OT - The yield curve turned positive!

This is just for your information. Please don’t respond on the board. If you have to say something to me about it please respond off board. Thanks


Remember back in July when the yield curve “inverted” and all that the gloom-and-doomers could talk about for weeks was how a recession was sure to follow. Well, on Oct 11, more than a month ago, the curve turned positive again and guess what? Only bad news makes the news, good news isn’t considered news! No one talked about it, and a month later you didn’t even know about it unless you really followed it better than I did. So that inevitable recession isn’t in the cards yet, apparently.




The market usually reacts around 6 months in advance. We hit the bottom 6 months prior to the bottom and at the bottom stocks are already rising. Last information the manufacturing index is down and all pointing negative (except for employment - but even that is said to suck (although it has never been better)), the moment to sell is exactly not now.

This said, I sure hate finishing paying for refurbishing my pool the last two months. It is all relative. Your down, and spending on anything hurts more than when you are up (the wealth effect). I think it is more acute to us though with higher-beta stocks.

But to add some more board relevance, Avalara, sales tax compliance in the cloud, not the first time brought up here, but hey, they’ve outperformed even Roku stock since their IPO. They are the clear mid-market leader with accelerating growth, but still a bit tamer than I normally look at. But hitting the 40s from the 20s. Only a 113 (was it, or was it 110) NRR. They have to work at upsetting, and creating more unsellable products. When you get your sales tax calculated on Amazon or eBay it is probably Avalara for any mid-market or small vendor.

Given the complexity of sales tax, it is likely to be a necessity for any enterprise in ecommerce world wide. Avalara is barely international now, but it seems to me they went public largely to fund this expansion. The company is founder run, has a great corporate culture, limited competition (but real) as Taxjar is real, but way behind Avalara for marketshare. Vertex is real, but focused primarily o larger enterprises and not much into the mid-market. Here is a 2 minute video from a customer who used Vertex and then with his new job switched to Avalara: https://www.youtube.com/watch?v=ofNksi0TGPg

It gives a lot of quick insight into the market. Boring, perhaps, but this is a company, like Paycom, focusing on the mid-market with a laser focus on sales and marketing execution quarter after quarter.

A new name interesting to discuss I think. Disclosure: No, I don’t own any. I usually have a hard time sticking with the more staid and steady. One reason I passed on Paycom, but also a reason I invested in AYX (AYX is similar to Paycom in that they both have turned their sales efforts into machines that execute, and that is largely the key to their success (ie, AYX is more unique and disruptive and growing even faster - so really like that sort of thing as it is also funner).

But I also like to learn from my oversights. I have exactly 0% success in my pat life trying to invest in more staid and practical investments. These bad experiences (fortunately I always sold out before disaster - and yes, multiple disasters were found investing in banks, and insurance companies, and student loan companies and the sort of companies that are proper and suited for the “unsophisticated” investor as many times in the past the professionals have told us) have influenced my not investing in say a Paycom. 30% into perpetuity growth with a Roman Empire like focus on sales and marketing execution, and the engineering to back it up, with limited competition (with Paycom because of their mid market focus, and with Avalara the same, plus they already are the dominant vendor, first mover in the industry (in the United States and Canada anyways) seems an excellent recipe for excellent long-term returns if you ignore the volatility.

I like more limited risk factors such as new technology disruptors coming along, or misjudging product trends, or new real competitors entering the market, and having my risk more limited to sales and marketing execution.

So will I dig in and buy some? I don’t know. I have decided to add more again (despite paying for my pool - blasted thing - I don’t even like to swim - but property values and all…) so maybe it will be Avalara, but would like a discussion in regard.

Just seeing if anyone else here has dug into it.



In every previous recession since 1980, the yield curve turned negative, then turned positive just before the recession began.




Tinker, I did a cursory look into AVLR when it came up on Bert’s Ticker Target not too long ago. I had similar Paycom-style reservations, probably because I didn’t pull back the covers very far due to time, and partly because the stock price had fluctuated pretty wildly and I wanted to know why – and then time kept me from undigging that answer. Looks like it’s gone down and back up to pretty much where I looked a month or six weeks ago.

This one may not strictly follow Saul’s high-growth-only rules, but it’d be worth a deep dive on to know for sure, IMO.


I have not bought any yet. So much easier just to do nothing (except as I start to fret - bad habit). The company is solid, clear leader, and the recent Supreme Court decision makes it a certainty that almost every state will charge sales tax (already more than 30) do for any sales in the state. It all turned on “nexus” with a state. Use to be the state had to have some connection other than just making sales to people in the state. The Supreme Court stated otherwise, thus the new found imperative to figure out how to live with all the sales taxes everywhere.

But I also find it difficult to put a huge multiple on a company like this. It is just sales taxes for crying out loud! But if this company can expand its verticals, expand its jurisdictions, and create unsellable products it could have a very long runway with long-term hyper-growth between 25-35%.

As indicated in my earlier post on this, however, being “pragmatic” has almost always lead to disaster for me. Paycom would have been the exception had I just held the line and did nothing (which would have been very difficult to do - but one reason why discipline can be so important).

But yes, worth a deeper dig.



Like %$%%$, the auto spell check not so good here. Yet again I typed in “upsellable” and it changed it to unsellable.

Sigh…it is “up sellable”. Upsell. AI/ML learn our lingo!



How about turning this into an AVLR thread since that’s what it is. That might attract people who are interested in AVLR.


Wendy -

Thanks for looking that up. I have to admit that was my first thought (i.e. “uh-oh”) when I heard that the yield curve had turned positive, but I was too lazy to go back and confirm.

Kind of like the scene in the old Western (The Searchers?) when the birds suddenly go quiet

Or maybe I’m just impatient, wishing this recession would just get going, already -



Wendy and sutton,

Well, from looking at the graph Wendy linked to, the recession appears to hit about 2 years after the yield curve first turns negative, so I’m looking forward to 2 good years of returns coming up! Thanks for that positive signal for the next couple years of returns!

Do I believe I have 2 good years of returns coming up…maybe. Do I believe a recession is coming…yes, sometime! Do I believe anyone has any idea when it’s coming…emphatic NO!

This will be my only comment on this clearly OT thread…