We are happy to humbly state when someone comes out with a really cool chart – in this case, it out does our charts/comments seen here, here , here, here. here, here and here – all good – We were there much earlier – theirs is pretty, much prettier, slight worry about so many all talking about it – discussion for another time …
Check this out!
Have a Great “Inverted Yield Curve” Day!
John A. Kvale CFA, CFP
Hello and Welcome to our May 2018 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format.
In our Social Security related post here, we discuss the tons of new options for use as well as the fantastic updates the Social Security Administration has done with their website.
The most important item to check if you are not already drawing Social Security is your credits… which can be done on this site… recall there is a possible time sunset of loosing your benefits if you do not have the Social Security Office notified, leading to a possible lower benefit.
Here are the new tax tables… if they look complicated, well it is because they ARE !
Expect much more on this throughout the coming months as we dig DEEP into the actual rates and the planning techniques necessary to optimize our tax liability …. One Important five letter word…. CLUMP – more later on this!
Bottom line, at its most basic level the yield curve should go upward and outward just as our home made chart below (the starting point for our discussion.)
When it does completely the opposite or inverts, as seen below… a recession is just around the corner for as long as the eye can see!
Expect a complete detailed video over the summer on this phenomenon … along with another review in the coming Newsletter… It can be boring info, not to worry … we will liven it up!
Have a Great Day – Talk to you at the end of June!
John A. Kvale CFA, CFP
Finally our conclusion to what we have all been waiting for …. The Predictive Value of our discussion …
So we know the FOMC fiddles with rates…
The FOMC Federal Open Market Committee raising the totally controlled short end … recall, they do not totally control the longer end… capital market participants do!
This following Chart is our sizzle….
This is the difference of the 2 year yield and the 10 year yield for about 5-6 decades…
When the 2 year yield is BELOW the 10 year yield the line is plotted above zero … think 1% less 3%, would give you a data point of 2 on this chart….
When the short end of the curve is ABOVE the long end — totally backwards to all logic, the plot on the graph would be BELOW zero… areas which we have circled in red…
Grey area are recessions …. just behind the inversions —
Take a moment and check this chart out…
Here is an easier to see chart from 1999 to present–
Why don’t they stop raising?
They cannot, it is their mandate – keep inflation under control …. raising rates is their main control mechanism.
Also, it is beyond their control as investors actually pile into the long end of the curve dropping it’s rate while the FOMC raises, in anticipation of the next recession…
Creating the Inverted Yield Curve!
In Never go all in or All out fashion, if the curve inverts we do not pack up our things and leave …. BUT caution is definitely advised.
There will be excuses …
Maybe- worth heeding with a track record shown above….
We will keep you posted!
Hope you enjoyed the Series … Quick links – Part 1, Part 2, Part 3, Part 4
Have a Great “Not Inverted Yield Curve” Day!
John A. Kvale CFA, CFP
Posted in Interest Rates, Investing/Financial Planning, Market Comments
Tagged FOMC, Inverted Yield Curve, Yield Curve
In our prior post here, we discussed the basic yield curve and why the longer the term, all other things being equal, the greater the risk, AND the greater the cost to finance or lend.
Just like the weather or most other items in life, the Yield Curve can change.
Generically, during faster growth periods of time .. think inflation or a faster growing economy, rates are higher.
During slower periods of time, rates may fall or go lower.
Assuming they do this pretty much evenly across the curve, changes look like our hand drawn graph below.
A Parallel Shift Across the Yield Curve.
Next up, real life examples of rates on the Yield curve AND where the Federal Reserve influences rates most on the curve.
Have a Great “Steady Yield Curve Movement” Day!
John A. Kvale CFA, CFP
Hello and Welcome to our April 2018 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format.
With Tax season finally over, here we mentioned how it seemed to never end…but we digress…
It appears the Cyber Thieves are back at it again, and have a new technique involving Social Security. Here in our Social Cyber Post, we discuss just how they are doing this.
Bottom line, if you see something suspicious, be sure to notify the appropriate agency.
This is going to be fun …. In the first of a multi-part series here, we discuss the basics of the yield curve.
Bottom line, at its most basic level the yield curve should go upward and outward just as our home made chart below (the starting point for our discussion.)
Have a Great Day! Talk to you at the end of May!
John A. Kvale CFA, CFP
Yesterday the 10 year US Treasury Bond did something it has not done in some time …. reach a yield of 3%.
We have been preparing for some time a multipart series about interest rates and the yield curve its self, and with the recent move in rates higher (finally) the timing could not be better. You will see a lot about this in the coming weeks if you peer into the Financial Section on your computer, periodical or tablet view … so we wanted to prep in advance.
This discussion will be multipart analysis, discussion, education and conclusion …. we hope you enjoy (we think you will as there is a terrific conclusion).
While the chart above shows the most popular “Headline” rate for most, it is really just one part of a series of rates …. here is where our discussion is born… so let’s go!
Liking to keep things simple, this is a self drawn chart that we will build upon, but gets the point across.
The longer something takes, generally the more it should cost. (Greater risk of loss)
Said another way, the more time something takes, the more it should cost.
If you loan a buddy $100 bucks today to be repaid tomorrow, it is less risky than if you give it to him for a year and hope to get it back! Right?
Our self made chart shows just this, the longer the time, the greater the cost.
Looking again at our chart, we could say the term is anywhere from one day going all the way out to 30 years, with the afore mentioned 10 year term being near the right end of the chart.
This chart shows what could be called a normal yield curve or cost situation.
Next up … Change!
Have a Great “Yield Curve Discussion” Day!
John A. Kvale CFA, CFP
Calls of an Inverted Yield Curve – Premature SO FAR –
This week a funny thing happened … on the yield curve that is, garnering a lot of attention. Those following our writings, here, here, and here, know we are watching for an inverted yield curve since it has a good predictive nature for recessions – a topic for another discussion. Heck, even Kent Smetters, the Wharton co-host professor mentioned the yield curve had inverted.
Inverted Yield Curve? Kinda!
Here is a good picture of a normal yield curve
Inversion occurs when the short term rate goes higher than the long term rate i.e. the 2 year greater than the 10 or even more clearly, the 90 day rate greater than the 10 year…
What happened this week were the 2 and 5 year yields, slightly inverting –
Does this count?
Maybe? BUT the real predictability is from the afore mentioned short and long, not short and slightly longer short…
Here is the 2 and 10’s, followed by the 90 day and 10’s
It may invert, and we will let you know when it happens, if it happens, but for now, in our minds ….
No inversion yet, but we are watching close!
Have a Great “Not Inverted Yet” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Interest Rates, Inverted Yield Curve, Yield Curve