What are some of the signs in terms of economics / financial markets that you think are giving us indications that another recession will come?
Also in what time frame?
What are some of the signs in terms of economics / financial markets that you think are giving us indications that another recession will come?
- EVIO Labs / Other anon1212more@opc123 great post. My thoughts exactly student and healthcare debt is driving the wedge between have and have nots. And yes, US has been spending decades protecting fossil fuel interests. When 20-30 years from now that will lose all relevance. It ties into the global warming argument too. I humans find a way to correct imbalances even if it takes a long time. We’ve begun reforesting Europe, we reversed ozone depletion, we corrected the industrial revolution smog, we cleaned up polluted rivers, and I think we will slow global warming.
That said, the US as superpower will also go away. As a nation we’ve gotten complacent. While we still have great entrepreneurs, Asia will dominate the next century. I saw that clearly at the Beijing olympics opening ceremony. They are a force of population and driveJun 23 2
- New / IT OPC123moreFrom the Trump thread since it was such a cluster...
The next recession is on the way and deliverable in two major markets: oil and gas industries and the various overpriced industries Americans subscribe to (education, Healthcare being the big ones)
Oil and gas: the Chinese government has for many decades, been focusing its efforts toward ensuring control of the African continent and other regions with high levels of rare earth minerals mines (lithium, nickel, cadmium, etc) while the US Military Industrial Complex, lacking vision, has placed all its bets on oil and gas...
China, now in control of nearly 100% of the supply chain and 100% of the manufacturing of lithium batteries for its own fleets is converting at a VERY low cost and high rate to battery powered vehicles to reduce both emissions and dependence on foreign oil. By 2020 they will no long import any US Oil and only a small amount from Russia and opec. (with no fear of pressure)
As this demand is decreased the American oil and gas companies are going to fill the pinch fastest and hardest. Our gas prices are going way down, way fast but it's going to shock many refineries into closing.. Oil and gas will become impossible to be a sustainable living. (and i know that sounds crazy, but these cycles happen frequently in the industry, just not to this scale).
The cost of education and health care is just eventually going to break so many of us that it causes mini recessions and if we don't repair it now we're fkd.
Long story short: we've invested in the wrong wars. We killed the wrong brown people for the wrong crap in the ground and the other empire got it right so the game is probably over because we will be reliant now upon China for so much of our needs that the position of rattling the cage won't be an option whatsoever.
And this recession is one that we can say is easily 75 years or more in the making.Jun 23 0
- New / Eng SharmaG@opc193 A lot of your observations are meaningful. It is true that China has been a lot more resourceful than the US and that the US squandered a lot of it's opportunities. The period from the collapse of the Soviet Union till about 2025 can be characterized as the time of true US global dominance. US could have really solidified it's long term future if it had recognized this position and the opportunity that comes with it. Fareed Zakaria has a nice summary of this stance: https://www.foreignaffairs.com/articles/2019-06-11/self-destruction-american-power
But I think that you are going too far in saying that the US will be reliant on China. US needs to reinvigorate it's tech industry and invest more in AI and related autonomous technologies that will help it compete with billions of people in the world. It cannot be dominant without that kind of non-linear technologies built into the economy. I believe that the US is woken up to the need for such a direction. It really depends on the execution going forward. That execution path includes a STEM focused education and rebuilding all the industries in a technology-focused way. Time will tell if that will really happen.Jun 24 1
- Wrong. Borrowers prefer free money 😀, who wouldn't?
But the borrowers don't decide the interest they pay, the lenders do. And why would you give a ten year loan when a two-year loan pays your more interest and there is less duration risk?
If your still disagree, would you be so kind as to lend me some money?
- Long term rates are closely following 10y treasuries, which is down, making longer term loans cheaper. There are plenty of willing lenders to lend at long term rates, as shown by ok strength of the housing market. Of course lenders need longer term rates to be higher for better NIM, but they don't stop lending, as long as they make money.
- Google come2daddyProblem of correct prediction is everyone knows and takes corrective actions. This delays the recession.
Recession is technically 2 back to back quarters of negative GDP growth. But this is post facto.
To predict , yield curve is one of the most consistent indicator. This is difference of rate of interest for short term vs long term borrowings.
Business Sentiment is another indicator. There are many institutions which run periodic sentiment check. This can predict recession before it happens.
