Dow slumps triple digits as Treasury yield curve inverts (recession indicator)

MarketWatch.com (by Dow Jones) ^ | 12/27/05 | Tomi Kilgore

[Recovering_Democrat]

'splain this chart, please? Looks like when yields go down the s&p goes down...but that doesn't make sense. unless it does.

[SierraWasp]

"Watch the news very closely."

I am! That's why I posted this!! Because a lot of investors thought Santa Claus was still comin, even though he only does it once a year!!!

[Cyber Liberty]

Sorry....

[Jigsaw John]

I would be quite happy if he overcame this early in his administration and had fired Greenspan (whom I loathe).

Greenspan is a fool, or has some kind of agenda. Continually raising the rates will only do good for a few. Everyone else will be holding their cards. Regardless of what anyone says, the market doing this right after Christmas is not good.

[SierraWasp]

"Not gonna happen sour pickle."

Ha Ha Ha!!! Bullseye on that Bear!!! Ha ha ha...

[Mase]

what in the heck is wrong with these (bleepin) financial newswriters that they missed a biggie like that???

I wish I could answer that. Here's the quote from today's WSJ:

But many policy makers, including Fed Chairman Alan Greenspan, have challenged the view that inversion signals economic trouble, pointing out that the shape of the curve is less predictive than it once was.

Nonetheless, a near-term inversion would likely ratchet up an already elevated anxiety level in the bond market, as investors worry about a cooler housing market, inflation and energy prices, particularly high home-heating bills.

Greg Habeeb, senior portfolio manager with Calvert Funds in Bethesda, Md., says an inversion between two- and 10-year notes "seems in the cards," but he expects the scale of the flip-flop in yields to be minimal, maybe just 0.1 to 0.15 percentage point over the next few months before things turn back around.

A brief, shallow inversion won't signal any marked slowdown in the economy, says Mr. Habeeb, who manages $5 billion in taxable fixed-income assets.

Over the past several decades, the yield curve has had to invert by two percentage points or more before a recession materialized.

FWIW, I've seen it argued that although the 1998 inversion did not cause a recession here, it led to the Russian debt meltdown and the eventual failure of LTCM. We know what kind of impact that had on the markets here.

[SierraWasp]

It's ok... I actually liked it!!!

[Cyber Liberty]

Well, I read all the gloom and doom...just popped, I guess.

[SierraWasp]

"Regardless of what anyone says, the market doing this right after Christmas is not good."

What's it's juxtaposition to Christmas got to do with anything? Just because a bunch of idiots got spooked on a day that started out good? They're probably liberal investors that became overcomed with gilt because everything was going so well and they hadn't done a dang thing to merit their wellbeing!!! Typical!!!

[Jigsaw John]

What's it's juxtaposition to Christmas got to do with anything? Just because a bunch of idiots got spooked on a day that started out good?

They're probably liberal investors

Riiight...This is all about liberal investors.

I really hope you don't believe that.

[Attention Surplus Disorder]

The option of M2M is likely searchable on the IRS website. But you have the right idea, I think you have to elect NOW, pre 12/31, for a return nominally dated 4/15/06....

I once met a guy who had a 1200 page schedule D. No comment necessary!

[SierraWasp]

Excellent post! Thank you!!!

One reason I'm so skeptical of these BS writers at MarketWatch.com is that it used to be CBS MarketWatch.com and while it was under CBS instead of Dow Jones which purchased it a few months ago, it was obvious these writers were communists in high places!!! (they oughta be fired unceremoniously)

They did their damnedest to drive the markets in the toilet especially during the war rally that started in March '03!!!

[xcamel]

I live and die on the homebuilding/construction industry - This is the 4th time an inversion will have little or no effect on the economy. The fundamentals are just too strong. Real income, low interest rates, strong business investment in R&D and expansion, low corporate debt, low inflation. Nothing is "normal" about this economy, and all of the "absolutes" have been smashed on the rocks -- including the yield inversion being a harbinger of doom.

[SierraWasp]

You still haven't answered what's the deal with right after Christmas be so telling. I do believe it was a relatively light trading day so if the liberal investors were there instead of playing with their Christmas presents, I'll bet they are the ones most easily spooked on the big board!

[xcamel]

$$ Spot On! $$

[Jigsaw John]

I have no idea why this happened right after Christmas. But I'll say it again, it can't be good.

They're probably liberal investors

I'll just leave this right here.

[SierraWasp]

And... I have little doubt that you are exactly right. The Liberal world refuses to believe in American Exceptionalism and now are so filled with Bush hatred due to his basic righteousness that they long for ANY sign of ANY down-turn in ANY thing on the world scene.

I have never seen a major US political Party so totally invested in defeatism since the days of Nixon and Vietnam!!! It's hideous!!!

[SierraWasp]

Well... That's what FreeRepublic.com is for... Poppin off!!!

It's Conservative America's great relief valve!!!

[SierraWasp]

Ok... You've got your's and I've got mine!!! Opinions are like bellybuttons...

[festus]

Time to panic.

Its ALWAYS time to panic. The only hard thing is deciding what to panic about.