
The U.S. Yield Curve Has Inverted - acdanger
https://www.bloomberg.com/opinion/articles/2018-12-03/u-s-yield-curve-just-inverted-that-s-huge
======
chadash
A quick explanation in layman's terms:

I have money on hand and I want to put it into something safe. The US
government is constitutionally bound to pay its debts, and is generally
considered to be very safe (if not the _safest_ investment around).

The US government sells bonds with different terms. I can buy 1 year bonds, 3
year bonds, 5 year bonds, 10 year bonds, etc. The treasury sets a fixed
interest rate and face value on treasury notes and then whoever pays the most
gets the note.

Right now, (annualized) rates [1] are approximately as follows:

1 month - 2.30% 6 month - 2.56% 1 year - 2.72% 3 year - 2.84% 5 year - 2.83% 7
year - 2.90% 10 year - 2.98%

Notice that the 3 year rates are higher than the 5 year rates. Generally
speaking, if I'm going to lock up my money for more time, I expect a higher
return. However, today, the 3 year notes are getting a higher rate of return
than the 5 year notes. Why?

Interest rates generally tend to follow the economy at large. When the economy
is doing well, people will invest in stocks and other investments and are less
willing to pay for the safety of treasuries, so effective rates go up when
people bid less at treasury auctions (additionally, the government will take
steps via the Federal Reserve to make rates higher). By the same token, when
the economy isn't doing well, people want the safety of treasuries, even if
they pay less, so effective rates on treasuries tend to go down.

In rare cases, the yield curve will invert. What this means is that investors
think that rates of return on government bonds are going to go down in the
future. In order to lock in a better rate now, they're willing to pay more for
longer term bonds (in this case, 5 year bonds vs. 3 year bonds) in order to
"lock-in" the good rates. The assumption is that they won't be able to get the
same good rates if they don't act now.

Note that only the 3 and 5 years have inverted. If people were really
panicked, you would probably see a more significant inversion, where for
example, the 1 year was higher than the 2 year and the 2 higher than the 3,
etc.

[1] these rates are actual rates of return calculated based on the auction
price paid

~~~
beginningguava
As far as insight for how this looks for the US economy, one of the few people
I respect when it comes to predictions is Ray Dalio, he says the US debt will
start becoming an issue soon. Within 10 years the majority of the US federal
budget will go to paying INTEREST on our debt, requiring us to borrow more to
pay for the rest which will result in exponentially rising debt and inflation
as the government prints money.

Dalio also talks about Thucydides Trap and Paul Kennedy's book on the decline
of great powers. He doesn't say it but he seems fairly confident in China
surpassing the US as the dominant global power in the near future. The only
issue I have is that he seems to think China's high debt is fine compared to
the US based on vague reasoning.

The US and the West in general need to wake the fuck up or we're going to be
under China's thumb. We've become complacent and assume our status on top of
the global hierarchy is guaranteed. China is playing to win and doesn't care
about breaking the rules to win

~~~
gammateam
> Within 10 years the majority of the US federal budget will go to paying
> INTEREST on our debt

All the Federal Reserve has to do is buy US treasures on the open market at
higher and higher prices. A premium on a bond pushes the yield lower. Yields
at 0% means that the US will not be paying interest on its [new] debt. Yields
at negative means that investors will be paying the US.

People and entities buying US treasury bonds is why they yield 2-ish percent
right now at all, instead of say 5%.

Regarding 0% rates, the Bank of Japan has already done this with Japanese
government treasuries, for a very long time

Regarding negative rates, the European Central Bank has already done this with
its constituent country's government bonds, for several years. Primarily
German bonds.

The US can do this with more efficacy than those economies, whenever it
chooses to do so. Right now, the US Central Bank chooses to raise rates and
the US Treasury continues to issue more debt at the higher rates for reasons
unrelated to its budget, to be honest just because the market can bear it. The
Federal Reserve chooses to have less dubious assets on its balance sheet.

Everything is done in a form of moderation, but the US has a lot of tools to
deal with its debt.

~~~
prostoalex
> All the Federal Reserve has to do is buy US treasures on the open market at
> higher and higher prices.

Doesn't that lead to inflation?

