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TrumpWinz [S] 18 points ago +18 / -0

The above chart is the WEEKLY chart of the 10 year treasury bond yield since 2017. It hit an ALL TIME LOW last year of 0.35% and is trending up.

It is currently at 1.086%. It is currently trending up because A. it can't really get materially lower and B Inflation is making it's way into all commodities.

There is no limit to how much money a government can fiat into existence. However that money ends up going into commodities and other things which make general prices go up. You can go look at the double digit rise in commodities over the last year and see for yourself.

When inflation goes up, LENDERS demand increased yield on the loans they are making in order to keep up with the cost of inflation.

This makes the cost of capital for BORROWERS higher.

Corporations borrow billions of dollars every day just for working capital and for rolling over debt. This will have a direct impact on their bottom line and a direct impact on their valuations.

This is going to put a cap on the market's upside and in fact will be a major factor in crashing the market under BIDEN.

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Dum_spiro_spero 4 points ago +5 / -1

Thank you for this explaination pede.

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TrumpWinz [S] 10 points ago +11 / -1

No problem. I know lots of people are depressed but I want them to know that Biden's administration is about to get royally fucked by this market and there's nothing he can do about it. In fact, there's little Trump could have done about what is about to hit. This will be worse that the 2008 collapse.

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hoopinfloyd 4 points ago +4 / -0

So whats the play?

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Bromandudebud 5 points ago +5 / -0

Buy gold.

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TrumpWinz [S] 1 point ago +1 / -0

Gold is good, but copper and silver too.

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Snowblind 3 points ago +3 / -0

This is the question

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Dum_spiro_spero 2 points ago +3 / -1

Sell calls? Buy puts? Leaps? Good question. Maybe 50lb bags of beans and rice ?

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JimDandy 4 points ago +4 / -0

All three are great investments if you have inside information. So unless you are a congressional staffer, I would stick with the 50lb commodity play.

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JamesBond007 3 points ago +3 / -0

GME to the moon ? Stonks only go up ???

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TrumpWinz [S] 1 point ago +1 / -0

If you are an active investor look to trade in and out of commodity plays. I am in and out of copper, gold, crude, nat gas, soy. Sometimes e -minis.

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Xtracredit 1 point ago +2 / -1

Do you think selling personal holdings to get out now is worth paying the capital gains tax?

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TrumpWinz [S] 3 points ago +3 / -0

I don't know what your porfolio of assets looks like or what they are currently yielding or what type of investment structure you are in so that is hard to answ er.

But, selling all personal holdings to avoid capital gains tax sounds nuts. They may still be taxed at ordinary income which may be higher depending on where you live, your tax bracket, etc. Gotta ask an accountant.

I would say that you need to think about what you want your portoflio to look like in 10 years. If you go straight cash right now that still gets taxed and you have negative yield as per inflation.

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Don-O-Mite 6 points ago +6 / -0

Im not terribly good at understanding these things. Little help please?

Does this mean now is a good time to get more bonds?

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TrumpWinz [S] 11 points ago +11 / -0

I posted a couple of explanations. I am not posting this as investing advice. I am posting this so you will understand what to watch for as an indicator that the market is probably going to be in trouble.

Interest rates have nowhere to go but up. That is bad for the stock market. Very bad. Very very bad for the stock market because the cost of borrowing of corporations who borrow a lot will go up and they rely very heavily on borrowing.

A crashing market is never good for any president, and the kind of crash we are looking at could be 30-40% just on the first leg down. Biden will look like shit in his first year.

The fucking market is literally afraid of 2% interest rates which is going to happen this year as we are already halfway there.

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Whoopies_tds 5 points ago +5 / -0

Someone is pumping money into the market to help Biden save face. It can only last so long before the foundation collapses

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TrumpWinz [S] 7 points ago +7 / -0

https://www.investing.com/commodities/real-time-futures

If you go to that investing.com commodities link, click on performance, and sort by 1 year return, you will see a shitload of double digit growth rates in commodities.

