The problem is that we've never printed 8 trillion dollars before. I think that might be why a lot of these classic indicators aren't as accurate as they used to be

For the last two years, I have never seen markets where everything is the opposite. It's the george costanza of markets. Interest rates hikes that have never been seen before. Equates to a bull market and a runaway Housing market???? Gold goes up as the dollar goes up.??? Even more disturbing is the Length of time that these continue to happen.

I honestly don’t believe the economy is doing that well. Corporate price gouging is unchecked and while corporate profits may be extremely high the middle class is vanishing. People can’t afford to buy a home or even afford rent in many places. Costs of food and consumer goods, gas are so overpriced and in many cases low quality. Since the US is an oligarchy there is just a huge imbalance of wealth. that doesn’t make for a strong economy when only a small percentage of people hold the majority of wealth

So where are you going to run? Cash? (Or other fiat-denominated securities?) In 1929 people sold their stocks for dollars that were backed by gold. What backs your dollars these days?

The unemployment is not low, the people who aren't working just are not being counted. They don't label you as unemployed if you are not actively searching for a job within a 4 week period. So if you stop searching for a month, you are no longer "unemployed" apparently and don't count towards the rate.

There is so much manipulation and distortion in the markets from Fed intervention over the last 15 years that historical indicators and patterns are mostly impotent. We've been in an asset bubble for at least 7 years now and still kicking that can down the road. It's brand new territory. It's really different this time!

I believe from the bottom of my heart that a severe recession or even a depression is on the horizon given all the leading economic indicators such as the yield curve inversion and the M2 money supply shrinking dramatically. I think wars will play a big role in the next economic downturn.

I can safely say... Something will happen, at some point.

By the end of the decade I bet we have a new definition of a Great Depression

If you print enough money everything will go up. If the economic indicators you pay attention to are based on a fiat currency everything looks great. Then you look at the real rate of inflation (not the one provided by the government) and you see a very different picture.

Excellent video. People who think "nothing will break" must absolutely watch this. Something always broke. Something will once again break.

5:40 Seems like the downturns usually come after the yield curve has corrected itself at least back above zero -- if not after climbing a little back up into the positive even.

The issue you left out is the growing M2 money supply. Data before 1971 should not be used as we were on the gold standard and could not print ourselves into a boom. Today, they are more than willing to print the next boom even at higher rates.

The problem with this, as you mentioned in the end of the video, is that we can end up closing positions that are about to rally and miss out. I use to follow a guy called Ron Walker who was constantly saying a crash was coming. That made me sell positions in Feb last year includind nvda, meta, crm and tsla just to see them sky rocket in the following months. What I am trying to say is that being exposed to growth stock during a crash is bad but selling before a rally is as bad and damaging. That guy I mentioned cost me thousands of dollars because of the fear he caused on me. Just be aware of that.

It's very simple. The inversion doesn't cause the recession, the recession end the yield curve. When do central banks cut interest rates? When the economy is beginning to contract. That's why this indicator has a perfect track record. JPOW isn't going to start cutting rates until he sees softness in the economy. That's the signal that the party's over, not the inversion itself.

If we live in a system that must constantly borrow more, we are doomed.

You forgot to say usually recession comes 1-2 years after inversion. Until then markets will go up.

Yeah, but THIS TIME is different. ;)

Remember 9000 US bank's went bankrupt during the Great Depression. Depositors lost over 7 billion in their savings accounts with no recourse. That fact seems to get overlooked when discussing the Great Depression.

There are other interesting indicators, such as looking at the price of stocks, ie PE ratios, PEG ratios and gold vs S&P, etc. Typically the stock market gets more and more expensive over time until suddenly the music stops. It isn't a hard limit on these indicators, but it usually is good to compare historical data. Plus, if looking for a strategy, I'd suggest cash diversification. A simple one is don't put all your cash in stocks. Leave some in stocks to grow as the market keeps melting up, but in the meantime keep lots of powder dry. Keep increasing your cash (and now getting ~5% on it) the higher things go. When the whole thing craters, start selling some cash to buy shares, if it craters again, sell more cash. Buy other assets as well, and adjust as desired.