~~~
TangoTrotFox
The one big gotcha in international finance is the petrodollar. Going back to
the 70s we made an incredibly prescient deal with Saudi Arabia. They agree to
sell their oil only in USD and then to invest annual surpluses back into US
securities. In exchange we agree to ensure protection of their kingdom and
guarantee weapon sells. This arrangement continues to this day in grand
fashion. For instance even though Saudi Arabia only has some 30 million
people, it's the third largest defense spender in the world spending some $70
billion a year on weapons, with most of that going straight [back] to us. Our
influence in turn led to the expansion of the petrodollar beyond just Saudi
Arabia to nearly all oil sales.

This doesn't seem like a particularly big deal, until you realize what it
does. Imagine the US pumps a bunch of funny money ( _I 'm using a sardonic
term just to clearly distinguish between organic/'real' growth_) into our
economy. This would naturally cause inflation. But here's where the fun kicks
in. Oil is still by far the most in demand resource in the world. And now when
countries go to buy oil they need to accumulate USD. But now due to inflation
a country that wants to buy the same amount of oil needs to keep an even
larger reserve of USD on hand. And that's exactly what happens. The USD
becomes worth less and countries are obligated to hoover up more USD to ensure
access to oil. As that USD starts getting removed from circulation, the
effects of the inflation start to abate. Like magic, we can 'print' (not how
many is made, but that's another topic) a practically unlimited amount of
funny money with minimal economic consequences.

This also explains much of otherwise inexplicable actions in the Mideast and
related places. We don't want their oil, we want them to sell their oil in USD
only. This [1] is an article from Time in 2000: " _Europe 's dream of
promoting the euro as a competitor to the U.S. dollar may get a boost from
SADDAM HUSSEIN. Iraq says that from now on, it wants payments for its oil in
euros, despite the fact that the battered European currency unit, which used
to be worth quite a bit more than $1, has dropped to about 82[cents]. Iraq
says it will no longer accept dollars for oil because it does not want to deal
"in the currency of the enemy."_" By 2003 we had destroyed the Iraq government
and killed Saddam in a kangaroo court. Similarly with Libya, Gaddafi was
aiming to create a gold backed 'Afro-currency' which is what he wanted to
start selling his oil in. Two other nations which have moved against the
petrodollar are Iran and Venezuela.

On the other side of things, this also explains Saudi Arabia. One of the most
backwards and repressive nations in existence today, we're still BFF since
they act like a loyal lapdog when it comes to the petrodollar. In exchange we
let them do just about anything. The CIA has recently stated that Khashoggi's
murder was likely ordered all the way from the top. I can tell you how this
story will end. Do you remember in 2015 when Saudi Prince Majed Abdulaziz Al
Saud had a rape and assault filled 'party' at a rented mansion in Beverley
Hills? The 'party' was only stopped once a neighbor called the police after
seeing a bleeding woman screaming for help as she tried to scale the fence of
his mansion to get away. He was arrested and that's where most media reporting
ended. The epilogue is that he was rapidly granted bail, got on a plane and
simply flew back to Saudi Arabia with no consequences whatsoever.

\---------

This is already getting long enough, but something very important now a days
is that the petrodollar is dying. It's a mixture of a perfect storm of a large
number different of factors, but it's definitely a dead system walking. And
this has major implications for the future of the US economy. To date we've
had 'economy armor' on. In the not so distant future, that armor is coming off
and our economy will stand or fall under its own weight. And this is when
being massively in debt suddenly does start to matter because if you just try
to print your way out of it, you would not be able to rely on the petrodollar
to protect the economy anymore.

[1] -
[https://content.time.com/time/magazine/article/0,9171,998512...](https://content.time.com/time/magazine/article/0,9171,998512,00.html)

[2] - [https://www.cbsnews.com/news/saudi-prince-majed-abdulaziz-
al...](https://www.cbsnews.com/news/saudi-prince-majed-abdulaziz-al-saud-
forced-oral-sex-beverly-glen-california/)

~~~
jjeaff
Thanks for the interesting insight.

While I agree the petrodollar is a big deal, and it does afford us a lot of
extra leeway in monetary policy, we can't forget that the US is still an
economic powerhouse in many, many different industries. And the power of
singularly focused economies like Saudi Arabia is waning.

The shallow reporting is that manufacturing is gone, but the reality is, we
have higher manufacturing output than ever. (The fewer jobs needed for higher
output is a different story.) We have an enormous lead in software. Intel and
Qualcomm are the two biggest semiconductor companies. We have the largest oil
and natural gas reserves, much of which is still untapped. A large share of
world media entertainment is here. The US pharmaceutical industry accounts for
almost half of the world output. World banking and finance is huge. Real
estate market is enormous and highly desirable to outside investment. And this
is for a country with less than 5% of the world's population.

And that's just some of the big stuff that the US leads the way in. There are
so many other industries that the US is still a global player in. What I'm
getting at is the the breadth and depth of the U.S. economy is so large that
it is hard to comprehend and I don't think the failure of any one industry
will be enough to produce significant hardship for the US. Nor does the
economy need to rely on the petrodollar for protection in the long term.

