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Big Crash Coming, According To Treasury Yields

Dec. 19, 2021 10:35 AM ETAM, OXLC, USA, WPC1.26K Comments


  • The long-term Treasury yields (or 10-year yield) remain stubbornly low, signaling a recession or deflation is coming soon.
  • Don't misinterpret Treasury yield signals. We are currently seeing dynamics that the market has not witnessed for over 70 years.
  • How did the stock markets do historically in periods of high inflation and low interest rates, similar to the one we are seeing today?
  • The Fed already fooled you about inflation this year. Don't be fooled by Powell's hawkish talk.
  • The Fed to remain dovish, inflation running high. How you can profit in the current environment?
  • Looking for a portfolio of ideas like this one? Members of High Dividend Opportunities get exclusive access to our model portfolio. Learn More »

stock market crash sell-off red finance numbers

bunhill/E+ via Getty Images

We have consistently been taught that we should always listen to what the Treasury yields are telling us. When inflation is running as high as it is today, you should expect one of two things from the Treasury yields:

  1. Long-term

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This article was written by

Rida Morwa profile picture

Rida Morwa is a former investment and commercial Banker, with over 35 years of experience. He has been advising individual and institutional clients on high-yield investment strategies since 1991.

Rida Morwa leads the investing group High Dividend Opportunities where he teams up with some of Seeking Alpha's top income investing analysts. The service focuses on sustainable income through a variety of high yield investments with a targeted safe +9% yield. Features include: model portfolio with buy/sell alerts, preferred and baby bond portfolios for more conservative investors, vibrant and active chat with access to the service’s leaders, dividend and portfolio trackers, and regular market updates. The service philosophy focuses on community, education, and the belief that nobody should invest alone. Lean More.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of USA, WPC, AM, AND OXLC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Treading Softly, Beyond Saving, PendragonY, Preferred Stock Trader, and Hidden Opportunities all are supporting contributors for High Dividend Opportunities. Any recommendation posted in this article is not indefinite. We closely monitor all of our positions. We issue Buy and Sell alerts on our recommendations, which are exclusive to our members.

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Comments (1,255)

Yellen From The Block profile picture
"I am looking forward for the year 2022 to be a very strong year for equities"

SO FAR this strong year has seen-----
way to go!!!!!!!!!!!

S&P 500: -22% YTD
Russell 2000: -24% YTD
Nasdaq Composite: -31% YTD
Yellen From The Block profile picture
If being wrong was right... this article freaking nailed it!! congrats on being wrong... you were right all along.....

"The Fed cannot and will not hike rates anytime soon. And if they do, it will be an immaterial rate hike that will have an insignificant impact on inflation.
The government will continue to ensure there is a high amount of liquidity in the financial system. The Bubble of Liquidity will remain large."
@Yellen From The Block They have been wrong for years on the macro and micro. Its uncanny. R/E is cracking around the Country and a lot of their picks are tied to it. Eleavtor is stuck on basement setting.
TechSales profile picture
This Biden career politician puppet guy is a disaster.
Donggle profile picture
@TechSales blame it on yourself, nobody forced you into the market.
TechSales profile picture
@Donggle Sleepy fell off a bike today! He’s a disaster!
Phil in OKC profile picture
@TechSales I did that "once" when I couldn't get my shoe cleat to disengage from the pedal in time. It only happens once, though.
blucrab profile picture
something titanic could happen
LikeaRock profile picture
I used to wonder if Biden was killing the markets on purpose or was it just incompetence. Well shortages are a reality, here's proof that Biden is causing the shortages. ussanews.com/...
Donggle profile picture
@LikeaRock Covid do not fool yourself. May the mask be with you. The article is just an opinion peace for the Maga crowd!
PendragonY profile picture

