Yield inversion is getting worse, the government now has to pay a meaningfully higher rate for a two-year loan than for a ten-year loan, which is the opposite of how it used to be (normally, you have to pay a higher rate if you want to take longer to repay the loan, since you know that inflation will generally make that money less valuable and the longer-term loan is at least a little riskier than the short-term one). That should be an argument that bond investors think we’re going into a recession and bear market, perhaps one that lasts for years… the last time the inversion got this extreme was back in September of 2000, during the dot-com mania, but it could also be that bond investors think inflation is terrible right now, but will be back to normal in a year or two. We don’t know, and, probably more importantly, we can’t know.

Which would be the end of the article, if we were trying to forecast the direction of the market. Thankfully, we are willing to admit defeat in that area before the game begins.

The market has taken this generally bad news as good news, with most stocks going up again this week — that’s probably because it seems like all “Mr. Market” is really worried about is how far the Federal Reserve will go in raising rates.

We can’t and won’t know that, either, and because inflation is such a lagging indicator it’s probably going to continue to be a messy year while we wait for it to “catch up”… for the obvious slowdowns in parts of the economy (hiring slowing dramatically, with even some layoffs, housing starts slowing as prices rise, spending failing to keep up with inflation, pessimism from both consumers and manufacturers, etc.), to actually have an impact on the numbers and bring inflation down (inflation measures what has happened in the past, and the most widely-watched number is mostly reported in terms of the impact over the past year, consumer sentiment and corporate planning are trying to tell us what most people think is about to happen).

CPI might surprise us and take a much longer time to fall than it did to rise, because so much of inflation is driven by housing, and indirectly by wages in the service sector, and by food and energy, and rising ...