The Dog that Did Not Bark

Debt bombIn one of Heinlein’s stories (I forget which one, and the search engines haven’t helped on this odd query) a character awakes after having been in suspended animation for many years and catches up on what he’s missed by spending a few hours reading a history book, then remarks on how much time he would have wasted had he read a newspaper every day for all that time, reading about matters too ephemeral to make the history books.

If you do follow the news (I try to spend as little time as possible doing so), keep in mind that the most important thing may be what’s not in the daily news.  Many of the things that end up in the history books were complete surprises to those embedded in the “news cycle” and to the “experts” who feed it.  For example, check the newspapers for early October 1929, November 1941, October 1989, the latter half of 1990, or August 2001: you’ll find little or nothing about the imminent stock market crash, Pearl Harbor, fall of the Berlin Wall, collapse of the Soviet Union, or terrorist attacks in the U.S.  And yet, in retrospect, the circumstances which led to these “surprises” were in plain sight.  Thus, I’m always interested in the big story that none of the chattering classes are chattering about.  Which brings me to…... [Read More]

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Inverted Yield Curve

U.S. Treasury Bond, 1977, US$ 1 millionThis is a fairly geeky financial technical analysis post.  I usually post such material as Gnome-o-Grams on my own Web log, but as an experiment, I’m posting this one here to see if there’s any interest among the membership or wish to see further posts of this kind.  If you’d like to see more like this here, please indicate by liking this post or commenting, including topics you’d like to see discussed (after reviewing those already published, linked above).  As always when anything discussing finance or investing, I don’t make recommendations; you’re entirely responsible for your own decisions and would be crazy to interpret anything I say as a course of action you should pursue without coming to your own independent decision.

The yield curve is a measure of the sentiment of investors, particularly conservative investors who own fixed-income securities (bonds and equivalents).  (Much of the financial press covers the equity [stock] markets and neglects the bond markets, but the bond markets dwarf the stock market in valuation.  Bonds aren’t [usually] exciting [and when they are things are generally unpleasant], so they don’t get much attention, but if you’re interested in the flow of funds [and you should be], that’s where you ought to be looking.)  The yield curve simply plots, for equivalent fixed-income (debt) securities (bonds), the relationship between the yield of the security and the time to its maturity (when the investor gets his or her money back).  For example, consider the most widely traded securities in the world: U.S. Treasury debt.  These instruments have various names: Treasury Bills, Treasury Notes, and Treasury Bonds, depending upon their time to maturity, but they all are obligations of the U.S. Treasury and bear the full faith and credit of the United States.  They are considered as close to risk-free as any paper investment in the world.... [Read More]

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