Geometry and geography were passing ships that were fit to be featured this past week. Let's take a closer look.
Grading on a yield curve
Inversions are pretty good on roller coasters, air shows, and mystery flicks, but they're not what investors want to see in a yield curve. As a result of the inverted yield curve that took place on Tuesday, the two-year U.S. Treasury bond's yield was higher than that of the 10-year U.S. Treasury. It's a rare sight, as investors usually expect to be compensated with higher yields for longer-term bond investments. It may also be a troubling sight, as flat and inverted yield curves have often led to economic recessions.
Bulls will argue that "it's different this time," but the truth behind the cliche is that every situation is unique. In this case, some point to increased buying activity by foreigners -- particularly in China -- of our country's 10-year bonds as one reason. The fact that the 30-year bond had been temporarily retired until just recently may have also factored into the mix. As fate would have it, interest rates factored into our Dueling Fools segment that took on the market's prospects for 2006.
In the end, it doesn't hurt to be cautious. If you're holding on to long-term bonds, you may want to consider the many money market funds that are yielding better than 4% these days. Yield curves don't invert every day, you know.
Just like playing Monopoly
It's an essential learning experience for any board game-playing kid buying hotels: The disillusionment of discovering that in real life, they're not all painted red. Since most of us can't afford to buy hotels -- or even green plastic houses -- we have to do it vicariously. This week, we were able to do it through Hilton Hotels (NASDAQ:HLT), as the hotelier announced a $5.7 billion deal to acquire its overseas sibling, Hilton Group PLC.
It's about time, really. Both companies already shared the Hilton HHonors loyalty program, and now the stateside Hilton operator will be able to run the entire empire at once, acquiring 403 new properties in the process.
Even though the lodging industry took a dramatic hit after 9/11 curtailed travel plans and a hesitant economy kept corporate travel in check, the industry is bouncing back, and it's a great time for Hilton to step up as the true global force that it is.
It's an expected move, so let's not go starting any takeover speculation over this. It's not as if sector consolidation is going to grip other leading players like Starwood (NYSE:HOT) or Marriott (NYSE:MAR) as a result of Hilton's colossal purchase. However, if you're going to play Monopoly with these guys, do yourself a favor and ask to be the banker. It's a fruitful task.
The headlines behind this week's stories:
Until next week, I remain,
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Longtime Fool contributor Rick Munarriz loves to look back, even if it means he falls on his face going forward. He does not own shares in any of the companies mentioned in this story. The Foo l has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
