Trump says it is past time to sell stocks, market dives

Joe Granville is smiling today.

Despite this costing me money, Trump is correct. With interest rates close to 0%, people (like me) have been willing to take the risk of stocks to chase a 2% dividend yield, risking a 40% loss in value. If medium term Treasuries returned to paying 4%, staying in stocks would be only for appreciation, not dividend yield. But the outflow of cash would crush any hope of stocks sustaining an upward momentum. Stock prices have very little to do with the health of underlying businesses.

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4 Responses to Trump says it is past time to sell stocks, market dives

  1. briand75 says:

    It strikes me that printing funny money for 8 years has done more damage to the markets than we know. We see it surface in the bond market. If Treasury Bonds returned to paying the 10% they used to we wouldn’t be so deep in the equity markets I think. I would be happy with my Savings Bank – oh that’s right, the Congress screwed that one up. It used to be an easy 5% – oh well.

    • Fred Stiening says:

      With the national debt at about $18 trillion, each 1% increase in borrowing costs adds $180 billion to the annual budget deficit. My memory is that around $4 trillion is internal debt (Social Security Trust fund), but the rest requires real interest payments – some of it to American people and corporations, some to foreign governments /banks / sovereign wealth funds / individuals. The Federal Reserve has morphed into the parent who lets their teenager be irresponsible, then gives them a red sports car on their 16th birthday. This “works” because all the central banks except Japan and Switzerland are doing the same thing.

      Of course, if you believe interest rates will suddenly go up the last thing you want to do is buy bonds – for existing bonds, as market rates go up, the value of the bond goes down. Catch 22,

      • CC1s121LrBGT says:

        The real debt is about 20x the 18 trillion figure you cite.

        Social Security has committed to baby boomers when they retire and none of those commitments are in the 18 trillion. Imagine signing a mortgage on a huge mansion and including the mansion but excluding the mortgage from your net worth because the mortgage payments haven’t come due yet.

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