6 ms·

Predicting recession reliably 2-3 years in advance with 2 year window would be really good indicator.

darkerside 8y ago
DOW 2005: ~10,000 DOW 2007: ~13,000 DOW 2009: ~8,000 DOW 2009 (later): ~10,000 DOW 2011: ~12,500 A 2 year window of precision is completely useless
- wokky 8y ago
  The stock market is not the economy.
  - Judgmentality 8y ago
    How do you propose to measure economic health?
    - aaavl2821 8y ago
      https://ig.ft.com/sites/numbers/economies/us https://ig.ft.com/sites/numbers/economies/us
    - bunderbunder 8y ago
      Economic health in general? GDP misses some important details, but it's a much better measure than simply looking at the share prices (not even the market caps) of a small selection of companies operating in a specific sliver of the economy that was very important 100 years ago, but represents a declining fraction of overall US productivity.
      - criddell 8y ago
        GDP is awful as well. Median wages, labor participation rates, access to education and health care, etc... are all more interesting measures. If the economy is only working well for the top 20%, then it's not a very good economy no matter what the GDP and stock market says.
    - wokky 8y ago
      The phrase "economic health" looks odder to me the longer I ponder it. "The economy" isn't a living creature, so the phrase is a metaphor, and different people are likely to have very different ways of interpreting it, according to their own interests and concerns. A hedge fund manager, a real estate magnate, and an unemployed single parent will have very different ideas about what is important for "economic health." You could probably do worse than to start with actual human health, though. Even if your goal is something narrow, like the opportunity to personally accumulate money through speculation, a high average level of human health is a great foundation for that kind of growth. Of course, if you accept all that, the news is again very ominous.
    - maxsilver 8y ago
      I'm not an economist, but: One way might be to measure average incomes against cost of living. The economy is healthy if the majority of incomes are going up faster than the costs of living are. Another might be the percentage of adults who are collecting incomes, based against the average of incomes. (Effectively, a more accurate unemployment figure). Another way might be to measure the average amount of savings individuals hold. Or, their assets, excluding homes and automobiles. --- I would propose that the stock market is probably the worst way to measure economic health. Because the vast majority of the population owns no stock themselves but must be customers of these companies, so the vast majority of the population only suffers when stocks price changes for any reason (both when it goes up, and when it goes down).
  - darkerside 8y ago
    I didn't say it was. I'm just searching for any kind of value from predicting a recession with such a coarse grained level of precision. I think it's a ridiculous claim.
- WhompingWindows 8y ago
  The DOW is a very poor indicator of the economy, it's just 30 "chosen" companies that somehow represent the whole US market. You're talking about precision and you use one of the most derided economic metrics.
  - addicted 8y ago
    Also the DOW constantly drops underperforming companies and replaces them with better ones. Further it would be interesting to see the Dow ex Apple.
  - darkerside 8y ago
    You're not wrong about that, but I don't think it disproves my point at all. What value exactly are you going to get from predicting recessions within a two year window?
    - Latteland 8y ago
      It does kind of poke a whole in your argument because the dow drops companies that aren't growing. So when it actually down there's a tremendous change. Otherwise they drop companies that are hurting, like ge.
    - fullshark 8y ago
      A lot of people don’t even have 3-4 month expense savings in case they lose their jobs. Knowing a recession is coming at some point in next 4 years would help them.
      - null000 8y ago
        A pretty significant portion of those people lack savings for reasons other than choice (and I'd wager a significant portion of those who do lack savings because they just can't be bothered probably won't bother if there maybe might be a recession eventually, probably perpetually convincing themselves they can just put money into savings later)
      - vowelless 8y ago

DOW 2005: ~10,000 DOW 2007: ~13,000 DOW 2009: ~8,000 DOW 2009 (later): ~10,000 DOW 2011: ~12,500 A 2 year window of precision is completely useless

wokky 8y ago
The stock market is not the economy.
- Judgmentality 8y ago
  How do you propose to measure economic health?
  - aaavl2821 8y ago
    https://ig.ft.com/sites/numbers/economies/us https://ig.ft.com/sites/numbers/economies/us
  - bunderbunder 8y ago
    Economic health in general? GDP misses some important details, but it's a much better measure than simply looking at the share prices (not even the market caps) of a small selection of companies operating in a specific sliver of the economy that was very important 100 years ago, but represents a declining fraction of overall US productivity.
    - criddell 8y ago
      GDP is awful as well. Median wages, labor participation rates, access to education and health care, etc... are all more interesting measures. If the economy is only working well for the top 20%, then it's not a very good economy no matter what the GDP and stock market says.
  - wokky 8y ago
    The phrase "economic health" looks odder to me the longer I ponder it. "The economy" isn't a living creature, so the phrase is a metaphor, and different people are likely to have very different ways of interpreting it, according to their own interests and concerns. A hedge fund manager, a real estate magnate, and an unemployed single parent will have very different ideas about what is important for "economic health." You could probably do worse than to start with actual human health, though. Even if your goal is something narrow, like the opportunity to personally accumulate money through speculation, a high average level of human health is a great foundation for that kind of growth. Of course, if you accept all that, the news is again very ominous.
  - maxsilver 8y ago
    I'm not an economist, but: One way might be to measure average incomes against cost of living. The economy is healthy if the majority of incomes are going up faster than the costs of living are. Another might be the percentage of adults who are collecting incomes, based against the average of incomes. (Effectively, a more accurate unemployment figure). Another way might be to measure the average amount of savings individuals hold. Or, their assets, excluding homes and automobiles. --- I would propose that the stock market is probably the worst way to measure economic health. Because the vast majority of the population owns no stock themselves but must be customers of these companies, so the vast majority of the population only suffers when stocks price changes for any reason (both when it goes up, and when it goes down).
- darkerside 8y ago
  I didn't say it was. I'm just searching for any kind of value from predicting a recession with such a coarse grained level of precision. I think it's a ridiculous claim.
WhompingWindows 8y ago
The DOW is a very poor indicator of the economy, it's just 30 "chosen" companies that somehow represent the whole US market. You're talking about precision and you use one of the most derided economic metrics.
- addicted 8y ago
  Also the DOW constantly drops underperforming companies and replaces them with better ones. Further it would be interesting to see the Dow ex Apple.
- darkerside 8y ago
  You're not wrong about that, but I don't think it disproves my point at all. What value exactly are you going to get from predicting recessions within a two year window?
  - Latteland 8y ago
    It does kind of poke a whole in your argument because the dow drops companies that aren't growing. So when it actually down there's a tremendous change. Otherwise they drop companies that are hurting, like ge.
  - fullshark 8y ago
    A lot of people don’t even have 3-4 month expense savings in case they lose their jobs. Knowing a recession is coming at some point in next 4 years would help them.
    - null000 8y ago
      A pretty significant portion of those people lack savings for reasons other than choice (and I'd wager a significant portion of those who do lack savings because they just can't be bothered probably won't bother if there maybe might be a recession eventually, probably perpetually convincing themselves they can just put money into savings later)
    - vowelless 8y ago