Investing General Discussion
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Flobee
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That's a good question. My understanding is that dumping a large amount of treasuries onto the market, even old ones, will drive price down and result in rates going up. We are in an unusual time right now where rates have moved pretty quickly in a short amount of time so I wonder how that would affect things. I took it for granted that the correlation between bond price and yield would remain intact but in our situation I'm not really sure.
I found some references that support this, but they don't address our current situation with yields raising so much in the short time. Not sure how that would play.
EDIT: I would also note that I misspoke in that original quote. Selling that many treasuries would put downward pressure on -price- and thus upward pressure on rates. Rates are determined by the market so I think that relationship would still hold up.
What Would Happen if China Started Selling Off Its Treasury Portfolio?
Just how important have foreign inflows been to the Treasury market?
www.cfr.org
Understanding Treasury Yields and Interest Rates
Understanding the factors behind Treasury yields and interest rates is crucial for an investor.
ShakyJake
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Could interpret that as more people re-entering the workforce?
EDIT: Nevermind. full time employment is way down.
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OU Ariakas
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That's a good question. My understanding is that dumping a large amount of treasuries onto the market, even old ones, will drive price down and result in rates going up. We are in an unusual time right now where rates have moved pretty quickly in a short amount of time so I wonder how that would affect things. I took it for granted that the correlation between bond price and yield would remain intact but in our situation I'm not really sure.
I found some references that support this, but they don't address our current situation with yields raising so much in the short time. Not sure how that would play.
EDIT: I would also note that I misspoke in that original quote. Selling that many treasuries would put downward pressure on -price- and thus upward pressure on rates. Rates are determined by the market so I think that relationship would still hold up.
What Would Happen if China Started Selling Off Its Treasury Portfolio?
Just how important have foreign inflows been to the Treasury market?
Understanding Treasury Yields and Interest Rates
Understanding the factors behind Treasury yields and interest rates is crucial for an investor.www.investopedia.com
China is not going to sell off all of their US treasuries at one time because it is a fucking horrible deal for them to do it. Right now they have $1.3T in bonds that we are paying them to hold them until they expire, then they will their principal back. If they put their 1.3T on the market right now they would lose that income stream AND have to take a haircut on the face value of the bond because no one is going to pay them full price for an old bond with a lower coupon rate and a shorter repayment period. So could they do it to "stick it to the USA"? Yes, but it would cost them a shit ton of money that they probably don't have and the USA wouldn't eat that cost......the new owner of the bond may just not buy newer bonds if they are satisfied with the amount they hold. The reason that it would put upward pressure on rates is that the USA would then need to entice bond buyers that a higher rate on a new bond is more attractive than a lower rate on a fire-sale old bond.
Here's the thing; a ton of bonds are held by the US public and private markets. If China puts on a fire sale on their stockpile then there is a high likelihood that it will be purchased at a steep discount by investors looking to make profit.
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Flobee
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Oh, we're not talking about China. I posted that article as an example of how dumping treasuries in volume would affect the price/rates. If you go back we're talking about liquidity issues w/ sovereigns in general. Specifically Japan because they need USD for debts, but can't buy them with their currency because its already getting hammered against USD. This problem will continue to spread as the Fed increases rates because just about every nation has USD debts and liquidity is drying up world wide. If you can't sell your currency for USD without massive devaluation then you're stuck with however much USD you have on hand then must resort to selling treasuries to meet debt servicing requirements.
As such the Fed has been creating swap lines with foreign Central Banks where they swap local currency for USD in a fashion that doesn't effect FX prices
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Sanrith Descartes
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MSFT has some pretty solid support at the $210 area for anyone interested.
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What limit buy are you thinking? I’ve had in my mind if it hit $200 I’d back the truck up, but I’d probably rather get in a little higher than miss an opportunity.
Such a shockingly ugly 1 year chart for such a beast company. Most of the small cap growth tech stocks i straight avoid because in my mind I think “Microsoft can do it better”
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Sanrith Descartes
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Here is the 5-year chart. Its hard to nail down an "exact" number over that long stretch but $210/$212 is what the computer likes. I think long term anywhere in this range is good. Notice it took the bounce this morning right around $213.
Sanrith Descartes
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Its getting to be that time of year if you have a taxable account. Starting to look at realized gains and loss harvesting to offset. My mom's account seriously outperformed my own this year due in no small part to being a lot more conservative in most areas. She is looking at a low 5-figure gain so far this year. Luckily almost all of it long term gains. Names I sold this year in her account. All but Medtronic were solid gains and MED was about a breakeven. WMT and ABBV were just selling off part of the positions to reap the profits off the table on some great runs.
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Sanrith Descartes
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So one last thought for today. There are lots and lots and lots of people online telling you big tech is dead. Some people here think it as well. Maybe its true. I dont believe it. Our economy over this last gigantor bull market we just finished was built on the backs of MSFT, AAPL, GOOGL, META, etc. I will believe they are dead when the markets are making new highs while they are making new lows. These stocks are coiled and have a shitload of pent up demand. The cash is going to flood back into them at some point and they are going to go parabolic. These arent companies who are money-losing, all growth, no profit, meme stocks. History tells us the worm will eventually turn for the market and we begin the march back upwards. My guess (and my money) is big tech will be in the vanguard.
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Furry
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Just dumping their bonds is likely a no go for a multitude of liquidity and trade reasons, beyond the hair cut they'd take just selling at spot values, if you think about this from a reasonable position. That said, indications are high that China intends to reunify with its core territory of Taiwan, and possibly within the next year or two, so those bonds become a massive liability in that case, as America has shown that it will just steal money from countries it politically disagrees with.
But lets be honest here, this is China, and being reasonable and responsible are not things their banks are known for. I think all bets are out the window when it comes to what moves they'll make when put in a corner. They aren't a country concerned about trivial matters such as prestige like Russia. China could very well put up a "no refunds" sign and just decide to stop paying all bonds held by unfriendly actors tomorrow, and intentionally trash the US treasury markets as a fuck you cherry on top of things. There's a reason I have strongly been against holding anything chinese for this entire thread.
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I think you are right and the cash in these markets right now is very conservative. You can see it with many of the dividend stocks bid up into the 40s on PE. When we really reach the turning point people will pivot into more growth focused stocks again and that will mean tech sees some monster years.
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Sanrith Descartes
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Sanrith Descartes
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Sanrith Descartes
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Aldarion
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starting to hit sell limits on my bear stuff (TECS sold so far, AAPD not far behind). Its sooner than I'd expected to be selling but I'll take the profits, its been on my side just about all week and I'm not sure how much farther down we go on this leg.
edit - Looking at 3M charts makes me think I suck at letting winners run and am gonna spend early next week regretting this!
edit - Looking at 3M charts makes me think I suck at letting winners run and am gonna spend early next week regretting this!
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Arden
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I've been feeling like I need to make move. I've been sitting in the same position for a long time and it's worked out well for me, but I definitely get the feeling we're on the precipice of something.
I've been kind of paralyzed trying to anticipate how next Tuesday is going to affect things. Still not sure if I should make a move before or immediately after
Sanrith Descartes
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Don't trade on "feels". Emotion is the wealth killer. Use charts and other info. If you dont have those skills then ask peeps who do for advice.
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Sanrith Descartes
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TSLA announced price cuts in China to try to boost sales numbers before the end of the year.