Where is the next financial crisis going to come from?
No one knows for sure, of course, but it’s not impossible to see the next disaster coming, according to Stephen Cucchiaro, president and chief investment officer at 3Edge Asset Management, who spoke Tuesday at Financial Advisor magazine’s Inside Alternatives conference in Denver.
Cucchiaro, who made his name as founder of Windward Investment Management (which was later acquired by Charles Schwab and renamed Windhaven), has developed what he calls his canary-in-the-coal-mine list of eight warning signs:
1) A flattening yield curve;
2) Rising “TED spreads” (the difference between the LIBOR bank rate and the Treasury rate);
3) Rising credit spreads;
4) A rapid change in the price of gold;
5) A rapid change in the inflation rate (either up or down);
6) Rising interest rates beyond a threshold;
7) Equity prices rising too quickly; and