Investing Thread

[MU82]

The art of buying high and selling low, from Yahoo Finance:

Last week's tariff-induced market sell-off ripped through 401(k) accounts, and over the weekend, millions of savers and retirees took matters into their own hands.

People pulled vast sums of 401(k) money from large US equity funds and target date funds and shifted to more conservative stable value, bond, and money market funds, according to Alight Solutions' 401(k) Index.

Trading activity on Monday was almost 10 times an average day's volume, with investors fleeing stocks for the safety of fixed-income funds, Rob Austin, head of thought leadership at Alight Solutions, told Yahoo Finance. It was the highest daily trading level since March 2020 when the pandemic hit.

Why the Monday meltdown? Historically, when stock markets have large losses on Fridays, very high trading activity in 401(k) plans follows on Monday, Austin said. People react to the news by tweaking their portfolios over the weekend, but those changes don't get executed until the market reopens.

"The high volume isn't surprising as people tend to sell during market drops and buy back after rebounds, which leads to selling low and buying high," he said. "Saving for retirement is a marathon, not a sprint and a long-term approach to investing is generally wiser, even if it means enduring occasional downturns."

[Jockey]

Too little. Too late.

[TSmith34, Inc.]

The amount of victory laps I'm seeing on Facebook over the one day stock bump helps me realize how we got into this mess.

How are the Facebookers today? Spinning today as yet another in the never-ending line of victories?

[cheebs09]

How are the Facebookers today? Spinning today as yet another in the never-ending line of victories?

It's been quiet. They might be exhausted from all the winning.

[NCMUFan]

From James Hickman from Schiff Sovereign.
OK— it's almost definitely China who's dumping Treasury bonds

Yesterday I wrote to you that something very fishy was going on in the bond market. And not just fishy— potentially destructive for the federal government and US economy.

For the past several days, US government bond yields have been surging at a rate not seen since at least 2008. And in some cases not since the early 1980s.

And this is a very, very big deal.

Higher bond yields not only mean that consumer interest rates (like mortgages) become more expensive. But they also dramatically increase the government's borrowing costs.

Bear in mind, the US government is already spending $1.1 trillion per year, just to pay interest on its $36 trillion national debt. That's 22% of all US tax revenue, i.e. twenty-two cents out of every tax dollar collected go to pay interest on the national debt.

(Plus another 47c out of every tax dollar go to Social Security and Medicare. And that's before you get to other mandatory entitlements like Medicaid, food stamps, and more...)

That annual interest payment is rising quickly; the government has roughly $10 trillion worth of debt this year to either finance, or refinance, which could easily result in hundreds of billions of dollars in additional interest expense each year.

So higher interest rates are a very big deal for a debt junkie like Uncle Sam.

That's why it's so alarming that bond yields are rising so quickly.

There's realistically only a few ways this could happen.

One way that yields might have risen so quickly, which I suggested yesterday, is that big Wall Street firms could have been shorting the Treasury market, causing bond yields to rise.

Possible, yes. But not super likely.

Many of those big Wall Street investors might have feared retaliation by the Trump administration. Or that, at a minimum, the President would single them out in social media, creating a lot of complications for their personal lives and businesses.

But I think we can safely take this possibility off the table; given yesterday's furious stock rally in which markets surged, any Wall Street firm shorting the bond market would have closed out its short positions and piled back into the stock market.

In other words, the trend of rising bond yields would have ended yesterday afternoon.

But that didn't happen. Bond yields continued rising and are up again today.

The US government's 30-year bond has been especially hard-hit and is up another another few basis points today, notching an astonishing 50-basis point (0.5%) increase in just a few days.

So with Wall Street busy trading the stock market, that only leaves a handful of possibilities.

It's also unlikely that big banks (JP Morgan, Citi, etc.) would have dumped their US government bonds, because they have regulatory constraints in terms of what types of assets they are allowed to hold.

Plus, any major selling of bank-owned Treasury bonds would have resulted in significant increases to bank reserves on the Fed's balance sheet— and that doesn't seem to have happened.

So at this point the most likely culprit is some disgruntled foreign country, whose government or central bank wanted to lash out and punish the US government over the tariffs.

Two or three days ago that could have been anyone. France. Germany. Japan. Etc.

But after yesterday's announcement which paused tariffs for almost the entire planet, there's only one suspect: China.

After the tariff pause, there wouldn't be any point for the European Central Bank or German government to sell its Treasury bonds. Why risk Donald Trump's wrath when a deal is at hand?

China, on the other hand, is stuck with a 100%+ tariff. So they definitely still have an ax to grind.

