54a US TIPS Curve Inverts: An Economic Warning?

———Part 1 Summary———
The US Treasury inflation-protected security curve has gone upside down. Indeed, it has NEVER been more upside down. What is the Treasury market telling us about the economy’s prospects? Also, how long does reflation typically last? Are we closer to its beginning or end?

———Episode 54 Intro———

“The pen is mightier than the sword.” “The great unwashed.” “Pursuit of the almighty dollar.” These are phrases we have all heard and they come from a single source: 19th century English writer and politician Edward George Earle Lytton Bulwer-Lytton.  Bulwer-Lytton was a successful novelist, poet and playwright.  His political accomplishments included nine years in Parliament, serving as the British Colonial Secretary, and being offered – AND TURNING DOWN – both a lordship of the Admiralty AND the Crownship of Greece (i.e. king)!  Today he is remembered for writing… the worst opening sentence in the history of the English-speaking peoples:

“It was a dark and stormy night; the rain fell in torrents — except at occasional intervals, when it was checked by a violent gust of wind which swept up the streets (for it is in London that our scene lies), rattling along the housetops, and fiercely agitating the scanty flame of the lamps that struggled against the darkness.”

Episode 54 reviews articles by Jeff Snider covering: the Treasury inflation-protected securities curve inverting, the life span of a post-2008 reflation, the curious appreciation of the Chinese currency, as well as how Fed officials in 1937 convinced themselves of an impending inflationary storm (in the middle of an economic depression).  None of those articles open in the Bulwer-Lytton style — precisely the opposite!  And yet many – some, a few… someone… And yet this podcaster wonders, how might a Eurodollar University educated author open their novel?

It was a dark and stormy depression; bank reserves fell in torrents — except at occasional intervals, when they were checked by a breath of reflation which swept up economists (for it is in the Eccles Building that our scene lies), rousing along the academics, and fiercely inflating the faith in a recovery that struggled against the darkness.

———See It———

AlhambraTube: https://bit.ly/2Xp3roy
Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
Art: https://davidparkins.com/

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———Ep 54a Topics———

02:41 The 5-year US Treasury Inflation Protected Security (TIPS) has set a decade-plus high
03:43 TIPS are tied to CPI and CPI largely reflects crude oil prices; oil prices head skyward
06:16 The 10-year TIPS yield is less than the 5-year implying  weakness in the long-term economy
07:28 The ‘TIPS Inversion’ happened before, in the early 2000s – what did it mean then?
09:32 How long does a reflation last?
11:49 Using the 10-year US Treasury how long did Reflations 1 thru 4 last, rom trough-to-peak?
14:17 Reflation ending quickly is GOOD NEWS. The longer reflation continues the WORSE it is.

———Ep 54a References———

TIPS Tipping Over, But Not That Way: https://bit.ly/3sVqgh4
Reflation Amplitude, Important, What About Frequency?: https://bit.ly/2MSUa68
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7

———Who———

Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, a dark and stormy host. Art by Master Quillsman, David Parkins. Podcast intro/outro is “Nocturne” by Trevor Kowalski at Epidemic Sound.