FROM INVESTOPEDIA :
https://www.investopedia.com/terms/i/invertedyieldcurve.asp
What is an Inverted Yield Curve?
An inverted yield curve is an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession.
A partial inversion occurs when only some of the short-term Treasuries (five or 10 years) have higher yields than 30-year Treasuries. An inverted yield curve is sometimes referred to as a negative yield curve.
Historically, inversions of the yield curve have preceded many of the U.S. recessions. Due to this historical correlation, the yield curve is often seen as an accurate forecast of the turning points of the business cycle. A recent example is when the U.S. Treasury yield curve inverted in late 2005, 2006, and again in 2007 before U.S. equity markets collapsed. The curve also inverted in late 2018. An inverse yield curve predicts lower interest rates in the future as longer-term bonds are demanded, sending the yields down.
The article wins the award for most confusing and awkward headline of the year.
Interest rates are historically low and taxes are historically low. Trump has gotten rid of some regulations. So what is the biggest drag on the economy? There has to be a powerful undertow. Is it the trade deficit perhaps? The cost of living? Perhaps this is just a transition period. Our economy has been repressed since 2006, thanks to Congress.
Off the top of my head, I would think that the rush to a 10-yr maturity instead of 3-mo paper would tell us--possibly--one of a couple of things (or both).
Whatever uncertainly causing the rush to quality isn't expected to resolve in the very short term (in a few weeks/months) or the rush to quality is also entangled in an expectation of a general decline in interest rates.
Usually, but not always, a pure interest rate wager is placed on bonds (i.e., long term paper) where the bang for the buck is biggest.
Another possibility is that Treasury traders are placing bets due to expectations re: the China trade situation but this is way above my pay grade.
Nonsense. Look at housing prices in most major cities, the cost of health-care, education, the cost of government or most services. Yes, we can buy cheap TVs from china or vegetables from Peru, but that's not a large part of people's income.
“But there’s no actual inflation problem in America today.
This is good news, why?
Low inflation, low interest rates, ongoing tax cut effects, repatriation of offshore assets, reindustrialization of domestic manufacturing, and a healthy fear by the Fed of a President that fights back, all add to short-term volatility in financial markets that adopt a short-term wait and see position causing these markets to FOLLOW industry rather than lead it as they ‘ve been doing for decades now.
The Fed has caused so much harm tinkering and intervening with the American economy rather than get out of its way. This started in the Carter years and it took Ronald Reagan to reverse it but it came back in spades under GHW Bush who failed to regulate and enforce the thrifts leading to the Savings & Loan crisis just as his son turned a blind eye to SEC enforcement of shady securities during the subprime crisis (same criminal cohort trained under S & L crisis), and in-between these two was a horrid creature known as Bill Clinton who signed the repeal of Glass-Steagall speared by an ignominious Republican named Phil Graham all following on the heels of Ronald Reagan’s hard-earned gains.
And 0bama? Nothing more than a high-level panhandling-extortionist backed by Chicago style thugs. A degenerate failure following a decade of failure.
Now there is a very strong President who will not be cowed by the economist bobbleheads on Wall St, and at the Fed because this President actually understands business better (see 1190s YT videos of DJT speaking to and educating Congress members on how business works) than the Ivy League double talkers who had grown arrogant to think their regression tables and number crunching of faulty datasets formed from selection bias were somehow important to business leadership and for which they received hefty salaries to boost their self-deception.
Economists are akin to astrologists masquerading as astronomists and the problem is the NY-DC media-political axis believes the latter much like Al Gorites believe Global Warm Feces.
So finally we have real business leadership in the WH and the future looks bright.
Regardless of Fed Chair puppet Powell’s mutterings and screwy prognostications, he and his masters understand the Fed is dead if he gets in the way of MAGA.
What we are seeing and will see more of is a movement of Americans making things, using computers and AI to rip the Chinese sweatshops a new one in terms of productivity, working smarter and creating supply to handily meet supply meaning NO INFLATION.
The Fed is inducing a recession to hurt Trump and our strong economy and the stock market.
I wonder if the Fed was trying to destabilize the economy in advance of the 2018 mid-term elections? If so, they succeeded.
-PJ