Job market conditions. Every job market boom is followed by a recession. Once everyone is hired and hiring becomes costly/very hard, businesses start to shrink.
Apart from these, large banks and governments build recession models in an attempt to predict . Here is one example from New York fed: https://www.newyorkfed.org/medialibrary/media/research/capital_markets/Prob_Rec.pdf
If it was only up to the markets without government intervening, recession would have long come. But Fed bank cutting rates is delaying the inevitable.
- Snapchat snapper1No one knows. People who guess right make a shitload of money and don't tell anybody else
- Google __human__That's not completely true.
People who guess right have an incentive to tell after they're fully into their position, since sharing their reasoning could help the bubble deflate earlier and get their positioned closed sooner, and holding big shorts for a long time is expensive.Jun 17 23
- Google ugHc25I created a machine learning model using TensorFlow to predict such an event based on the last 50 years of stock market performance and financial data. Each time I run it it comes back with 403 (April 3?) It just won't tell me the year.
- Microsoft Robot2Agreed!
Low interest and corporate buy backs are still there. Once interest rates go up, the cooperations will start sell off, cut backs and lay offs will follow. So as long as the federal reserve plays ball, recession will be delayed.
Truthfully, this is not how capitalism should work. This is more of a socialist economy and was Obama Project...When government regulates markets.
- I think there's something to be said about the fact that Keynesian economics can sort of find a way for surplus production to be used and achieve gains through scale and stability. However it's a very dangerous tool since everyone has the short term incentive to just keep borrowing and printing money.
The fed kept QE and low rates too long, and the federal government used up all its budget for potential stimulus, so now our economy is highly unstable.Jun 17 5
- Netflix mr.clippyReagans economy was also Keynesian. Spent an insane amount of money pumping up the Cold War machine, which was an economic stimulus.
It faded like many Keynesian efforts, with additional tax hikes and massive debt.
Keynesian works better when money is spent in areas that have a ROI, like world class infrastructure and education, or NASA. Don’t discount all the tech born out of the space race that led to lots of commercial innovation.
Governments are better ran like Amazon, specifically investing in growth, than short term tax cuts that fizzle out eventually and leave behind a boat load of debt.
Or just stay out of market manipulation entirely. But I’m sure no sane person wanted the feds to let the last recession just play itself out. We’d be fucked.Jun 17 8
- Micro Focus foolmeoneIf California remains part of the United States we will see a recession.
- I think we have been in uncharted territory for awhile. The fed is willing to use dramatic levers to manipulate the economy, historically low interest rates are the new norm, and there seems to be consensus that the national debt can grow much higher and no one cares. so it’s very hard to say what will happen in the next few years.
- Services are 70% of the economy. If you were to factor in all economic activity that has minimal linkage to China, it would probably be 85%+. The net effect of a China trade war is more expensive plastic shit, and consumption of that will simply fall and people will adapt more sustainable lifestyles. The trade war is not that big of a deal for us, and it may even be a good thing for the environment.
- The problem is the economy is very sensitive to rate increases since it's so leveraged from loose monetary policy, and the inflation rate without a rate increase is already at 2% target. 0.5%-1% is the projection for inflation for 25% tariffs on all Chinese goods, that could make the fed finally push us over the edge.
By the way, there is a big services surplus to China.
- Tariff driven inflation is a one time hit and then diminishes as supply chains adjust, so I think the Fed would take that into account. It will be interesting to see if The wealthy Chinese stop visiting and sending their kids to school here. Probably will be impacted to a degree, but doesn’t seem likely to stop unless tensions really ratchet up.
- Chinese tourism and students are decreasing, but I think that has a much more localized impact (namely on universities and big city retail).
I'm not sure how the fed thinks about these things. The research reports I read suggest the full tariff impact will continue for over a year. So if inflation is slightly higher than the target for a few quarters, it's possible the fed won't do anything.
What's certain is that corporate earnings are going to tank. I'm short stocks, and I hope I made the right call. The tariffs don't have enough impact on the Chinese economy either to force a deal, so I think escalation is inevitable.
- I've heard many people say over the years that raised rates will trigger a recession because too many companies have bad debt and are dependent on cheap financing.
There's a clear catalyst for higher rates now, which is the trade war, as it can speed up inflation substantially.
