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October 3, 2018 | Rising Yields Darken the Economic Picture

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Yields on Treasury debt took a big leap on Wednesday toward some longstanding targets (see TYX and TNX touts below), adding yet another dark cloud to the Fed’s preternaturally sunny picture. The central bank’s narrative is that the economy is strong enough to weather more rate hikes, but the banksters seem not to realize that the housing and auto sectors are ready to tank with just one more turn of the screw. A chat-room denizen who builds homes noted today that the 150-basis-point rise in 30-year mortgage rates off their lows amounts to about $75 per month for each $100,000 of debt. This has had a significant impact on the housing market, he said, starting with a collapse of canary-in-the-mine homebuilder stocks that began six months ago. Higher rates are also starting to take a toll on auto sales and leases — especially the latter, since they were explicitly designed to allow Americans to drive more car than they can afford. Toss in a sharp rise in car sticker-prices over the last two years, and it’s not hard to see why the used-car market is so strong.  Something’s got to give, since prices for stocks and bonds cannot continue to move in opposite directions, as they have been doing, indefinitely.

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October 3rd, 2018

Posted In: Rick's Picks

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