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Predicting Next Recession

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Re: Predicting Next Recession

#51

Post by RickJWagner »

fauigerzigerk wrote: post #47
DennisP wrote: post #38

Earlier quoted context omitted.

It's hard to imagine a stock market crash coming when everyone already expects it, but it's quite easy to imagine a recession coming when everyone expects it. If people expect stocks to crash, then the expected "crash" is probably already priced in. If people expect a recession, then the reduction in economic activity is something of a self-fulfilling prophecy.

I think many who expect a recession have been expecting one for years. They have been watching from the sidelines as the market passed them by. That's why the fear of losing out dominates everything else right now and every mini correction gets bought - until something unexpected happens.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

Re: Predicting Next Recession

#52

Post by throwawaymath »

scyclow wrote: post #46

These metrics are totally meaningless. If some metric claims that there is a 50% chance of recession in the next 12 months, I'd expect it to be right roughly half the time it makes that confident a claim. Similarly, I'd expect a recession one third of the time that the metric says 33%. The year leading into the Great Recession was mostly around 36%. One year before the 2001 recession it was 24%. And then we have spik…

> If some metric claims that there is a 50% chance of recession in the next 12 months, I'd expect it to be right roughly half the time it makes that confident a claim. Similarly, I'd expect a recession one third of the time that the metric says 33%.

What if the forecast is Bayesian rather than frequentist?

Re: Predicting Next Recession

#53

Post by ced »

zeeone wrote: post #41

Most modern recessions are caused by investor fear and panic. In March 2020, if Elizabeth Warren gets the democratic nomination, you can expect a medium to deep recession caused by her high tax plan and business-hostile policies. You can gauge this by the high number of put option contracts with March expiration being purchased, compared to all other months.

Link?

Re: Predicting Next Recession

#54

Post by xiphias2 »

michalu wrote: post #25

During the height of the bitcoin bubble I had my gym coach leave job and become "crypto investor" ... Katy Perry changed her nails to each look like one of the popular coins. And yes I did have an uber driver talk to me about crypto. The mainstream media were shilling Ripple at its highest price ever. Today, all the same people talk about coming recession. I was lucky to have my first job in finance during the credit…

The usual argument regarding the stock market crash is that even if it's coming, it's hard to predict when, and it's great investment long term even if it crashes temporarily.

At this point I think it just depends on what the central banks want, as they took control over stock market prices with the low interest rates.

Re: Predicting Next Recession

#55

Post by arminiusreturns »

I don't think it is as near or going to be as bad as some people think, but with caveats.

Listening to the guy who the big short was based on now, my main takeaway is that the banks deleveraged significantly since 07/08, down to ~11 vs ~30 then. Of course, part of the problem is they were using financial tricks to cover up bad assets... so I think they might be more leveraged than they are letting on.

Second, the legislation afterwards only really did one thing: make the "fix", aka fed bailout, automatic. This means there should be less time between drop and recovery. At the same time, it creates incentive for bankers to be more reckless.

Politically, midterms are always about the economy at heart. If Trump is serving Wall Street well enough they will try to keep him propped up for 2020, and would probably try to delay the big dip till either right after or till 2023/24.

https://econbrowser.com/archives/2019/06/recession-anxieties...

https://www.investmentwatchblog.com/rosenberg-on-lagged-effe...

Re: Predicting Next Recession

#56

Post by sprash »

Every crisis since 1929 has been manufactured. Just look at what the central bank(s) are doing and you get reliable results.

The current monetary system creates money in form of debt with interest which can only be paid by issuing even more debt.

As soon as the central banks pull the plug on liquidity (either by raising rates or fixing the balance sheet) you will have a cascade effect of bankruptcies which "clears out" all debt that could never be repaid in the first place.

Right now the central banks are increasing liquidity around the globe again hence the low probability of a recession.

Re: Predicting Next Recession

#57

Post by samsonradu »

puranjay wrote: post #33

Around the last recession, I had this distinct feeling: that this exuberance is a little too irrational. The press was constantly talking about how great the economy was, and people I knew around me were splurging on things they could in no way afford. I used to trade domain names at that time, mostly to fund my college. Everyone in my industry was talking about how the value of certain domains will 10x in the next 5…

This likely happens when the upcoming recession is brutal, which was the case in 2008. But if the recession is moderate it could be anticipated for.

I also believe that a moderate recession every decade is healthy, cleaning up the economical landscape of unproductive investments.

Re: Predicting Next Recession

#58

Post by swsieber »

aguyfromnb wrote: post #11
viburnum wrote: post #2

Most recessions are easy to predict because they’re intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work.

> intentionally triggered by central banks with the aim of controlling inflation by putting a lot of people out of work This is the top comment, while someone calling it a conspiracy theory is down-voted. That is sad. The Fed was founded in 1913. The US had recessions in 1785, 1789, 1796, 1802, 1807, 1812, 1815, 1822, 1825, 1828, 1833, 1836, 1839, 1845, 1847, 1853, 1857, 1860, 1865, 1869, 1873, 1882, 1887, 1890, 1893…

That's what i would expect from someone trying to kill the economy - prop it up for longer than normal, making the recessions greater than normal.

I'd compare it to forest fires. They should be frequent and small. Make them less frequent (via suppression), and they get a lot worse and much more dangerous.

Re: Predicting Next Recession

#59

Post by vladimirralev »

xiphias2 wrote: post #54
michalu wrote: post #25

During the height of the bitcoin bubble I had my gym coach leave job and become "crypto investor" ... Katy Perry changed her nails to each look like one of the popular coins. And yes I did have an uber driver talk to me about crypto. The mainstream media were shilling Ripple at its highest price ever. Today, all the same people talk about coming recession. I was lucky to have my first job in finance during the credit…

The usual argument regarding the stock market crash is that even if it's coming, it's hard to predict when, and it's great investment long term even if it crashes temporarily. At this point I think it just depends on what the central banks want, as they took control over stock market prices with the low interest rates.

> it's great investment long term even if it crashes temporarily.

That's not really true outside the US. And in fact it's not even true for the smaller cap stocks in the US. The Japanese stock market being the most cited foreign example of the opposite. Pretty much everywhere outside the US the stock market is very vulnerable. Odds are this will come to the US sooner or later.

They can QE forever to feed the demand, however it's on the whim of a few powerful people when and how some shortage will occur. Stocks grew 20% YoY with flat earnings in the last few years. Price discovery and market signals are dying, but they are dying for both directions up or down.

Many analysts expect asset prices and income inequality to be a major topic of debate this election and we don't know yet if Fed policy will be at the crosshairs. Either way social justice impulse will be stronger against the tech giants either thru cancel culture or outright riots.

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