It's Here: Yields Just Inverted – Say Your Prayers!
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The Most Reliable Recession Indicator Just Flashed
Buckle up – you can bet your bottom dollar that every algorithm trading computer, every hedge fund, sovereign wealth fund, and each and every central bank is now preparing for the inevitable and imminent recession.
There's a big difference, of course, between imminent and immediate.
What just happened turned someday into any day now.
Take a close-up look:
There are many yield inversions at this point, but the one that is considered perhaps to be the most reliable, predictable, and ominous is the 3-month to 10-year one.
On average, the U.S. ended up in a full-blown recession each and every time this has occurred. In fact, the last times were just before the Dot.Com bubble burst, and just before the sub-prime criminal lending meltdown.
It's here and it’s no coincidence that the USD index just broke below its support line, one that's been in an uptrend for over a year.
These are two very strong signals: right when gold hits a 3-week high, and as the FED is trying its best not to appear weak and stressed. But I see right through those $2,000 Armani suits.
While enjoying some skiing down the white slopes in Park City last month, I went to Olympic Park of the 2002 winter games, and climbed into an Olympic bobsled.
Before the activity begins, you're warned about the intensity of the ride, the speed, G-force pressures, and sheer power of the 45-second thrill. They ask if you're scared shitless – and, of course, you nod that you're fine. Anyone who knows you, though, can see past the façade.
No one is fooling us. Just as I saw the reluctance of my wife as the guide instructed her to hold on tight, so I see the FED’s desperate attempt to keep this theater going a little while longer.
One of the most frequent questions I get asked on radio is why I hold 75% of my net worth with Dividend Aristocrats if I see a recession coming. The answer is that (1) they hold-up much better than the S&P 500 in times of a market meltdown, (2) they still pay a dividend no matter what – since they are the Aristocrats that have paid increasing ones for over 25 years (which means they survived 2008), and (3) the markets should always be compared with a failed NASA missile launch.
Here's what I mean by that: if you watch footage of any failed mission, you'll see the rocket head higher, a beautiful triumph of human engineering and hard work – until the moment the rocket changes course and heads back to earth.
Up until the moment the crash HAPPENS, all looks to be intact, but inside the belly of the engine, the seed of the crash has already been planted.
Don't be fooled by rallies. Instead, look only at opportunities as they come to you. Let the sheep chase markets higher and learn their lesson.
This chart shows facts, not opinions; results, not theory.
I want to also stress that this yield inversion is coinciding with dollar weakness. Go back to 2008 in your mind, and you'll remember how the dollar rallied hard.
There was a shortage, due to a liquidity crunch. 2018 was a mini-version of that. 93% of asset classes were negative for the calendar year, and the almighty buck was the best performing asset, worldwide.
There is NO dollar shortage any longer.
There is only a shortage of humility, from the likes of politicians, central banks, and Deep State agencies. They're all about to meet their maker the next time around, because while corporations may be too big to fail, countries are too big TO BAIL.
Crisis births change. Change leads to wealth transfer. Be on the right side of it!