One of the things you’ve heard me say many
times on the show, if you’ve been watching or listening for any period of time, is that
right? We are just genuinely really bad at predicting
recessions. Some people have been predicting a recession
for the last five years. Some have been saying it’s six months away,
others it’s 12 months away. Others, it’s 18 months away and were really
just terrible at predicting when the next recession is going to be. But one of the things we do know is that we
are one day closer today than we were yesterday to the next recession. That’s just sort of a reality. Unless you believe that something so fundamental
has changed that there will never be a recession again, and if you’re making that case well,
I, I’d love to hear why that’s what you believe. Number two, we do know that there are certain
signals that we can look at that will tell us whether we are imminently closer to a recession. We’re still not very good at predicting the
future state of the economy at any particular point in time, but we actually increasingly
have indicators that suggest we are getting closer and closer to the next recession. The latest being that the yield curve has
inverted. If you have no idea what that means, fear
not. I am going to explain it to you hopefully
in terms that will make it clear to everybody even if this is not in your educational or
or personal interest background, so don’t worry about that. But before we get to that, some of the other
signals we’ve seen recently that are of concern, there’s one that doesn’t get a lot of attention,
but it is important, which is that the number of people, the percentage of people who are
90 days or more behind on car payments has been going up, up, up, and this is really
important because it seems sort of innocuous and as esoteric in some way. 90 plus days behind on car payments. What does that tell us about the state of
the economy? Car payments and car loans. Tell us a lot about the degree of financial
stress on people because to fall 30 days behind on a car payment because you had an unexpected
expense, uh, okay, to fall 60 days behind. Okay. But when people become 90 or more days behind
on car payments, cars that they presumably need to get to work and earn money that they
need to get their kids to school or whatever else the case may be, that starts to be a
red flag about the personal financial situation of many, many people in the United States. That’s been a red flag. Number two, the stock market eroticism as
a result of Donald Trump’s trade war, including basically market’s being back down to where
we were a year and a half ago, does not bode particularly well for the future of the economy. And then now yesterday, the yield curve has
inverted. What does that mean and why do we care if
you don’t understand it? It’s hard to see it as a red alert. So let’s try to dig into it so we can all
understand what I’m talking about in general in the world of money. In order to potentially earn a higher and
higher return, you either need to accept more risk the risk of losing money or tie up your
money for longer periods of time. So if you look at cds, a certificate of deposit
you can get with a bank or financial institution. If you’re willing to lock your money up for
a year, you say, take my money, I can’t touch it for a year, you might be offered a 2% return
on your CD. These are hypothetical numbers by the way,
but if you’re willing to say, I will lock my money up for two years, you can in principle
earn a higher return. Maybe it’s a 3% return instead of a 2% return
because you’re giving up access to the money for a longer period of time. This is the way things typically work. Because if you were able to earn 2% on a one
year or a two year CD, most people would pick the one year CD because it’s a shorter lockup
period. So along the same lines, normally when you
look at the 10 year us treasury bond, the interest rate yield on that is higher than
the yield on the two year us treasury bond. Basically for the same reasons that I just
discussed. There’s now been an inversion of the yield
curve where the 10 year us treasury bond briefly, and this fluctuates all the time, had a lower
yield than the two year bond. This is a marker with a very strong correlation
to recessions. If you look at the last seven recessions,
going back to 1969, all seven were proceeded by the 10 year bond yield, uh, dropping below
the two year bond yield. And as you might remember, the Fed recently
lowered rates with the idea in part of keeping the 10 year bond yielding more than the two
year us treasury bond. But the continued chaos with the Chinese trade
war that Donald Trump is waging and other things have been an opposing force. And indeed the 10 year yield has dropped below
the two year yields. So why does this matter so much? The 10 year treasury bond is considered a
very reliable, safe haven for investor money. The 10 year bond, if you believe in the general
future, stability of the economy is a very safe place to put money. When the 10 year bond yields less than the
two year bond, it signals that there is a very negative outlook about the future of
the economy in the next few years. Why? Because investors are so scared about the
two year outlook that they prefer to take the guaranteed return on the 10 year, even
if it’s less to such a degree that it ends up a bidding down the yield because it is
seen as safer and more favorable for traders and for markets and for the economy, and it
effectively creates a feedback loop where because of the lower yield banks become less
willing to lend money, which further causes an economic slow down and like much of this
stuff, these feedback loops go on and on and on and who knows where they stopped. So understand a few things. Number one, none of this changes that the
economy doesn’t work for tens of millions of people. In the United States, maybe even hundreds
of millions. That’s understood. I’m still a social democrat. I’m not jumping into finance bro mode or anything
like that. Uh, that’s one thing to understand. Number two, we are always heading to the next
recession. The question is when and number three, increasingly
the indicators say that it’s going to be soon and we actually know of specific Trump policy
that’s pushing us closer. Think back to 2012 before the 2012 election. Obama versus Romney, they both made claims
about the economy. The reality was that indicators, we’re pretty
good at the time and the economy was likely to remain pretty good no matter who was elected
president in 2012 I said it at the time it remained true. We now actually have White House policy that
is specifically precipitating the next recession led by the disastrous trade war and we are
starting to see more and more indicators of that. I want to hear from you, let me know what
you think. Uh, and we will certainly do a followup and
continue to keep an eye on that yield curve.

