Author Topic: Next Recession is already here  (Read 5952 times)

vand

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Next Recession is already here
« on: March 12, 2020, 02:23:33 AM »
It may or may not have needed the CoronaVirus pin to prick the bubble, but the markets are now moving to price in a recession officially starting this time next year.

The betting market odds have gone from 57% last time I looked to 73% this morning.

In reality, as the official figures are always revised backward, it may well be that the recession has already begun

Buckle down.. whatever happens the next few years is likely to be a bumpier ride than the last few

elysianfields

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Re: Next Recession is already here
« Reply #1 on: March 12, 2020, 08:34:13 AM »
The layoffs have started as well: The First U. S. Layoffs from the Pandemic Are Here

vand

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Re: Next Recession is already here
« Reply #2 on: March 16, 2020, 07:33:50 AM »
Markets now put the chances of 2020 recession at 78%.

Basically, we're already in recession.

Paper Chaser

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Re: Next Recession is already here
« Reply #3 on: March 16, 2020, 11:09:31 AM »
Segments of the economy have been in recession for a year already, everything else is just now catching up:

https://www.businessinsider.com/trucking-truck-drivers-job-loss-september-2019-10

vand

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Re: Next Recession is already here
« Reply #4 on: March 16, 2020, 11:49:13 AM »
Segments of the economy have been in recession for a year already, everything else is just now catching up:

https://www.businessinsider.com/trucking-truck-drivers-job-loss-september-2019-10


I'm sure that the NF Payroll numbers will start to show job losses mounting in the next few set of published figures, which could coincide with another leg down in the markets.


LoanShark

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Re: Next Recession is already here
« Reply #5 on: March 16, 2020, 01:20:59 PM »
100%...no way this hasn't pushed us there already.

Schaefer Light

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Re: Next Recession is already here
« Reply #6 on: March 16, 2020, 03:26:30 PM »
Technically, a recession is 2 consecutive quarters of negative economic growth.  I don't think we've had a single negative quarter yet (though it seems likely that this quarter would be given the impact of coronavirus), so the earliest we would know if we were in a recession would be sometime this summer.

Buffaloski Boris

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Re: Next Recession is already here
« Reply #7 on: March 16, 2020, 05:27:34 PM »
A depression is technically a 10% drop in real GDP.  Several places will be closed for weeks.  I wonder if we hit that milestone? 

vand

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Re: Next Recession is already here
« Reply #8 on: March 16, 2020, 06:22:30 PM »
Technically, a recession is 2 consecutive quarters of negative economic growth.  I don't think we've had a single negative quarter yet (though it seems likely that this quarter would be given the impact of coronavirus), so the earliest we would know if we were in a recession would be sometime this summer.

Yes, correct.

My thinking is that a sharp contraction will have begun last month, and even if we do get a bit of a dead cat bounce in Q2 the Q1 figures will be buoyed by a relatively normal first 6 weeks or so, which would be enough for the aggregate activity of the first 3 months to be greater than the that of the following 3 months, hence recession official when the set of Q2 figures is released. But by then I think it will be painfully obvious that we have been in contraction for a few months, just from a wave of profit warnings and unemployment spike.

vand

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Re: Next Recession is already here
« Reply #9 on: March 21, 2020, 02:52:10 AM »
FWWI The recession odds are now trading at 90% probability.

I think everyone has accepted that it's a slam dunk now, given how fast everything has gone into lockdown and the shock to private business activity.


Next question is, what is the shape of this downturn going to look like? The best case scenario which everyone (and I include myself) seems to be clinging on is a very sharp initial drop in macros aggregates, but a quick bottoming and eventual bounceback as the unprecedented stimulus measures preserve production capacity during the period where the virus runs its course.

So Q3 would seem the earliest time where we could expect activity to begin turning up.. what say ye?

