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Predicting Next Recession

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Re: Predicting Next Recession

#71

Post by scyclow »

throwawaymath wrote: post #52
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?

It's fine if the underlying model is Bayensian, but if you're going to present a time series graph then those past numbers don't mean a whole lot. Why not adjust the past data to be frequentist at that point?

Re: Predicting Next Recession

#72

Post by H8crilA »

hogFeast wrote: post #31
H8crilA wrote: post #3

Earlier quoted context omitted.

Those are actually somewhat rare. US in the late 70s with Paul Volker and the famous British Pound short by Soros which interrupted the government chocking off the economy with high interest rates, broke the pound and saved the UK from a recession. Do you have more prominent examples? It's usually policy error in the other direction - keeping easy money for too long. I.e. you don't handle a catastrophe by fixing the…

It happened in 1958 (it may have been '56, my memory is poor), and 1920-1. In the case of the Fed, the last central banker to take this approach was Martin in the 1960s ("leaning against the wind")...and his legacy ended up being inflation. You are basically correct but these factors are essentially structural. For example: is the central bank independent from the govt? How much oversight is there over policy decisio…

They wanted high rates because ERM was the main policy goal of the prime minister. Super high rates were also choking the economy. It was a choice between ERM and easier recession, and the breakage of the pound forced them to no ERM and easier recession. The bundesbank was the one to put the final nail in the UK Euro coffin.

Also, this is not about the FED being dependent or independent from the government. This is about the widespread idiocy of thinking that expensive assets = well-being of the country. Dotcom and 2008 (and today, but let's wait for it to burst first) are all FED's pedal-to-the-metal work.

Re: Predicting Next Recession

#73

Post by viburnum »

ur-whale wrote: post #5
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.

That sounds like a conspiracy theory. Also, I fail to see how this theory applies to the recession of '08.

I said most. Occasionally there are bank crises (like in 2008).

This isn’t a big secret, it’s right there in FOMC meeting notes. Google Greenspan and punch bowl. Google Kalecki and politic aspects of full employment.

Re: Predicting Next Recession

#74

Post by H8crilA »

xiphias2 wrote: post #62
vladimirralev wrote: post #59

Earlier quoted context omitted.

> 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,…

You’re right, I’m in the gold / silver / Bitcoin believer minority, I don’t see any other safe place for my money long term, as I believe that those are the only things that can’t be manipulated easily long term.

Gold is a leveraged bet on negative yielding bonds these days: https://www.youtube.com/watch?v=lYNCpWo7Ucg

It is "manipulated" to the same extent as anything else.

Re: Predicting Next Recession

#75

Post by xiphias2 »

H8crilA wrote: post #74
xiphias2 wrote: post #62

Earlier quoted context omitted.

You’re right, I’m in the gold / silver / Bitcoin believer minority, I don’t see any other safe place for my money long term, as I believe that those are the only things that can’t be manipulated easily long term.

Gold is a leveraged bet on negative yielding bonds these days: https://www.youtube.com/watch?v=lYNCpWo7Ucg It is "manipulated" to the same extent as anything else.

As cash is too easy to print, I would still prefer to look at gold/SNP500 ratio, gold/house price or other gold/stock ratios (even though you're right about the correlation between gold price and inverse bond yields).

Of course as technology is getting faster and creating more value, and people are moving to cities, it's hard to get a correct valuation, but still gold seems undervalued compared to these other asset classes.

Re: Predicting Next Recession

#76

Post by H8crilA »

xiphias2 wrote: post #75
H8crilA wrote: post #74

Earlier quoted context omitted.

Gold is a leveraged bet on negative yielding bonds these days: https://www.youtube.com/watch?v=lYNCpWo7Ucg It is "manipulated" to the same extent as anything else.

As cash is too easy to print, I would still prefer to look at gold/SNP500 ratio, gold/house price or other gold/stock ratios (even though you're right about the correlation between gold price and inverse bond yields). Of course as technology is getting faster and creating more value, and people are moving to cities, it's hard to get a correct valuation, but still gold seems undervalued compared to these other asset c…

I agree.

Re: Predicting Next Recession

#77

Post by beatgammit »

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.

Would that result in a spike if Trump looks like he'll win the general election?

Re: Predicting Next Recession

#78

Post by zeeone »

beatgammit wrote: post #77
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.

Would that result in a spike if Trump looks like he'll win the general election?

Yes. As it already did in 2016.

Re: Predicting Next Recession

#80

Post by hogFeast »

H8crilA wrote: post #72
hogFeast wrote: post #31

Earlier quoted context omitted.

It happened in 1958 (it may have been '56, my memory is poor), and 1920-1. In the case of the Fed, the last central banker to take this approach was Martin in the 1960s ("leaning against the wind")...and his legacy ended up being inflation. You are basically correct but these factors are essentially structural. For example: is the central bank independent from the govt? How much oversight is there over policy decisio…

They wanted high rates because ERM was the main policy goal of the prime minister. Super high rates were also choking the economy. It was a choice between ERM and easier recession, and the breakage of the pound forced them to no ERM and easier recession. The bundesbank was the one to put the final nail in the UK Euro coffin. Also, this is not about the FED being dependent or independent from the government. This is a…

> They wanted high rates because ERM was the main policy goal of the prime minister.

Again: no they didn't. They didn't "want" high rates. You understand how dependent the Conservatives were on home owners and the structure of UK mortgages?

The reason ERM was the main policy goal of Major was inflation. The Bundesbank was the immediate cause but the reason they got into that position was inflation (if you read the research, even the die-hard Lawson fans believe that the ERM set the stage for the 1990s).

Yes, the nature of the relationship between the central bank and the govt determines the response to those events. Do you realize that there have been substantial changes in this relationship since the Fed was created? The Fed is politically unable to respond. I don't understand the relevance of your point about expensive assets...that determines nothing, the market will go up and down regardless of anything.

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