7 ms·

How we will know when a recession is coming?

95 points by vlindos 7y ago

Havoc 7y ago
We don't. Anyone with any real predictive power over that question had a license to print money
- kasey_junk 7y ago
  How?
  - eberkund 7y ago
    Buy low, sell high
    - rjf72 7y ago
      More like borrow + sell when high, buy + return when low. Doesn't flow off the tongue as well though, have to admit.
    - deleted 7y ago
      [deleted]
    - h3throw 7y ago
      Or more importantly in this case: sell high, buy low
  - robjan 7y ago
    Writing option contracts and shorting the market are two examples which come to mind.
    - kasey_junk 7y ago
      Let’s say you had an algorithm that predicted when a recession was declared on average (this is important) 2 months earlier than when it was technically acknowledged (what this algorithm purports to do). What series of orders would you put in & where to take advantage of it? What market conditions would make money for those orders?
- diveloper 7y ago
  So, the Federal Reserve?
- ameister14 7y ago
  Yes, which is why Ray Dalio has done just that
SeeDave 7y ago
Will the US economy experience a recession in the next... 100 years? Yes!!!! 50 years? Yes!!! 25 years? Yes!! 12.5 years? Yes! 6.25 years? Yes 3.125 years? Yes? 1.5625 years? Maybe .78125 years? Maybe? .390625 years? No? 0.1953125 years? No 0.09765625 years? No!
- TuringNYC 7y ago
  This is the best reply. We really don't know, and only greater horizons provide greater certainty of a recession. Further, we're now in a society where a third of the population lives in a perma-recession where they have not actually recovered from the previous one -- while another section of society lives in permanently good times -- so it is hard to gauge recession from looking around you.
- tinktank 7y ago
  You make an astute point lost to those trying to time the market.
  - bhouston 7y ago
    I decided to be mostly cash now rather than stocks. I just can not buy stocks when they are this high as I worry what is the upside. Stock markets fall the most as soon as we enter into a recession and they recover fast so I want to be prepared. I am likely too soon though...
    - novaRom 7y ago
      How do you define it's high? P/E ratio of most value stocks is not much higher than ever. Don't exclude technological advancements, they really contribute a lot to economical growth.
- benj111 7y ago
  People have been calling the next recession for more than 3 years, it'll be fun to return to this prediction when we actually do have a recession, as you think it's likely within 3 years. By the way, a recession is technically 2 quarters of negative growth, so assuming we start from when we actually know we're in recession, it's a minimum of 6 months from now before we are in recession so ".390625 years" would be a definite no.
anm89 7y ago
This is a really interesting metric but I'm going to argue that it doesn't say that much about our current situation given that our current unemployment numbers are highly skewed due to a strong shift towards low quality part time work and a large number of people opting out of the labor search (who are not considered unemployed in these statistics). I could see an argument made that given that this is statistic is relative to itself and just tracks movement it shouldn't matter if things are different now than in the past but it feels to me like the nature of this metric is so different now than it was in the past that it's just not an apples to apples comparison.
- kasey_junk 7y ago
  You could use any of the BLS unemployment numbers in a metric line this to see if some of the others were better predictors historically (not sure why they didn’t document that). If what you are saying is that we are in a historically unprecedented time you’ll note their metric predicted recessions that happened across a wide variety of historical regimes.
- nradov 7y ago
  Right, unemployment by itself means little unless you have the labor market participation rate for context.
  - scottlocklin 7y ago
    Working age labor participation; there's a huge demographic shift in place towards old people across almost all first world countries. Not sure if they measure this at all, as the historic assumptions was that the distribution of population across age didn't vary much.
- testis321 7y ago
  I do not have any real numbers, and this is just anecdotal, but in Slovenia (small EU country), a lot of our larger retailers have replaced some posters (basically ads) in their stores with "workers needed" posters, and some have literally advertised that they're looking for workers in their paper ads we get in the mail. Also a car repair shop literally had an radio ad that they're looking for repairmen. It might be just a coincidence, but it's easy to get/change jobs at the moment, if you're actually willing to work.
tiborsaas 7y ago
Interesting and makes sense for someone someone like me who's a dummy for macroeconomics. Unemployed people can't afford to spend too much, thus businesses revenue decreases, they lay off more people and it becomes a negative feedback loop. I've also seen this VOX documentary about the "yield curve" which also famous for predicting recessions. https://www.youtube.com/watch?v=xiiHjrewXNI https://www.youtube.com/watch?v=xiiHjrewXNI
outside1234 7y ago
The current odds of a recession are the same as just before the big recession of 2008. Also, concerningly, the real estate market is just as leveraged and bubbled as then as well. https://www.forbes.com/sites/jessecolombo/2019/06/30/current-u-s-recession-odds-are-the-same-as-during-the-big-short-heyday/#10258ec1708d https://www.forbes.com/sites/jessecolombo/2019/06/30/current...
- novaRom 7y ago
  This analyst writes about that bubble and that it will burst since many years. What is the point? You simply cannot predict future exactly based on historical data. Times are different, technology is different, human behavior is changing, demography is changing, etc.
arkadiyt 7y ago
All these indicators are guesses at best, but out of curiosity I checked the current Bureau of Labor Statistics numbers [1]: Prior 12 months lowest unemployment rate: 3.6% (in April & May 2019). Prior 3 months average (June/July/August 2019): 3.7%. So according to this metric we are not in a recession. [1]: https://www.bls.gov/web/empsit/cpseea03.htm https://www.bls.gov/web/empsit/cpseea03.htm
