Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
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Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#2How often does it invert? Had it ever happened without a financial crisis to go with it?
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#3How often does it invert? Had it ever happened without a financial crisis to go with it?
According to the article, there has only been one false positive, back in 1965. Not sure how many inversions have occurred.
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#4How often does it invert? Had it ever happened without a financial crisis to go with it?
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Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#5How often does it invert? Had it ever happened without a financial crisis to go with it?
The specific part that just inverted has inverted before every recession since 1957 (9 times) and given one false alarm in 1965
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#6How often does it invert? Had it ever happened without a financial crisis to go with it?
Here's the last nearly 40 years worth of that curve, with recessions marked for convenience: https://fred.stlouisfed.org/series/T10Y3M (use the range selector below the graph to see everything)
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#7What can the average founder, employee, and person do in the face of this news?
I understand that it’s scary, but what can we do to turn that fear into an actionable checklist?
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#8Simple explanation of what this means. Here are current yields on Treasury Bonds (expressed as an annualized rate)[0]:
1 Mo - 2.47
2 Mo - 2.47
3 Mo - 2.46
6 Mo - 2.49
1 Yr - 2.41
2 Yr - 2.26
3 Yr - 2.19
5 Yr - 2.21
7 Yr - 2.32
10 Yr - 2.43
20 Yr - 2.68
30 Yr - 2.87
In normal times, rates are higher for longer terms. This makes sense: the longer I tie up my money, the higher interest rate I'm going to want. However, right now, the rates are mostly inverted. For example, I'd get a higher rate on a bond with a lockup period of 6 months than I would on a bond with a lockup period of 10 years.
Typically, this sort of thing precedes a recession. Bond market investors think that a recession is coming, so they are willing to pay for longer term bonds on the assumption that rates on these will go down in the future when the federal reserve lowers rates (to stimulate the economy) and when people flee the stock market generally in order to avoid risk.
[0] Source https://www.treasury.gov/resource-center/data-chart-center/i...
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#9What can the average founder, employee, and person do in the face of this news? I understand that it’s scary, but what can we do to turn that fear into an actionable checklist?
Reduce your burn rate (you should have no debt except a mortgage or a lease obligation). Have at least 6-12 months of emergency fund in an FDIC insured account. Network to be prepared to find a new gig fast if yours evaporates. Be prepared for credit card and home equity credit lines recinded with no notice.
I did not do these things prior to the 2008 global financial crisis, and it was unpleasant.
Re: Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis
#10What can the average founder, employee, and person do in the face of this news? I understand that it’s scary, but what can we do to turn that fear into an actionable checklist?
For example, paying down debt would be a good idea. [sound of numerous economists jumping up and down saying this would turn prediction of recession into self-fulfilling prophecy] Also, holding off on any major new purchases like houses or new cars. [sound of foresaid economists moaning and putting their heads in their hands in despair]