5 ms·

https://www.bloomberg.com/news/articles/2018-05-14/fed-s-bullard-blames-central-bank-for-flattening-yield-curve https://www.bloomberg.com/news/articles/2018-05-

https://www.bloomberg.com/news/articles/2018-05-14/fed-s-bullard-blames-central-bank-for-flattening-yield-curve https://www.bloomberg.com/news/articles/2018-05-14/fed-s-bul... David Kelly from JPMorgan and Bullard, the head of the Fed Reserve of St. Louis, say the yield curve going inverted doesn't mean that much because it's being manipulated by the Fed - that means it's broken as a measuring tool (still should be watched, though)

Analemma_ 8y ago
A Fed chairman is never going to say, "Yup, there's a recession coming": the incentives of their position don't permit it. So they will always come up with reasons why a signal with a previous 100% success rate doesn't mean much now, but in the end, it always amounts to "This time is different", aka, the four most expensive words in history.
- justwalt 8y ago
  Note that it isn’t quite a 100% success rate, there was a false positive in the 60s.
- Eridrus 8y ago
  Looking at the table, it's odd that only "inversions" are counted as predictions, and there seem to be far more cases where it got "close" to zero, but not quite there. Without a good explanation on why that exact point is so critical, I am a bit skeptical that this is anything but noise. If there is a good explanation of why it is critical, then we're not really in worrying territory yet either then, because we're not there yet, and we're in the zone of lots more false positives.
  - ISL 8y ago
    An inverted yield curve is an explicit statement that bond buyers expect the near term to be worse than the long term. When the yield on the long-term note is smaller than the short-term yield, and buyers would still rather buy the long-term note, something is afoot.
    - ak39 8y ago
      Correct. This is the only rational explanation for the inversion. There is nothing else to imagine about the negative (inversion). Whether the number is "gamed" or just a single statistic makes zero difference to what the market is actually saying about debt instruments: "we care about now than the future". What is afoot, as you say, is clearly a lack of confidence in longer term markets resulting in a move towards keeping asset in cash. Or those strange commodities like gold. I personally believe global markets are in for a rough ride very soon. Brexit is not going to help much either. DT is going to have no time for Twitter.

Analemma_ 8y ago

A Fed chairman is never going to say, "Yup, there's a recession coming": the incentives of their position don't permit it. So they will always come up with reasons why a signal with a previous 100% success rate doesn't mean much now, but in the end, it always amounts to "This time is different", aka, the four most expensive words in history.

justwalt 8y ago
Note that it isn’t quite a 100% success rate, there was a false positive in the 60s.
Eridrus 8y ago
Looking at the table, it's odd that only "inversions" are counted as predictions, and there seem to be far more cases where it got "close" to zero, but not quite there. Without a good explanation on why that exact point is so critical, I am a bit skeptical that this is anything but noise. If there is a good explanation of why it is critical, then we're not really in worrying territory yet either then, because we're not there yet, and we're in the zone of lots more false positives.
- ISL 8y ago
  An inverted yield curve is an explicit statement that bond buyers expect the near term to be worse than the long term. When the yield on the long-term note is smaller than the short-term yield, and buyers would still rather buy the long-term note, something is afoot.
  - ak39 8y ago
    Correct. This is the only rational explanation for the inversion. There is nothing else to imagine about the negative (inversion). Whether the number is "gamed" or just a single statistic makes zero difference to what the market is actually saying about debt instruments: "we care about now than the future". What is afoot, as you say, is clearly a lack of confidence in longer term markets resulting in a move towards keeping asset in cash. Or those strange commodities like gold. I personally believe global markets are in for a rough ride very soon. Brexit is not going to help much either. DT is going to have no time for Twitter.