The yield curve is a really powerful indicator. It always has been. The shape of the curve still matters.

One reason the 10-year note yield has risen so much this week is that investors are worried that the end of the carry trade -- a trade that involves borrowing at very low rates in Japan and investing at higher rates abroad -- will end any day now.

The market reacted exactly the way they wanted it to, which was to flatten the yield curve. I think the point is clear: Policy makers are going to do whatever they can to help the Fed. The rate cuts that the Fed is putting through are only hitting the short curve; they're only psychological.

I think the message in this inverted yield curve is muddled. I think it is something to watch and to understand better. But I am not overly concerned.

The shorter end of the U.S. yield curve is holding a fairly nice firm tone.

It's been foreigners looking for yield that has driven the U.S. curve to flatten. The market will interpret this inversion as more circumspect than previous ones.