This article was originally published by Michael Snyder at The Economic Collapse Blog.
You can believe that we will somehow beat the odds this time if you want, but history is completely against you. One of the biggest reasons why there is so much anxiety on Wall Street right now is because of how the yield curve is behaving.
We have seen yield curve inversions before each of the last seven U.S. recessions, and now it has happened again. Perhaps this helps to explain why insiders are dumping stocks right now as if there will be no tomorrow. If you were looking for a giant waving a red flag to tell you that it is time to run for the exits, it doesn’t get much better than this. This week, we watched the yield curve do something that it hasn’t done in 12 years…
The spread between the 10-year Treasury yield and the 2-year rate fell to negative 5 basis points, its lowest level since 2007. This is called a yield curve inversion. Experts fear it because in the past it has preceded recessionary periods. The 3-month Treasury bill rate also traded higher than the 30-year bond yield.
“The primary thing is yields are going down and going down with some acceleration,” said Art Cashin, the director of floor operations at UBS.
In addition, the spread between 3 month Treasury bonds and 10 year Treasury bonds just hit negative 50 basis points. We haven’t seen that happen since March 2007.
And as David Rosenberg has noted, when the spread between 3 month Treasury bonds and 10 year Treasury bonds goes negative for at least three months, we have a recession 100% of the time…
We now have had three months of a 3-mo/10-yr yield curve inversion. The track record this has had in predicting recessions: 100%.
Yes, it is theoretically possible that this indicator could be proven wrong this time.
But do you really want to bet against an indicator with a track record of 100% accuracy?
Plus, we have a trade war with China to deal with this time around. Hopeful comments from President Trump briefly bolstered the markets on Monday, but over in China, prominent voices continue to pour cold water on the notion that a deal will happen any time soon. Here is an example from Tuesday…
Sentiment was also dampened after Hu Xijin, editor-in-chief of the Global Times in China, tweeted that China is “putting so much emphasis on trade talks,” adding that “it’s more and more difficult for the US to press China to make concessions” as China’s economy becomes increasingly driven by its domestic growth. China announced measures aimed at boosting consumption, including potentially removing car-buying restrictions.
Unless one side chooses to fold like a 20 dollar suit, there isn’t going to be a resolution to this trade war any time in the near future, and that is going to mean a tremendous amount of pain for the U.S., China, and the entire global economy.
Another indication that things are about to get bad is the fact that investors are starting to flock to precious metals.
Gold and silver are considered to be “safe haven assets” during a financial crisis, and right now gold and silver are both surging…
Gold prices are moderately higher in early U.S. trading, while the silver market is again sharply higher and hit another two-year high overnight. Bullish technical postures in both metals continue to invite the chart-based buyers to climb on board the long side. A weaker U.S. dollar index is also supportive to the precious metals markets today. December gold futures were last up $4.60 an ounce at 1,541.90. December Comex silver prices were last up $0.295 at $18.075 an ounce.
But for most hard-working Americans, it is going to be far more important to build up an emergency fund as we head deeper into this new crisis, and this is something that I have written about repeatedly. The reason why so many Americans lost their homes during the last recession was that they were living right on the edge financially. It is imperative that you have a financial cushion so that you can pay your basic expenses when things start getting really hard.
Unfortunately, it is often young people that get the hardest during an economic downturn, and this is something that Annie Lowrey discussed in her most recent article…
Recessions are never good for anyone. A sputtering economy means miserable financial, emotional, and physical-health consequences for everyone from infants to retirees. But the next one—if it happens, when it starts happening — stands to hit this much-maligned generation particularly hard. For adults between the ages of 22 and 38, after all, the last recession never really ended.
Millennials got bodied in the downturn, have struggled in the recovery, and are now left more vulnerable than other, older age cohorts. As they pitch toward middle age, they are failing to make it to the middle class, and are likely to be the first generation in modern economic history to end up worse off than their parents. The next downturn might make sure of it, stalling their careers and sucking away their wages right as the millennials enter their prime earning years.
