WHAT THE HECK DOES THAT MEAN AND WHY DID IT DRIVE THE DOW
HUNDREDS OF POINTS LOWER?
ALI VEL CHEE IS HERE NOW.
FUN CATCH PHRASES LIKE YIELD
CURVE INVERSION.
CURVE INVERSION. >> WE DON’T GO OUT OF OUR WAY AS
BUSINESS REPORTERS TO SAY THINGS
LIKE THAT TO PEOPLE.
THAT’S THE KIND OF STUFF THAT
TYPICALLY WOULD BORE SOMEONE.
BUT THE YIELD CURVE IS A SIGNAL
THAT RECESSION COULD BE COMING.
ONE HAS PRECEDED EVERY
RECESSION.
RECESSION. IT’S NOT A PRECONDITION FOR A
RECESSION BUT IT’S A SIGN.
THE YIELD CURVE IS THE CHART.
LOOK AT THE FACT THAT IT DIPS
BEFORE EVERY RECESSION.
SOMETIMES IT’S 10, 12, 18, 20
MONTHS BEFORE THE RECESSION BUT
IT’S A SIGNAL.
THE SHORT EXPLANATION IS THERE’S
NO PAYBACK FOR INVESTING IN
BONDS RIGHT NOW.
IT’S A SIGNAL THERE’S A LOT OF
FEAR, PEOPLE ARE LEAVING THE
STOCK MARKET.
STOCK MARKET. >> THE LAST TIME WE SAW A YIELD
CURVE INVERSION WAS 2007.
WHEN WE SAY, THOUGH, THE YIELD
CURVE IS CORRECT AND IT IS
INDICATING A RECESSION, IT
DOESN’T MEAN TOMORROW THAT WE’RE
IN TROUBLE.
IN TROUBLE. >> NO.
>> NO. IN FACT, THE AVERAGE IS ABOUT 22
MONTHS.
MONTHS. HERE’S THE PROBLEM.
WE’RE TEN YEARS AND I DON’T KNOW
HOW MANY MONTHS INTO AN
EXPANSION.
EXPANSION. THE LONGEST ONE WE’VE HAD WAS 10
YEARS AND 6 MONTHS IN THE ’90s.
WE’RE DUE FOR A RECESSION BUT
SUGGESTING ONE COULD BE COMING
IN 18-20 MONTHS IS NOT IN ITSELF
UNUSUAL.
UNUSUAL. IT’S THE OTHER THINGS, IT’S THE
TRADE WAR.
TRADE WAR. IT’S MESSY AND INVESTORS DON’T
LIKE MESSY.
LIKE MESSY. WHEN YOU COMBINE MESSY WITH
FALLING INTEREST RATES AND WITH
THIS YIELD CURVE WITH THE FACT
THAT PEOPLE DON’T KNOW WHAT THE
POLICY IS GOING TO LOOK LIKE
WITH CHINA, YOU PUT THAT ALL
TOGETHER, PEOPLE SAY, I’M GOING
TO INVEST IN BONDS NOT STOCKS,
THEY’RE LESS RISKY.
>> ARE THERE INDICATIONS THAT
MAYBE THE YIELD CURVE COULD BE
COMPLETELY WRONG BECAUSE A LOT
OF PEOPLE THINK OUR ECONOMY
LOOKS PRETTY GOOD IN SPITE OF
THOSE GLOBAL ISSUES.
>> WE’RE ALREADY IN A SLOWDOWN
OF SORTS.
OF SORTS. WE’RE GROWING, WE’RE JUST NOT
GROWING AS FAST AS WE WERE.
THE BIG QUESTION AND IT WAS
REBORN IN 2008 IS HOW BAD DOES A
RECESSION HAVE TO BE?
IT CAN BE A LITTLE RECESSION.
THERE ARE THINGS THAT THAT SS TH
THAT ARE NOT GOOD FOR ANYBODY IN
A RECESSION, BUT WE CAN HAVE A
SHALLOW ONE THAT’S NOT AS LONG
AND DEEP.
AND DEEP. THE DOW IS DOWN 3% TODAY.
