Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

nytimes.com

Post reply on HN
Print view View original

71–80 of 289 posts

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#71

Post by mnctvanj »

zeveb wrote: post #39

I think it's nearly unarguable that the current market is irrational. The problem is the old adage that the market can remain irrational longer than you can remain solvent, and thus simply shorting it can result in short-term bankruptcy. Worse, there's a corollary that even trying to move your funds into lower-risk vehicles now can still lead to long-term losses vice keeping them in higher-risk investments now and mo…

In same boat. I've just been splitting my new investments between stock and cash and treat my cash as part of my diversification strategy (or a hedge against possible market peak). If a recession occurs, I'll hope it drops a lot, put my cash back in, and hope it comes back up. All those things have always happened (recession, recovery - not necessarily me timing a market bottom) so I feel ok about my cash. Whatever it loses in value to inflation should come back if I buy cheaper stocks during a market lull. Or so I tell myself.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#72

Post by rubicon33 »

yellowstuff wrote: post #57
ISL wrote: post #44

Earlier quoted context omitted.

The S&P on roughly that date was 1268. In the depths of the recession, it reached as low as 684.

Then a year after the lows it was back over 1200, and it's basically been straight up since then. Unless you timed things very accurately you were better off simply holding.

Housing markets in many areas didn't recover for 8+ years.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#73

Post by simonsarris »

People often note, like another comment here notes:

> since 1960 there has been a US economic recession once every 5 to 10 years. The last one ended in 2009, 9 years ago

This is an interesting line of thinking, but I think it's a mistake. We can use this fact itself and circumscribe some meta-thinking around it. Put the same fact another way, this is arguing that the 1960's started a brand new paradigm that was materially different from the 1950's-before.

For all we know, the 2020's+ will repeat the past (in a way) and usher in a paradigm different from the 1960's! No more recessions every 5-10 years.

So:

* Maybe from now on there will be a recession every 20 years

* Or Fed manipulation will get "so good" that we won't have large recessions

* Or capital's other options for returns (real estate, emerging markets, etc) will look bad-ish for the next 10 years and continue to prop up the stock market because its the only good outlet for extra cash for a decade or three

I could see any of these being plausible. I think leaning on the past is a bit of a mistake. Personally, I think the third one is quite possibly the case. Other non-stock-market options simply do not look as attractive as they used to, relatively.

The future will look very different from the past, as Thiel says.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#74

Post by timr »

codingdave wrote: post #64
yellowstuff wrote: post #57

Earlier quoted context omitted.

Then a year after the lows it was back over 1200, and it's basically been straight up since then. Unless you timed things very accurately you were better off simply holding.

Over the long run, that is always true. Just hold and grow, until you are within 10 years of retiring. Then move to a more conservative position.

"Over the long run, that is always true. Just hold and grow, until you are within 10 years of retiring."

No, it isn't. It's quite possible to lose money with a buy-and-hold strategy if you get unlucky, particularly if you aren't diversified. It's probably the most reliable way of investing, but you can still lose money. Stocks are not guaranteed to go up over all possible 50-year intervals.

Monte carlo simulations of S&P500 investments illustrate this:

https://seekingalpha.com/article/4109617-buy-hold-just-works...

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#75

Post by ISL »

yellowstuff wrote: post #57
ISL wrote: post #44

Earlier quoted context omitted.

The S&P on roughly that date was 1268. In the depths of the recession, it reached as low as 684.

Then a year after the lows it was back over 1200, and it's basically been straight up since then. Unless you timed things very accurately you were better off simply holding.

One could have bought again at 1100 and still reduced losses significantly.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#76

Post by tryptophan »

melling wrote: post #59
tryptophan wrote: post #54

Earlier quoted context omitted.

They don't. QE ended many years ago.

The unwind of QE is just getting started. It’ll be interesting to see the impact.

If anything, unwinding QE would raise long term rates.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#77

Post by Eridrus »

Analemma_ wrote: post #30
ameister14 wrote: post #22

https://www.bloomberg.com/news/articles/2018-05-14/fed-s-bul... David Kelly from JPMorgan and Bullard, the head of the Fed Reserve of St. Louis, say the yield curve going inverted doesn't mean that much because it's being manipulated by the Fed - that means it's broken as a measuring tool (still should be watched, though)

A Fed chairman is never going to say, "Yup, there's a recession coming": the incentives of their position don't permit it. So they will always come up with reasons why a signal with a previous 100% success rate doesn't mean much now, but in the end, it always amounts to "This time is different", aka, the four most expensive words in history.

Looking at the table, it's odd that only "inversions" are counted as predictions, and there seem to be far more cases where it got "close" to zero, but not quite there.

Without a good explanation on why that exact point is so critical, I am a bit skeptical that this is anything but noise.

If there is a good explanation of why it is critical, then we're not really in worrying territory yet either then, because we're not there yet, and we're in the zone of lots more false positives.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#78

Post by throwaway5752 »

The difference is that a powerful group of people is enacting policies that have triggered recession/depression in the past and no good historical precedent/academic support for working. It's seems kind of crazy to me we're ignoring that part.

We're starting trade wars on multiple fronts, exiting or weakening multilateral alliances (and simultaneous giving an advantage to our global adversaries), and weakening the balance sheet of the federal government (during a business cycle peak). Of course this is going to end terribly.

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#79

Post by darkerside »

Nokinside wrote: post #47
cal5k wrote: post #42

An article from 2005 with the same prediction: http://money.cnn.com/2005/12/27/news/economy/inverted_yield_... The recession didn't happen until 2-3 years after that, making me question the utility of such predictions. "A recession will happen - eventually" is about as useful as predicting your own eventual demise.

Predicting recession reliably 2-3 years in advance with 2 year window would be really good indicator.

DOW 2005: ~10,000 DOW 2007: ~13,000 DOW 2009: ~8,000 DOW 2009 (later): ~10,000 DOW 2011: ~12,500

A 2 year window of precision is completely useless

Re: ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention

#80

Post by Bartweiss »

mtgx wrote: post #50
cal5k wrote: post #42

An article from 2005 with the same prediction: http://money.cnn.com/2005/12/27/news/economy/inverted_yield_... The recession didn't happen until 2-3 years after that, making me question the utility of such predictions. "A recession will happen - eventually" is about as useful as predicting your own eventual demise.

I think that's mostly irrelevant. 2-3 years prediction would actually be quite good. If you have large investments, 2-3 years would give you a good heads-up for what to do with them before the recession arrives. The reason I say that point is irrelevant is because what matters most is the signs that a recession is about to happen. Once you have the signs, you pretty much know the recession is inevitable, given the fa…

2-3 years is a great prediction if that's a stable window. But if the range is 0-3+ years, it's not clear how much benefit there is. The average growth cycle has been 4.7 years since WWII, so blindly predicting recession within the next 3 years will pan out ~60% of the time.

I guess a solid 0-3 prediction would still allow aggressive positions outside that window, and caution or shorting as you come up towards 3 years since the prediction. But precisely because that would be so effective for investors, I assume it can't be that consistent a signal.

Post reply on HN