The Yield “Curve” Knows

By Craig Hemke – Re-Blogged From Gold Eagle

As global interest plummets to historically negative levels—and as the U.S. bond market reveals a deeply inverted yield curve—it’s time again to assess what all of this means for the precious metals investor.

Just yesterday, a fellow on CNBC remarked that “no one had seen this coming”. By “this”, he meant a sharp rally in both gold and bonds. Oh really? We write these articles for Sprott Money each and every week.

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History Of Yield Curve Inversions

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

The inversion of the yield curve is of crucial importance as it has historically been one of the most reliable recessionary gauges. Consequently, we invite you to read our today’s article about the history of the yield curve inversions and find out whether the recession is coming, and what does it mean for the gold market.

We keep our promises. In the previous edition of the Market Overview, we promised our Readers to “dig even deeper into the predictive power of the yield curve”. As a refresher, please take a look at the chart below. It shows the U.S. Treasury yield curve, or actually not the whole curve, but the spread between 10-year and 3-month government bonds. As one can see, that difference is still negative (as of July 19). It means that the yield curve remains inverted (on a daily basis) since May 2019 (we abstract from the short-lived dip in March 2019).

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Reading the Next Recession

Here is a journey in photos and facts to compare the present Great Recession with the past Great Depression to gain perspective on where we might be headed.

Just as we had two great world wars, we might have two great depressions, the last of which we started out calling “The Great Recession” because, at the time, we didn’t know where it would end up or how long it would continue. Remember that World War I did not start off being called WWI. It was originally called “The Great War.”

What The World Doesn’t Need Now Is Lower Rates

The Q2 earnings season is upon us and the risks to the rally that started after the worst December on record at the close of last year is in serious jeopardy. We received a glimpse of this with some of the current companies that have reported. For example, to understand how dangerous this earnings reporting season can be, take a look at what one of the largest US multinational firms had to say recently after it reported earnings. The Minnesota-based Fastenal, which is the largest fastener distributor in North America, reported worse-than-expected second-quarter earnings and revenue. Shares of Fastenal promptly tanked more than 4%. But what the management said about the quarter was very interesting. The company said in its press release that its strategy to raise prices to offset tariffs placed to date on products sourced from China were not sufficient to also counter general inflation in the marketplace.

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Will Fed Easing Turn Out Like ’95 Or ‘07?

By Michael Pento – Re-Blogged From PentoPort

You should completely understand that the market is dangerously overvalued and that global economic growth has slowed to a crawl along with S&P 500 earnings. However, you must also be wondering when the massive overhang of unprecedented debt levels, artificial market manipulations, and the anemic economy will finally shock Wall Street to a brutal reality.

Artificially-low bond yields are prolonging the life of this terminally-ill market. In fact, record-low borrowing costs have been the lynchpin for perpetuating the illusion. Therefore, what will finally pull the plug on this market’s life support system is spiking corporate bond yields, which will manifest from the bursting of the $5.4 trillion BBB, Junk bond and leveraged loan markets. And, for that to occur, you will first need an outright US recession and/or a bonafide inflation scare.

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Fed’s Recessionary Indicators

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

How likely is a recession in the United States? Predicting a recession is difficult, but one can make some nice money with a good forecast. So let’s focus on the most important recessionary models developed by the Fed.

The first model is the smoothed recession probabilities for the United States developed by Marcelle Chauvet and Jeremy Piger based on the research published in the International Economic Review and Journal of Business and Economic Statistics. The odds are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payment enrollment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales.

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Frothy Bubbles Make Me Whine

By David Haggith – Re-Blogged From Great Recession Blog 

These are not the tiny champagne bubbles Don Ho used to sing about, but those greenish-gray floats of foam that pile up against harbor docks where the churn of the waves meets the oil spittle of boat motors. They are the economic froth that has piled up around us and is now beginning to fizzle.

They are the bubbles of overbuilt retail space, heaps of junk bonds and layers of leveraged loans, rafts of student loans, bloated government spending. They’re the slop that formed from massive monetary expansion frothed up out of less than nothing — out of debt.

You’ve heard about all of them many times, but my concern in this article is that we are starting to hear tiny popping sounds, which leads me to the following scenario as a plausible path into recession this summer: (Not the only possible route, but one littered with likelihoods.)