant mid caps and never made
a cent. With analysts lowering earnings expectations and companies missing
the lower estimates for almost 4 quarters before the 'crash' anyone who lost
big was either asleep at the wheel or just didn't know any better.
I don't think that 9/11 played much of a roll in the stock market. Sure,
they closed it for a week and it did go a little lower, on 9/10 the S&P500
was 1,092, on 9/28 it was 1,040. It continued lower in a pretty orderly
fashion except for the little blip down below 1,000 in that September. It
was just another factor and while it had a large impact on the leisure
industry it didn't do much to cave in the stock market.
"Steven L." <> wrote in message
news:4JfCe.5944$
>
> Right now, I would say short-term interest rates have nowhere to go but
> DOWN.
>
> If Greenspan keeps jacking up short-term interest rates past 4%, he's
> going to drive this economy back into a recession. As the Fed Funds
> rate keeps rising, it's catching up to the longer term rates on the
> 10-year and 30-year Treasuries. That's always bad news for the economy
> and the stock market.
I find it hard to believe that, with so very many dollars sloshing around in
the world, looking for a place to be invested, that interest rates will go
up all that much.
>
> Remember what happened the last time we had an inverted yield curve, in
> late 2000-early 2001? The economy slowed, and the stock market went
> into a bear market. The 9-11 terrorist attack only accelerated that
> process, it didn't start it.
Inverted yield curves aren't caused by the Fed raising short-term rates, per
se. They are caused by investors eschewing longer maturities in the
expectation that a higher rate can be had later. The Fed can contribute to
this but the rest of the market has to believe what we've all seemed to know
for years (rates are on the way up). So far, it doesn't seem to be
happening and short-term rates are still low by historical standards, aren't
they?
Herb wrote:
> "Steven L." <> wrote in message
> news:4JfCe.5944$
>
>>Right now, I would say short-term interest rates have nowhere to go but
>>DOWN.
>>
>>If Greenspan keeps jacking up short-term interest rates past 4%, he's
>>going to drive this economy back into a recession. As the Fed Funds
>>rate keeps rising, it's catching up to the longer term rates on the
>>10-year and 30-year Treasuries. That's always bad news for the economy
>>and the stock market.
>
>
> I find it hard to believe that, with so very many dollars sloshing around in
> the world, looking for a place to be invested, that interest rates will go
> up all that much.
>
>>Remember what happened the last time we had an inverted yield curve, in
>>late 2000-early 2001? The economy slowed, and the stock market went
>>into a bear market. The 9-11 terrorist attack only accelerated that
>>process, it didn't start it.
>
>
> Inverted yield curves aren't caused by the Fed raising short-term rates, per
> se. They are caused by investors eschewing longer maturities in the
> expectation that a higher rate can be had later. The Fed can contribute to
> this but the rest of the market has to believe what we've all seemed to know
> for years (rates are on the way up). So far, it doesn't seem to be
> happening and short-term rates are still low by historical standards, aren't
> they?
The short-term Fed funds rate has now become equal to the rate on the
10-year Treasuries. The issue is the Fed funds rate *relative* to
long-term interest rates, not how high it is in an absolute sense.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
Herb wrote:
> "Steven L." <> wrote in message
> news:4JfCe.5944$
>
>>Right now, I would say short-term interest rates have nowhere to go but
>>DOWN.
>>
>>If Greenspan keeps jacking up short-term interest rates past 4%, he's
>>going to drive this economy back into a recession. As the Fed Funds
>>rate keeps rising, it's catching up to the longer term rates on the
>>10-year and 30-year Treasuries. That's always bad news for the economy
>>and the stock market.
>
>
> I find it hard to believe that, with so very many dollars sloshing around in
> the world, looking for a place to be invested, that interest rates will go
> up all that much.
I'm really amazed how intelligent folks can believe that the
availability of lots of cash somehow "forces" investment into this or
that market.
Except for morons who throw money into markets without understanding
them, most investors look at the risk-reward ratio in each market. If
they're flush with dollars, they have lots of choices. They can invest
in foreign stocks or foreign bonds or domestic stocks or domestic bonds
or real estate or precious metals or foreign currencies like the Euro.
