Into the deep end of the pool

 "Remember two things:

1. That everything has always been the same, and keeps recurring, and it makes no difference whether you see the same things recur in a hundred years or two hundred, or in an infinite period.

2. That the longest-lived and those who will die soonest lose the same thing.  

The present is all that you can give up, since that is all that you have.  And what you do not have, you cannot lose." - Marcus Aurelius

Brief post about the economic situation.  

One of the most common market indicators that is used to predict an economic recession is the "bond yield inversion".  To explain what this is and why it's such a useful indicator, it's necessary to understand a little bit about bonds, terms, and yields.  And a "little bit" is all I know, really.

If you were to buy a $100 bond at a 10 year term, it might pay a 4% yield - that is, if you were to hold the bond for the entire 10 years, it would return 4%, per year.  

If you were to buy a $100 bond at a 2 year term, it might only pay a 1% yield.  The reason that the longer yield pays more interest is because your money is locked up for a longer period of time.  You might miss out on better opportunities in those 10 years, and you are compensated for that with a greater yield.

During periods of economic stress, investors - whether individuals or larger investing companies - tend to get out of the stock market.  They suspect there will be a downdraft and move their holdings into bonds, which are relatively safe from being clobbered by a bear market, compared to volatile stocks.

So investment funds, retirement funds, individuals all invest in higher-yielding bonds.  This drives the price of the longer-term bonds up, because everyone wants them, and the bid price goes up.  This in turn drives the yield down, because your $100 bond now costs $105.

The 2 year/ 10 year bond yield split is closely watched by many analysts, because on rare occasions, the yield curve "inverts".  This means that people are willing to take a lower yield for the 10 year bond than they can get on the 2 year bond - just to get to the safety of being out of stocks and into safer bonds.

With that explanation out of the way, I'll just point out that the 2yr/10yr bond yield curve is highly inverted, and has been for a while now.  

Below is a chart of the 2yr/10yr yield spread going back to 1990.  Recessions are marked in dark gray.  As you can see, the 2yr/10yr yield spread dropping below zero nearly always precedes a recession.  It's not comforting that the spread is now significantly more inverted than at any other point on the chart.

Chart courtesy of Advisor Perspectives.

Companies such as Amazon, Meta (Facebook), Alphabet (Google), Microsoft, Goldman Sachs, Blackrock, McDonalds, as well as several crypto and media outlets have announced significant layoffs.  These companies see the economic headwinds, because they are financially exposed and tuned in to the economy in ways that most of us are not.  To me, it looks like the inversion is severe enough that a recession is baked in, if not already here.

I'm not a prognosticator on the economy though, although I did correctly guess the implosion in 2007-8.  This may turn out to be a similar or even worse event.  The world is changing in strange and unpredictable ways.   Final word: Ignore the 2yr/10yr split at your own peril.