~~~
jacobush
What the fall of the petrodollar will change though, is that the US will lose
some of its "friends" it could rely on by default. The US will have to work on
its diplomacy again. I hope it will not be too much of the gunboat kind.

------
gibybo
There is a 1 bps spread between the 3-year and 5-year US Treasury (2.84 vs
2.83) as of close of market today.

While somewhat noteworthy, it's not huge (yet). When people talk about yield
curve inversion and it being an indicator of recessions, it's much more common
to compare the 2-year with the 10-year. Currently that sits at 2.83 (2yr) vs
2.98 (10yr). While the shorter spreads do often invert first, there is no
requirement for the longer spreads to follow.

~~~
acdanger
Here's a graph plotting the 10 vs 2 year spread:

[https://fred.stlouisfed.org/series/T10Y2Y](https://fred.stlouisfed.org/series/T10Y2Y)

~~~
Obi_Juan_Kenobi
Going off of that graph, we could 'bounce' and remain at non-inverted levels
for a few more years as in 1995. But once the rates truly are inverted to a
substantial degree, a recession generally follows within a couple years.

~~~
freehunter
1995 was special, though, since that was the start of the Dotcom boom. Every
year after 1995 and before 2000, the Dotcom bubble got bigger and bigger. To
bounce like 1995, we'd need an economy like 1995.

------
mikhailfranco
_Banks borrow short and lend long_.

Meaning they take short-term deposits (e.g. current account balances) and make
long-term loans (e.g. mortgages). They normally make a profit, because they
borrow short paying low rates, and lend long receiving high rates. Easy. Head
to the golf course.

If the yield curve inverts, banks lose money ... their capital ratios and
share prices fall ... they become more risky and less creditworthy ... people
withdraw their money ... bank runs, ATMs stop working, bail-ins ... your
current account is _permanently unavailable_ (see Cyprus, Greece).

Note that many banks, especially European banks, are starting from an existing
almost-bankrupt state, with plummeting share prices (DB, UniCredit, BBVA,
BNP). If the EUR yield curve inverts, they all crash faster than an anvil
without a parachute (DB is already giving the anvil a good race).

------
madamelic
Can someone explain this in dumb person language? All I get is that the yield
that bonds give is below zero, meaning you lose money holding them? And bonds
are buying debt on faith the issuer will pay, and as the issuer pays, you get
dividends.

And I think the interest rate is inversely proportional to the amount the
bonds pay or something like that?

Just explain in simple language. :)

~~~
bunderbunder
Not quite that. The yield for a 5-year note is less than the yield for a
3-year note.

More generally, a yield curve inversion is when the interest rate you earn on
short-term debt ends up higher than that of long-term debt of the same
quality.

I don't think the issue is that the inversion causes the recession. It's more
an indicator of pessimism in the market. It implies that investors think that
interest rates are going to get worse, so they look to buy more longer-term
bonds in order to try and lock in current yields for a longer period of time.
That increases demand for those assets, which drives down their
price^H^H^H^H^H yields.

~~~
cloakandswagger
> That increases demand for those assets, which drives down their price.

I'm not an economist but this seems wrong

~~~
nwah1
That commenter should've said the yield is driven down. The US government
wants to borrow at the cheapest rate of interest. If more people want to lend
to them, they have more options and can pick the cheapest option.

~~~
User23
> The US government wants to borrow at the cheapest rate of interest

This is categorically not true. If it were then Congress would pass
legislation ordering the Fed to buy securities from the Treasury at whatever
rate it liked (or abolish the Fed altogether and just directly spend money
into existence). Congress in fact wants to provide savings vehicles, it's not
actually necessary for Congress to borrow to fund the federal government. Sure
it's necessary under _current_ law but Congress by definition can change that
law. That it chooses not to is an expression of a preference.

------
jstanley
So I read the article but I don't quite get it.

A 5-year bond now has a lower yield than a 3-year bond? How is that even
possible? Wouldn't anyone who wants a 5-year bond just buy a 3-year bond and
then put the cash under their mattress after 3 years?

Is the idea that in 3 years' time, negative interest rates will be widespread,
physical cash will be abolished, and figuratively keeping the cash under your
mattress isn't even possible?

EDIT: And why don't arbitrageurs buy up 3-year bonds and sell 5-year bonds?

