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> Signs all point to a recession in one to two years. People have been saying this for the past 7 years.

by dtehranian 8y ago

jedberg 8y ago
Maybe, but people who actually know what they're talking about have only been saying it recently.
- stefanmichael 8y ago
  > citation needed
  - repsilat 8y ago
    A year ago the markets zeitgeist was "synchronised global growth". Then it was "narrowing term spread on bond yields". Now it's "China and European growth slowdown" and "US Q1 earnings softness". Getting off the news headlines, market prices for the last couple of years were broadly consistent with Fed interest rate projections -- slow but consistent rate raises last year and in 2017. That is no longer the case. Now the Fed has backed off the pace of raises and is (IIRC) projecting zero or one for the rest of the year, and markets are projecting rate cuts for the first time in a long time. If people think the Fed will need to cut rates, it's because they think inflation will be down, likely due to lower wage pressures from a softer labour market etc. Other things: some market indicators have "gotten better". P/E multiples and similar metrics were historically high and have trended down (both due to price drops and earnings increases.) Blame interest rates rising last year IMO, why wouldn't ratios be high when rates are low? They're still high, but not worryingly so. TBH I don't give much thought to the Chicken Littles. Maybe we'll have a technical recession this year or next, maybe due to trade, maybe due to China or Germany, but for the moment I think people in the markets broadly agree that things are long-run pretty healthy. Famous last words, I guess.
- quickthrower2 8y ago
  What's the trigger?
  - neom 8y ago
    Pension, student and auto debt, I'd guess.
    - toomuchtodo 8y ago
      Unlikely, either because of guarantees (student) or too small (auto loans). It’ll be the corporate bond market getting spooked, and a crunch when anyone running on cheap debt can’t service or refi it without default.
      - gaadd33 8y ago
        US auto loans have a total of 1.1 trillion outstanding, writing that off wouldn't affect the markets at all or increase the cost of debt?
        toomuchtodo 8y ago
        That collateral is easily repo’d and disposed of. Think Rent A Center. The margins on the vehicles being sold make up for estimated losses.
        neom 8y ago
        https://www.pionline.com/article/20181101/ONLINE/181109968/list-of-struggling-multiemployer-plans-grows-in-2018 https://www.pionline.com/article/20181101/ONLINE/181109968/l... https://www.mercatus.org/bridge/commentary/pension-crisis-you-may-not-know-about-yet https://www.mercatus.org/bridge/commentary/pension-crisis-yo... https://www.bloomberg.com/news/articles/2018-10-17/the-student-loan-debt-crisis-is-about-to-get-worse https://www.bloomberg.com/news/articles/2018-10-17/the-stude... https://www.citylab.com/transportation/2019/02/subprime-car-loans-buy-automobile-lending-debt-trap/582652/ https://www.citylab.com/transportation/2019/02/subprime-car-... I think multiple sectors of underfunded pension, student debt and auto debt all coalescing at once is the problem, not any one of them individually. You're also negating that folks defaulting, massively hinders their ability to move in the financial system. And yes, you can put cars back into the system the same way you can put houses back into the system, but it doesn't matter if no one wants cars.
donkeyd 8y ago
They're bound to be right some time though, as always.

> Signs all point to a recession in one to two years. People have been saying this for the past 7 years.

jedberg 8y ago

Maybe, but people who actually know what they're talking about have only been saying it recently.

stefanmichael 8y ago
> citation needed
- repsilat 8y ago
  A year ago the markets zeitgeist was "synchronised global growth". Then it was "narrowing term spread on bond yields". Now it's "China and European growth slowdown" and "US Q1 earnings softness". Getting off the news headlines, market prices for the last couple of years were broadly consistent with Fed interest rate projections -- slow but consistent rate raises last year and in 2017. That is no longer the case. Now the Fed has backed off the pace of raises and is (IIRC) projecting zero or one for the rest of the year, and markets are projecting rate cuts for the first time in a long time. If people think the Fed will need to cut rates, it's because they think inflation will be down, likely due to lower wage pressures from a softer labour market etc. Other things: some market indicators have "gotten better". P/E multiples and similar metrics were historically high and have trended down (both due to price drops and earnings increases.) Blame interest rates rising last year IMO, why wouldn't ratios be high when rates are low? They're still high, but not worryingly so. TBH I don't give much thought to the Chicken Littles. Maybe we'll have a technical recession this year or next, maybe due to trade, maybe due to China or Germany, but for the moment I think people in the markets broadly agree that things are long-run pretty healthy. Famous last words, I guess.
quickthrower2 8y ago
What's the trigger?
- neom 8y ago
  Pension, student and auto debt, I'd guess.
  - toomuchtodo 8y ago
    Unlikely, either because of guarantees (student) or too small (auto loans). It’ll be the corporate bond market getting spooked, and a crunch when anyone running on cheap debt can’t service or refi it without default.
    - gaadd33 8y ago
      US auto loans have a total of 1.1 trillion outstanding, writing that off wouldn't affect the markets at all or increase the cost of debt?
      - toomuchtodo 8y ago
        That collateral is easily repo’d and disposed of. Think Rent A Center. The margins on the vehicles being sold make up for estimated losses.
        neom 8y ago
        https://www.pionline.com/article/20181101/ONLINE/181109968/list-of-struggling-multiemployer-plans-grows-in-2018 https://www.pionline.com/article/20181101/ONLINE/181109968/l... https://www.mercatus.org/bridge/commentary/pension-crisis-you-may-not-know-about-yet https://www.mercatus.org/bridge/commentary/pension-crisis-yo... https://www.bloomberg.com/news/articles/2018-10-17/the-student-loan-debt-crisis-is-about-to-get-worse https://www.bloomberg.com/news/articles/2018-10-17/the-stude... https://www.citylab.com/transportation/2019/02/subprime-car-loans-buy-automobile-lending-debt-trap/582652/ https://www.citylab.com/transportation/2019/02/subprime-car-... I think multiple sectors of underfunded pension, student debt and auto debt all coalescing at once is the problem, not any one of them individually. You're also negating that folks defaulting, massively hinders their ability to move in the financial system. And yes, you can put cars back into the system the same way you can put houses back into the system, but it doesn't matter if no one wants cars.

donkeyd 8y ago

They're bound to be right some time though, as always.