Playing For A Potential Yield Flexure Inversion

Yes.
Also trying to ascertain the timing for a real high leverage, highly concentrated short-term equity long. Not yet but maybe to a greater extent than after today.

Here's the crimp from The Integrating Investor:

If you’ve consumed whatever fiscal media lately, you’re probable good aware that the yield crimp has been flattening. Since some 2014, the yield differential betwixt the 10 twelvemonth U.S. of America Treasury bond too whatever release of short-maturity ones has been compressing (the two twelvemonth is almost normally used). Why this has much of the investment community inwards a tizzy is due to the measure’s reliability every bit a recession predictor. But given all of this press too – almost importantly – the lack of a causal link, should nosotros Integrating Investors accept banknote too brand preparations for a Keynesian Beauty Contest; or does the immense scrutiny become far dependent plain to Goodhart’s Law too thus the entire spectacle may live on ignored?

Backtest: an inverted yield crimp signals a recession

Reverse psychology: but everyone already knows this too so it won't occur this time

Reverse-reverse psychology: ok it'll yet run b/c straight off ppl mean value it won't happen

Contrarian fintwit: I'll 'actually' whatever opinion you lot take

— Ben Carlson (@awealthofcs) July 18, 2018

Investing is a funny describe of piece of work concern where expectations too sentiment tin forcefulness out trump reality, at to the lowest degree over the brusk term; too let’s confront it, the brusk term is really what constitutes fifty-fifty the almost patient of all professional person investors’ timeframes. Economic too marketplace cycles oscillate over the course of educational activity of years, too so trying to exactly pivot downward cost movements inwards whatever given 3-12 calendar month menstruation is hard to nation the least. Thus, a large role of these day-to-day investment gains (in general) tin forcefulness out lawsuit from trading make dissonance rather than reverberate key cost movement.

doc Ben Hunt over at Epsilon Theory characterizes the agency inwards which almost of us invest every bit “playing the player.” Stealing an analogy from poker, doc Hunt contends that what almost investors are engaged inwards is a giant, zero-sum game whereby each is trying to outmaneuver opponents (i.e. other marketplace participants) every bit much every bit they are playing their best manus (my apologies to doc Hunt for butchering his eloquent analogy). Now over the long run investing is almost sure enough not zero-sum activity, but inwards the competitive plain of professional person coin administration where i is ranked versus his/her peers, it sure enough tin forcefulness out be.

doc Hunt is non the outset to accept banknote of this behavior. The infamous John Maynard Keynes described such a phenomenon using a beauty competition analogy. In Chapter 12 of his seminal work, The General Theory of Employment, Interest too Money, Keynes wrote:

“… professional person investment may live on likened to those paper competitions inwards which the competitors get got to pick out the half dozen prettiest faces from a hundred photographs, the prize beingness awarded to the challenger whose alternative almost nearly corresponds to the average preferences of the competitors every bit a whole; too so that each challenger has to pick, non those faces which he himself finds prettiest, but those which he thinks likeliest to grab the fancy of the other competitors, all of whom are looking at the employment from the same indicate of view. It is non a illustration of choosing those which, to the best of one’s judgment, are really the prettiest, nor fifty-fifty those which average persuasion really thinks the prettiest. We get got reached the 3rd storey where nosotros devote our intelligences to anticipating what average persuasion expects the average persuasion to be.”

And too so was birthed the concept of the Keynesian Beauty Contest (though I honour “playing the player” to get got a nicer weep upward to it). While approaching investing every bit a poker game or gimmicky beauty competition may seem “low brow” for the “Harvard types”, it is exactly this mispricing of futurity expectations that lubricates “buy low, sell high” activities....MUCH MORE