- trufflebutter 7y ago
  Typically a recession is defined by having at least 2 quarters of decreased GDP growth, so it is often a lagging indicator. By the time we definitively know we are in a recession...we've already been in it for 6 months. That is to say that I'm not sure how good of an indicator a rolling average of unemployment is, especially in a gig-economy sort of market. But I agree, using indicators to predict a recession is basically an educated guess, with little emphasis on the educated part.
srl 7y ago
On topic, and well outside of my ability to know how seriously to take it: https://johnhcochrane.blogspot.com/2019/09/more-on-low-long-term-interest-rates.html https://johnhcochrane.blogspot.com/2019/09/more-on-low-long-....
AkaShiroKen 7y ago
I watched a Ted talk sometime ago about how they've discovered a method to genetically modify mosquitoes to eradicate entire populations of mosquitoes from an area (I think it was it made them mos babies die due to genetic engineering). I couldn't find it now but it seemed like a massive success at the time almost eliminating all mosquitoes from the a city in Brazil (iirc). Anyone know what happened to it? If that were to come to fruition than a lot of disease in addition to malaria like chikungunya, dengue, etc will be cured too.
- SketchySeaBeast 7y ago
  I believe you're on the wrong post.
gzu 7y ago
Why does it have to be just a recession with rebound a few years later? I’d argue many are thinking too positive following 2008 where everything will go back to normal and prices will rally to all time highs. The US economy almost blew up into a full blown depression in 2008. The Fed swooped in to save the day. Can the Fed do that again indefinitely with not only US but potential problems worldwide? The global economy is reaching uncharted territory now with the amount of debt and negative interest rates. Maybe a depression like 1930’s are a relic of the past once we decoupled from the gold standard. Central banks today have full power to devalue currency indefinitely in order to maintain the financial status quo.
- jethro_tell 7y ago
  > Can the Fed do that again ...? I mean they don't have much to give do they? Unless we're doing negative interest rates this time.
  - kasey_junk 7y ago
    The president asked for negative interest rates this morning.
  - deleted 7y ago
    [deleted]
  - ChaseT 7y ago
    Japan did negative interest rates in 2016. https://www.npr.org/templates/transcript/transcript.php?storyId=733800857 https://www.npr.org/templates/transcript/transcript.php?stor...
- dragonwriter 7y ago
  > Can the Fed do that again They've probably got more tools, as they've said that the foreign experience puts negative interest rates on the table as a realistic tool. But, even if they can't, Congress could, in principal, step in with serious fiscal stimulus [0], which is less limited than the monetary tools available to the Fed. But they've been unreliable in the last few recessions, leaving the Fed holding the bag.
buboard 7y ago
Maybe the recession will never come? What are we going to do now without the recession? In a way, that thing was a solution.
- 29_29 7y ago
  Impossible. Ray Dalio explains the business cycle and why recessions are inevitable with our credit based system https://youtu.be/PHe0bXAIuk0 https://youtu.be/PHe0bXAIuk0
  - streetcat1 7y ago
    Possible. The system got broken by the 2009 rescue attempts (QE 1,2,3). We are in a different regime right now (negative interest rates). I would not bet on any recession now or in the future.
newsreview1 7y ago
Just looking at shifts in the national unemployment rate will never render an accurate assessment of the labor market. It simply overlooks how, why, and which folks are leaving jobs or accurately reflect the under-employed.
joeyrideout 7y ago
It baffles me how financial analysts can try to answer such a question by only focusing on the domestic economy. Economies are so interconnected, the next recession is likely to be a global recession. Alarm bells are currently ringing all over the world, but the U.S. is isolated to some extent due to its currency status and relatively stable markets. It's like standing in a room on the top floor of the Titanic and measuring whether the boat is sinking by measuring the water level on the floor in your room. Meanwhile, if water is getting into the rooms below you...
- novaRom 7y ago
  >Alarm bells are currently ringing all over the world This is not true. Please be more specific with 'all over the world' statement. Do you speak about 5% or 7% of world economy?
MegaButts 7y ago
Out of curiosity, how reliable are all of the metrics we use for measuring economic health? For instance, how reliable is the unemployment rate when it is a highly political number with lots of incentives to misrepresent (ie the chronically unemployed are excluded from the count)? Beyond that, how much are these indicators just fudged or straight-up lied about? Everybody is happy to agree with me when I say that China fudges their numbers, but when I say other countries are capable of the same thing they tell me I'm crazy. I am not an expert on China by any means, and I don't believe other countries report their economic health in the same way; but I also don't buy that everything the US and other western countries say is gospel.
- foota 7y ago
  You can look at different measures of US unemployment, the top line number I think is normally "those looking for jobs but unable to find them" but there are a number of other metrics as well.
- kasey_junk 7y ago
  The markets watch the BLS numbers like crazy and compare them to estimates from private sources that come from a wide range of methodologies. Frequently the big moves in the markets are not triggered by the bare numbers but from the difference between the expectation and the numbers. If there was a systematic fudging of those numbers lots and lots of people would notice.
  - theturtletalks 7y ago