Hey, nice vid as always! I always wonder what do you use to make the on-screen animations and where do you get the data for them?

It is dangerous to try and time it. If it is expensive just park in cash and do nothing. Doing nothing is the hardest investment advice but it is why Warren Buffett is so rich. Not him trying to get a few weeks of gains.

Love this data and all of your presentations. Keep up the good work.

I have experienced most of the recessions that you have referred to (except the one in 1929) and although the phrase, 'this time is different' is much maligned, these days things may be different. For example the largest companies in the S&P are technology companies with lots of cash, and little debt so interest rates are less of a concern compared to heavily indebted industrial companies. Some are suggesting that the neutral fed rate may be higher than once thought and perhaps oil is less critical to our economy than it once was. Unfortunately most recessions are caused by the fed leaving interest rates too high for too long.

Does anyone know where we can track the inversion day count?

Imagine the coming QE.....lol

Gas prices in CA have been steadily rising… now about $5

Great analysis. Keep up the good work!

Could someone explain to me why this yield curve talk is disregarding inflation expectation? Second, if the treasury wouldnt lean on the front of the curve so much, it would surely look different. Right? If real rates are less or not inverted, does that change anything?

Which are the dates used for the inversion of the 10 year - 3 month yields that took place before the financial crisis?

Can you tell what needs to happen to come out of inversion?

What program do you use for your exceptional graphics. Envious! Jerry

We broke trend this week, if CPI comes in hot tomorrow, forget your theory about a blow off top.

Great so what stocks you guys picking when it happens

Kk but what is yield curve.

Wow, excellent work

When I learned one thing in my study program, it is we cannot look into the future. All this chart analysis is useless to predict anything. It is just describing the past, never the future.

I smell opportunity.

That's a mammoth inversion.

Short and precise. The charts are very helpful. Great video as usual.

Very informative and intuitively presented videos, thank you GoTs. Reading and hearing more these days about the "unsustainable debt bubble" combined with more countries trading without the US dollar, reducing need and DEMAND for US dollar and our debt unsustainable reducing appetite for the US bond sales the fund our annual govt deficits. I believe in a proactive govt and the many benefits we enjoy here from regulation, in spite of it's red tape and burdens, but we j have to reform our tax and spend plans to face this issue, bring a swift end to annual deficits, and start paying down that debt rather than "inflation it away" and devaluing the dollar further. Would love a GoT video on that topic.

I love how a good chunk of my early teens was lived in the shadow of a massive recession destroying the economy and leading to my family having almost no money. Now I'm an adult, finally living on my own, and I get to live through another historic recession! Really makes a person believe that capitalism is the most efficient system to distribute wealth and there are no flaws in it.

Nothing bad is currently happening in the economy? You haven't noticed the worst inflation in 50 years?

Was it allways around atums time when recession hit in the past?

Maybe area under the curve (depth and duration) vs duration?

The monetary policy responses of the Fed reserve over the last two decades of open market operations, sustained decade long quantitative easing, discount rate adjustments of ST yields, and reducing the reserve requirements of banks had put is in an unprecedented place where inflation was 2% for a decade and savings interest was 2.5% for a decade (2010 till the pandemic). The market still has priced in that about 7 years from now the interest rates will be closer to that. Given the bond market is the largest asset market in the United States (besides foreign currency), there’s definitely room for violent swings of value if it seems these longer term bonds should begin to reflect similarly higher interest rates than have been normal since 2007 when at scale open market operations have begun. If there is a recession, I think it will more so be a paper recession of the value of stocks and bonds falling. The consumer recession already hit in 2023 with the insane degrees of inflation and price gouging. We live in an incomparable world now…

This is probably the best information channel in its field. Keep up the good work.

Brilliant. The question is, at which point of the "recovering" YC is the market finally a Buy? A better chart would be: Call start of YC

Brilliant!

My hypothesis is between Sept & Dec this year we will know if the crash will happen or not. That's about where the 12 month lag period is from the interest rate changes.

so if i'm correct here, the long term trendline should be the norm, and when in the short term the deviation from this is excessive then it will usually end in it falling or rising when whatever caused this has been rectified or ended leading to either recession or a bull market?? am i correct in this?

