Yield Curve Inverted today

The yield curve for today, March 22, 2019 was inverted, or at least partially inverted.  This means short term rates were higher than long-term rates.  This is bearish, and one of the more important indicators.

The Dow closed at 25,502 today. We'll see how it holds up.

Bloomberg: Fed to Shrink Assets Next Month, Boost Rates by Year End

What does this imply for investors?  Raising rates mean raising mortgage rates, too.  Homeowners with fixed rate mortgages will be OK, but those with variable rate mortgages, and new home buyers, will not be OK.  The only reason people of ordinary means can afford to buy a home now is because of the very low interest rates.  There will be fewer home buyers and some of the variable raters will have to sell.  So I foresee an end to the real estate boom currently going on.

Florida Real Estate

Why do people still buy homes in Florida, esp. southern Florida?  The danger from hurricanes is obvious, and then there's global warming.  Florida is only a few feet above sea level.  If you deny the existence of climate change, then, sure, buy Florida.  It's scary to think that there are so many who believe the seas won't rise.  My prediction, and I'm not alone in this, is that Florida real estate values will collapse completely within 30 years.

Time to sell oil/gas companies?

Looks like it might be time to get out of the energy sector, because electric cars are going to replace gasoline cars.  The EVs will soon be cheaper to buy, maintain and fuel.  Watch this persuasive video from Canada:
The Rise of Electric Vehicles

The Summer 2016 Outlook

Let's review the current situation.

• The stock market indices are at, or near, all-time highs.
• Interest rates are near zero.  They've never been this low.
• Housing prices have recovered from the 2008 slump and are making new highs.
• Unemployment is low and GDP is growing, albeit slowly.

It hardly makes sense to buy bonds, except maybe short-term bonds.  They pay little interest.  The market doesn't think interest rates will rise anytime soon, but if rates rise, bonds will drop.  Interest rates can hardly go lower, so the risk is all one-way. Keynes showed, in his General Theory, that interest rates do not have a natural rate that they return to.  Instead, interest rates can stay low (or high) indefinitely.

As to stocks, they're not cheap.  The S&P 500 price to earnings ratio is about 25, on the high end historically.  So one would tend to think the top is near and that it's not a good time to buy.

As to housing, it's high-priced, as I'm sure you know.  The very low interest rates of recent years have allowed buyers to pay more, as their mortgage payments are lower than they would be if interest rates were higher.  I also think housing prices have gone up because there is so much immigration - these folks have to live somewhere.

Scenario One:  Interest rates stay low.  Bonds hold steady, stock market ditto, maybe grows a little.  Housing must surely be reaching a top.  If immigration is curbed, it could go down.

Scenario Two: Interest rates rise.  Bonds crash, stock market crashes, housing slumps. Banks need rescuing.

So not a good outlook.  Be cautious.  On the plus side, technology is changing the world.  Today, the top five stocks by market cap were Alphabet (Google), Amazon, Apple, Facebook and Microsoft.  You need to have positions in these or risk getting left behind.

Debt Crisis: Here We Are Again

Once again we have the crisis of raising the US government debt ceiling, or defaulting on the national debt.  The last time this happened, I sold my regular Treasuries ETF and glad that I did.  I still own a TIPS (Treasury Inflation-Protected Securities) ETF, however.  It's down quite a bit this year, but still above what I paid for it.  So I'm wondering if I should sell it ahead of Thursday's possible default by the federal government.  I'm inclined to think so, for two reasons: (1) the default, if it happens, will surely hit the prices of all government bonds, including TIPS, and (2) TIPS, or at least my TIPS fund, are mostly long-term bonds.  Interest rates have nowhere to go but up from today's near-zero levels, and that will hit all long bonds.

Orders to buy

I should mention that the rules for selling apply also to buying.  If the next earnings announcement is a week away or less, use a market order, else a limit order.

The one thing that's different is that there should be less urgency to act to initiate a position than to close one out.  You know what they say, the best way to double your money is to fold it in half and put it back in your pocket.