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100 thoughts on “Recession IMMINENT? Yield Curve Inverts”

  1. Sucks the blow back from the trade war that leads to recession will most likely fall on the next president whom will probably be democrat.

  2. I think the issue of people 90 days behind on car payments is a much better signal of the health of the economy than the inverted yield curve. Today, Wall Street is completely reactionary towards FED policy. The FED recently lowered rates for the first time in some while, so that sent a message of a potentially slowing economy and the FED was attempting to boost it with lower rates. Wall Street are like lemmings…the herd mentality usually moves together one direction or another. In this case, they herded into buying the 10 year, which drove rates down because of all the demand. Next week it will likely be another economic indicator moving it in the opposite direction. I try nowadays not to pay attention to Wall Street simply because I think it's become detached from the actual economy, mostly because of manipulative FED policy. Too often today, Wall Street cheers bad news because they know the FED will lower rates, which means money can be borrowed more cheaply…and corporations use those borrowed funds to buy back more stock in the company, which boosts stock prices. But again, all detached from the real economy…it's just money being shuffled around.

  3. Nobody knows yeild curves like donald trump, a lot of people call him the king of yeild curves. I'm not one of those people, but a lot of people are saying it. 🤣🤣🤣

  4. This is old news, the yield curve inverted like 8 months ago. I've been warning people for several months, but some people are seeing the stock market go up and they don't believe it. Well, they'll see soon.

  5. Well well Dump, you made the World closer to resession… And the US about to go bankrupt if you just continue🤦‍♂️🤯. Beeing stupid and narcisisstic is no good combination 🤯🤦‍♀️🤦‍♂️🤔

  6. I feel so bad when David is being so patient, trying to explain the American economy to me again and again, and I just doze off every time 😡

  7. I don't think we can or should single out the 90 days late on just car payments. There is a graph showing 90 days or more late on payments for Mortgages, Credit Card, Student Loan, Auto Loan and HE Revolving.

    https://usa.streetsblog.org/2019/02/13/americas-car-centric-transportation-policies-are-driving-us-to-ruin/

    The only one that is late now is the auto loan. The other ones are about the same or going down. Unlike during the 2008-2009 recession when the all went high.

  8. A big factor fueling a coming recession is the failure of the $2 trillion tax cuts to make a meaningful effect on the economy other than putting more money in the pockets of the already-rich. So the GOP is happy, and a recession is not going to bother them.

  9. Very well explained! Took a look at it myself – it seems from the moment the spread turns negative there is an 18-24 month period before sh*t really hits the fan. Almost to the month the market crashes when there has been a period of negative spread (of 18-24 months) followed by a rapid spike. The last 6 crashes seemed to occur soon after this initial spike. Perhaps this is due to the lag in the economy? There will be a lag time between the spreads turning negative and liquidity drying up (banks stop lending as you say). Data: https://fred.stlouisfed.org/series/T10Y2Y

  10. What horrifies me is if a dem get elected and a recession hits that was caused by trumps policy. Everyone will blame the party in power despite none of their laws yet being in effect

  11. the recession is coming regardless, the thing is how bad is going to be, if Trump back from his tariffs and everything else then maybe the coming recession is going to be less bad but if he continues like now then is total collapse.

  12. The real changes occured in 1971 when the US dollar became a fiat currency and in the 1980s with the introduction of Reaganomics, based on Milton Friedman's cargo cult economic theories with reversed cause and effect flow.
    The result of these changes is that there is no longer a connection between financial economy and real economy. The nominal value of things becomes highly subjective and easy to manipulate. Of course everybody want to give the impression that what they have to offer is worth more and with little of no reality check, it's fairly easy to inflate values far out of proportion.
    This only works as long as people believe it works and banks and authorities have spent a tremendous amount of effort just to keep up appearances. But that's getting hardr and harder and sooner or later, they'll run out of options – there's a limit to how much you can manipulate data before it becomes too obvious. What really worries me today, is that I've seen financial experts telling us everything is fine without even trying to explain why. Is that because they've been taken by surprise or have they run out of excuses? I don't know.

