Recession on the horizon?

Water Cooler Investing
#61

if you’re a passive investor and believe the market is perfectly efficient, you’re required to forfeit your charter. just sayin.

i’d rather try to make calls and potentially be far ahead of the pack than mosey along with the rest of the investing robozombies.

#62

Please MLA, don’t take my precious charter away. good luck reading hussman and predicting the future

#63

thank you very much. good luck investing without taking valuation into consideration.

#64

If I may interject, it seems like people are always confusing fundamental analysis with predicting the future.

These are two separate things. Fundamental analysis said subprime was wack as early as 2003, that the USG was bankrupt by 2006, and that US stocks have been crazy-valued for years. I keep that compartmentalized, completely separate from short/medium term forecasts. An analysis of fundamentals is not a forecast, unless the analyst adds that part at the end (which I generally don’t).

I like Marks, Schiff, and some other names for their insightful analysis. BUT, when they start placing dates on events that’s when I roll my eyes, nobody knows that. Probably the media game, makes headlines to make bold calls, people gotta make a living.

#65

https://www.washingtonpost.com/business/economy/beware-the-mother-of-all-credit-bubbles/2018/06/08/940f467c-69af-11e8-9e38-24e693b38637_story.html?noredirect=on&utm_term=.658d1408d7bc

mb pa was a lil early with his call

#66

some very early indicators are starting to appear but nothing conclusive. market is usually down 10-20% before you get a conclusive signal though. italian bond and EU bank stress could be a very early signal. too early to tell, as that’s the thing.

#67

Stocks are usually the best leading indicator, so I don’t know if it is feasible to predict a decline before it happens, other than just through luck. In the mean time, guessing too soon means you miss out on a 10% to 20% rally.

#68

there are certain early signals, mostly related to credit growth, but yeah, nothing is certain. many fakeouts.

#69

the TV in my elevator this morning said yield curves could invert soon. Which means we have to seriously raise short term rates??

fake news?

#70

I doubt the Fed will allow the yield curve to invert. The 2y rate expectation has like 4-5 more rate hikes assumed. Powell and friends can easily cancel half of those.

#71

lol? why not?

when everything is heating up, the fed applies teh brakes by raising short term rates. thus causing an inverted yield curve. the long term rates are less volatile and is affected by the overall market.

now is a good time as any. skirttttt

the 2 10 is 43 bps lol. 2 rate hikes this shit is already flat/slighlty ivnerted assuming each rate hike is 25 bps

the 10 30 is 14 bps. that’s 1 rate hike.

#72

That’s weird. The TV in my elevator said the yield curve wasn’t going to invert soon. My elevator’s TV is usually right about this kind of stuff…

#73

i wouldn’t trust the yield curve as a leading indicator this cycle given it is so damn manipulated. it could still end up being an early indicator but who knows. one quarterly negative gdp print + continued credit contraction is usually a surefire way of predicting a recession early. seeing as that seems to be a little while off, a slight inversion of the yield curve now would likely not be conclusive.

#74

Okay, but what if the market itself inverts the yield curve?

#75

I don’t really pay much attention to economic metrics, everyone has these (and so many are fabricated by the USG).

In Q4 2007 it was easier, we had specific events on a known bubble (Bear funds implosion, 5yr ARM resets). I’m still waiting for some specific trigger this time hoping I’ll know it when I see it, but maybe there won’t be one (just death of the bull by old age). In hindsight we will see the REAL economic numbers were signaling/mirroring such. Tough game.

#76

well yea it sort of both happens. fed raises/forces short term rates up. and overall market which feels the breaks and slows down has flight to safety. so more people pile on bonds lowering rates further. but since fed is forcing rates up, you’ll get inverted yield curve.

#77

possible but not conclusive. a short-term correction causing the yield curve to invert does not a recession make. currently banks are pulling back on lending to the consumer (auto loans, credit cards) but are still lending to corps at a healthy rate. if businesses are getting more and more capital lent to them, they’re not pulling back hiring intentions or other business spending.

#78

Okay, so now we have a trigger event defined.

  1. It’s only a matter of hours before US pulls the tariffs trigger (Trump says they will).
  2. If so, there’s almost 100% probability CN pulls trigger on return-fire tariffs.
  3. US says they will then do 10X tariffs.
  4. CN says they will then target S&P500 giants, destroy demand for American products with nationalism, limit treasury buying, etc.

It’s late bull market, fragile high-valuations, and the above chain of events would almost certainly bring a recession. And there’s no way figure-head Trump could be allowed to do step #1, without sign-off from corporate America. The unusual growing consensus is important, and signals to me the US knows there is a gust of wind in the S/T that could blow down their house of cards, so now (too late), they desperately react. So this is definitely on my radar now (unless Trump backs out in next 24hrs).

Am long SPX puts. :+1:

#79

Ouch. Thanks for time stamping that.

#80

So, you’re predicting Armageddon? Because those options (the expirations I checked at least) are ANYTHING but cheap.