The concept of "face" (mianzi) runs very deeply in China; this is the idea that every individual, business, and even the government must uphold a reputation for strength. It would be culturally unthinkable for the Chinese government to accept tariffs without responding aggressively.

Dumping a portion of their vast US Treasury holdings is an easy way to send a message to Washington: "we can hurt you too."

If I'm right, it means this trade dispute has now graduated to full-blown economic warfare. And we could see some pretty rapid escalation.

For example, if China keeps dumping its Treasury bonds (and hence raising US interest rates), I wouldn't be surprised to see the US administration sanction the CCP and Chinese central bank, essentially freezing the bonds that they own and preventing any further sales.

China could escalate with export controls over vital rare earth minerals, which are essential in the electronics industry.

Then there's the possibility that each government could expropriate foreign-owned assets, i.e. US business operations in China, or Chinese investments in the US.

Then would come the cyberattacks, and more.

We can hope for cooler heads to prevail. But history is full of examples of how economic warfare can very quickly spiral out of control and escalate into much larger conflicts. And, at the moment, that seems to be the direction that this is heading.

To your freedom,

James Hickman
Co-Founder, Schiff Sovereign LLC

[Hards Alumni]

Certainly, that is part of it.

China didn't start this, but it is certainly showing how damaging it could be for the US.

[The Sultan]

I doubt it will get to that economic warfare benefits neither party. My guess is that some sort of "agreement" will be reached that gives both sides "wins" but largely results in status quo ante.

[MU82]

Today's fun, via NYT ...

"Rare, ugly and worrying." That is how Krishna Guha, vice chair at Evercore ISI, described the combination of market moves today, which saw U.S. government bonds sell off and the dollar weaken against a basket of leading currencies, while stocks sold off sharply. In the last 30 years, he said, there are only four other episodes in which the U.S dollar index depreciated more than 1.5 percent with the yield on U.S. 30-year government debt up more than 0.1 percentage point.

It was a mere "bonus" that the S&P lost 3.5% and Nasdaq fell 4.3%. One day left in this insane week.

[GB Warrior]

It'll be a confusing day for Fox News and Facebook posters.  What lane to take?

It's always darkest just before it goes pitch black

[Jockey]

Today's fun, via NYT ...

"Rare, ugly and worrying." That is how Krishna Guha, vice chair at Evercore ISI, described the combination of market moves today, which saw U.S. government bonds sell off and the dollar weaken against a basket of leading currencies, while stocks sold off sharply. In the last 30 years, he said, there are only four other episodes in which the U.S dollar index depreciated more than 1.5 percent with the yield on U.S. 30-year government debt up more than 0.1 percentage point.

It was a mere "bonus" that the S&P lost 3.5% and Nasdaq fell 4.3%. One day left in this insane week.

It's intentional.

[The Sultan]

It's intentional.

I am increasing convinced its not. It's irrational and implusive actions by someone who both doesn't understand what he is doing, and has surrounded himself with people who got their jobs largely because they don't challenge him.

It's one thing to talk tough and make promises that no one actually believes you can keep, but its another to use the power you have without fully understanding the consequeses.

The reason I believe this is because of his quick turnabout yesterday. There were consequences that either were not explained to him, or didn't understand, and he blinked when interest rates jumped. (Let's be real...he didn't make deals with 75 countries.) But he couldn't do that with China, and here we are.

Too often people think that there is some sort of grand, master plan, when incompetence is really the easiest and most obvious answer.

[Skatastrophy]

The 2018 tarrifs (with the same justification) were never lifted, and resulted in a monsterous ongoing tax on the American people. Idk why this time would be different. Just the exact same thing a 2nd time in a row, exactly what was promised.

[rocky_warrior]

The 2018 tarrifs (with the same justification) were never lifted, and resulted in a monsterous ongoing tax on the American people. Idk why this time would be different. Just the exact same thing a 2nd time in a row, exactly what was promised.

Nonesense!  We scrapped NAFTA, tariffed for a couple years, "negotiated hard" and then got USMCA (NAFTA 2.0).  Win, win, win?

Oh, wait, you were talking about China

[GB Warrior]

Everyone knows that the best negotiating power comes in the form of 100 bilateral negotiations. Economies of scale are a liberal lie told to us over the centuries.

[TSmith34, Inc.]

I am increasing convinced its not. It's irrational and implusive actions by someone who both doesn't understand what he is doing, and has surrounded himself with people who got their jobs largely because they don't challenge him.

The decimation of the U.S dollar is intentional. This is one of their stated goals.

