Recession - Are We There Yet?

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Interestingly enough, Nobel prize winning economist Robert Schiller said that the yield inversion is typically a strong indicator for a recession but that it needs to have staying power, and the yield inversions so far have been brief.

Ironically, what may tip is into a downturn is the public panic emanating from the brief yield inversions…!

“A lot of what happens with the markets is a “self-fulfilling prophecy,” Shiller adds. "I hear so much talk about a market correction, it might make it happen”

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See when you look at all the indicators from employment, lay offs, store closures etc I genuinely believe we are already in a recession, it’s just not “official”.

I was listening to a podcast with Raoul Pal at the weekend and, don’t quote me exactly, but he was saying certain companies had been using their pension funds for share buy backs to prop up the market. And when the sh*t hits the fan the consequences are going to frightening.

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Which recessionary indicators are investors watching?
In short, the bond markets.

Historically, the inversion of the US yield curve might have been an accurate predictor of recession — but it is impossible to predict when any slump might actually happen.

(FT - https://www.ft.com/content/952d9c50-c405-11e9-a8e9-296ca66511c9 )

The more optimistic investors argue that banks are better capitalised than they were ahead of the last downturn. The more pessimistic believe the extended length of the current economic cycle means any potential recession could be more drawn-out than we have previously seen.

FOMO:

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To be honest from the first graph it looks like the recession comes after it’s uninverted and it’s on the way back up

No not yet, consumer confidence is still high and the unemployment rate is still low. As soon as the unemployment rate starts creeping up combined the the worldwide economic slowdown and USA’s trade war then we will be. ES1816Fig2_rev_20180601094851

The reports from companies this quarter was mixed as soon as they start missing targets they will slowdown their recruitment process or even start letting people go. People who don’t have a job won’t spend much, resulting in companies revenue decreasing even further.

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US consumer brands reporting great results and continuing demand.

I think there’s a danger of talking ourselves into a recession. But even then it will likely be short and shallow.

Well it all comes down to the US voter. If trump hadn’t been elected, we would not even talk about a possible global recession right now.
The trade war costs everyone dearly. No winners.

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Damn that democracy, letting people vote what a terrible world we live in

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The trade war needs to happen in my opinion. China has not been trading fairly, market access is restricted there and they steal IP.

If you look at Trumps potential opposition, minus maybe Biden, I think they are all going to continue and perhaps intensify the trade war.

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Well, that’s not a very helpful comment.
And nobody in the democratic nomination pool would further the trade war. That’s nonsensical.

The methods used by the Trump administration are dumb, which is the consesus of all economic scholars. China and the US have both massively profited from their interdependency, your view is incorrect.

Aside from some good :fishing_pole_and_fish: .

One google search confirms the above that the Democrats have previously supported China tariffs to protect US jobs. The fact that Trump has done it means they can’t be seen to support it despite the over arching aim matching theirs (implementation is very different). I’ll reserve judgement on my views being incorrect.

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It wouldn’t surprise me. Trump has already cause all stocks to fall that day wiping everyone’s profit and now today he’s doing it again :unamused::unamused::unamused:.

Whether someone wants to buy stocks during a bear market (or a recession) or a bull market (or a :beer: goggles market), if you’re in it for the long run, Buffett’s advice to invest in businesses not stocks is an interesting one:

"It’s exactly the same way as if you were going to buy a farm a few miles here outside of Omaha. You would not get a price on it every day, and you wouldn’t ask, you know, whether the yield was a little above expectation this year or down a little bit.

"You’d look at what the farm was going to produce over time. You’d look at expected yields. You’d look at expected prices, the taxes, the cost of fertilizer, and you would evaluate the intelligence of your purchase based on what the farm produced relative to your purchase price.

"Quotes would have nothing to do with it. That’s exactly the way we look at stocks. We look at them as businesses. We make judgments about what the future of those businesses will be. And if we’re right about – in those judgments, the stocks will take care of themselves."

Source - https://finance.yahoo.com/news/warren-buffetts-advice-investing-recession-175948627.html

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Quite interesting, though it may not be linked:

Corporate insiders have sold an average of $600 million of stock per day in August, according to TrimTabs Investment Research, which tracks stock market liquidity.

“It signals a lack of confidence,” said Winston Chua, an analyst at TrimTabs. “When insiders sell, it’s a sign they believe valuations are high and it’s a good time to be outside the market.”

But Nicholas Colas, co-founder of DataTrek Research, noted insider selling is not always a helpful indicator at a high level. Rather than reflecting a lack of confidence, he said, the selling may simply be the result of insiders bracing for leaner compensation.

“Most managers get paid on earnings growth. If they anticipate bonuses will be slower, they will sell stock to make up the gap,” Colas said. “It’s one more sign that managements know this will be a tough year for growing earnings.”

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October 31st. Could the Market really be suspended by government for a week following this date?

That seems very unfair to regular investors.

Maybe it’s the confirmation bias but this is also interesting:

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Ok so now we next it’s for next week :face_with_monocle:

Decision trees, ML, bear markets, training and test data… this article did its homework on AI :books:

The thing though is that this time it might be different :ghost: Past != future

Still could be true :woozy_face:

The machine-learning model reckons there’s now an 84% chance of a bear market sweeping U.S. corporate debt within the next year. That’s the highest level since before the financial crisis and “a validation” of HSBC’s mildly bearish view, according to strategists


HSBC trained its model with four decades of data, from 1950 to 1989, then tested it on data from 1990 onward. It accurately predicted five of the last six credit bear markets with a lead time of between seven and 16 months.

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https://www.bloomberg.com/amp/news/articles/2019-09-18/the-credit-robot-at-hsbc-says-odds-of-a-bear-market-are-now-84

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