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The Martians have landed in New Jersey! Chinese Army tanks are rolling in the Chicago Loop! California has fallen into the ocean! Giant robots have kidnapped the Statue of Liberty! D.C. is in flames!
The yield on 10-year Treasuries has fallen below the yield on three-month Treasuries!
We are doomed!
Enough already – yes, last week, the yield curve inverted.
So, the conventional thinking goes, we'll have a recession. Right? Maybe. When? Don't know. It could be a month or two; it could be almost two years from now.
The truth is, there has been a yield curve inversion before every recession – if you don't care how long it took for that recession to develop. The historical record shows the yield curve inverted a whopping 23 months before the economy slowed in the most recent recession.
So, a yield curve inversion heralds a recession in kinda the same way baseball's Opening Day "causes" the World Series, or that being born is a leading cause of death.
In other words, it's a bit of a stretch – and certainly nothing you'd want to make do-or-die investing decisions on.
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of "Max Wealth" and Heatseekers.