- Shorting in this environment is high risk due to geopolitical climate. Economic slowdown is a slow process and yet markets will have a fomo rally if trade issues are resolved.
Personally im long as i think the election will force trump to get a deal done so that he can start polling better. This is coupled with the feds cutting rates which delays the slowdown due to global trade reduction.
- Expedia nchangmanThe last one was caused by high interest rates on mortgage backed securities. The next will be caused by high interest rates on credit card backed securities. So when you see a hike in interest rates on bonds, and other packaged securities, that is a red flag. It is so luring to investors. Don’t buy mortgage backed, credit card backed or any form of packaged securities. Save your money in the bank and make low interest instead of pursuing high interest securities. TMoney has a 4% interest rate on your check account . At least they are a FDIC bank, I’d rather make the 4% interest than risk it on clumsy securities
- Apple public2.These are good investments for emergency account not for the bulk of your actual long term investing. There are other safer investments such as mutual funds and indexes that has much higher rates. Sure, eventually the market always goes down and no one can predict it but it always goes up too, so just continue playing the game until you need the money.
- Tableau pvDk82Orion makes you do deposits and use the card 8 times per month. That's obnoxious, what if I travel abroad use it only 7 times? Do you lose status for a year? I'd gladly take 3% and no bullshit, just take my money and go make more money like every other bank. Synchrony does this but only at 2.4%
- Amazon ThickmanThe real question is what does the fed do when the recession hits? Going back to quantitative easing or 0 interest won't solve the problem as them doing that caused this problem. So you'll have inflation building up from all the spending in the last decade + recession = stagflation.
- Printing money does not couse inflation by itself. Try to deeply understand M*v=P*Q. Just pumping up M (monetary base) will not cause increase in P price (or Q neither) if velocity slows down. What we experienced during this brilliant QT move is that the super extra big surplus in M highly differentiated places (sectors, regions etc) with high Q (economical throughput) and low Q where the v (velocity of money exchange) was already quite high, thus it created a significant price pressure (and you can choose your poision from the dry startup investment to the nba teams through real-estate or simple cleaning services) everywhere else the v went down, and they experience some economical growth but it is supressed compared to the overall cost or investment from the fed. This feeds the huge acquisition trends, startup beanbag culture, etc... And just think about how insane is that the fed prints out the money thay eventually pumps up real estate prices through a chineese investor in paris in an environment where yields are lower than amortization (so the properties are empty), or there are countries who went bankrupt 6 times in the last 50 years and their 8-9% bonds are auctioned with 100% success...crazy times we live in.
- fyi fed is just opening for rate cut today. this bull could drag on even longer.
with all the debts and deficit the next crash could be really bad.
- Intuit 7htio98The fed messed up a bit but average people don’t understand so it’s possible we get a rally on lower interest rates. The market could go up to stupid levels enticing you lot to stay in and/or go in bigger. This speculative rally will end badly as they all do. I think the data on inverted yield curves is 70% of the time recession follows... but 18 months on average post the inversion. Check out the dot com bubble for example... market exploded after the yield curve inverted but we know what happened later.
Regardless, the fed got hawkish and with QT and slowly raising rates to historically weak levels still we saw how quick things started to puke. Now they know so they ended QT and are backing off rates but smart money sees where we are at now.
Trade wars are a side show. All that really matters is the fed.
- I fully agree. They overpumped the monetary base. Throuput weighted inflation measures please, and it would be obvious in their brilliant inflation targeting framework. Now they desperatley try to find a way to get rid of the access, and they fail miserably as the modern money making mechanism that assumes that the trees grows to the sky and it does not have good recipie to remove the access. As it will try to survive it may do immense damage.
- the fed DID NOT "mess up". I hear these people talking like that and it drives me crazy. The fed behaves like Dr. Frankenstein, trying to keep the economy alive FAR LONGER than it should when the death of a natural economic cycle is long overdue. Think of the economy like a woman's period. If you try to deny it with super absorbent tampons, the woman goes into toxic shock and sometimes dies (1929). This is how the fed is trying to manage the economy right now - with super absorbent interest rates. It's natural to have a sharp recession every 3-4 years. When a heart beats regularly (not fractally, which is its normal behavior) for 3 months chance of death is 400%. Well, the fed is trying to make the economy beat regularly for 10 years, chance of economic death is now 400%.Jun 28 0