~~~
anilshanbhag
Thats not how it works. If 5-year bond has yield x, for principal P you
receive P _x for 5 years. With 3-year bond with yield y, you get P_ y for 3
years. If y > x => after 3 years rates will be lower than y. So you will get
lower than P*y for the last 2 years (of 5 years).

~~~
jstanley
Ahh, got it.

So the overall yield is not lower, just the annualised yield.

That doesn't sound like nearly as much cause for alarm.

~~~
adw
The alarm is that bond yields are more or less `yield = (k / economic
confidence)` - if people are confident then they don't buy bonds, so the price
of bonds falls, so the yield (which is annualized return) rises. (Thus
recessions lead to falling interest rates as people seek safe harbors for
money, making credit cheaper.)

What this means is that the bond market thinks available bond yields for cash-
on-hand will be lower in three years than five, so they're willing to take a
hit now to lock in the longer-term payout. That reflects serious economic
pessimism.

------
jameslk
If anyone is curious how this has compared over time for more context, this is
a great visual tool to graph/animate the yield curve:

[https://stockcharts.com/freecharts/yieldcurve.php](https://stockcharts.com/freecharts/yieldcurve.php)

------
apo
Worth noting that unlike previous business cycles the Fed is manipulating both
the long and short end of the curve. Quantitative Tightening (QT) is the Fed's
program to sell and/or let expire the long-term Treasuries it bought during QE
1/2/3.

As the same time, the Fed is raising short term interest rates using its
tried-and true headline short-term interest rate target.

This is not just unusual - it's unprecedented. QT has the effect of
suppressing the yield curve inversion signal (by artificially increasing long-
term rates). As a result, the gap between the next yield curve inversion (the
one mentioned in the article hardly qualifies) and the next recession could be
surprisingly short.

Backing off now on QT and short term raising, with unemployment at a very low
point and inflation ramping up, would be lethal to the Fed's credibility.
Whatever Powell says to try to talk the stock market up, he's locked and
loaded and can't do much beyond stick with the program: triggering the next
recession.

~~~
ep103
Why can't he slow QT?

~~~
cinquemb
> QT has the effect of suppressing the yield curve inversion signal (by
> artificially increasing long-term rates)

i.e they could, but the long end yields will drop below where they are now, on
top of signaling to the market that things are worse than what is admitted if
they have to stop.

------
neurobashing
Fans of Planet Money’s “The Indicator” are no doubt imagining Cardiff prepping
new yield curve material.

~~~
ric2b
Yup, I love that he's so enthusiastic about the yield curve that I was
immediately reminded of him when I read the title.

------
jf-
Question: Are there any other recession signals which have also recently
presented themselves? I know very low unemployment, which we have, is one. Are
there others?

~~~
therealdrag0
NPR's "Planet Money: The Indicator" Just did two episodes on this:
[https://www.npr.org/sections/money/2018/11/16/668745229/rece...](https://www.npr.org/sections/money/2018/11/16/668745229/recession-
indicators-pt-1)
[https://www.npr.org/sections/money/2018/11/19/669368782/rece...](https://www.npr.org/sections/money/2018/11/19/669368782/recession-
indicators-pt-2)

------
jakelarkin
a better way to understand the causality between yield curves and recessions
is to look at it from the perspective of the banking sector ... banks/lenders
primarily borrow short-term and lend long-term. They pay depositors short-term
rates and earn the long term rates on loans. If this carry trade turns
negative, it makes it difficult to make money lending, they get more
conservative and collectively they tighten credit conditions on the economy as
whole.

------
aportnoy
> All it means is that the central bank will probably leave interest rates
> steady, or even cut a bit, in 2022 or 2023.

This event reflects the relative preference of the markets for the 5 yrs
compared to 3 yrs, producing lower effective yields. This is probably done to
secure a certain rate for a longer period of time.

------
cinquemb
One thing I'm interested to see if anyone can discuss what's different this
time (i.e, Fed has ~4x more assets on it's balance sheet [and the roll-offs],
corporate have ~2x more debt, labor force participation rate is at levels not
seen since the 60's, 4 eurodollar "events" since, US gov debt levels since)
and how it could theoretically affect the yield gymnastics?

