Any person approaching or in retirement already knows how difficult it is to get reliable information from the news media, especially about money.
So, this week, I’d like to try and untangle some of the mess the money media has been putting out there about interest rates and the possibility of a recession.
The talking heads with degrees in journalism are ablaze again with rantings about one of the most technical and misunderstood aspects of the bond market, the yield curve.I’ve been investing since 1983 and working in the money world since 1991, and I’ve spent most of that time in the bond market.
And I admit that the intricacies of the technical details of that market—especially the international bond market, which I’ll talk about in a second—are, at times, beyond me.
So why networks hire people with degrees in English and journalism to analyze and comment on this monster of the money world is beyond me.
Most if not all of the most recent hubbub in the media is based on the fact that the two-year Treasury’s yield was 0.06% higher than the 10-year’s. According to our English and journalism majors, this means we have to have a recession.
There is some correlation between yield inversions and recessions; however, it is nowhere near the one-to-one relationship that the talking heads would have you believe.
In fact, when a recession has occurred after a yield inversion, it has been out as far as months to years after the fact. The world doesn’t end immediately, or at all, when an inversion occurs.
But let’s put this recession thing in perspective. Yes, we will have a recession. It’s the nature of the beast. Recessions happen. If they didn’t, the Dow would be 300 million and we would all be gazillionaires.
As obvious as that is to anybody with any experience in the money world, the talking heads have spent the better part of the last 10 years calling for a recession and trying to predict when it would happen—as if that would somehow improve their reputations.
And the fact that the soothsayers of the networks and cable channels have been consistently wrong hasn’t slowed them at all.
The fact, when it manages to make its way to the surface, is that we will have 2.5% to 3% growth in 2019, not a recession. The reason our 10-year yield is as low as it is, is because the German 10-year bund has a negative yield.
The mess that is the EU is the reason the bund has a negative yield and we have an inverted yield curve. And no, I won’t attempt to explain the ins and outs of why the bund affects our Treasury yield, but I do trust the analysts I read who are saying exactly that.
All of the strategists at The Oxford Club pound the table constantly about the essential elements of making money. It’s about fundamentals, patience, and time. Soothsayers and people who would prefer to be writing the Great American Novel are not the place to look for information that will make money.
As we age, our ability to recover from mistakes, misinformation and panic-selling, most of which are driven by the English and journalism folks on TV, becomes more difficult each year.
Keep your focus on fundamentals, not TV personalities. That will work.