Bonds are in the first few innings of the biggest debt meltdown in history. Stocks are on the brink of collapse.

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Ok, think of it this way. You can get a low risk short-term cd for approximately six percent (didn’t check current rates so I’ll take your word on that).

The earnings yield on stock market is earnings / price of the market. That is around 4.0% today. The dividend is 1.6%. So the total “return” on that is 5.6%.

Therefore, the very low risk CD is paying better than a very risky stock market. In finance theory that is not supposed to ever happen because low risk should always pay less than higher risk. Therefore the CD investment “dominates” the stock investment under CAPM theory — which is assumed to be impossible.

Please note that the CD has risk in that the bank could choose to simply not pay it. In the past i would have said this is a nearly zero risk. I’m not so sure now because of the massive instability going on in the banks. A better choice is government t-bills.

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I’m a MBA and a CFA and worked for 30 years in Corp. Finance for a very famous company.

#notinvestmentadvice

We are clearly going off the rails similar to the crash in the 80s.

This is the yield curve inversion right now:

fred.stlouisfed.org/series/T10Y2Y/

The last time the yield curve was inverted this much, for this long, was way back then.

Somebody is eating huge losses in the bond market:

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Why a rout in government bonds is worrying

h/t Tonight We Ride!

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