    You're right, but what if revealing the discrepancies wouldn't be beneficial to the company? Many people knew about the subprime mortgages before the 2008 recession and no-one came forward, although some shorted it.
    - graeme 7y ago
      Lots of people gave warnings. I was reading warnings about it in the Economist for years. It was a damned complex system and so is the economy. A lot of stuff is only fully obvious in hindsight. You also have the problem of knowing who to listen to. Many people are warning about many things right now. Some are prescient, some are wrong. How to judge? 2008 could have been better predicted and better prevented, but it's false to say no one warned.
H8crilA 7y ago
No economic numbers are reliable due to reflexivity - "reliable numbers" become inputs for policy makers and market participants, which drive changes in the economy that affect the previously "reliable numbers". George Soros wrote extensive literature on the topic. He called his fund (second best performing hedge fund in history) the Quantum Fund because, according to him, true nature of economic reality is unknowable to humans. As in it is genuinely impossible to know, regardless of the amount of efforts. Example: mortgage credit decisions depend on people's earnings and collateral value. Problem? Both earnings (salaries) and the collateral value (home prices) depend on the amount of credit in the system. The economy, being a subset of psychology/sociology, cannot be understood via normal science because the level of understanding is not independent from the actual rules at work. I.e. the more we understand the different-er we behave. Unlike atoms, which don't care what humans think and just go about their own business.
brewdad 7y ago
“Recession is when your neighbor loses his job. Depression is when you lose yours." --Ronald Reagan
- mothsonasloth 7y ago
  Harry S Truman originally said it, Ronald Reagan added on an additional part. "Recovery is when Jimmy Carter loses his job"
  - brewdad 7y ago
    Doesn't surprise me that it wasn't original. I purposely left off the last bit to avoid "politics" creep.
dev_dull 7y ago
I worry a lot less about a market correction then I do a political "correction" affecting the markets. We're so polarized. You can sense a desperation among those who took out an exceptionally high amount of student debt and have no realistic way of repaying it. Risk of medical bankruptcy is also extremely high. Among other things, these types of occurrences make people desperate, and desperate people are willing to try desperate solutions, such as radical wealth redistribution, or government/centrally planned economies (socialism), or ...? Ask yourself how 50% of the country might feel if we removed from power (either constitutionally or other means) our democratically elected president?
- asdfman123 7y ago
  It's funny, I feel the exact same way as you (I just want our country to hold together) but due to my own biases I'm afraid of threats from the right. I see social democracy as a necessary palliative that will prevent people from resorting to self-destructive populism. We've got to find some way to bring people back into the fold. I don't buy the idea that investing in our own people leads to authoritarianism.
- tempguy9999 7y ago
  This is pure fear spreading. Why are you doing it - is the future really so terrifying?
  - dev_dull 7y ago
    What fear am I spreading? I think the market is more volatile that many people believe, but more importantly the source of that risk might stem from a source they might not expect.
    - tempguy9999 7y ago
      From this post, nebulous statements of dread "You can sense a desperation" "make people desperate, and desperate people are willing to try desperate solutions" "such as radical wealth redistribution, or government/centrally planned economies (socialism) [already happened, no?] or ...?" (or = unstated fear) "radical wealth redistribution, or government/centrally planned economies (socialism)" (oh noes, the horror!) Your prior posts go the same way. Pretty good way of stirring up dread. Basic question then: what have you done about any of it? Or, what should we do about it, specifically? " think the market is more volatile that many people believe" - I think anyone with half a brain is aware there's a crash coming. For real concern, a carrington event or global warning are likely much more dangerous. So do something.
Animats 7y ago
"The indicator has both correctly signaled a recession 4–5 months following the beginning of the recession and has virtually never called a recession incorrectly since 1970.' This is more like "how will we know when a recession has already started without waiting for a down GDP for two quarters." That's 6 months in. This signal lets you know 4-5 months in. Not exactly a leading indicator.
- the_watcher 7y ago
  > has virtually never called a recession incorrectly since 1970. "virtually never" also sounds like weasel words considering the total number of recessions.
  - asdfman123 7y ago
    Also, what happened before 1970? Is it possible they're just overfitting here?
    - the_watcher 7y ago
      IIRC that's when the key inputs to all these recession indicators began to be collected.
- dragonwriter 7y ago
  > This is more like "how will we know when a recession has already started without waiting for a down GDP for two quarters." That's 6 months in. It's at least 6 months in: NBER recession dating even for recessions that include at least two down quarters (which, while a popular conception is not the official definition, though I don't think any two-quarter consecutive downturn has failed to be included within a declared recession) is often before the first down quarter in a consecutive pair. (E.g., the Great Recession is timed from the Q4 2007 peak, even though there was only one quarter of decline immediately following, then a dead-cat bounce quarter, then a four quarter consecutive decline. If you looked for a pair of down quarters, you'd detect the Great Recession a year after it started; 4-5 months moves that up a lot.)
fooker 7y ago
You won't. If you could, you could make an enormous profit off this knowledge.
iamwil 7y ago
