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SunOpta Inc. Message Board

  • naturalgoldcolor naturalgoldcolor Jun 24, 2005 8:59 AM Flag

    Fed up to a Recession?

    Ominous clouds are on the economic horizon; cool winds of recession are replacing a lazy summertime air of prosperity. Dark gray clouds are seen in the treasury yield curve.

    To be sure, the Fed is more than aware of the bond market and the predictive ability of the yield curve. An inverted yield curve has signaled the last five recessions in the United States.

    An inverted yield curve is when shorter dated maturities yield more than longer ones. The last time this happened at the short-end of the curve (2-3 yr and 3-5 yr) was 3/16/2000, four days after the Nasdaq hit its all-time high of 5048.62.

    The yield curve has flattened at a rapid pace since the Fed began raising rates in June-2004. The difference in yield between 2 yr and 3 yr treasuries has narrowed to a meager 0.03%, while the difference between the 3 yr and 5 yr stands at only 0.07%.

    Do not be surprised if the Fed holds rates constant at its June 29-30 meeting. If this happens, look for winds to change; with a summertime rally in the stock market. This will be good for STKL. If the Fed does not hold rates constant, ask yourself how SunOpta will do in stormy recession. A storm with strong winds and lots of damage.

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    • I disagree with you on the Fed natural. I'd bet my entire STKL position that there's going to be a fed-rate increase 6/30...only question is 25bp or 50 (markets are priced in at 25 already). I believe that if the Fed didn't raise the rate next week, you'd see total chaos in the markets due to their actions being contradictory to their statements. Not even a remote posibility. As to the oil situation, I think manufacturers and distributors have taken oil prices up the butt as long as they're going to. You're going to see BIG price increases across all parts of the market basket - and soon. Of course, this won't make much of an impact on the richer half of the country (ok, maybe the hummer will stay in the garage a bit more and the 'little' V8 SUV will be the errand vehicle) - but we're about to have an acceleration of the 'rich get richer, poor get poorer' syndrome. My opinion, of course.

      • 1 Reply to retireb4death
      • California's coming recession will come in another 2 years. Housing Prices will drop 30% we will see all those people that bought houses on the Interest Only ARM have payment increases at the 1st Adjustment and then 6-12months later we'll start seeing the foreclosures. There is legislation right now to raise the already high gas tax another 50cents. Mom & Pop Trucking Companies will be spending an extra $200K per year in Fuel Taxes to the state which will force many of them out of business. California refuses to deal with it's illegal immigration problem and actually cities continue to further the problem because they sanction and finance day labor centers and strong arm business into allowing trailer work centers on their properties where they get jobs illegally on street corners. There have been numerous hospital closings here in the LA area in the last year with threats to shut down more. Many hospitals are closing their trauma centers. We are in for another good recession. It's all cyclical. We are at the top and the indicators are there for the decline. It's just a matter of time. I'm already ready to re adjust my business strategy for my sales staff when the decline comes.

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