Hi,
Just a comment on the yield curve. To determine an inversion, I use the difference of the 10-yr treasury note yield and that of the 3-month Treasury bill. This is a more extreme measure than the one mentioned on CNBC, which uses the 2-year Treasury note rather than the 3 month bill, as near as I can tell. Generally, I would declare an inversion later and under more extreme conditions than CNBC would.
Anyway, the difference of the long and short term yields was much less on Friday than on the previous Friday, but was still positive. Based on a cursory look at my database, I believe that the current value last occurred in October, 2007. The actual inversion occurred before that.
Because everyone on TV seems to be watching the yield curve to assess the possibility of a future bear market, this indicator is probably less useful than in was in 2007. Either way, note that the yield curve inverted in 2007 and the bear market hit around a year later. So this does not appear to be an indicator of a plunge in the near future unless investors are already very worried.
Zweig discussed this in his book and I have not checked the statistics that he presented. I can say that this does make me nervous. Given that I am retired, I might very well pull the trigger on exiting stocks if the my inversion measure becomes negative.
While I cannot see anything that would make the financial system unstable, I am starting to see a possible weakness in S&P 500 index investing, given that everyone thinks that it is absolutely safe. Of course, I am a contrarian, so my intuition might very well be faulty.
Sadly, bonds don't look good to me either. Fortunately, this is pure opinion on the part of one person out of many million investors.
Just FYI.
Good luck,
Tex
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Posted by: mrweyl@hotmail.com
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