Bureau of Economic Analysis this morning here:
Thursday, October 26, 2023
Tell me, Bwana: What mean GDP, why important?
Friday, October 20, 2023
Vanguard's long term Treasury fund, started in 1986, set a new all time low price record yesterday: What a coincidence
VUSTX fell to $7.37 yesterday, October 19, 2023.
Until the bond debacle of 2022, the lowest price ever was set way back in 1987, also on October 19, aka Black Monday, when the S&P 500 crashed 20.47% in its worst single day ever.
2022's new all time low for VUSTX at 8.16 had occurred on October 24, missing the anniversary of the old all time low by just three days. Also a very odd coincidence.
The debacle has only continued in 2023, and VUSTX prices haven't seen $8 since September 22nd.
ZIRP since the Great Recession is ultimately to blame for the current mess in long term Treasury securities. The clamor it created for yield drove bond investors long, culminating in the highest nominal prices ever paid for long term UST in March 2020, and the lowest yields. 30Y UST yield crashed to 0.99% on March 9, 2020, 20Y to 0.87%. Yields across the board in 2023 for 2Y to 30Y have set records for this cycle in October. Yesterday 20Y demanded 5.30%, 30Y 5.11%.
No one wants that 2020 and prior junk now, so wherever it sits it's causing collateral problems, at banks, insurance companies, pension funds, et cetera. And on the Fed's balance sheet: As of October 18th the Fed has $1.503922 trillion of UST maturing in more than 10 years on its balance sheet. It basically has to keep it until it matures, and it pays it very little to return to the Treasury as it does.
Are prices done falling?
Confident pretenders said so a year ago this month, and now here we are with $TLT investors down another 12.22% since then.
Given the obscene overvaluation of stocks, and the demand for higher yields by bond investors, cash still seems the safest place to be. VMRXX, Vanguard Cash Reserves Federal Money Market Fund Admiral Shares, has returned 4.00% ytd. You continue to lose to inflation, however.
Nothing is ever perfect.
1987 high and low |
2022 high and low to the left, all time high and low to the right |
Saturday, October 7, 2023
Trump Tower triplex overvalued by at most 272%, Instagram undervalued in 2012 by 14,900%
Trump's NY fraud trial is beyond stupid.
Saturday, July 29, 2023
It's been a terrible year so far for investors in US Treasury securities because of the rising rate environment, but great for stocks
UST yields rose a net 1.31% in the aggregate week over week on 7/28.
DFF rises to 5.33% after the latest FOMC rate hike.
Year to date Treasury, Total Bond, Cash, and Total Stock performance using popular Vanguard funds:
VFISX +0.75% VFITX 0.90% VUSTX 1.58% VBTLX 2.05% VMFXX 2.75% lol VTSAX 19.99%!
Stocks have been the place to be, and cash has beaten even the total bond market.
Meanwhile stocks are obscenely overvalued at 169 using the latest report of GDP out Thursday:
Saturday, July 1, 2023
Wednesday, June 7, 2023
Gold remains far more overvalued than US stocks, which is saying a lot
Gold is at least 167% overvalued relative to inflation since 1913. $600ish gold makes sense. $1600 gold does not, let alone $2067, the 2020 high.
Meanwhile stocks are off-the-charts overvalued, about 93% relative to the post-Great Depression median valuation of 81 through 2019, as of the latest GDP figures from late May.
Speculation in both gold and stocks, not to mention a host of other things, has been driven by Federal Reserve interest rate suppression since 2001.
How long elevated gold and stock prices can persist in the new higher interest rate environment is anyone's guess.
The Fed Funds rate still averaged a low 1.69% in 2022, so it's still early innings.
. |
May 25, 2023 |
Saturday, October 8, 2022
US homes were at least 84% overvalued in 2021
Rounding out the Unholy Trinity of Big Ticket Asset Inflation, Housing joins Stocks and Bonds in similar overvaluation territory in 2021 at about 84%.