For fun, I put together http://isitrecession.com http://isitrecession.com, in the spirit of https://isitchristmas.com https://isitchristmas.com It just shows the inverted yield curve, pulling down data from the US treasury everyday, and subtracting the 1 year from the 10 year interest rate.
- bhouston 7y ago
  What defines a recession? Contraction of business right? Not just inverted yeild curve.
- nodesocket 7y ago
  Can you also plot the S&P 500 (SPY) either overlayed or below the yield curve graph. Would be interesting to correlate.
  - iamwil 7y ago
    Will do.
    - novaRom 7y ago
      You can also add frequency of words like 'recession', 'downturn', etc. You may count them on different news sites. I did it like 15 years ago, it was a lot of fun.
rubicon33 7y ago
> The Great Recession officially ended in June of 2009 As a "millennial" who graduated in 2008, I seriously hate reading shit like this. Maybe it recovered for the Boomer's pension funds and 401k's, but it took many of my friends over a decade to find work equal to their qualifications. They're only JUST NOW starting to get payed what they deserve (PHDs, MBAs, and Masters degree holders).
- kasey_junk 7y ago
  They are using a technical definition of recession.
  - JackRabbitSlim 7y ago
    To be fair, OP was using the technical definition of shit.
  - flukus 7y ago
    Technical definitions used by economists are increasingly divorced from reality experienced by people. You don't see a lot of low wage single income families buying 3 bedroom houses anymore but economists will tell us how much richer we are.
- drevil-v2 7y ago
  > They're only JUST NOW starting to get payed what they deserve That is absurd. In a free market with free movement of goods and people, whatever you are getting paid is what you "deserve" aka what other participants in the market are willing to pay for your services. It is only explicit government intervention that overrides this process; subsided renewal energy sources, childcare, housing etc. But with everything else being equal your friends were getting exactly what the market could afford. Just because you have a PHD or Masters does not mean someone else owes you a high paying salary.
  - mirimir 7y ago
    In real markets, "free movement of goods and people" just doesn't happen. Workers arguably have more constraints on movement than employers and goods do. There's no human equivalent for long-haul trucking and container ships. Not to mention learning Chinese or whatever, getting a work visa, and adapting to the culture.
nessunodoro 7y ago
in one of Buckminster Fuller's books (Critical Path IIRC) he recalls an indicator of the Great Depression being half-finished housing developments - rows and rows of houses, covered in tarpaulin, plumbing exposed like a skeleton, abandoned. I recalled this vivid description later during the mortgage crisis of 2008.
mirimir 7y ago
Maybe I'm just too cynical, but we know that it'll happen just before the next Presidential election. If the party in power can't get enough buy-in from enough influential people.
- refurb 7y ago
  You believe the party is power has enough sway to move the needle on a $20T economy?
  - mirimir 7y ago
    From what I've read over the years, it's happened before. Or at least, it's been claimed that it's happened before. PR obviously also plays a huge role. https://www.nytimes.com/1991/10/09/business/recession-and-re-election-don-t-mix.html https://www.nytimes.com/1991/10/09/business/recession-and-re... https://en.wikipedia.org/wiki/Early_1990s_recession_in_the_United_States https://en.wikipedia.org/wiki/Early_1990s_recession_in_the_U... https://www.brookings.edu/opinions/the-economy-and-the-election/ https://www.brookings.edu/opinions/the-economy-and-the-elect... https://www.bizpacreview.com/2019/08/19/fox-friends-not-afraid-to-show-medias-deliberate-attempts-to-crash-economy-by-crying-recession-787371 https://www.bizpacreview.com/2019/08/19/fox-friends-not-afra... https://www.dailywire.com/news/50222/bill-maher-recession-worth-it-prevent-trump-paul-bois https://www.dailywire.com/news/50222/bill-maher-recession-wo... https://www.nationalreview.com/news/stocks-drop-as-recession-fears-grow-trade-tensions-loom/ https://www.nationalreview.com/news/stocks-drop-as-recession... https://www.salon.com/2019/08/24/history-suggests-that-a-recession-might-doom-trumps-re-election-chances/ https://www.salon.com/2019/08/24/history-suggests-that-a-rec...
swsieber 7y ago
The transportation sector seems like a pretty good indicator. Maybe a dip in the number of semi's in the road over time?
11thEarlOfMar 7y ago
Very recent report from the Bureau of Labor Statistics. Number of employed Americans is at an all-time high, participation rate is not: https://www.bls.gov/web/empsit/cps_charts.pdf https://www.bls.gov/web/empsit/cps_charts.pdf For example, slide 15, percentage of the unemployed deemed as long term unemployed declined from 45% to 20% from 2012 - 2019.
code4tee 7y ago
People have been calling for a recession/big market correction since around 2012. At some point an analyst will be right and then they’ll hold the throne of “this analyst predicted the last recession... hear what they think now” until the cycle repeats itself again. Those that have been around a while know this whole story plays out on a loop over and over and over :-)
rossdavidh 7y ago
So, I make no claims as to its accuracy, I'm just putting this out as food for thought, but here's another possible metric: https://trends.google.com/trends/explore?date=all&geo=US&q=recession https://trends.google.com/trends/explore?date=all&geo=US&q=r...
mudlus 7y ago
Massive (last I checked 13 trillion and rising) negative yields government bonds market all with. Lowering interest rates twice already, heading to another one next week (rumor). Instead of bailing out the homeowners in 2008, they bailed out the banks. "Too big to fail." Think about this stuff people. Nothing has changed, nothing ever changes, Governments are incentivized by the market to steal money from the working class to protect the stability of an economy. It's simple: SLOWLY separate money and state and we don't have to worry about manipulation of the money supply to "protect us." Buy Bitcoin.
avonmach 7y ago
...when student loan delinquency increases and consumer spending decreases

