The Bond Market Is Signaling The End

According to the bond market, the world has ended. Not ending. But ended. 

Bonds are going bonkers. Well… actually their yields are going bonkers. 

The US 30-Year Yield just hit lifetime lows. It’s as if the bombs are landing right now on US soil and people are dying. 

Countries around the world are dropping their Federal Fund rate equivalent so their own currency doesn’t get too pricey. 

Crazy stuff is happening. 

And Greenspan himself, our dear 93 year old Ex-Fed Chairman apparently read my blog from last week and he himself is saying US rates can go below zero now. 

You can watch and listen to why I believe US rates are going below zero in last weeks blog post.

Negative Yielding Debt. 

Where’s the bottom?

About 25% (and growing) of government debt around the world is negative yielding. Gulp!

50% of a EuroZone debt is negative yielding. 85% of German debt is negative yielding. 

100% of Swiss debt is negative yielding. You might want to read that last one again and also consider Switzerland’s longest dated debt is 50 years. If you do that math that means you’ll get most of your money back in 2069!

And it gets better. 

A Danish bank has just launched the first ever negative yielding mortgage. Danes can now borrow money and pay less back. 

But there’s a big problem to all of this negative yielding craziness. 

Stocks Aren’t Agreeing With Bonds. 

When bonds are acting like they are right now. Usually, like all the time, stocks are falling apart. 

Think 2000’s dot com crash, 2008’s Global Financial Crises, 2011’s Debt Ceiling Debacle. 2015 Sideways Market Thingy That Never Got Named, 2018’s Nameless 20% Fall. 

But none of that is happening in stocks. 

You know what stocks are doing right now? 

The Dow Jones had its, wait for it, 380th worst drop ever. The actual drop was just a tinch over 3% on Wednesday. 

Oh my. 3%. 

That’s a real number. And if you have not been trained to know what to do and when to do it, this week could have caused a lot of sleeplessness. 

Get Trained. 

There have been 307 other 3% drops in the US stock market as measured by the Dow Jones. 

I’m just saying, if we’re in the realm of the 300th-ish worst whatever, we’ve got a disagreement going on between stocks and bonds. 

Join me for my video this week as I do something a bit usual. I spend this week’s video on one price chart. 

One price chart that goes back 20 years and shows us every yield drop with the corresponding stock market move. 

In Your Corner,

RCPeck-Dig Signature.JPG

RC Peck, CFP

PS – I’ve got four things for you this week…

(1) The Market Was Just Given A Boost
Below is an image that shows [historically] what happens to the stock market in the US when the Federal Funds Rate is dropped 0.25%. Ben Carlson provides this chart below that shows the details.

(2) The Third-Rail Of Comedy
Apparently growing up in Illinois in a religious family is nothing like growing up in the South. John had me laughing the whole time. 

(3) The Chart of the week…
I just love this one chart comment from David Zarling this week.

(4) And one more…
We don’t rise to the level of our teachings. We fall to the level of our trainings.

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