How did commodity prices grow double digits in 2020 when the world economy crashed so hard and demand sucked shit?

That is inflation. We are in the early stages of a multi stage multi year inflationary cycle.

Biden's admin just said they want to put another 4 trillion into the economy so look forward to another double digit return in commodities this year.

I want people to understand that the Biden administration is truly fucked on so many economic levels without even talking about the shitty regulations and trade deals he's going to do. He is macro economically fucked.

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JamesBond007 3 points ago +3 / -0

I sold all stock in my 401K and moved in to cash. I’ve seen this story before but thankfully Trumps economy rebuilt ALL my losses from the Obama disaster movie and I learned my lesson. No where to go with Biden but a stock market crash and he threw gas on the fire the first day shutting down the XL pipeline and dumping thousands into unemployment. PAIN is coming so protect what you worked so hard for.

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TrumpWinz [S] 4 points ago +4 / -0

For most people, I think that should be the safest move overall. But to add another layer of defense take a look into some precious metals. Not certificates I mean shit that you stick in a safe in your house. In 2008 money market was days away from going insolvent. That's how fucking close we came to game over.

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JamesBond007 2 points ago +2 / -0

Believe me I know. I pulled thousands out in small bills under $20 in case we had to buy with cash. I wanted to be able to pay the least without making change that might not be possible. Having that and knowing that if it all crashed I could still function day to day for a few months helped me immensely sleep at night.

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Don-O-Mite 1 point ago +1 / -0

I cant post thanks enough to you for all the replies in here. I look forward to seeing future heads up from you, Im not 100% sure what Im going to do but at least this gives me some ideas and I can talk to an advisor without being totally lost.

I already stack precious metals, thats been a thing that is recommended my entire life, so at least I have that part right.

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TrumpWinz [S] 2 points ago +2 / -0

What you can do for yourself is to start learning more about trading. There are hundreds of styles but I would suggest learning about trend followers style of trading. The reason is that it is the least reliant upon news and focuses largely on just asset prices. This keeps the bullshit out of your head as much as possible.

you can go on youtube and start looking at michael covel and turtle trading as an intro but theres lots out there.

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Don-O-Mite 1 point ago +1 / -0

Thanks, I'll check into that

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Don-O-Mite 2 points ago +2 / -0

Thanks for this info, this is really helpful.

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cornfedandconfused 4 points ago +4 / -0

absolutely not.

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Don-O-Mite 2 points ago +2 / -0

thanks!

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deleted 3 points ago +3 / -0
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RiseOfTyranny 4 points ago +4 / -0

I'm also not very good at putting these things together but I'd like to know: What kind of effect would this have on the stock market? Would it impact only certain industries? How long before major changes are seen?

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TrumpWinz [S] 7 points ago +7 / -0

This will effect all industries and all stocks though multiple vectors.