The market up 98% in 2 years since the yield curve inverted in 1929. How much has the stock market risen currently since the yield curve inverrted?

Thank you!

This is the best yield curve breakdown I've heard. Nicely done!!!

This is one of the best videos of this channel yet. Well done chap.

Lets see what happena...I am going 100% gold long term...😅

Superb analysis. But, as you say, situation today is different...

Fantastic video and T.A.!!!!!!!

we are going up 38% this year the inverse of 2008 rally barely started I am selling in August near top after huge blowoff rip. dont miss it

But what is a yield curve?

Very usefull. Thanks! In 1929 everybody was investing with borrowed money and even before that, in the roaring twenties they had inflation, which for a moment looks as if the economy is booming, but it is not in real terms.

The time for our big shorts will come boys, just stay patient and keep some money on hand.

If you want to solely look at the yield curve to predict future potential recessions you need to be very aware of the way you are thinking about it. As most of you know, it is a measure of short-term yields relative to long-term yields, nothing more. In other words, it can be interpreted as a measure of how investors expect future interest rates to look. In times of high inflation people expect interest rates to rise in the short term, but level out over the longer term. Therefore, a recession do not come simply because of the reinversion of the yield curve, but rather, economic tumult causes short term rates to fall (fed cuts interest rates), normalizing the yield curve. Therefore, an inversion of the yield curve do not guarentee a future recession (altrough it has been a good predictor), since it basicly all boils down to whether the fed is able to effectively balance inflation and unemployment, i.e., that they are able to cut rates before the economy has taken damage (hence, the infamous soft landing). TLDR: While the yield curve has historically been a good predictor for upcoming recessions, keep in mind that it is simply a measure of investor's expectations of future interest rates. This means that whether a recession are to happen or not, depends on the fed's ability to orchestrate a "soft landing".

Is euro backed coin an option?

The depth of the inversion appears to be as pronounced as the duration, relative to past instances.

Look at oil / m2. We could see about 260 a barrel next spike!

Get ready.. the sh.. will hit the fan....

So, as a new investor, what should I do? Shift to cash in July 2024 to avoid the expected drop?

Sorry, but the 10y-2y has been inverted for 644 days, looking at Tradingview. Inverted on the 6th of July, 2022.

Great video! Considering that its the everything bubble after a 5 month furious rally this market can only go down from here! Microsoft value is Germanys GDP!!!

Bond market is manipulated, longer duration bond yields are artificially low making yield curve inverted. Now without us government manipulating bond market the yield curve might have been uninverted since begining of 2023. So hard to say really..

The duration of the inversion might have something to do with the amount of money printing that took place leading up to the inversion. The Fed has been deflating for 24 straight months. It does this by allowing government securities it holds to mature without replacing them. The government pays them and the Fed just poofs the money out of existence. The assets the Fed is holding is mostly short term government securities. When the Fed allows one to mature and doesn't replace it, the government must try to sell one like it to someone else. This drives down the price of shorter term government securities. Thus inverts the yield curve. Why then is the Fed doing this? Because they printed 80% of all the money in existence in 2020 and 2021. Now they are unprinting it. They can print about as fast as they want to but unprinting is this monthly process I described above. The more they print, the longer it takes to unprint until there is a recession. Because we had record printing, we might have a record number of days of inverted yield curve. So far, they have unprinted 17% of everything they had ever printed in its 111 year history.

How was the Bitcoin in 1929?

maybe make a model that quantifies recession risk, I think that predicting one event from happening in the future has a probability. Now you have made a prediction in the future (I do agree and think that you are on to something) but you also did in the past. Quantifying based on different factors might be a great tool for traders!

great analysis. Subbed!

While I’m waiting for the potential economy correction to come I’m going to position myself in a better spot so I may benefit from it. I will not let this opportunity pass again.

Everything a short especially the weaker stocks such as FL ,VZ,intel etc

Good stuff - great analysis

Excellent video

inflationary depression is coming, everyone will get rekd.