So the idea that dollars will "automatically" buoy the U.S. bond market
is as nonsensical as the idea that dollars can "automatically" buoy the
U.S. stock market. The fact that millions of American workers were
"automatically" investing in the stock market thru their 401(k) plans
didn't stop the S&P 500 from declining by 50% in just 2 years.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
Ed wrote:
> There was no way that earnings reports were going to improve. Many of the
> companies (new then) are gone now, they were instant mid caps and never made
> a cent. With analysts lowering earnings expectations and companies missing
> the lower estimates for almost 4 quarters before the 'crash' anyone who lost
> big was either asleep at the wheel or just didn't know any better.
What "crash"?
> I don't think that 9/11 played much of a roll in the stock market. Sure,
> they closed it for a week and it did go a little lower, on 9/10 the S&P500
> was 1,092, on 9/28 it was 1,040. It continued lower in a pretty orderly
> fashion except for the little blip down below 1,000 in that September. It
> was just another factor and while it had a large impact on the leisure
> industry it didn't do much to cave in the stock market.
I think that 9-11 had a very negative effect on investor confidence.
And we saw that last summer during the 2004 Presidential campaign. Why
should someone invest in the U.S. stock market when the President and
Vice President are warning us about a suitcase nuke that could wipe out
the entire New York City financial district at any time? We're hearing
those same warnings again now, after the London terror attack.
As I've discussed here before, global war has an effect on investor
confidence which affects the U.S. stock market. As the Nazis and
Japanese were on a rampage in 1940-41, the U.S. stock market declined
steadily. But around mid 1942, it recovered and began a new bull
market. Because investors were beginning to notice that the tide was
turning and that the Allies could really win the war. (Mid 1942 was the
time of the Battle of Midway.)
As I've said before, when you invest in the U.S. stock market for a long
term (say 20-30 years), you are in effect betting on the future of
America itself. After 9-11, and the uncertainty in the Iraq War, and
the way our elected officials (both parties) tell us that WMD terrorist
attacks are probable and can happen at any time, that confidence in
America's future is lower than it was after the Cold War ended in the
1990's.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
"Steven L." <> wrote in message
news:3EzCe.6345$
> Herb wrote:
>
> > "Steven L." <> wrote in message
> > news:4JfCe.5944$
> >
> >>Right now, I would say short-term interest rates have nowhere to go but
> >>DOWN.
> >>
> >>If Greenspan keeps jacking up short-term interest rates past 4%, he's
> >>going to drive this economy back into a recession. As the Fed Funds
> >>rate keeps rising, it's catching up to the longer term rates on the
> >>10-year and 30-year Treasuries. That's always bad news for the economy
> >>and the stock market.
> >
> >
> > I find it hard to believe that, with so very many dollars sloshing
around in
> > the world, looking for a place to be invested, that interest rates will
go
> > up all that much.
>
> I'm really amazed how intelligent folks can believe that the
> availability of lots of cash somehow "forces" investment into this or
> that market.
>
> Except for morons who throw money into markets without understanding
> them, most investors look at the risk-reward ratio in each market. If
> they're flush with dollars, they have lots of choices. They can invest
> in foreign stocks or foreign bonds or domestic stocks or domestic bonds
> or real estate or precious metals or foreign currencies like the Euro.
At the risk of seeming a moron, how do you invest in Europe using dollars?
You'd have to trade them for Euros which means someone else will have to buy
(and hold) them. They don't simply go out of existence.
>
> So the idea that dollars will "automatically" buoy the U.S. bond market
> is as nonsensical as the idea that dollars can "automatically" buoy the
> U.S. stock market. The fact that millions of American workers were
> "automatically" investing in the stock market thru their 401(k) plans
> didn't stop the S&P 500 from declining by 50% in just 2 years.
I don't know about "automatic" but supply is a big factor in any market. If
you are holding dollars, then you have to hold them in some form unless you
are stashing them in your mattress.
If the 10-year Treasury is commanding the same rate as shorter term
securities, that says that people are still buying them in the open market.
It's hard to understand why unless it is a lack of alternatives.
"Steven L." <> wrote in message
news:ytzCe.6342$
> The short-term Fed funds rate has now become equal to the rate on the
> 10-year Treasuries. The issue is the Fed funds rate *relative* to
> long-term interest rates, not how high it is in an absolute sense.
Actually, the issue is the effect of the rate on the supply of money. So
far, there is not a lot of evidence that this is becoming constricted
(higher interest rates).
You do understand that only banks pay the short-term interest rates
controlled by the Fed. A quick look at the yield curve (determined by a
relatively open market) shows positive slope. People still want to be paid
for waiting.