95 points by vlindos 7y ago

Havoc 7y ago

We don't. Anyone with any real predictive power over that question had a license to print money

kasey_junk 7y ago
How?
- eberkund 7y ago
  Buy low, sell high
  - rjf72 7y ago
    More like borrow + sell when high, buy + return when low. Doesn't flow off the tongue as well though, have to admit.
  - deleted 7y ago
    [deleted]
  - h3throw 7y ago
    Or more importantly in this case: sell high, buy low
- robjan 7y ago
  Writing option contracts and shorting the market are two examples which come to mind.
  - kasey_junk 7y ago
    Let’s say you had an algorithm that predicted when a recession was declared on average (this is important) 2 months earlier than when it was technically acknowledged (what this algorithm purports to do). What series of orders would you put in & where to take advantage of it? What market conditions would make money for those orders?
diveloper 7y ago
So, the Federal Reserve?
ameister14 7y ago
Yes, which is why Ray Dalio has done just that

SeeDave 7y ago

Will the US economy experience a recession in the next... 100 years? Yes!!!! 50 years? Yes!!! 25 years? Yes!! 12.5 years? Yes! 6.25 years? Yes 3.125 years? Yes? 1.5625 years? Maybe .78125 years? Maybe? .390625 years? No? 0.1953125 years? No 0.09765625 years? No!

TuringNYC 7y ago
This is the best reply. We really don't know, and only greater horizons provide greater certainty of a recession. Further, we're now in a society where a third of the population lives in a perma-recession where they have not actually recovered from the previous one -- while another section of society lives in permanently good times -- so it is hard to gauge recession from looking around you.
tinktank 7y ago
You make an astute point lost to those trying to time the market.
- bhouston 7y ago
  I decided to be mostly cash now rather than stocks. I just can not buy stocks when they are this high as I worry what is the upside. Stock markets fall the most as soon as we enter into a recession and they recover fast so I want to be prepared. I am likely too soon though...
  - novaRom 7y ago
    How do you define it's high? P/E ratio of most value stocks is not much higher than ever. Don't exclude technological advancements, they really contribute a lot to economical growth.
benj111 7y ago
People have been calling the next recession for more than 3 years, it'll be fun to return to this prediction when we actually do have a recession, as you think it's likely within 3 years. By the way, a recession is technically 2 quarters of negative growth, so assuming we start from when we actually know we're in recession, it's a minimum of 6 months from now before we are in recession so ".390625 years" would be a definite no.

anm89 7y ago

This is a really interesting metric but I'm going to argue that it doesn't say that much about our current situation given that our current unemployment numbers are highly skewed due to a strong shift towards low quality part time work and a large number of people opting out of the labor search (who are not considered unemployed in these statistics). I could see an argument made that given that this is statistic is relative to itself and just tracks movement it shouldn't matter if things are different now than in the past but it feels to me like the nature of this metric is so different now than it was in the past that it's just not an apples to apples comparison.

kasey_junk 7y ago
You could use any of the BLS unemployment numbers in a metric line this to see if some of the others were better predictors historically (not sure why they didn’t document that). If what you are saying is that we are in a historically unprecedented time you’ll note their metric predicted recessions that happened across a wide variety of historical regimes.
nradov 7y ago
Right, unemployment by itself means little unless you have the labor market participation rate for context.
- scottlocklin 7y ago
  Working age labor participation; there's a huge demographic shift in place towards old people across almost all first world countries. Not sure if they measure this at all, as the historic assumptions was that the distribution of population across age didn't vary much.
testis321 7y ago
I do not have any real numbers, and this is just anecdotal, but in Slovenia (small EU country), a lot of our larger retailers have replaced some posters (basically ads) in their stores with "workers needed" posters, and some have literally advertised that they're looking for workers in their paper ads we get in the mail. Also a car repair shop literally had an radio ad that they're looking for repairmen. It might be just a coincidence, but it's easy to get/change jobs at the moment, if you're actually willing to work.

tiborsaas 7y ago

Interesting and makes sense for someone someone like me who's a dummy for macroeconomics. Unemployed people can't afford to spend too much, thus businesses revenue decreases, they lay off more people and it becomes a negative feedback loop. I've also seen this VOX documentary about the "yield curve" which also famous for predicting recessions. https://www.youtube.com/watch?v=xiiHjrewXNI https://www.youtube.com/watch?v=xiiHjrewXNI

outside1234 7y ago

The current odds of a recession are the same as just before the big recession of 2008. Also, concerningly, the real estate market is just as leveraged and bubbled as then as well. https://www.forbes.com/sites/jessecolombo/2019/06/30/current-u-s-recession-odds-are-the-same-as-during-the-big-short-heyday/#10258ec1708d https://www.forbes.com/sites/jessecolombo/2019/06/30/current...

novaRom 7y ago
This analyst writes about that bubble and that it will burst since many years. What is the point? You simply cannot predict future exactly based on historical data. Times are different, technology is different, human behavior is changing, demography is changing, etc.

