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« Contrarian Investing Framework | Main | More Overreaction in Energy Stocks »

December 27, 2005



Hi Barry,

I think that readers will understand both what you wrote and what I wrote. You did not say anything about a guarantee of recession, but you say the odds favor it.

I am hopeful that you will do more than the average person discussing it on CNBC today. Spell out your causal model. What are the historic precedents that you cite? How many of them are there? Did any of them start from a 1% Fed Funds rate?

This is the difference between research and a heuristic. If you will not spell this out, I doubt that anyone will.

Barry Ritholtz

BTW, an inverted yield curve coming contemporaneously with rising inflation and high energy prices has been a precursor to recessions.

No guarantee it happens again, but historically, the odds favor it.

Barry Ritholtz

I thought this was pretty clear:

An inverted yield curve is not a guarantee of a recession, but it is nonetheless a worrisome thing. If it doesn't foretell a recession, its not because "its different this time;" rather, its more likely because only some conditions precedent will have been met . . .

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