Happiness Is a Normal Yield Curve

“I never liked quantitative easing. Flattening the yield curve is not stimulative; flattening the yield curve is anti-stimulative.”

– Ken Fisher

“There is a limit to how much the United States Treasury can borrow.”

– Alan Greenspan

“In other words, we have the models we have because of inertia and theology, but also because all we can do is all we can do.”

– Kit Webster

“[T]he specific manner by which prices collapsed is not the most important problem: A crash occurs because the market has entered an unstable phase, and any small disturbance or process may have triggered the instability. Think of a ruler held up vertically on your finger: This very unstable position will lead eventually to its collapse, as a result of a small (or an absence of adequate) motion of your hand or due to any tiny whiff of air. The collapse is fundamentally due to the unstable position; the instantaneous cause of the collapse is secondary.”

– Didier Sornette, French geophysicist

Photo: Paul Kelly via Flickr

Once again I start this letter with a warning: A recession is eventually coming and a financial crisis with it. There is a real potential for it to come soon, as in the next year or two, although serious tax reform could change that equation. But at the end of the day, the pressures of too much government debt and too many government promises, plus growth that is continually grinding slower, will result in a recession. There is always another recession. You can’t run your life and business as if you expect one to happen tomorrow, but you can make contingency plans. With each passing day, recession gets closer, but that’s no reason to be fearful if you’re prepared.

I’m not trying to sound like an Old Testament prophet – OK, so maybe I am – but this is serious. Many business owners aren’t ready, nor are many portfolio managers and individual investors. They will likely regret their inattention.

Today I will show you a simple indicator that has an excellent recession-forecasting record, according to research by the Federal Reserve itself. Though the Fed’s own wacky policies may have weakened this early-warning system’s reliability, an interpretive adjustment can restore its usefulness.

First, thought, let me give you yet more reasons for concern on a completely different front. We have been getting complaints from readers that Thoughts from the Frontline is no longer showing up in their inboxes. We have cornered the problem, and its name is Google.

Google’s Gmail creates categories to characterize emails that are sent to your inbox. They are trying to route all newsletters directly into a dedicated folder (I believe they even call it “Promotions”), instead of sending them through to people’s inboxes. There is not much we can do about it at this point. I’m on the hunt for an email delivery specialist who can help us with what is now being called “inboxing.” This problem is industrywide. If you are using Gmail, you might want to check to see where the emails that you want to read are actually being routed.