arkadiyt 7y ago

All these indicators are guesses at best, but out of curiosity I checked the current Bureau of Labor Statistics numbers [1]: Prior 12 months lowest unemployment rate: 3.6% (in April & May 2019). Prior 3 months average (June/July/August 2019): 3.7%. So according to this metric we are not in a recession. [1]: https://www.bls.gov/web/empsit/cpseea03.htm https://www.bls.gov/web/empsit/cpseea03.htm

trufflebutter 7y ago
Typically a recession is defined by having at least 2 quarters of decreased GDP growth, so it is often a lagging indicator. By the time we definitively know we are in a recession...we've already been in it for 6 months. That is to say that I'm not sure how good of an indicator a rolling average of unemployment is, especially in a gig-economy sort of market. But I agree, using indicators to predict a recession is basically an educated guess, with little emphasis on the educated part.

srl 7y ago

On topic, and well outside of my ability to know how seriously to take it: https://johnhcochrane.blogspot.com/2019/09/more-on-low-long-term-interest-rates.html https://johnhcochrane.blogspot.com/2019/09/more-on-low-long-....

AkaShiroKen 7y ago

I watched a Ted talk sometime ago about how they've discovered a method to genetically modify mosquitoes to eradicate entire populations of mosquitoes from an area (I think it was it made them mos babies die due to genetic engineering). I couldn't find it now but it seemed like a massive success at the time almost eliminating all mosquitoes from the a city in Brazil (iirc). Anyone know what happened to it? If that were to come to fruition than a lot of disease in addition to malaria like chikungunya, dengue, etc will be cured too.

SketchySeaBeast 7y ago
I believe you're on the wrong post.

gzu 7y ago

Why does it have to be just a recession with rebound a few years later? I’d argue many are thinking too positive following 2008 where everything will go back to normal and prices will rally to all time highs. The US economy almost blew up into a full blown depression in 2008. The Fed swooped in to save the day. Can the Fed do that again indefinitely with not only US but potential problems worldwide? The global economy is reaching uncharted territory now with the amount of debt and negative interest rates. Maybe a depression like 1930’s are a relic of the past once we decoupled from the gold standard. Central banks today have full power to devalue currency indefinitely in order to maintain the financial status quo.

jethro_tell 7y ago
> Can the Fed do that again ...? I mean they don't have much to give do they? Unless we're doing negative interest rates this time.
- kasey_junk 7y ago
  The president asked for negative interest rates this morning.
- deleted 7y ago
  [deleted]
- ChaseT 7y ago
  Japan did negative interest rates in 2016. https://www.npr.org/templates/transcript/transcript.php?storyId=733800857 https://www.npr.org/templates/transcript/transcript.php?stor...
dragonwriter 7y ago
> Can the Fed do that again They've probably got more tools, as they've said that the foreign experience puts negative interest rates on the table as a realistic tool. But, even if they can't, Congress could, in principal, step in with serious fiscal stimulus [0], which is less limited than the monetary tools available to the Fed. But they've been unreliable in the last few recessions, leaving the Fed holding the bag.

buboard 7y ago

Maybe the recession will never come? What are we going to do now without the recession? In a way, that thing was a solution.

29_29 7y ago
Impossible. Ray Dalio explains the business cycle and why recessions are inevitable with our credit based system https://youtu.be/PHe0bXAIuk0 https://youtu.be/PHe0bXAIuk0
- streetcat1 7y ago
  Possible. The system got broken by the 2009 rescue attempts (QE 1,2,3). We are in a different regime right now (negative interest rates). I would not bet on any recession now or in the future.

newsreview1 7y ago

Just looking at shifts in the national unemployment rate will never render an accurate assessment of the labor market. It simply overlooks how, why, and which folks are leaving jobs or accurately reflect the under-employed.

joeyrideout 7y ago

It baffles me how financial analysts can try to answer such a question by only focusing on the domestic economy. Economies are so interconnected, the next recession is likely to be a global recession. Alarm bells are currently ringing all over the world, but the U.S. is isolated to some extent due to its currency status and relatively stable markets. It's like standing in a room on the top floor of the Titanic and measuring whether the boat is sinking by measuring the water level on the floor in your room. Meanwhile, if water is getting into the rooms below you...

novaRom 7y ago
>Alarm bells are currently ringing all over the world This is not true. Please be more specific with 'all over the world' statement. Do you speak about 5% or 7% of world economy?

MegaButts 7y ago

Out of curiosity, how reliable are all of the metrics we use for measuring economic health? For instance, how reliable is the unemployment rate when it is a highly political number with lots of incentives to misrepresent (ie the chronically unemployed are excluded from the count)? Beyond that, how much are these indicators just fudged or straight-up lied about? Everybody is happy to agree with me when I say that China fudges their numbers, but when I say other countries are capable of the same thing they tell me I'm crazy. I am not an expert on China by any means, and I don't believe other countries report their economic health in the same way; but I also don't buy that everything the US and other western countries say is gospel.

foota 7y ago
You can look at different measures of US unemployment, the top line number I think is normally "those looking for jobs but unable to find them" but there are a number of other metrics as well.
kasey_junk 7y ago
The markets watch the BLS numbers like crazy and compare them to estimates from private sources that come from a wide range of methodologies. Frequently the big moves in the markets are not triggered by the bare numbers but from the difference between the expectation and the numbers. If there was a systematic fudging of those numbers lots and lots of people would notice.
- theturtletalks 7y ago
  You're right, but what if revealing the discrepancies wouldn't be beneficial to the company? Many people knew about the subprime mortgages before the 2008 recession and no-one came forward, although some shorted it.
  - graeme 7y ago
    Lots of people gave warnings. I was reading warnings about it in the Economist for years. It was a damned complex system and so is the economy. A lot of stuff is only fully obvious in hindsight. You also have the problem of knowing who to listen to. Many people are warning about many things right now. Some are prescient, some are wrong. How to judge? 2008 could have been better predicted and better prevented, but it's false to say no one warned.

