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While saying "it's around the corner" isn't terribly useful, hosts of indicators such as incoming increases in interest rates and stagnating wages support the e

While saying "it's around the corner" isn't terribly useful, hosts of indicators such as incoming increases in interest rates and stagnating wages support the expectation, and these warning signs have increased over the last two years.

toomuchtodo 8y ago
FedEx just posted a terrible quarter and oil just dropped below $50/barrel. To your point, lots of macro indicators [1] flashing red right now that a slowdown is in progressive. I’d bet money (already have technically with SPX puts) that when you look back 6 months from now (the only way to properly asceetain when a recession has started), you’ll see it’s started. These IPOs are too late. [1] https://reddit.com/r/investing/comments/a66a1g/_/ebsgrmv/?context=1 https://reddit.com/r/investing/comments/a66a1g/_/ebsgrmv/?co...
- slededit 8y ago
  The US is doing great. The rest of the world not so much. It’s really been the story of this recovery since the end of the Great Recession. The US went for Keneysian stimulus and Europe went for austerity. The results have been unambiguous.
  - konschubert 8y ago
    I may be confused, but doesn't the European Central Bank have a zero percent interest rate set at the moment? Isn't that a Keynesian stimulus?
    - slededit 8y ago
      In addition to negative rates, the US gave out money in every way they could, including "helicopter" money - just sending everyone a check. And they did it quickly with immediate impact. Europe let the crises drag on for years, with questions about whether Greece, Portgual and Ireland would even stay in the euro. 0% now is much too little, far too late.
      - fbonetti 8y ago
        Wow, you weren't kidding. The Fed dropped the funds rate down to nearly zero by December 2008.[1] It took the European Central Bank until June 2014 to bring their interest rate down to the same level.[2] They even had a couple rate hikes in the interim. [1] https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS [2] https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
  - how_many_times 8y ago
    >> The US is doing great. The rest of the world not so much. These are going to be famous last words. The US is going to be doing horribly over the next decade, precisely because of how "great" the last decade has been. If I borrowed (or pseudo-borrowed a.k.a "printed money" because of reserve currency status) a trillion dollars and enjoyed a commensurate lifestyle, neither my awesome lifestyle nor the fact that there have been a lot of suckers to sponsor it is any indication of what the future will hold. Soon, US will not be able to borrow any more money and sustain its quality of life. Potential lenders will spurn them: "Why, so you can borrow the money to sponsor your lavish lifestyle, and then turn around and conduct trade wars and actual wars with us? No thank you!" China will probably do worse, because its greatest borrower, and source of economic prosperity, is going to massively default. In comparison, this correction will mean the rest of the world is probably going do better, unless they foolishly allow themselves to be dragged into a war which one of these countries will almost certainly start as a last resort to placate any internal discontent.
    - learc83 8y ago
      The US debt load isn't particularly high, the ability to print money isn't directly tied to reserve currency status, and selling US debt doesn't work in the way your comment suggests that it does.
      - JoeAltmaier 8y ago
        Apparently its second-worst in the world or something? Right behind Italy. https://www.newsmax.com/finance/economy/us-debt-italy-imf/2018/04/18/id/855278/ https://www.newsmax.com/finance/economy/us-debt-italy-imf/20...
        learc83 8y ago
        It's not the 2nd worst in the world, it's not behind Italy, and it's below historic highs.
nostrademons 8y ago
Wages are hardly stagnating - by the numbers, they hit a 9-year high last month [1], and anecdotally, I'm finally hearing non-tech people saying "Dude, just find another job and get a big raise." The unemployment rate is lower than it's been since Nixon took office. [2][3] Interest rates are a bit worrisome - historically the Fed has a tendency to overshoot and cause a recession, and do so 2-3 years after the rate hikes go through. If they didn't hike at all, we'd end up with the mother of all bubbles, though. To learc83's point - the last time I can remember when people didn't think a recession was imminent was 1998-2000, when everybody was talking about the "New Economy" and how profits didn't matter anymore and insane stock valuations would be justified by productivity increases going forward. That was a helluva bubble. Then from 2001-2003 we actually were in recession, 2004-2007 smart money was predicting the coming CDO/housing/hedge fund crash, 2008-2009 the crash happened, 2010-2011 everyone was talking about a double-dip, 2011-2014 was the "jobless recovery" and talk about how the sectors that were destroyed in 2009 were permanently dead and tech was the one bright spot in the economy, 2014-2015 was the seed funding/delivery startup/sharing economy bubble, 2015-2016 was a tech slowdown as that bubble popped, and 2017-2018 was all about how Trump was about to ruin the economy (hasn't happened yet, who knows about later?). In the process, we've had bubbles in dot-coms, housing, derivatives, hedge funds, Web 2.0 startups, mobile apps, accelerators, delivery startups, West Coast real estate, and cryptocurrencies, all of which have amounted to a large transfer of wealth from those who followed the news to those who make the news. [1] https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?panel=1 https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?pan... [2] http://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx http://www.ncsl.org/research/labor-and-employment/national-e... [3] https://www.thebalance.com/unemployment-rate-by-year-3305506 https://www.thebalance.com/unemployment-rate-by-year-3305506
- monocasa 8y ago
  A nine year high: ie. they still haven't fully recovered since the last recession. And your source doesn't doesnt appear to take into account CPI increases over the same period.
  - nostrademons 8y ago
EGreg 8y ago
Not for nothing, but why can’t the Fed just keep the base interest rates low forever? Inflation doesn’t seem to go up very much at all. It seems almost as if the FED by raising interest rates creates the very credit crunch that it later helps alleviate. Has anyone run models of what happens if the Fed just keeps the interest rates low forever and lets the market price each loan?
- mschuster91 8y ago
  > Not for nothing, but why can’t the Fed just keep the base interest rates low forever? Low interest rates are basically propping up the finance industry. The cheap money that banks can borrow from the Fed is not going to end up at yours truly, it will only end up in investment shenanigans. In addition, low interest rates also kill savings for poor(er) people - this is something that's a real problem in the European Union right now. Banks offer their customers sometimes negative rates on their savings, and no "conventional" savings accounts hit even inflation percentages which means both poor people and "rich-ish" (=not poor, not rich enough to be able to risk money on the stock markets, but rich enough that their banks charge negative interest) effectively lose money.
  - lbotos 8y ago
    I didn't think negative rates hit "consumer" accounts yet? Just Government issued bonds and "institutional" instruments. But my data is about ~18 months old.
- JoHawth31 8y ago
  Ray Dalio has a really cool book about this. I'm just starting it myself but I think it would help explain a lot of the questions in this thread. He has a FREE pdf which you can download to any eReader, or you can buy the hardcopy. You can find it here: https://www.principles.com/big-debt-crises/ https://www.principles.com/big-debt-crises/ The short of it is interest rates are a tool used by the Fed to attempt to control the rate at which people and institutions take on debt. Too much debt = recession. Too little debt = recession. I'm greatly oversimplifying here but Ray does a fantastic job explaining things. If anyone wants to dig in deep I highly, highly recommend you read this book.