  13. Anyone who thinks it makes sense that we live in a system that describes the health of our system to us by the silly “curves” of bonds is ridiculous! Most working people don’t have bonds and they just want to live a normal life. END CAPITALISM

  14. I do think you explained the concept well. However, i think what you're doing is at best naive and at worst disingenuous. The yield is curve is one indicator of performance. The likelihood of an imminent recession is pretty low at present, with only 4 of the 18 indicators flagging on several bear market checklists. If you're going to make claims about this and point this to trump's policies as the reason (which there are very good reasons to believe) I'd like to see a more holistic explanation. Saying that the trade war is directly speeding up a recession is also wildly naïve about how macroeconomics works. Still – love your videos in general, this one just wasn't your finest (and it is a bit making me question how genuine you're being in the rest..)

  15. Do we ever stop to think about why so many people have car payments in the first place? Not exactly a smart financial decision.

    AND YES, some people need SPECIFIC cars for their jobs etc. Not exactly the rule, but the exception. All my friends have car payments whilst in college, working fast food. Complete idiots. Can’t imagine how older, people who are not as financially educated are doing. And it doesn’t take college to not be stupid enough to not have car payments when you live paycheck to paycheck.

    Of course, this a tangent from the video, but it’s something worth noting. The car culture and the overall spending culture in the US is messed up from what I’m seeing.

  16. Another indicator of a coming recession is the price of gold. The price of gold is increasing. Brexit in combination with Trump´s trade war will most certainly cost the world some kind of recession. It will happen at the end of this year and maybe at the beginning of next year. It could be a short temporary dip but it could also get worse. The increasing instability in Asia will also affect the markets.

  17. Early 2020, you'll see a mild decline start. Mid-2020 is likely the bottom. Start strengthening your emergency fund! Also, Credit Card delinquency Rates, inverted, is a pretty good indicator.

  18. The first trigger was the tax break for the top 1 percent which caused the companies to reinvest in their own stock. Which overheated the stock market. Then he pursued a renegotiation of trade deal with everyone including his own allies. The final blow was the China trade deal. Where China realised that if they gave in Trump/US will see this as a weakness and continue with more renegotiations. So they drew the line and now we have recession on the way. The entire world economic growth has slowed down already. Germany the engine of the EU is at the brink of a recession. England is the same due Brexit. This was also supported by Trump. Australia is also at 0.3 growth rate so it doesn’t look good.

  19. go long in gold… short everything else. at least try to make some money this time from this republicuck dipshitery.

  20. The 1% have been ridding a high on their own BS. Problem is…if the 99% won’t buy from the 1% because they’ve actually been doing terrible, who the heck do the 1% expect to buy from em?

    A social correction is long overdue to make us an economy with the 99% as it’s driving force that (secondary) allow the 1% to make money.

  21. Even MONIAC can't help up now https://www.youtube.com/watch?v=rAZavOcEnLg because with negative interest rates and water can't flow up hill the MONIAC can be set up for present day conditions.  PEOPLE WE ARE TOTALY IN THE DARK!   Trolls / Bots Russian or other wise go ape now .

  22. Step 1: Buy cheap index funds during the current trade war and recession.
    Step 2: Wait for the next administration to normalize trade relations which will lead the index funds to increase significantly in value.
    Step 3: Profit

  23. Maybe the saddest part is these ultra-rich with the lobbyists and the hey hey it hurts me will be on their survival yachts blowing us away when Waterworld comes true, we will be back to a cutthroat existence at the species level.

  24. YES!!!! This is the REAL TRUMP ECONOMY. The OBAMA ECONOMY has been crushed by the CLOWN PRINCESS. THIS is the result!!!

