Double Dip ... Y/N ?

WSY? I’m optimistic … N for me.

Definitely not.


There won’t be a double dip in the true sense of the word but we are headed back down…

say yes to volatility and speculation until we know how the europe thing will play out.

Europe will double dip until Germany decides to grow up and learn how economics really works. For the US the jury is still out but I would say probably no double dip just based on where large discretionary purchases are and in looking at previous large temporary hits to consumer sentiment (1987 crash, Hurricane Katrina, etc). The stock market influences the economy though so the sell-off could be self-fulfilling.

You rang?

DoubleDip Wrote: ------------------------------------------------------- > You rang? hahaha I think we WILL have a double dip.

Yes if: - Euro zone fails to set up Euro Bonds or something similarly solid system of joint guarantees. AND - I see inventory to increase, especially given the higher productivity figures but poor sentiment. While I cannot find much correlation in sentiment and GDP, I believe the recent equity losses depressed purchasing power of retirees as I think many US retirees hold stock. This in combination with low general sentiment should destroy consumer purchase figures. OR - US politicians fail to raise taxes and post pone spending cuts to 2014 with a mechanism to limit future governments to reduce the cuts and taxes, and in addition they or the Fed kick start some fiscal or monetary support. No if: - We get Euro Bonds AND - Equity markets recover FAST -> sentiment increases -> more goods get purchased -> inventory does not increase significantly OR - US politicians do the right thing to debt (see above) and fiscal and/or monetary stimulus is agreed

Yes…sooner rather than later.

So we’re speaking using 2 quarters of negative GDP as the deciding factor? Not sure if we’ll actually get that. I’m 50/50. But, I think practically speaking, it’s safe to say we’re already there.

yes but only if you are sure no one is looking

I wonder how much time has to pass before the next recession is not considered a double dip. Officially, the last recession ended in June 2009 according to the National Bureau of Economic Research.

If you are talking the economy: no Stock market: who knows?

You bet! Europe was screwed since day EU was created. Get ready for a wave of defaults and the eventual disintegration of the EU. The sooner that happens the faster we will be able to start the recovery.

I say no… Yield curve is too steep (for now!)

Are you kidding? It is only a matter of time before people really cut down on spending because taxes will be raised and/or federal, state, and local budgets are drastically (or property taxes are raised, or state employees wages are cut, etc, etc, etc). This will have a severe impact on the economy. If the Tea Party has its way, we will not raise ANY taxes and will make large budgets cuts, which will lead to less money in people’s pockets and increased fear. DOW at 8,800 by Xmass

they really need to start restructuring all this bad debt instead of rolling it over.

The yield curve says no, but how can the yield curve possibly invert with 2 years yielding 20 bps? I think the yield curve can’t be trusted to tell you about a recession right now. It’s flattened which is about as close to inverting as one can get. I don’t have the data to do a real yield comparison, but if you subtract the TIPS breakeven spread from the nominal treasury yield, you might get an inverted yield curve. Hey, maybe that’s a blog piece for the weekend. I actually have a feeling we might squeak by without a contraction, but it almost doesn’t matter. To most people it might as well be a recession, even if the numbers say theres a tiny bit of growth. I heard on Bloomberg Surveillance (BBG radio) that revenues seem to be contracting across the board, and that seems like a pretty good recession indicator. So it looks like we’re going to have one, or we will barely miss. If we werent’ going into one before, I suspect that all the market volatility is making people scared for their jobs, and the natural thing to do in that situation is delever and save, which isn’t exactly expansionary. Fiscal stimulus is pretty much running out and there’s little prospect of more. Monetary stimulus might happen, but this is really just pushing on a string. Yeah, so it’s bad. On the other hand, a 15-20% drop in the stock market might be enough to deal with recession. If Europe’s banks don’t freeze up, I could see stocks being a decent value here. Unfortunately, if Europe’s banks do have runs on them, then we could be down another 15-20%. I’m just pulling those numbers out of the air here, but it would be a Lehmanesque moment. But I don’t think it’s quite as bad as Lehman, because policy makers must have at least thought through scenarios by now. In 2008, the crisis came and no one had even really thought about what to do.

OK actually, the treasury has the yields up online (no big surprise there) Here’s what happened to the yield curve just this month. These are real yield curve rates Date 01-Aug-11 19-Aug-11 5 yr -0.75 -0.8 7 yr -0.21 -0.45 10 yr 0.33 0.02 20 yr 1.09 0.62 30 yr 1.34 0.95 And compared to July 1st (about 7 weeks ago) Date 01-Jul-11 19-Aug-11 5 yr -0.25 -0.8 7 yr 0.32 -0.45 10 yr 0.77 0.02 20 yr 1.47 0.62 30 yr 1.77 0.95 The yield curve has flattened since Aug 1st, and it’s shifted down parallel about 55 bps since Jul 1st. Interesting… I don’t look at the yield curve data all that often. Clearly I need to do it more.