H8crilA 7y ago

No economic numbers are reliable due to reflexivity - "reliable numbers" become inputs for policy makers and market participants, which drive changes in the economy that affect the previously "reliable numbers". George Soros wrote extensive literature on the topic. He called his fund (second best performing hedge fund in history) the Quantum Fund because, according to him, true nature of economic reality is unknowable to humans. As in it is genuinely impossible to know, regardless of the amount of efforts. Example: mortgage credit decisions depend on people's earnings and collateral value. Problem? Both earnings (salaries) and the collateral value (home prices) depend on the amount of credit in the system. The economy, being a subset of psychology/sociology, cannot be understood via normal science because the level of understanding is not independent from the actual rules at work. I.e. the more we understand the different-er we behave. Unlike atoms, which don't care what humans think and just go about their own business.

brewdad 7y ago

“Recession is when your neighbor loses his job. Depression is when you lose yours." --Ronald Reagan

mothsonasloth 7y ago
Harry S Truman originally said it, Ronald Reagan added on an additional part. "Recovery is when Jimmy Carter loses his job"
- brewdad 7y ago
  Doesn't surprise me that it wasn't original. I purposely left off the last bit to avoid "politics" creep.

dev_dull 7y ago

I worry a lot less about a market correction then I do a political "correction" affecting the markets. We're so polarized. You can sense a desperation among those who took out an exceptionally high amount of student debt and have no realistic way of repaying it. Risk of medical bankruptcy is also extremely high. Among other things, these types of occurrences make people desperate, and desperate people are willing to try desperate solutions, such as radical wealth redistribution, or government/centrally planned economies (socialism), or ...? Ask yourself how 50% of the country might feel if we removed from power (either constitutionally or other means) our democratically elected president?

asdfman123 7y ago
It's funny, I feel the exact same way as you (I just want our country to hold together) but due to my own biases I'm afraid of threats from the right. I see social democracy as a necessary palliative that will prevent people from resorting to self-destructive populism. We've got to find some way to bring people back into the fold. I don't buy the idea that investing in our own people leads to authoritarianism.
tempguy9999 7y ago
This is pure fear spreading. Why are you doing it - is the future really so terrifying?
- dev_dull 7y ago
  What fear am I spreading? I think the market is more volatile that many people believe, but more importantly the source of that risk might stem from a source they might not expect.
  - tempguy9999 7y ago
    From this post, nebulous statements of dread "You can sense a desperation" "make people desperate, and desperate people are willing to try desperate solutions" "such as radical wealth redistribution, or government/centrally planned economies (socialism) [already happened, no?] or ...?" (or = unstated fear) "radical wealth redistribution, or government/centrally planned economies (socialism)" (oh noes, the horror!) Your prior posts go the same way. Pretty good way of stirring up dread. Basic question then: what have you done about any of it? Or, what should we do about it, specifically? " think the market is more volatile that many people believe" - I think anyone with half a brain is aware there's a crash coming. For real concern, a carrington event or global warning are likely much more dangerous. So do something.

Animats 7y ago

"The indicator has both correctly signaled a recession 4–5 months following the beginning of the recession and has virtually never called a recession incorrectly since 1970.' This is more like "how will we know when a recession has already started without waiting for a down GDP for two quarters." That's 6 months in. This signal lets you know 4-5 months in. Not exactly a leading indicator.

the_watcher 7y ago
> has virtually never called a recession incorrectly since 1970. "virtually never" also sounds like weasel words considering the total number of recessions.
- asdfman123 7y ago
  Also, what happened before 1970? Is it possible they're just overfitting here?
  - the_watcher 7y ago
    IIRC that's when the key inputs to all these recession indicators began to be collected.
dragonwriter 7y ago
> This is more like "how will we know when a recession has already started without waiting for a down GDP for two quarters." That's 6 months in. It's at least 6 months in: NBER recession dating even for recessions that include at least two down quarters (which, while a popular conception is not the official definition, though I don't think any two-quarter consecutive downturn has failed to be included within a declared recession) is often before the first down quarter in a consecutive pair. (E.g., the Great Recession is timed from the Q4 2007 peak, even though there was only one quarter of decline immediately following, then a dead-cat bounce quarter, then a four quarter consecutive decline. If you looked for a pair of down quarters, you'd detect the Great Recession a year after it started; 4-5 months moves that up a lot.)

fooker 7y ago

You won't. If you could, you could make an enormous profit off this knowledge.

iamwil 7y ago

For fun, I put together http://isitrecession.com http://isitrecession.com, in the spirit of https://isitchristmas.com https://isitchristmas.com It just shows the inverted yield curve, pulling down data from the US treasury everyday, and subtracting the 1 year from the 10 year interest rate.