Buffaloski Boris

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Re: Next Recession is already here
« Reply #10 on: March 21, 2020, 06:29:00 AM »

Next question is, what is the shape of this downturn going to look like? The best case scenario which everyone (and I include myself) seems to be clinging on is a very sharp initial drop in macros aggregates, but a quick bottoming and eventual bounceback as the unprecedented stimulus measures preserve production capacity during the period where the virus runs its course.

So Q3 would seem the earliest time where we could expect activity to begin turning up.. what say ye?

We're shutting down industrial economies across the world. As in  A 10% drop or more drop in real GDP is I think a foregone conclusion.

While it seems most people are expecting a V shaped crash and recovery, I don't see why. If we put a helluva lot of people out of work, and we are, then that's going to change behavior.  People are going to minimize expenditures, as they should, and focus on what they need to survive.  That has a ripple effect across the economy.  Some of those unemployed were already at the margins of employability and are not going to be re-employed.  Then there will be the effects of the pestilence itself.  Some are going to have significant health issues even if the pestilence doesn't kill them. They may or may not be employable.  And then we're going to have the emotional fallout of a lot of sad people.

I do see plenty of silver in very dark clouds here.  Unfortunately, a lightning fast economic recovery isn't one of them.     

former player

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Re: Next Recession is already here
« Reply #11 on: March 21, 2020, 07:37:55 AM »

Next question is, what is the shape of this downturn going to look like? The best case scenario which everyone (and I include myself) seems to be clinging on is a very sharp initial drop in macros aggregates, but a quick bottoming and eventual bounceback as the unprecedented stimulus measures preserve production capacity during the period where the virus runs its course.

So Q3 would seem the earliest time where we could expect activity to begin turning up.. what say ye?

We're shutting down industrial economies across the world. As in  A 10% drop or more drop in real GDP is I think a foregone conclusion.

While it seems most people are expecting a V shaped crash and recovery, I don't see why. If we put a helluva lot of people out of work, and we are, then that's going to change behavior.  People are going to minimize expenditures, as they should, and focus on what they need to survive.  That has a ripple effect across the economy.  Some of those unemployed were already at the margins of employability and are not going to be re-employed.  Then there will be the effects of the pestilence itself.  Some are going to have significant health issues even if the pestilence doesn't kill them. They may or may not be employable.  And then we're going to have the emotional fallout of a lot of sad people.

I do see plenty of silver in very dark clouds here.  Unfortunately, a lightning fast economic recovery isn't one of them.   
I hadn't previously thought of this, but a minimisation of expenses in today's economy will have a much bigger overall depressive effect than it would have at any time in the past because so much more income has been going to frivolities rather than necessities.  That could mean that recovery to early 2020 levels of economic activity might take a very long time indeed.

sherr

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Re: Next Recession is already here
« Reply #12 on: March 21, 2020, 07:46:26 AM »
Technically, a recession is 2 consecutive quarters of negative economic growth.  I don't think we've had a single negative quarter yet (though it seems likely that this quarter would be given the impact of coronavirus), so the earliest we would know if we were in a recession would be sometime this summer.

The NBER, which is what officially declares recessions in the US, does not actually agree with this definition. Probably precisely because by definition the "recession" would always lag the actual economic conditions by half a year, which is not the most useful thing. They are looking for "a significant decline in economic activity lasting more than a few months". Depending on how confident they are that we're in that situation they could potentially declare we're in a recession tomorrow.

vand

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Re: Next Recession is already here
« Reply #13 on: March 21, 2020, 08:22:03 AM »

Next question is, what is the shape of this downturn going to look like? The best case scenario which everyone (and I include myself) seems to be clinging on is a very sharp initial drop in macros aggregates, but a quick bottoming and eventual bounceback as the unprecedented stimulus measures preserve production capacity during the period where the virus runs its course.

So Q3 would seem the earliest time where we could expect activity to begin turning up.. what say ye?

We're shutting down industrial economies across the world. As in  A 10% drop or more drop in real GDP is I think a foregone conclusion.