THAT’S THE BIGGEST PERCENTAGE
LOSS OF THE YEAR.
IT ALL FEEDS ON ITSELF.
IT’S PSYCHOLOGICAL.
IT’S PSYCHOLOGICAL. IT’S NOT SCIENTIFIC.
>> I WANT TO TOUCH ON SOMETHING
THE PRESIDENT TWEETED TODAY.
HE CAME OUT AND BLAMED THE YIELD
CURVE ON THE FED.
>> YEAH.
>> YEAH. >> WE KNOW THE PRESIDENT LOVES
TO BLAME THE FED FOR THINGS.
ANY TRUTH TO THAT AT ALL?
>> NO.
>> NO. NO.
NO. >> ANY CONNECTION TO WHAT THE
FED’S BEEN DOING?
>> NOT REALLY.
THE PRESIDENT WHEN HE WASN’T
PRESIDENT WANTED INTEREST RATES
TO BE HIGHER.LOWER.
HE BECOMES PRESIDENT.
I DID IT THE WRONG WAY AGAIN.
HE WANTS THE RATES TO BE HIGHER.
HE GETS INTO OFFICE AND HE WANTS
THEM LOWER.
THEM LOWER. ALL PRESIDENTS WANT RATES LOWER
ON HIS WATCH.
HE REPLACES THE CHAIR JANET YELL
YELLEN WITH HIS GUY POWELL.
AS YOU AND I DISCUSSED LAST
TIME, INTEREST RATES ARE THE
FUEL IN THE TANK.
IF YOU GET INTO A RECESSION, YOU
WANT TO BE ABLE TO LOWER
INTEREST RATES TO STIMULATE THE
ECONOMY.
ECONOMY. IF YOU LOWER THE INTEREST RATES
BEFORE THE RECESSION AND YOU GET
INTO A RECESSION, YOU CAN GET
STUCK IN THIS RECESSION FOR A
VERY LONG TIME.
>> I THINK ONE QUESTION PEOPLE
MAY BE THINKING IS WHAT SHOULD I
DO?
DO? WHAT IS THE SMARTEST WAY TO
HANDLE YOUR FINANCES AND
YOURSELF IN THE NEXT SIX MONTHS?
>> I WANT TO REMIND PEOPLE THE
THING THEY HAVE TO TAKE MOST
SERIOUSLY IS THEIR INCOME.
THEIR JOB IS MORE IMPORTANT THAN
THE STOCK MARKET.
BUT THE STOCK MARKET IS THEIR
SAVINGS.
SAVINGS. IF YOU GET OUT OF THE MARKET AND
YOU DON’T KNOW WHEN TO GET BACK
IN, YOU CAN MISS THE FIVE BEST
DAYS FOR THE STOCK MARKET AND
ALL YOUR GAMES ARE GONE.
IT’S NOT SOMETHING A LOT OF
PEOPLE DO.
PEOPLE DO. YOU SHOULD GO IN AND MAKE SURE
THAT YOUR PORTFOLIO IS BALANCED
ACCORDING TO YOUR RISK
TOLERANCE.
TOLERANCE. TAKE THESE SURVEYS ALL OVER THE
WEB.
WEB. TYPE IN RISK TOLERANCE.
THAT’S THE BEST THING YOU CAN DO
FOR NOW.
FOR NOW. IF THE SIGNALS CHANGE A LOT AND
WE LOOK LIKE WE’RE REALLY HEADED
FOR TERROR, I’LL COME AND TELL
YOU.
YOU. >> THE ONE THING WE ALWAYS TELL
PEOPLE IS JUST BREATHE, RIGHT?
>> YEAH.
>> YEAH. PARTICULARLY IN BUSINESS TV THIS
IS WHAT WE DO.
WE TELL PEOPLE ABOUT ALL THESE
LITTLE MOVES.
LITTLE MOVES. I TREAT THIS INVERSION OF THE
YIELD CURVE LIKE A TORNADO
WARNING.
WARNING. IT DOESN’T SAY ONE’S COMING.
IT SAYS THE PRECONDITIONS EXIST
FOR ONE, SO YOU SHOULD TAKE