What does an inverted yield curve mean? Impending Recession?

Question

What does an inverted yield curve mean?  Impending Recession?   Any other signs recession/correction is coming?

Account Closed · Answer

It means "Danger, Will Robinson". (From Lost in Space, oh forget that, you've probably never seen the TV series. It was kind of like Gilligan's Island in Space.)

Inverted Yield Curve means they ain't making a profit and something's got to give. Could be a recession (tho' not likely for a couple of years), could mean a reset for some large companies with heavy debt loads, could mean the Fed has no idea what to do, (that one is likely) could mean impending inflation, (not so likely), could mean a market correction, (most likely) could mean a bunch of things. The point is that those with really big money (Hedge funds, big banks, etc) are moving large amounts of money around looking for yield and not finding what they are looking for. You want to be in commodities or real estate when it blows. The Stock Market will take a direct hit.

Eric Delcol · Answer

@Mike M.

I researched this about a year ago prior to inversion.

For certain, it means short term rates pay higher than long term.  That in itself is unsustainable so something will change.

Some predict that it is an indication of recession - however, per IBD, the last 8 times this has occurred 4 times resulted in recession, 2 times the market remained flat for over several years, and 2 times the market continued with a bull run.

A predictor that SOMETHING will change - yes.  A crystal ball it is not.

Josh Rogers · Answer

Account Closed Thanks Mike!  That helps a lot.  And you know, they did make a movie of Lost in Space for my generation.  ;)

So if I understand you correctly, you are saying to RE is a good place to be during this time vs stocks?  Would we expect interest rates to go up meaning now is a good time to leverage?

Account Closed · Answer

When I started out a good interest rate was 8%. It went as high as 18% to 21%.

Now the rates are 4% and for them to go from 4% to 6% is no problem for investors. (It will hurt home buyers though) I don't think the Fed will allow rates to go much higher than they are today for a few years. It would crash the economy.

There is a tremendous amount of cash out there looking to be invested and they can't buy enough single family homes fast enough to make it worthwhile. They have to stick to stocks, bonds, derivatives, etc.

Buy wisely, off market, cash flow the properties and you will be fine. Here is the model I use and how I got to retirement:

Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Needed

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

What does an inverted yield curve mean? Impending Recession?

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