  25. The word recession, is incorrect, when the economy collapses this time around it will be unrecoverable. Why, the wealthy have taken all the money and froze it unto themselves.
    You would have to tax the 1/10 of 1% at WWII tax rate of over 90% to restore even a small part of the economy, They would refuse to do so and hide the money in 1,000's of ways
    Then we are very much starting the biggest money pit in history the damaged caused by climate change that grows by $ Billion every year.
    HELLO!!! How in the F are we suppose to keep any normalcy, when the carpet baggers at the top have already put us in a downward spiral that spins faster every second of everyday.
    Point blank we are entering the point of no return, Greed has won, where by we all have lost
    By 2030 there won';t be enough capitol in the world to fix the destruction to the financial markets or the Climate, Trump is just adding the finishing touches, just like he has done with every other failure he has constructed.
    I'm an Atheist, but he sure acts like the Antichrist Mr. 666

  26. How about the fact that railroad car and container loadings have been down cf the same week in 2018 every week in 2019 so far. RR's are still posting profits because of stock buy backs, efficiencies and higher pricing.
    The tariffs are biting and also many commodities like gravel, sand and lumber are down – mirrored by lower housing starts. And of course agricultural products – hit by a double whammy of weather and tariffs.
    The stock market does not tell the whole or real tale and certainly not soon enough. Look at manufacturing, down, car sales, down, coal, downI I am sure there are plenty more. Yes the greatest economy EVER!

  27. All these voters who look at the economy as this "thing" that's either good or bad based upon what the president or some idiot on tv tells them, you literally are part of the economy and if you haven't been able to make your car payment in 3 months the the shit isn't doing too well now is it?

  28. If you keep predicting it, you will eventually be correct.

    Seriously. If we are always scared of a recession, it’s not a bad thing.

  29. Trump supporters, you don't need to worry about recession or depression because Mexico is gonna pay for this Trump recession Wall. Do you remember Mexico paid border wall two year ago ? Who is gonna pay for the wall? Mexico ! who ? Mexico !…Who ? Mexico !……Every one of you will be rich like idiot Trumpf…….!!!

  30. I cant help but laugh at this guy’s ignorance on the yield curve inversion. He makes absolutely no sense and contradicts himself multiple times. Why does he front like he knows ANYTHING about economics when he really does not? If investors were going into 2 year bonds because it is so risky to go into 10 year bonds, then rates would be RISING across the board, with the 10 year rising even more. The 10 year rate is falling which means people are BUYING IT. Lol this guy is an ignoramus pretending he knows jack shit

  31. In January a report came out stating that a recession was coming and that Trump was of little influence; even with his tax cuts.

    With recent domestic terror attacks, and other problems that have happened in recent weeks, it isn’t a surprise that the Market is going to take a hit.

    This is what happens when people think through fear and not logic.

    A few people acting out, with media sensationalism, often causes fearful people to sell their stocks, and waste it on “supplies”.

    I’ve seen this happen more than once in my life.
    It certainly doesn’t mean that past year of economic growth is erased. It just means this quarter had negative growth.

    A recession doesn’t mean we’re going to lose everything and that people will lose jobs.

    Just means people are on edge and protecting their own asses.

  32. Trump, "The Democrats and media caused this recession for me, to destroy my re-election chances".
    This could work with; hardcore Republicans & Trump Supporters.
    You know who it won't work with; Democrats, Independents and marginal Trump Supporters.

  33. They know the Petro dollar will be dropped.
    USD value will drop some so the money you put in will be worth less.
    They want to prevent losses I think. The money may not be worth much in ten years and they can't piss off rich people the way they can poor ones. It's precautionary

  34. The really stupid thing is that if we got social democrats in office who reestablished appropriate regulations on business we’d be seeing steady (albeit lower) returns and a healthier economy instead of the stupid boom bust roller coaster we’ve been on since the 80s. But republicans think Bernie would destroy capitalism and tank the economy.

  35. David: Consider the historical consequences of supply side economics vs. demand side. While Trump's cuts were immediate gratification for the wealthy, the Democratic time tested policy of giving the money to the middle consumer class and making the corporations compete for it has proven to greatly extend periods of an economic expansion. The Republicans have thrown us into recessions multiple times by using their policy of "trickle down" BS. It's not any different this time. I think tax cuts for the rich should be included in the economic prediction of a recession.

  36. Are recessions a bad thing for everyone? Think back to 2008, 2009, or 2010. If you had access to lots of cash, what could you have done? The first thing that comes to my mind is you could have bought lots of dirt cheap real estate. Now imagine if you would have had unlimited access to foreign cash and investors to back you? Man, you could have made a killing. When you think of this scenario, who comes to mind?

  37. Expansions do not die of old age, they die from shocks to the outlook: the trade war and slowing global growth being the culprits of this one. Recessions are not always inevitable; the next recession will likely be a small one, and certainly not to the degree of the financial crisis. Unemployment (even the U-6, which is a much more comprehensive measurement of labor market health) is at historic lows, inflation is pretty stable, and wage growth is stabilizing around 3%. The real economy is doing well, but of course we cannot ignore these headwinds. People are of course struggling, but the US labor market has been nothing short of a success in the 2010s. The biggest problem in the upcoming recession would be the federal deficit, which is already at unstable levels.

