Comments on: Inverted Yield Curve http://www.tasgall.com/2006/12/03/inverted-yield-curve/ Peering into the Cauldron of the Gods... Wed, 28 Sep 2011 10:20:57 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jason G. http://www.tasgall.com/2006/12/03/inverted-yield-curve/comment-page-1/#comment-234 Jason G. Sun, 03 Dec 2006 18:18:09 +0000 http://www.tasgall.com/2006/12/03/inverted-yield-curve/#comment-234 The point isn't whether or not there is still "gas in the tank" -- that is a separate question... the trend could change tomorrow, or could have changed on 11/22/06. But the credit expansion didn't stop when the yield curve first became inverted in August. It is worth noting that the article was written in August when quite a few people (like John Mauldin) were proclaiming impending doom, so it was quite timely and just as the current rally was getting started. I personally don't think we've seen the final top, and this year has been rich across many asset classes as you point out... but only time will tell. The point isn’t whether or not there is still “gas in the tank” — that is a separate question… the trend could change tomorrow, or could have changed on 11/22/06. But the credit expansion didn’t stop when the yield curve first became inverted in August.

It is worth noting that the article was written in August when quite a few people (like John Mauldin) were proclaiming impending doom, so it was quite timely and just as the current rally was getting started.

I personally don’t think we’ve seen the final top, and this year has been rich across many asset classes as you point out… but only time will tell.

]]> By: John http://www.tasgall.com/2006/12/03/inverted-yield-curve/comment-page-1/#comment-233 John Sun, 03 Dec 2006 16:36:09 +0000 http://www.tasgall.com/2006/12/03/inverted-yield-curve/#comment-233 Fascinating find! So this author seems to assume that for the near future there's still a good amount of liquidity in the markets. There's still more gas in the tank to fuel this rally. If the curve inverts further, that's not necessarily a bad sign for the short term. The inversion of the curve itself isn't good, but the environment it reflects is a boon in the short-term. I think it's good to keep in mind that the change in trend will be the trigger. Right now, the market seems to already have digested the concept of an inverted curve. Heartburn will set in once the curve begins to straighten back up. We're in a higher risk situation now, but there seems to still be great opportunities for profit. This year's been a surprisingly good investment year on many fronts (Gold's up roughly 25%, REITs are up roughly 30%, S&P500 is up 10%, International stocks are up on average 15% or higher, general Bond funds are even up a smidge). A quick look at many charts seem to suggest that most markets are still trending upward. There's still an upside to this broad rally on many fronts, and the inverted yield curve does suggest that more speculative short-term money is flowing around now relative to more conservative long-term investments. Fascinating find! So this author seems to assume that for the near future there’s still a good amount of liquidity in the markets. There’s still more gas in the tank to fuel this rally. If the curve inverts further, that’s not necessarily a bad sign for the short term. The inversion of the curve itself isn’t good, but the environment it reflects is a boon in the short-term.

I think it’s good to keep in mind that the change in trend will be the trigger. Right now, the market seems to already have digested the concept of an inverted curve. Heartburn will set in once the curve begins to straighten back up.

We’re in a higher risk situation now, but there seems to still be great opportunities for profit. This year’s been a surprisingly good investment year on many fronts (Gold’s up roughly 25%, REITs are up roughly 30%, S&P500 is up 10%, International stocks are up on average 15% or higher, general Bond funds are even up a smidge). A quick look at many charts seem to suggest that most markets are still trending upward. There’s still an upside to this broad rally on many fronts, and the inverted yield curve does suggest that more speculative short-term money is flowing around now relative to more conservative long-term investments.

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