Flattening Yield Curves

[Mister Imperceptible]

A companion thread to the thread Augustus started for Shiller PE.

https://www.stlouisfed.org/~/media/File ... .pdf?la=en

What’s of note is that the yield curve flattened in the mid-90’s, but the market ran another 5 years before it inverted and the dot com bubble burst.

I’ve read a lot of posts online, at least one of them a guest post on Jacob’s blog, about people, some of them with hundreds of thousands of dollars, who were sitting in 100% cash in 2009, 2010, 2011, 2012, because “the market just doesn’t look good right now.” These poor souls, healthy though their skepticism was/is, have seen the market run away from them.

“The market can stay irrational longer than you can stay solvent.” Sitting in 100% cash is the poor man’s version of shorting the market. Well, either that or hedging another way. What to do, what to do.....

[unemployable]

The best gains in the stock market usually come in the process of the yield curve going to flat, as opposed to when it is flat or inverted. That was 2017, and still is now.

[Mister Imperceptible]

The question is whether the end-cycle melt-up gets completely wiped out by the ensuing correction.

[unemployable]

The question is whether the end-cycle melt-up gets completely wiped out by the ensuing correction.

If you plan to stay 100% in stocks at all times, or otherwise don't plan to change your allocation other than systematic rebalancing, does it matter?

We're at all-time highs, which means everyone who bought at every previous point in history is up. Oh by the way the yield curve has been steepening so far in 2018.

What's your concern, anyway? Trying to figure out when to sell?

[Mister Imperceptible]

After I made a down payment on a rental property I finished wiping out my student loans. I’m not interested in a second mortgage so it’s time to invest elsewhere. Feels like a scary time to start. I envy those who started their FIRE journey in the wake of 2008. That’s with hindsight. I could just pay off the mortgage. I’m thinking of putting 25% of new income into each stocks, gold, cash, and the mortgage (rather than bonds). I paid cash for my Honda so I have no debt now other than the mortgage- perhaps I’ll underweight cash and make it 30/30/30/10.

[Mister Imperceptible]

I have a small sum in a Roth IRA that I rolled over from a previous employer’s Roth 401(k). Nothing in a taxable account yet.

[Mister Imperceptible]

https://m.youtube.com/watch?v=jUwd737mioM

[ducknalddon]

We're at all-time highs, which means everyone who bought at every previous point in history is up.

Shouldn't you expect all time highs to be a common occurrence in a growing economy, I'm not sure that in itself is anything to worry about.

[unemployable]

Shouldn't you expect all time highs to be a common occurrence in a growing economy, I'm not sure that in itself is anything to worry about.

Yes; that's my point.