  38. Great video David, I would say though that in my own opinion I don’t think the economy was fixed after 2008, they just reinflated the bubble to get things going, they never actually fixed the underlying structural issues that keeps allowing this to happen in such a big way, Trump just made it worse by putting it on steroids

  39. Irony; When a debt ridden person, living large, beyond their means, is condescending and judgemental toward someone who has no debt, who lives modestly, below their means.
    Resentment; When the acts of the careless spill over and
    affect the careful.

  40. Brexit might be the nail. Obama caked himself a moderate republican so the case can be made republicans cause recessions when in actuality both parties are garbage and corporate America is fucking us via the 2 party system

  41. By itself, an inverted yield curve is not an indicator for a recession. They will occur several times, long before a recession actually hits which means that by themselves, they're not actually indicators at all. One could make the false argument that a full moon is an indicator for a recession by showing all of the full moons to have occurred before a recession while neglecting all of the full moons to have taken place prior to them in which a recession didn't occur. An inverted yield curve is incidental to the indicators of a recession.

  42. trumps bankruptcies and deficits have transferred to america, conveniently socialism and bernie are the only things that can save us

  43. Lol, I was just talking about this today on twitch. Then some random guy called me racist for not using facts and stating how Trump is fucking up the country.

  44. A recession is definitely coming. May not be the big one. This one may be relatively normal because there is not a looming catalyst for the big one such as the dot com crash or the housing bubble. But, unless we change course the big collapse is coming.

  45. The thing is that if it was obvious that aa recession is close by, then everybody would try to sell their stocks and then the recession would already be a reality.

  46. the economy is far worse than this video describes. And this has been a ten yr ticking time bomb.

    the economy has been a false economy since 2008- based on printed trillion$$$, and negative real rates. What to know why u can;t afford a home? This is why. Neg rates and $ printing has artificially raised prices, debts, and the economy. But the economy did not rise as fast as the increase in new debt ($ printing is debt). That means we have been waiting for a bigger crisis than 2008 ever since. Now, it is coming. The inversion has been a failproof indicator. But here is why this crisis will be worse. than 2008.

    Debts as % of economy are greater than ever. Int rates are already low so how can u stimulate by lowering rates? (Perhaps negative nominal rates- pay people to take out debt and punish people for saving). Perhaps. But that has never been attempted – it could be disastrous – peple could withdrawll their cash and stuff it under their mattress. Enough people do that, oh fuck. This may lead to loss of all trust in $. If that happens, wed could have the worst recession in history. When ppl don;t trust $, all is lost. But pother than negative rates, what? Tax the Rich till peeps squeak and use for govt spending? U think so?

    Trump policies may have exacerbated this: Tax cuts, record deficits during a rising economy (v v v bad), trade wars. But this has been a matter of time ever since 2008. Why? Because the bailouts and $ printing have not worked. It is just that lay people have forgotten about the $ printing and don't realise it has to be repaid. Big problem. The weak recovery means it can't. Gulp!

  47. Honestly, when Trump was elected president I thought we were going to end up in world war 3. A recession is definitely not as bad as that.

  48. https://amp.businessinsider.com/trucking-truckers-bloodbath-signals-recession-inverted-yield-2019-8
    Another indicator. 8 consecutive months of low rates in the trucking industry also in semi truck sales

  49. Epoch times is touting Trump was conclusively found not to be colluding with Russia??? FAKE newspaper…blaming Obama again??? This shiznit epoch times is in "my drugstore!" Ugh….I don't want these intrusive ads – YouTube!! Jesus!! So Tired of this circus! TOO MUCH DISTRACTION David, love your plain and simple, honest reporting. We are heading for a recession and I have ZERO DOUBT it's the DISASTROUS policies of THIS moron in the WH, but more disastrous – our earth is dying and we have TOO MUCH DISTRACTION to see the real issue of urgent import. Pray for Humanity (if you're the praying type), but it won't stop the humanitarian crises.

    Let's TAKE OUR COUNTRY BACK!!!

    Simple Truth:
    United we Stand – Divided we Fall

  50. Russia didnt work out, now the left wants to scare the country into triggering a recession. Left wing extremists would rather throw millions out of work and obliterate retirement accounts if it means their candidate is put in power.

  51. What sucks most is if Democrats win 2020, they might inherit the bad economy and Republicans will blame them rather than owning the source of the issues.

  52. If we are lucky it will only be a recession unless its like the last recession which sure looked like a depression to all but the bankers , and the guy who shorted the mortgage industry and made billions.

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