"Steven L." <> wrote
> Ed wrote:
>
>> There was no way that earnings reports were going to improve. Many of the
>> companies (new then) are gone now, they were instant mid caps and never
>> made a cent. With analysts lowering earnings expectations and companies
>> missing the lower estimates for almost 4 quarters before the 'crash'
>> anyone who lost big was either asleep at the wheel or just didn't know
>> any better.
>
> What "crash"?
To quote you, easier that doing actual research:
The S&P 500 declined nearly 50% peak-to-trough, and the NASDAQ declined
some 75% peak-to-trough.
If this isn't a crash, please describe one.
>> I don't think that 9/11 played much of a roll in the stock market. Sure,
>> they closed it for a week and it did go a little lower, on 9/10 the
>> S&P500 was 1,092, on 9/28 it was 1,040. It continued lower in a pretty
>> orderly fashion except for the little blip down below 1,000 in that
>> September. It was just another factor and while it had a large impact on
>> the leisure industry it didn't do much to cave in the stock market.
>
> I think that 9-11 had a very negative effect on investor confidence. And
> we saw that last summer during the 2004 Presidential campaign. Why should
> someone invest in the U.S. stock market when the President and Vice
> President are warning us about a suitcase nuke that could wipe out the
> entire New York City financial district at any time? We're hearing those
> same warnings again now, after the London terror attack.
It didn't stop me.
> As I've discussed here before, global war has an effect on investor
> confidence which affects the U.S. stock market.
Steve, no one cares about the Nazi's anymore. Get over it. Globalization has
a much stronger effect than global war. Think about it.
Herbie, I think you should stay on whatever itis you're taking. You are
starting to make sense. Very unusual for you.
"Herb" <> wrote in message
news:ljxCe.435951$
>
> "Steven L." <> wrote in message
> news:4JfCe.5944$
>>
>> Right now, I would say short-term interest rates have nowhere to go but
>> DOWN.
>>
>> If Greenspan keeps jacking up short-term interest rates past 4%, he's
>> going to drive this economy back into a recession. As the Fed Funds
>> rate keeps rising, it's catching up to the longer term rates on the
>> 10-year and 30-year Treasuries. That's always bad news for the economy
>> and the stock market.
>
> I find it hard to believe that, with so very many dollars sloshing around
> in
> the world, looking for a place to be invested, that interest rates will go
> up all that much.
>>
>> Remember what happened the last time we had an inverted yield curve, in
>> late 2000-early 2001? The economy slowed, and the stock market went
>> into a bear market. The 9-11 terrorist attack only accelerated that
>> process, it didn't start it.
>
> Inverted yield curves aren't caused by the Fed raising short-term rates,
> per
> se. They are caused by investors eschewing longer maturities in the
> expectation that a higher rate can be had later. The Fed can contribute
> to
> this but the rest of the market has to believe what we've all seemed to
> know
> for years (rates are on the way up). So far, it doesn't seem to be
> happening and short-term rates are still low by historical standards,
> aren't
> they?
>
>
"Steven L." <> wrote
> The short-term Fed funds rate has now become equal to the rate on the
> 10-year Treasuries.
T-bills 3.187
10 yr note 4.75
Is this equal?
"Steven L." <> wrote
> I'm really amazed how intelligent folks can believe that the availability
> of lots of cash somehow "forces" investment into this or that market.
>
> Except for morons who throw money into markets without understanding them,
> most investors look at the risk-reward ratio in each market. If they're
> flush with dollars, they have lots of choices. They can invest in foreign
> stocks or foreign bonds or domestic stocks or domestic bonds or real
> estate or precious metals or foreign currencies like the Euro.
I haven't really been following your contest but what place are you in?
The stock market has nothing to do with reality. You must understand this if
you want to make money. It has everything to do with perception. If you
disagree then please explain the 1990's.
Just for fun I bought 1000 shares of Smith & Wesson for $1.86
They are having legal problems. Unsafe product. They make guns. Guns can
kill you. I think that if a gun has a safety and can't be fire until the
safety is disabled it wasn't the gun that caused the 'accident'.
SWB closed at 4.51 on Friday and it will get to $5. Superior products,
superior company.
Hello Disney World.
"Herb" <> wrote
> At the risk of seeming a moron, how do you invest in Europe using dollars?
All those good things I said about you, I take them back.