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To: 2sigma who wrote (1424)	10/1/2007 10:20:05 PM
From: SouthFloridaGuy	Read Replies (2) \| Respond to of 1718

First tell me how one guy...loser...can spend so much time doing or saying nothing? Member 988914

To: 2sigma who wrote (1424)	10/7/2007 9:14:50 AM
From: SouthFloridaGuy	Read Replies (1) \| Respond to of 1718

The yield curve only represents the desire for capital at given points of the treasury curve. Logically, it should be upward sloping due to term structure theory. One can make broad interpretations based on its shape. Usually those interpetations during inversion revolve around the demand for short-term capital to complete projects, speculation, etc. In the case of the most recent reversion, it was clearly caused by a flight to quality on the short-end which was simply overwhelmed due to limited liquidity. To start making outright conclusions on recession risk based on recent "events" in the curve is just stupid and naive particularly when citing 3 month 10 year. Using Hulbert's methodology, "recession" risk was also reduced at the beginning of 1990, beginning of 2001, etc. If anything, recession risk INCREASES due to the recent steepening because it represents a "cash is king" mentality amongst speculators who would rather park their money in T-Bills than put it into instruments with credit risk or risk-assets in general. That, of course, is symptomatic of a credit crunch and credit crunches do not reduce recession risk. A back of the envelope and simple way to guage recession risk is to look at a few indicators like temp employment growth, ISM Manufacturing and to guage Real GDP versus us 10 year TIPS yields. The first two items are easy to find and put us somewhere in muddle economy stage. In the case of the last item, TIPS yields are at about 2.25% and real GDP is set to be below 2%. That means Fed policy is still tight and recession risk remains.