  1. Cost of borrowing. The 10 year treasury bond is government debt guaranteed by the us treasury. It is considered the safest bond you can buy. Therefore the yield, which is the annual interest that it pays, is used as a benchmark for all other bonds. Said another way, the 10 year yield is the lowest interest rate that any bond will pay. If the lowest interest rate that any bond will pay goes up, that means everything else goes up. Corporations borrow money daily for everything from payroll and rent, to long term infrastructure projects like buying a new factory. If the cost of borrowing goes up, they will borrow less and also have to spend more money on interest.
  2. Higher cost of capital by definition will reduce the net present value of companies which reduces the price of stocks. Institutional investors, the big investors that move the market not mom and pop retail, use substantial amount of financial modeling to calculate the value of a company. One of the key formulas is the Net Present Value which is basically Cashflow / (1 + cost of capital). I am greatly simplifying but you can look this up on investopedia. They always discount the future stream of earnings that they are forecasting, by the future anticipated cost of capital. Remember, they want to know how much something is going to make for them in the future and figure out how much that is worth in today's money in order to determine how much they are willing to pay for that investment.
  3. Higher cost of capital reduces economic activity. This is straight forward. Our economy is built on cheap borrowing. Slightly more expensive borrowing is enough to make people not buy houses, not buy cars, not spend as much on their credit cards, etc. When is all this shit going to hit the fan? It will happen in phases and by the way not just due to interest rates but this will be a large chunk of it. Right now interest rates are slowly creeping up. But when the rate of change goes from a slow creep to a spike, the market will pay attention. I think the first phase occurs this quarter and as early as February. The reason is that the Biden administration wants to put 4 trillion of stimulus into the economy. Initially that will make the market happy but that is only cotton candy satisfaction. Shortly thereafter it will make inflation shoot up faster because that money will get spent into the real economy and that will make the bond market start to say, fuck this shit, I want a higher rate of return to keep up with inflation. That will make interest rates shoot up. Then that will make the stock market react with hard selling. The second order effects such of reduced economic activity will take it down the next leg which will lead to the next round of stimulus and rinse and repeat until the the inflation gets too much for the system to handle.
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RiseOfTyranny 3 points ago +3 / -0

Thanks for another lengthy write up. Found some good information in this thread.

You guys are great.

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TrumpWinz [S] 4 points ago +4 / -0

I will be doing this shit like this every day. People need to understand that Biden is in all likelihood royally fucked on the economic front.

This isn't wishful thinking, Trump would have probably been fucked as well but slightly less so and wouldn't have sold us out in the process.

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deleted 4 points ago +4 / -0
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TrumpWinz [S] 5 points ago +5 / -0

In the 2008 collapse shit got so bad that money market funds were within DAYS of becoming insolvent. Money Market!!!!

If that happened that would have caused a bank run and every industry would have failed.

That is what we are facing again in the upcoming crash which could kick off this quarter but very likely this year. When it gets underway, Biden is fucked. His administration can not handle a 2008 style market collapse.

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deleted 1 point ago +1 / -0
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RiseOfTyranny 3 points ago +3 / -0

Brutal but seems simple enough. Thanks for the detailed write up.

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deleted 3 points ago +3 / -0
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scarfacexxx 2 points ago +3 / -1

you should buy bonds when the yeld is high and sell when it's low.

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TrumpWinz [S] 4 points ago +4 / -0

The 10 year yield is used as a benchmark for cost of capital. Said another way, how do lenders decide how much to charge a borrower in interest?

First they must start with a "Risk Free" rate. This is an interest rate for the supposedly MOST SECURE and RISKLESS ASSET available, which is government debt. Because if the government can not pay you back, then nobody can.

So lenders will often look at the 10 year as the starting point interest rate and then tack on cost from there to reflect the type of risk that they are assigning to the borrower. Maybe they borrower has a perfect credit history, steady cashflow, and payment history and assets.

Well, they will say, this guy is pretty safe so I will charge him the 10 year yield + 2% annual interest for a totaly of 3.086%.

Let's say the guy has some credit problems, spotty payment history, and is of higher risk. Well the lender might say, I will charge the guy the 10 year yield + 8% because this guy is risking for a total of 9.086%.

ETc, etc.

This is just a simple example, but as the benchmark rate of interest climbs, obviously the costs of borrowing go up.

With all the borrowing that is going on right now, that means that the cost of borrowing gets more expensive. This means that will reduce borrowing, it will direct more money towards debt service, and it will lower the valuations of the companies and the stock market.

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fu3l3dByRag3 2 points ago +2 / -0

it has already started, two straight days of losses is terrible for confidence

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TrumpWinz [S] 3 points ago +3 / -0

I think that max move to the upside is 4000 on the S&P 500, which is only a couple of hundred points away so I'll give it that move.

But, yeah the best down moves start with early warning signs like more selling days a week with late recoveries. Then selling in the overnight session with the day session struggling to stay up. Then more bear days than bull days. Then maybe one last short squeeze rally and kaput it's week after week of blood in the streets.

