Paul Krugman tweeted this morning:
Well, you really need to look at both. Stock and bond activity mean different things at different times. It is not as easy as "professionals study bond markets." What a joke.— Paul Krugman (@paulkrugman) August 14, 2019
As I wrote in yesterday's newsletter (to which you should subscribe!), amateurs talk about stocks, but professionals study bond markets. As of this morning the bond market is basically begging governments to borrow: the US 10-year real rate just 0.02 percent 1/
Krugman needs to spend some of his Nobel Prize money and read The Stock Market, Credit, and Capital Formation by Fritz Machlup. Machlup goes into detail on what different stock and bond positioning means. Nothing was done like it before he detailed it all and no one has since.
Finally, Krugman and pretty much everyone else is missing two major things about the current inversion of the yield curve that no one else is covering anywhere, except me in the EPJ Dail Alert.
-RW
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