toomuchtodo 8y ago

FedEx just posted a terrible quarter and oil just dropped below $50/barrel. To your point, lots of macro indicators [1] flashing red right now that a slowdown is in progressive. I’d bet money (already have technically with SPX puts) that when you look back 6 months from now (the only way to properly asceetain when a recession has started), you’ll see it’s started. These IPOs are too late. [1] https://reddit.com/r/investing/comments/a66a1g/_/ebsgrmv/?context=1 https://reddit.com/r/investing/comments/a66a1g/_/ebsgrmv/?co...

slededit 8y ago
The US is doing great. The rest of the world not so much. It’s really been the story of this recovery since the end of the Great Recession. The US went for Keneysian stimulus and Europe went for austerity. The results have been unambiguous.
- konschubert 8y ago
  I may be confused, but doesn't the European Central Bank have a zero percent interest rate set at the moment? Isn't that a Keynesian stimulus?
  - slededit 8y ago
    In addition to negative rates, the US gave out money in every way they could, including "helicopter" money - just sending everyone a check. And they did it quickly with immediate impact. Europe let the crises drag on for years, with questions about whether Greece, Portgual and Ireland would even stay in the euro. 0% now is much too little, far too late.
    - fbonetti 8y ago
      Wow, you weren't kidding. The Fed dropped the funds rate down to nearly zero by December 2008.[1] It took the European Central Bank until June 2014 to bring their interest rate down to the same level.[2] They even had a couple rate hikes in the interim. [1] https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS [2] https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
- how_many_times 8y ago
  >> The US is doing great. The rest of the world not so much. These are going to be famous last words. The US is going to be doing horribly over the next decade, precisely because of how "great" the last decade has been. If I borrowed (or pseudo-borrowed a.k.a "printed money" because of reserve currency status) a trillion dollars and enjoyed a commensurate lifestyle, neither my awesome lifestyle nor the fact that there have been a lot of suckers to sponsor it is any indication of what the future will hold. Soon, US will not be able to borrow any more money and sustain its quality of life. Potential lenders will spurn them: "Why, so you can borrow the money to sponsor your lavish lifestyle, and then turn around and conduct trade wars and actual wars with us? No thank you!" China will probably do worse, because its greatest borrower, and source of economic prosperity, is going to massively default. In comparison, this correction will mean the rest of the world is probably going do better, unless they foolishly allow themselves to be dragged into a war which one of these countries will almost certainly start as a last resort to placate any internal discontent.
  - learc83 8y ago
    The US debt load isn't particularly high, the ability to print money isn't directly tied to reserve currency status, and selling US debt doesn't work in the way your comment suggests that it does.
    - JoeAltmaier 8y ago
      Apparently its second-worst in the world or something? Right behind Italy. https://www.newsmax.com/finance/economy/us-debt-italy-imf/2018/04/18/id/855278/ https://www.newsmax.com/finance/economy/us-debt-italy-imf/20...
      - learc83 8y ago
        It's not the 2nd worst in the world, it's not behind Italy, and it's below historic highs.