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Thehumancentipede 2 points ago +2 / -0

What is the safest bet if this turns into a total nightmare?

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TrumpWinz [S] 2 points ago +2 / -0

Cash and precious metals that you own in a safe. But that's total shit hits the fan tier. You have part of your portfolio for that and the rest for investing until shit looks like its heading south.

I like commodities for the long run and stocks related to commodities.

Some guys like super defensive low growth companies and utilities.

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JamesBond007 1 point ago +1 / -0

Cash in hand or ammunition and guns. Something that can buy or barter.

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Basehobo 1 point ago +1 / -0

Hasn't the Fed indicated they would start trying to control higher up I to the yield curve?

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TrumpWinz [S] 2 points ago +2 / -0

That's beyond their ability to directly control. They can influence it through buying and selling bonds but ultimately they are one of many buyers in the market. They are a very influential buyer, but if inflation is at 3% nobody is going to accept a yield of less than 3%. That's not going to happen.

The only thing they can directly control is the cost of capital that banks borrow at the overnight window.

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FreeNow 1 point ago +1 / -0

I guess it impacts the balance between holding stocks and bonds. When rates are really low people are out of bonds, when rates are higher they become more competitive with stocks on a risk return basis. Printing money only gets you so far before it catches up with you.

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TrumpWinz [S] 2 points ago +2 / -0

Get long commodities. Trade in and out if you can but we're in for a multi year run up in commodities.

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ninja009 1 point ago +1 / -0

Maybe it should all crash and burn and then we would see who can actually survive. Not painting a pretty picture for anyone, but there will be survivors and none survivors.

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JimDandy 1 point ago +1 / -0

I think that the powers that be are a in a bit of a jam here. Trump always highlighted how well the stockmarket did under his watch. If they tank it now, it is all on Biden. Everything they do will be to convince us that Trump was a mistake. I think they will do the opposite and try to hit Dow 50,000 to show that Trump was not so great after all.

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TrumpWinz [S] 2 points ago +2 / -0

There is one thing that is more powerful than all the governments combined, and that is the markets.

The governments and central banks are of course 100% going to try juice the markets up. But what I am saying is that the end game for that tactic is when inflation starts shooting up, and then starts making the bond investors asking for higher yields in order to keep pace with inflation.

In 2020 when the economy went to the shitter, commodities such as soy, wheat, corn, sugar, coffee, gold, copper, lumber, etc all had DOUBLE DIGIT returns when demand was crap. All that Covid stimulus from the central bank and congress were directly responsible for this inflation and it is going to get worse this year because Biden and the democrats want to shove another 4 trillion in stimulus into the economy!

Then on that chart I posted we are seeing yields start to go back up, albeit slowly.

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JimDandy 1 point ago +1 / -0

I agree with what you are saying. The hard part is getting the timing right. Someday the US will default again. That may be Biden's role. Once he destroys the US military there will be nothing backing the dollar. But then I think he is a puppet of China for what that is worth.

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TrumpWinz [S] 1 point ago +1 / -0

The key thing is to not try to GUESS the high. You can point to spots and say, I think that this area is a likely pivot point. Then you watch the behavior once the instrument gets there and see if it starts reversing the trend. There is a lot of technique behind that which I've spent years developing.

But the point is to not guess the high. Have a spot where you think is the high. See if it starts to turn around. Watch the short term trend and then make the bet that the short term trend will become a longer term trend.

If you are wrong, then you have the recent high as a location to STOP out your position. If you are right and the short term trend is confirming your thesis, then you can add to your bet.

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humped2424 1 point ago +1 / -0

Buy index funds like vtsax fzrox voo VTI and just Hope for the best they track the best 500 companies of the stock market if they all fail were in bigger trouble

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brundlefly777 1 point ago +1 / -0

Good info in this thread. Thank you.