In Feb 2012 when housing bottomed after The Great Financial Crisis, a previous inflation-adjusted Case-Shiller home price index chart no longer updated for present years showed that prices had fallen into the top range of US house prices which had prevailed throughout the post-war from the 1950s to the late 1990s. Mind you, the top range of those inflation-adjusted prices.
Thanks to Democrats and Republicans, including Bill Clinton and Newt Gingrich, the American Dream, the nest of the American future, was turned into a mere commodity in the late 1990s, to be churned in the markets for profit.
Long-suppressed long term interest rates have conspired with commoditization to produce valuations which have exploded, making houses unaffordable as nests, which is why your kid is still living in your basement.
The chart below shows the nominal price figures, on an average annual basis through 2021. The blow-off tops in 2022 are even worse (the index topped 308 in June), and are not shown because the year ain't over, and prices are falling.
At an average index level of 260 in 2021, prices were inflated from 141 in 2012 by about 84%, not far below the overvaluation of stocks and bonds at 90% and higher.
The percentage holding full-time jobs through September 2022 held above 50%, disappointing the ubiquitous advocates of a Fed interest rate pivot
Full time as a percentage of civilian population in September was 50.3%, and for 2022 through September averaged 50.15%.
Not bad, considering.
The Fed will see little evidence in this figure that its interest rate increase policy is harming employment.
Stocks on Friday collapsed after a head fake to start the week to within 1.5% of the 52-week lows set a week ago.
Long term investment grade bonds and US Treasury securities also revisited lows from 9/27/22, coming within pennies of those benchmarks.
30-year yield for UST is back up to 3.86%. It was 3.87% on 9/27. At the beginning of 2022, yield was a paltry 2.01% by comparison.
UK gilts are experiencing the same action despite the Bank of England intervening to buy bonds.
The bond crisis is not over.
With yields soaring across the board no one wants to own the lower paying outstanding issues, which are legion, destroying their value.
But everything in the global economy is based on those, piled up in earnest after The Great Financial Crisis of 2008, and in orgiastic frenzy afterwards during the late pandemic.
Bond yields in 2022 are telling you that they are overvalued by 92%.
Stock market valuation is telling you a similar thing.
From 1938 through 2019 the median ratio of the S&P 500 to GDP is 81. In 2020 we averaged 154, or 90% overvalued.
This is the major deflationary headwind facing the world, the other side of the COVID-19 inflationary shock coin.
Push here, it comes out over there.
Modern central banking cannot escape this conundrum any more than the gold standard could.
The only thing the individual can do in this situation is to owe nothing and save everything, preferably in your hands.
Good luck.
Sunday, July 7, 2019
The continuing crisis of housing bubble-itis
Sunday, August 31, 2014
Total Market Capitalization To Nominal GDP Ratios, Selected Years
2000 1.420
2001 1.209
2004 1.170
2005 1.147
Tuesday, July 8, 2014
Something about riskier bonds for Bob Brinker listeners to think about
Tuesday, June 10, 2014
John Hussman: It's advisable to panic before everyone else does
Friday, February 21, 2014
How Speculators Redistribute Wealth: Find The Greater Fool
Saturday, January 18, 2014
Both Shiller p/e and Tobin's q warn stocks are seriously overvalued
Saturday, October 19, 2013
If profit margins were historically normal, the Shiller p/e would be about 29 here, not 24
Thursday, April 11, 2013
For What The Nation Earns Homes Are Still Overpriced (15%)
Saturday, February 16, 2013
Give Us A President So Depressed He Can Hardly Get Out Of Bed
Monday, October 1, 2012
Fear: The First, Second And Third Reason NOT To Invest
"God knows I'm long. I'm long . . . I have no choice."
If it's a free country and a free market, why is there so much compulsion?
Tuesday, August 7, 2012
The Market Was Already Overvalued In October 2011, And It Still Is
Thursday, July 12, 2012
NY Fed Study Shows S&P 500 Near 600 Subtracting Fed Interventions Since 1994
575 looks as good to me now as it did in August 2011, here.