And that is why trailing stop exists. Just sell it when correction starts and buy more at the bottom :) But everything seems like a pure madness today and no rules work.

Your content is fantastic. Truly.

It is not important when the inversion starts, but when it ends. At that moment the countdown starts.

I think it's going to be all over red rover when these AI stocks eventually pop, when people realise they're nothing but pies in the sky.

Your estimate looks about right. We are currently in job creation season (February through July), and so a deep recession is not likely until we reach job loss season (August through January). The way the job market is tracking, full-time jobs in March were 1.4 million fewer than March 2023. So by July, the economy is set to have at least 2 - 3 million fewer full-time jobs than last year. After that, the job market is set to fall off a cliff due to all the built up damage from the inverted yield curve.

You forgot to talk about the Amplitude of the inversion, it's not only about the length !!!

A masters or Doctoral holder in Economics?

Maybe QE and QT is working lol now where able to cut rates if we're in a recession

I wish I knew what an yield curve is

"The economy is doing that well", seriously?! The stock market WAS doing OK, but the economy was basically an anxiety riddled mess. Corporate profit taking, large scale layoffs, and short terms gains prioritized over long term.

With gold at all time highs, and it's inverse correlation with the stocks, it seems that the smart money is just waiting for the dumb money.

the unemployment rate isn't low

I think there are a few unprecedented things going on in the economy these past few years that some people are missing. Boomers retiring and the impact on not only the job market but the transfer of wealth to their kids. This impacts everything from the tax base to investment (for retirement) across the world. The US is the only major economy that has the millennial generation in the numbers that will soften the impact of boomers leaving the workforce vs the rest of the world where millennials are about half the size of boomers... that is going to hurt quite a bit. Also, although not new we in the US seem to subsidize risk for corporations and the wealthy. They take more risk because we always bail out the too big to fail organizations... just look at the trillions of dollars in loans to businesses during the pandemic. Look at how the debt balloons after every recession since we adopted the Austrian school/ Supply Side economic theory (or Reaganomics if you don't know) we also print more money every time (quantitative easing) to keep the economy going or to pay for government functions because we don't raise taxes to balance the budget. It also doesn't seem the middle class is benefiting from much of this. We may be at the precipice of another change like we saw with Kynes and the Austrian school... essentially the pendulum is swinging back to labor... hopefully, I'm sure capital isn't going to let that happen very easily. Anyway, prep your a**es because history shows that these things usually are not easy often violent changes.

How many dollar do you think will evaporate after the crash?

You need to integrate the curves - depth x time - use Simpson's Rule for ease.

Did he say Black Tuesday ??? Ruttrow... that is today... 😮

Reading some comments of Panic selling before this crash comes. Long story short: Dont panic sell. Long story: Keep your Positions, maybe they will rais another 60% that means you can tank a -40% beore starting to lose money, that you recover fast by buying low (Time in the market always beats timing it). My advice should you be afraid of a crash: Keep all you positions and relocate new funds, maybe funds from your monthly investmentpayment into other assets, like Gold (-mines) or Bitcoin and Diversify.. so should a crash come, maybe this positions retain their value and the money of the last couple of months, do not need 15 years to return to buy-in-hifh

US oil production was also down 800k Barrels/Day in Jan 2024 due to colder than expected weather reducing production. Real estate has had a lot of new listings come on to the market and Nvidia and Apple stock prices are in correction mode. Perhaps the downturn has already started? Then again if the market does go kaput then the FED has plenty of room to cut rates again.

You’ll want to compare Dow transports with the S&P in the 1998 -2003 and 2021 to present.

with the background of record amount of debt, of additional debt and of the liquidity trap (zero and even negative rates in 2019 - after the C.thing was initiated as a "rescue operation" following with the agenda points that followed right after) ... together with the understanding that so many of the established sub-systems that make up the total socio-economic system have reached the end of its lifecycle (you cannot "play" MONOPOLY forever...) - the outcome, the reset, the new start and new order will be much different from what most of the people do expect today ... but sure: I do stick with "ceteris baribus" as well - at least with one foot ...