I understand that a lot of people may not want to hear this, but every economic indicator is telling us that a U.S. recession is coming, and many experts believe that it will be far worse than the last one.
If you prepare in advance for what is coming, that is going to help to take the fear out of the equation. Because when things get really crazy, it is those that don’t understand what is happening that is going to give in to fear, depression, and despair.
We have not seen an economic environment like this in a decade, and there is no reason to believe that a miracle is going to come along and rescue us from the storm that is now looming above us.
The months ahead promise to be quite “interesting”, and not in a good way.
Chicken Little again? Oh well, ZZZZZZZZZZZZZZZZZZZZZZ!
Last year Sweden mobilized their Home Guard. Why would Sweden government mobilize 22,000 people? What do they Know or Fear?
USA culture is being destroyed from within. Traditional American values and free speech is now verbotten. Censorship. YouTube banning anything not leftist, calling the defense of American values “hate speech. My comments banned here.
The technology noose is being TIGHTENED around your kneck. Remove the technology rope from your life NOW.
Have you:
– Maps, Paper.NOT digital.
– Compass
– Practice leaving. No GPS.
– Lighters, matches, candles
– Can openers
– Salt
– Medical supplies
– Spare vehicle parts, fluids, tires, belts, filters.
– Bullets
Something is cooking. Pot may boil over.
God Bless America
Long Live the Republic
When are you going to let that cut under your nose heal Snyder????
Yep just like the sun coming up in the east every morning. We know it is coming. Big deal.
Lower prices used to considered a good thing. Got to keep up with runaway fed inflation these days. They keep telling me I should support rising prices but when I take those limited dollars out of my pocket and pay more today than I did yesterday, it’s sort of difficult to agree.
People whom are not swimming in debt, claiming an unfair portion of wealth for themselves while others of us live within our means, they’ll get hit the hardest.
A recession to me spells out easy opportunity to strike while the iron is hot and pick up investments on discount. These bubbles expand and contract with more frequency these days.
Those without debt and not leveraged to the hilt will adjust in short order. Small business will flourish on smaller more affordable operational scales. Corporations will use their media talking heads to convince people that a recovery is only possible if we prop up those corporations.
I think we’ve seen this before.
BTW, the yield curve inversion has predicted 14 of the last 8 recessions.
Markets to set yet higher records by XMAS.
American store sales revenues will be up due to the trade war.
Americans will blindly pay more for less, they have been doing so since 1913. Most millennials, they don’t care what any price is, they just buy it [$8.00 coffee, $20 hamburgers, yet don’t own cars or homes; many haven’t even gotten a job, still waiting for the entry level CEO job they know they deserve, every other job is just beneath them].
Americans will, and must have their fat Christmas, along with all the foods and drinks that contain one or more of the 50+ different names for sugar.
The American obese adult proudly wears her medical condition- as if it was some sort of combat medal, “purple heart” for having type II, she demands that you feel sorry for them cause she weighs 700 pounds and they amputated her legs and she went blind. It is everyone’s fault except the fat-so. Motorized shopping carts full of carbohydrate garbage.
Why does anyone even hire a fat person? Doesn’t their irresponsibility show in their appearance? No self respect, no discipline, no self control, is this what you want to hire, the face of your company? Can’t even take care of yourself. Oh and then their is the finger pointing at everyone except the 800# elephant in the mirror.
I tell them [obese] what they have to do to lose the weight and they’ll run around like a 20 year old, they always say “well I just couldn’t do that… [limit their food intake to real food, non-processed, non-dairy, no meat; at least until they get a BMI below 25]”
There is no recession as long as the Twinkies trucks run on cheap fuel, the illegals keep invading, the unwedable baby machines keep pumping out bastard entitlement meal-tickets.
Trillion$ annually someday soon will be wasted on medical care for these obese people, that care less about their lives, so why should we even treat them at all.
No recession, no link to my books at Amazon needed. Take the $30 and spend it on some spinach.
More people die in America due to poor diet and weight than those that die from guns. Six out of the ten top causes of death in America are caused by the food one consumes.
That alone may make the USA recession proof.