Some banks keep saying 2020 is the big one since that's when most of the
corporate debt will be need to rolled over onto higher rates, but I'm of the
mind we don't even make it that far because of even shorter term liabilities
(think corporate buybacks with debt at higher rates that will increasingly put
pressure on balance sheets m/m, liquidity pressure risk assets, devaluation on
collateral) in this environment.

~~~
schlumpf
Good questions. Two differences to consider vis a vis past late cycle moments:
US corporate profits haven't peaked, and the politicians could have a better
claim on being part of the problem than on being part of the solution. I was
tempted to add "leverage" but that's too slippery for a concise discussion.

Profits: it took about two years peak-to-trough for profits/GDP to correct
during the past two recessions. Unless you see sudden stop risk, this suggests
the US corprorate sector isn't staring down the barrel of a massive
deleveraging...yet.

Politics: public support for legislative non-compromise does not speak to the
kinds of policy fixes applied in 2008-9. Executive belligerence toward the Fed
doesn't seem helpful either. As much as markets may have appeared to ignore US
political risks while momentum was positive, it seems credulous to think this
more of a divorce than a separation.

There are other quantitative arguments that the turn in the cycle is not here
yet (e.g. employment, notwithstanding participation rate). But the prospect of
a return to political gridlock is, to me, the most important risk contrast
with recent past cycles.

------
jgalt212
It doesn't have to be this way. The curve was unnaturally flat to start with
due to Operation Twist. As the Fed unwinds its balance sheet, it seems only
naturally to also unwind the effects of Operation Twist at the same time.

------
NTDF9
Can someone concisely explain what yield curve inversion could indicate?

I can think of a few explanations for why long term yields are going lower:

1\. Long term yields going lower because there are far fewer places for
capital to go to besides US treasuries, indicating slower business activity

2\. Short term yields going higher because no one wants to buy short-term
treasuries because there's something else to invest in or expect higher return
for short term investment?

Are these the only two reasons? Why are people so fearful of inverted yield
curves?

~~~
tedsanders
Inverted yield curves mean that interest rates are expected to fall. Interest
rates falling mean that (a) demand for money is falling and/or (b) supply of
money is rising. In economic recessions, the demand for money often falls and
the supply of money often grows. Therefore, an inverted yield curve indicates
an increased forecast of recession chances over the next few years.

(I am not an expert and could be wrong.)

~~~
NTDF9
Good explanation. Thank you.

But isn't the demand for money going to go up because the US is running
ginormous deficits? I would expect the demand for money to be through the
roof.

~~~
tedsanders
[Edited] As described by the IS-LM model, government deficits tend to do three
things:

-Increase output (more people working/getting paid)

-Decrease economic investment (investors put dollars in treasuries instead of private sector projects)

-Increase interest rates (fewer investor dollars to go toward private sector projects, since some have been diverted to government debt/production)

However, the Fed usually tries to account for this force in their monetary
policy (see monetary
offset):[https://www.bloomberg.com/opinion/articles/2018-07-20/fed-
im...](https://www.bloomberg.com/opinion/articles/2018-07-20/fed-impact-on-
deficit-has-nothing-to-do-with-trump)

~~~
NTDF9
Doesn't debt issued by US treasury have to be funded by private holders of US
dollars? Or does the Fed simply buy out the debt issued by treasury?

I thought the Fed simply buys only a small portion of US treasury debt (thus
printing money) but the vast majority of that treasury debt is purchased by
holders of US dollars (banks, funds, China, Japan etc.)

~~~
tedsanders
Yes, debt issued by the US treasury is funded by private holders of US
dollars.

Here's how I think it works:

-In theory, the Federal Reserve targets average inflation of 2% (along with its unemployment mandate)

-When the US government runs a deficit, the government sells bonds and uses the dollars to pay whatever it's paying for

-This process soaks up dollars from investors and gives out dollars to people, which on net lowers investment, increases interest rates, and increases GDP (see IS/LM model: [https://en.wikipedia.org/wiki/IS–LM_model](https://en.wikipedia.org/wiki/IS–LM_model))

-The Fed, which aims to stabilize inflation, accommodates the rise in interest rates by setting higher target rates for its open market operations (if they fought the movement in interest rates by buying assets, inflation would rise, which is against their mandate)

~~~
RobertoG
How selling bonds soaks dollars from investors?

If you go to a bank and ask for a credit for starting a business, if the bank
approve of your project, they will credit your bank account with new money.
That money is new created money.

How is that related to more or less bonds sales?