While there are questions about that policy, that isn't what is causing the shortages. Rather the shortages are caused by a plant shutdown over concerns (since proven unfounded) that the plant was producing bacteria contaminated formula.
PaFromFL profile picture
@LikeaRock Democrats are famous for "never let a good crisis go to waste". They have continually tried to manufacture one crisis after another, while trying to divide and conquer the country along racial and political lines.
The FED doesn't care if the stock market crash, they have their priorities and that's it, actually they probably think it is just the return to normal valuation...
LikeaRock profile picture
@Stevenvig Milk shake theory. We are the best looking horse in the global glue factory.
@Stevenvig History shows the Fed follows T-Bill rates keeping a modest premium to FFunds. This time Powell is worried about his political confirmation and has held back. Fed is political yet declares themselves "in control of rates" when rates are set by markets. The Fed does not control rates or inflation. Rates are set by investor preferences for equities and businesses preferences for investing in plant, equip and inventories depending on economic perceptions. Once one shifts to this view, every market cycle becomes understandable. Prices are set by market psychology based on headlines.
Powell is behind T-Bills by 20-30bps.
Donggle profile picture
@Rida Morwa My income annuity diversification is doing fine! You asked several times, just an update!
Yellen From The Block profile picture
"I am looking forward for the year 2022 to be a very strong year for equities" .... well done!!!!!
PrAcharya profile picture
@Yellen From The Block I regret reading this article in December.
But, not till T-Bill inverts the 10yr. Till then, cash is flowing into industrial US to expand capacity to meet demand. 3yrs-5yrs of economic expansion with 7-8% inflation. 70% correction to follow.
This article definitely didn't age well.
Risk Advisor profile picture
Ten Year at 1.5%? It closed last Friday at 3.142%. Powell to be dovish? He has already hinted at 50 basis points of increase at both the June and July FOMC meetings.
@Risk Advisor Kashkari says 7 hikes here in '22, we have had 2. two more 50's coming at least so that takes the FF to 2, 1 more 50 and 2 25's and we are at 3. Where does that put the 10's and 30's?
@Cmon down
June 1 2009 30 year was 4.65% ( beginning of market climb )
Feb 14 2011 30 year was 4.70%
Today 30 year is 3.46% add two 50s and we hit 4.46%
World did not end then will not end now, we just have to adjust our holdings

In 1971, 30-year fixed-rate mortgages hovered between 7.29% to 7.73%

Rates up here will hit house prices for sure and because its higher than dividends margin accounts will be much smaller affecting stock prices.
Inflation will have to get much worse to drive rates to 7-8 %.
@RUBYRUBY3 The difference RR is that when rates were there in '09 in '11 it wasn't coming off zero, today this rapid rise is off a zero interest rate so the shock is higher. Worlds not coming to an end, but we need to adjust our holdings or not add to holdings that are most sensitive to losses due to rising rates. Keep durations shorter and avoid levered bond funds, Mreits and growth as their earnings are being discounted more than before. Think a FB. In the 1970's when Carter had inflation in the double digits it took Volcker time and rates on bonds hit 21% for Investment grade. So anything can happen now and people just have no idea how bad this can get. BDC's are a no go as well
Rida, do you still have the same view?
lavenderziyi profile picture
Now already reached the bottom?
blucrab profile picture
PendragonY profile picture

Not sure what this has to do with the article. And why the need to shout?
blucrab profile picture

you had your chance - blow off or someone!
PendragonY profile picture

Well, you can shout all you want, but that doesn't make your statements any more coherent. I have no idea what you are trying to say.
Isn’t inflation a bit over 15% if calculated in the manner it was until recently “changed” ? Part of the BIG lie.
@PendragonY so please explain. Thank you.
Who Moved My Cheese profile picture
@GPAm It's probably closer to 20% to 25%. Even higher in many sectors.
Risk Advisor profile picture

Will check back with you on March 15-16, the next meeting dates of the FOMC. Will see if Mr. Powell turns hawk or remains dove. He is taking a lot of political pressure on inflation unlike many former doves.
metalhead profile picture
One key difference between the post-WWII period and today is, back then, the US had the economic playing field to itself, as Europe was in ruins, as was Japan, and the rest of the world was basically underdeveloped. Also the demographics were much different, with the baby boom just starting and years of population growth ahead.

Today, we are shrinking in terms of our relative share of world GDP. And demographically stagnant. My prediction is the Fed will fail to generate enough inflation or will destroy so much of the lower-middle class as to create a populist leader who will end the Fed itself.
Risk Advisor profile picture
On 02-04-22, the Ten Year reached 1.93%. Rates do move.
WaveRider007 profile picture
It will not be a crash since the Fed will accomodate the thousand rate rises at .003 increments. The economy will be like an alcoholic that drinks one bottle instead of two, work will get done, but there will be a lot of bitching to deal with in the beginning.The big rate increases will come later when the rates are higher. No more cheap money, powerplay acquisitions starting. Time for MOAR commodities/metals until it sobers up. It won't be a crash, just a boring flatline for a while.
Mark Krieger profile picture
the title of the article should be re-written to: "why the big crash came"
Yellen From The Block profile picture
@Mark Krieger ....S&P500 down 8.6% year to date... my goodness, and you realize this article is not calling for a crash, its calling for a rally. The title should be changed from.... "CLICK ME!!!!" to "I am looking forward for the year 2022 to be a very strong year for equities"

So far this article is wrong on both counts. Which is ironic....
PendragonY profile picture
@Yellen From The Block

LOL. Yeah, one month in certainly proves that the article was wrong about how the market would do this year.
Yellen From The Block profile picture
@PendragonY it really doesn't matter what the market does... the way this article was written stocks could crash or rally and the author will be right either way.
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