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Yield Curve

Quantitative Easing, Inflation, and the Yield Curve

Back in October of 2010, I did a video on YouTube called Bonds and Quantitative Easing For Dummies. It has over 69K views. I still get compliments on this video today.

The battle line drawn in the sand by the Federal Reserve has been to hold a normalized yield curve.

If you look at the S&P 500 and where it’s at today, you might be tempted to jump on the band wagon that the market is going to reverse and crash just like it has every time since 2000 when it gets to this level; however, if you really know your economics and the importance of the yield curve, you are not going to make that mistake in your analysis.

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It’s amazing at how silly people are, even CEOs, when they talk about how a major downturn is likely because it has happened before when the S&P 500 was up at the level it currently trades at today.

Comparing the two previous downturns off this level in 2001 and then again in 2008, to the S&P 500 today is like comparing apples to oranges. You can’t make that comparison. If you do, it shows you have no understanding of quantitative easing and how it’s all about holding the normalized yield curve.

Here is the viral video I created back in 2010 to explain what the Federal Reserve was doing with QE and the yield curve.

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Market is overbought.

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