bhouston 7y ago
What defines a recession? Contraction of business right? Not just inverted yeild curve.
nodesocket 7y ago
Can you also plot the S&P 500 (SPY) either overlayed or below the yield curve graph. Would be interesting to correlate.
- iamwil 7y ago
  Will do.
  - novaRom 7y ago
    You can also add frequency of words like 'recession', 'downturn', etc. You may count them on different news sites. I did it like 15 years ago, it was a lot of fun.

rubicon33 7y ago

> The Great Recession officially ended in June of 2009 As a "millennial" who graduated in 2008, I seriously hate reading shit like this. Maybe it recovered for the Boomer's pension funds and 401k's, but it took many of my friends over a decade to find work equal to their qualifications. They're only JUST NOW starting to get payed what they deserve (PHDs, MBAs, and Masters degree holders).

kasey_junk 7y ago
They are using a technical definition of recession.
- JackRabbitSlim 7y ago
  To be fair, OP was using the technical definition of shit.
- flukus 7y ago
  Technical definitions used by economists are increasingly divorced from reality experienced by people. You don't see a lot of low wage single income families buying 3 bedroom houses anymore but economists will tell us how much richer we are.
drevil-v2 7y ago
> They're only JUST NOW starting to get payed what they deserve That is absurd. In a free market with free movement of goods and people, whatever you are getting paid is what you "deserve" aka what other participants in the market are willing to pay for your services. It is only explicit government intervention that overrides this process; subsided renewal energy sources, childcare, housing etc. But with everything else being equal your friends were getting exactly what the market could afford. Just because you have a PHD or Masters does not mean someone else owes you a high paying salary.
- mirimir 7y ago
  In real markets, "free movement of goods and people" just doesn't happen. Workers arguably have more constraints on movement than employers and goods do. There's no human equivalent for long-haul trucking and container ships. Not to mention learning Chinese or whatever, getting a work visa, and adapting to the culture.

nessunodoro 7y ago

in one of Buckminster Fuller's books (Critical Path IIRC) he recalls an indicator of the Great Depression being half-finished housing developments - rows and rows of houses, covered in tarpaulin, plumbing exposed like a skeleton, abandoned. I recalled this vivid description later during the mortgage crisis of 2008.

mirimir 7y ago

Maybe I'm just too cynical, but we know that it'll happen just before the next Presidential election. If the party in power can't get enough buy-in from enough influential people.

refurb 7y ago
You believe the party is power has enough sway to move the needle on a $20T economy?
- mirimir 7y ago
  From what I've read over the years, it's happened before. Or at least, it's been claimed that it's happened before. PR obviously also plays a huge role. https://www.nytimes.com/1991/10/09/business/recession-and-re-election-don-t-mix.html https://www.nytimes.com/1991/10/09/business/recession-and-re... https://en.wikipedia.org/wiki/Early_1990s_recession_in_the_United_States https://en.wikipedia.org/wiki/Early_1990s_recession_in_the_U... https://www.brookings.edu/opinions/the-economy-and-the-election/ https://www.brookings.edu/opinions/the-economy-and-the-elect... https://www.bizpacreview.com/2019/08/19/fox-friends-not-afraid-to-show-medias-deliberate-attempts-to-crash-economy-by-crying-recession-787371 https://www.bizpacreview.com/2019/08/19/fox-friends-not-afra... https://www.dailywire.com/news/50222/bill-maher-recession-worth-it-prevent-trump-paul-bois https://www.dailywire.com/news/50222/bill-maher-recession-wo... https://www.nationalreview.com/news/stocks-drop-as-recession-fears-grow-trade-tensions-loom/ https://www.nationalreview.com/news/stocks-drop-as-recession... https://www.salon.com/2019/08/24/history-suggests-that-a-recession-might-doom-trumps-re-election-chances/ https://www.salon.com/2019/08/24/history-suggests-that-a-rec...

swsieber 7y ago

The transportation sector seems like a pretty good indicator. Maybe a dip in the number of semi's in the road over time?

11thEarlOfMar 7y ago

Very recent report from the Bureau of Labor Statistics. Number of employed Americans is at an all-time high, participation rate is not: https://www.bls.gov/web/empsit/cps_charts.pdf https://www.bls.gov/web/empsit/cps_charts.pdf For example, slide 15, percentage of the unemployed deemed as long term unemployed declined from 45% to 20% from 2012 - 2019.

code4tee 7y ago

People have been calling for a recession/big market correction since around 2012. At some point an analyst will be right and then they’ll hold the throne of “this analyst predicted the last recession... hear what they think now” until the cycle repeats itself again. Those that have been around a while know this whole story plays out on a loop over and over and over :-)

rossdavidh 7y ago

So, I make no claims as to its accuracy, I'm just putting this out as food for thought, but here's another possible metric: https://trends.google.com/trends/explore?date=all&geo=US&q=recession https://trends.google.com/trends/explore?date=all&geo=US&q=r...

mudlus 7y ago

Massive (last I checked 13 trillion and rising) negative yields government bonds market all with. Lowering interest rates twice already, heading to another one next week (rumor). Instead of bailing out the homeowners in 2008, they bailed out the banks. "Too big to fail." Think about this stuff people. Nothing has changed, nothing ever changes, Governments are incentivized by the market to steal money from the working class to protect the stability of an economy. It's simple: SLOWLY separate money and state and we don't have to worry about manipulation of the money supply to "protect us." Buy Bitcoin.

avonmach 7y ago

...when student loan delinquency increases and consumer spending decreases