The long-term inversion of the yield curve manifests deflation and severe weakness in the economy and possibility of stock market crash in April
Peter Oberois
Mar. 21, 2007

The April is the month that is scaring a lot of analysts. They have never seen a resilient stock market like this that has tolerated the inverted yield curve for such a long period of time. The inversion in the yield curve manifests deflation and severe weakness in the economy. The fact that long bond rates did not budge when Fed raised the short term rates – just says market knows Fed is short sighted and wrong.

The biggest question in the minds of the investor is the true nature of the stock market. Is it resiliency or complacency? Debt driven liquidity is the essence of deflation over borrowed time. The same is being used very heavily to support the market and even move it higher against the fundamentals.

Most likely it is complacency as manifested in the volatility indicator VIX indicator in the last one-year time frame. If that is the case, the stock markets all over the world can collapse in a crash in April.

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