nostrademons 8y ago

Wages are hardly stagnating - by the numbers, they hit a 9-year high last month [1], and anecdotally, I'm finally hearing non-tech people saying "Dude, just find another job and get a big raise." The unemployment rate is lower than it's been since Nixon took office. [2][3] Interest rates are a bit worrisome - historically the Fed has a tendency to overshoot and cause a recession, and do so 2-3 years after the rate hikes go through. If they didn't hike at all, we'd end up with the mother of all bubbles, though. To learc83's point - the last time I can remember when people didn't think a recession was imminent was 1998-2000, when everybody was talking about the "New Economy" and how profits didn't matter anymore and insane stock valuations would be justified by productivity increases going forward. That was a helluva bubble. Then from 2001-2003 we actually were in recession, 2004-2007 smart money was predicting the coming CDO/housing/hedge fund crash, 2008-2009 the crash happened, 2010-2011 everyone was talking about a double-dip, 2011-2014 was the "jobless recovery" and talk about how the sectors that were destroyed in 2009 were permanently dead and tech was the one bright spot in the economy, 2014-2015 was the seed funding/delivery startup/sharing economy bubble, 2015-2016 was a tech slowdown as that bubble popped, and 2017-2018 was all about how Trump was about to ruin the economy (hasn't happened yet, who knows about later?). In the process, we've had bubbles in dot-coms, housing, derivatives, hedge funds, Web 2.0 startups, mobile apps, accelerators, delivery startups, West Coast real estate, and cryptocurrencies, all of which have amounted to a large transfer of wealth from those who followed the news to those who make the news. [1] https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?panel=1 https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?pan... [2] http://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx http://www.ncsl.org/research/labor-and-employment/national-e... [3] https://www.thebalance.com/unemployment-rate-by-year-3305506 https://www.thebalance.com/unemployment-rate-by-year-3305506

monocasa 8y ago
A nine year high: ie. they still haven't fully recovered since the last recession. And your source doesn't doesnt appear to take into account CPI increases over the same period.
- nostrademons 8y ago

EGreg 8y ago

Not for nothing, but why can’t the Fed just keep the base interest rates low forever? Inflation doesn’t seem to go up very much at all. It seems almost as if the FED by raising interest rates creates the very credit crunch that it later helps alleviate. Has anyone run models of what happens if the Fed just keeps the interest rates low forever and lets the market price each loan?

mschuster91 8y ago
> Not for nothing, but why can’t the Fed just keep the base interest rates low forever? Low interest rates are basically propping up the finance industry. The cheap money that banks can borrow from the Fed is not going to end up at yours truly, it will only end up in investment shenanigans. In addition, low interest rates also kill savings for poor(er) people - this is something that's a real problem in the European Union right now. Banks offer their customers sometimes negative rates on their savings, and no "conventional" savings accounts hit even inflation percentages which means both poor people and "rich-ish" (=not poor, not rich enough to be able to risk money on the stock markets, but rich enough that their banks charge negative interest) effectively lose money.
- lbotos 8y ago
  I didn't think negative rates hit "consumer" accounts yet? Just Government issued bonds and "institutional" instruments. But my data is about ~18 months old.
JoHawth31 8y ago
Ray Dalio has a really cool book about this. I'm just starting it myself but I think it would help explain a lot of the questions in this thread. He has a FREE pdf which you can download to any eReader, or you can buy the hardcopy. You can find it here: https://www.principles.com/big-debt-crises/ https://www.principles.com/big-debt-crises/ The short of it is interest rates are a tool used by the Fed to attempt to control the rate at which people and institutions take on debt. Too much debt = recession. Too little debt = recession. I'm greatly oversimplifying here but Ray does a fantastic job explaining things. If anyone wants to dig in deep I highly, highly recommend you read this book.