~~~
tedsanders
If investors spend their dollars on government bonds, they have fewer dollars
to spend on other investments. The lower supply of investor dollars for these
investments causes interest rates to rise.

------
Tsubasachan
All those Princeton and Harvard economists travelling the world telling
foreign governments how to run their economy lol. Does any politician in the
US even read the emails the Fed sends them? Must be the most thankless job
ever.

------
philjohn
Interesting use of the Smiler RollerCoaster in the lead photo. It was involved
in a serious crash a few years ago.

------
howard941
Is this a result (in part or more) of setting a schedule for fed funds rate
increases and sticking to it?

------
tabtab
Based on past patterns, we now have about 15 months before a formal recession
is declared. This is rough and imperfect, but many other metrics are pointing
to both the end of the bull market and a coming recession. I've been
monitoring the econ because I plan to invest in real-estate and stocks during
the next slump. [Corrected "bear" typo.]

~~~
shostack
>"I've been monitoring the econ because I plan to invest in real-estate and
stocks during the next slump."

Which raises the question of "isn't every other investor?" And if that's the
case, how much of that has the market already factored into pricing?

For example, I hear a lot of people in the Bay Area talking about saving up
for when the next crash occurs so they can buy real estate cheap. But if
there's sufficient pent up demand and capital, that can dampen the impact like
what appears to have happened with the 2008 recession[1], only perhaps
magnified after this bull run.

[1]
[https://www.bayareamarketreports.com/trend/3-recessions-2-bu...](https://www.bayareamarketreports.com/trend/3-recessions-2-bubbles-
and-a-baby)

~~~
tabtab
Going back roughly 4 decades, the best time to buy real-estate for investment
has been during or just after recessions. Have investors changed after those
four decades? If by chance real-estate doesn't go down during the next slump,
then perhaps stocks will; I got choice. It's unlikely that _neither_ will
shift downward, and I might skip investing if both stay high.

Interest rates on constructed real-estate is also lower during slumps. Of
course investors could be wrong, it happens. But buy-low-sell-high has on
average worked best. It's one of Warren Buffett's key strategies (although
arguable he is buy-low-and-keep).

------
RayVR
This is not the typical yield spread a practitioner or the fed would look at.

~~~
umeshunni
Would they look at 7 and 10 year yield spreads?

~~~
airstrike
I believe the 10- and 2-year yields are most often compared.

[https://fred.stlouisfed.org/series/T10Y2Y](https://fred.stlouisfed.org/series/T10Y2Y)

------
ChrisPodlaski
Inverted yield curve has predicted 10 of the last 3 recessions

~~~
jakelarkin
on a 2 year window its pretty accurate.
[https://fred.stlouisfed.org/series/T10Y2Y](https://fred.stlouisfed.org/series/T10Y2Y)
Max view

also true that 2 years a very long time for an economic/investment hypothesis
to play out

------
nu2ycombinator
Is it Good or Bad? And in what way?

~~~
throwawaymath
"Good" and "bad" aren't nuanced enough terms for the discussion. What has
happened is a classical indicator of a recession has emerged, because
investors are demonstrating pessimism about long term bond yields compared to
near term bond yields. This does _not_ mean we are presently in a recession,
nor does it mean we are necessarily entering one soon. But the indicator has
historically correlated with recessions (consistently since 1970 if I recall
correctly).

A better question for you to ask is this: what does my investment portfolio
look like and when do I expect to withdraw from it? It's healthy for economies
to go through credit/debt prosperity cycles, but this will be concerning for
you if you (among other things) plan to withdraw a nontrivial amount of your
investment fund(s) in the near future. If your employment situation is stable
and you're not planning any large withdrawals, this is probably not something
to immediately worry about. If you work in an industry which benefits from
greater volatility, this might actually be beneficial for you.

~~~
shostack
>"If your employment situation is stable and you're not planning any large
withdrawals, this is probably not something to immediately worry about."

This is an important note. If we do face another Black Swan event like the
housing crisis, it may not be directly related to housing in the same way. As
such, it signals a general "be on alert" from a risk standpoint. If you would
be in serious trouble financially if you lost your job tomorrow, you may want
to shore up your cash position to ensure you have a way to ride things out. If
you feel relatively secure, you may want to free up some liquidity for
opportunities that might present themselves. If you're about to buy a house,
now might be a good time to move those funds out of the market, or consider
the timing of your purchase altogether. These are just a few considerations.

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elvirs
so there is starting to begin some panic but its not in full swing yet.