And keeping on brand, they are doing it in stupidest, most destructive of ways because they (or he) has the understanding of a warthog.

[TSmith34, Inc.]

For example, if China keeps dumping its Treasury bonds (and hence raising US interest rates), I wouldn't be surprised to see the US administration sanction the CCP and Chinese central bank, essentially freezing the bonds that they own and preventing any further sales.

1) Earlier reports all point to Japan starting the selling; they are the largest holder of our debt. China could certainly have jumped on that train as well.

2) Sanctioning the Chinese central bank to attempt to stop them from selling their treasuries???? What better way to undercut the US dollar as the reserve currency of the world...it is so stupid that I can certainly see Trump doing this.

[Uncle Rico]

BTW, I point these things out not because I think Biden deserves all the credit for the economy. In fact I think the immediate action under the Trump administration to blunt the effects of the Covid economy means he deserves credit as well.

People should just stop spreading the narrative that the economy sucks.  It absolutely doesn't. It's rocking.

Those were the days

[Skatastrophy]

The decimation of the U.S dollar is intentional. This is one of their stated goals.

And keeping on brand, they are doing it in stupidest, most destructive of ways because they (or he) has the understanding of a warthog.

If you believe this to be absolutely true, then you should take on as much debt as you can, no matter the rate.

[MU Fan in Connecticut]

And we're only 3 months in.......

[Jockey]

I am increasing convinced its not. It's irrational and implusive actions by someone who both doesn't understand what he is doing, and has surrounded himself with people who got their jobs largely because they don't challenge him.

It's one thing to talk tough and make promises that no one actually believes you can keep, but its another to use the power you have without fully understanding the consequeses.

The reason I believe this is because of his quick turnabout yesterday. There were consequences that either were not explained to him, or didn't understand, and he blinked when interest rates jumped. (Let's be real...he didn't make deals with 75 countries.) But he couldn't do that with China, and here we are.

Too often people think that there is some sort of grand, master plan, when incompetence is really the easiest and most obvious answer.

As I said in a previous post where I gave you props for your opinion here, I think it is a combination of both. He has such utter arrogance that he thinks he can make any economic move and it will work. He thinks bullying other countries is economic policy.

But I also think he is partly doing this because he can manipulate the world to his will. He thinks throwing the world into economic chaos will benefit him and his friends in the long run.

[TSmith34, Inc.]

If you believe this to be absolutely true, then you should take on as much debt as you can, no matter the rate.

You say that as if I am peddling a conspiracy theory. Again, it's exactly what they've said they want.

https://www.businessinsider.com/trump-tariff-us-dollar-dominance-selloff-trade-war-inflation-exceptionalism-2025-3
"Trump has said he wants to see the US dollar weaken, and spent the election floating ideas that would achieve that goal. The idea is that devaluing the currency would help US exporters stay competitive in a world of rising protectionism."

Trump Wants the Dollar to Be Mighty But Weak. It Makes No Sense.
https://www.barrons.com/articles/weak-dollar-trump-vance-reserve-currency-6851b258

https://www.nytimes.com/2025/01/27/briefing/donald-trump-currency.html

It's twisted up in his idiotic lizard brain that every trade has to have a winner and a loser. He's not just stupid, he's monumentally dangerously stupid.

[Jockey]

It's twisted up in his idiotic lizard brain that every trade has to have a winner and a loser. He's not just stupid, he's monumentally dangerously stupid.

Hey T, that is exactly what I was trying to say. You put it much more succinctly. A tragic combination of manipulation & stupidity.

[Skatastrophy]

You say that as if I am peddling a conspiracy theory.

I said it literally, not sarcastically.

Edit: Like I've considered it. It would be the way that I could most closely align my lifestyle with the current President's (being in monumental, crushing debt) and then trust that by helping himself, he will help me.

[Mutaman]

And keeping on brand, they are doing it in stupidest, most destructive of ways because they (or he) has the understanding of a warthog.

You're overrating "they (or he)". What Hitchens said about someone else, applies here:

"The fox, as has been pointed out by more than one philosopher, knows many small things, whereas the hedgehog knows one big thing. xxx was neither a fox nor a hedgehog. He was as dumb as a stump."

Oh wait, you were talking about a "warthog". Is  a warthog the same as a hedgehog?

[TSmith34, Inc.]

I said it literally, not sarcastically.

Edit: Like I've considered it. It would be the way that I could most closely align my lifestyle with the current President's (being in monumental, crushing debt) and then trust that by helping himself, he will help me.

Crushing debt sounds interesting. Might have to take a pass though.