This is a tribute to N.B. and his continued effort to search for perspective (and his love of Joni Mitchell):
I’ve looked at life from both sides nowFrom up and down and still somehowIt’s life’s illusions I recallI really don’t know life at all
I bring this up because last night’s blog elicited a great deal of comment about the 2/10 yield curve. Everything we do in trading and investing is about perspective and so much of our thought is time-based. A person using a 10-minute chart sees the financial and commodity markets from a much different series then a person relying on a daily, weekly or monthly horizon. Therefore, tonight I am posting an eight-year chart of the 2/10 yield curve, which includes the period prior to the onset of the Great Recession, as well as the Fed’s large-scale asset purchases. Before the housing crisis, note that the 2/10 curve had actually inverted, which is the paradigm of an ultra-flat curve. As the FED cut rates in an effort to “prime the liquidity pump,” the Fed was able to steepen the curve as short-term yields fell and long yields began to moderately rise in the view that the Fed would be successful in its attempt to stimulate the economy.