While it seems most people are expecting a V shaped crash and recovery, I don't see why. If we put a helluva lot of people out of work, and we are, then that's going to change behavior.  People are going to minimize expenditures, as they should, and focus on what they need to survive.  That has a ripple effect across the economy.  Some of those unemployed were already at the margins of employability and are not going to be re-employed.  Then there will be the effects of the pestilence itself.  Some are going to have significant health issues even if the pestilence doesn't kill them. They may or may not be employable.  And then we're going to have the emotional fallout of a lot of sad people.

I do see plenty of silver in very dark clouds here.  Unfortunately, a lightning fast economic recovery isn't one of them.   

I honestly don't think it's going to be that terrible. The ceasure of economic activity has been largely driven by governments understandable desire to prioritize the spread of the virus, but at some point the lockdown will cause more problems that it solves.

Additionally the drop in private activity will somewhat be offset by the huge increase in stimulus packages.

And lastly, while the real-life drop off has been headspinningly fast, the way the government calculates these things they always apply some smoothing algorithms so numbers-wise it looks like a best-fit moving average rather than a sudden crash.

Buffaloski Boris

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Re: Next Recession is already here
« Reply #14 on: March 21, 2020, 09:06:21 AM »

Next question is, what is the shape of this downturn going to look like? The best case scenario which everyone (and I include myself) seems to be clinging on is a very sharp initial drop in macros aggregates, but a quick bottoming and eventual bounceback as the unprecedented stimulus measures preserve production capacity during the period where the virus runs its course.

So Q3 would seem the earliest time where we could expect activity to begin turning up.. what say ye?

We're shutting down industrial economies across the world. As in  A 10% drop or more drop in real GDP is I think a foregone conclusion.

While it seems most people are expecting a V shaped crash and recovery, I don't see why. If we put a helluva lot of people out of work, and we are, then that's going to change behavior.  People are going to minimize expenditures, as they should, and focus on what they need to survive.  That has a ripple effect across the economy.  Some of those unemployed were already at the margins of employability and are not going to be re-employed.  Then there will be the effects of the pestilence itself.  Some are going to have significant health issues even if the pestilence doesn't kill them. They may or may not be employable.  And then we're going to have the emotional fallout of a lot of sad people.

I do see plenty of silver in very dark clouds here.  Unfortunately, a lightning fast economic recovery isn't one of them.   

I honestly don't think it's going to be that terrible. The ceasure of economic activity has been largely driven by governments understandable desire to prioritize the spread of the virus, but at some point the lockdown will cause more problems that it solves.

Additionally the drop in private activity will somewhat be offset by the huge increase in stimulus packages.

And lastly, while the real-life drop off has been headspinningly fast, the way the government calculates these things they always apply some smoothing algorithms so numbers-wise it looks like a best-fit moving average rather than a sudden crash.

One of the problemsat least in the US is the elimination of a lot of small businesses.  They're the ones that generate the jobs.  They're hemorrhaging cash.  Once those shut down, I expect a great many not to open back up.  That was a huge issue with the GFC.  You have to have entrepreneurs ready and willing to put their time and capital at risk.  It takes awhile to persuade folks to do that even if they have the wherewithal and it took a good long time after 2008-2009 for that to happen. A lot of this is psychological.  If you have a business fail due to this, are you going to ready and raring to open another?  Probably not.  At least for awhile. 

Fiscal stimulus only goes so far.  You have to have people who are willing to take the risk of keeping a business open notwithstanding the risk that their government may shut them down due to national emergency.

What I think could be done, but I don't anticipate, is for vast de-regulation of equities markets so that very small businesses could "go public" open with Other People's Money and not have to put so much of their own resources at risk. I just don't see it happening.  The watch words in politics and regulation are "an abundance of caution."  Well, this "abundance of caution" and avoidance of any risk on the part of politics and bureaucracies is murdering us.           

Schaefer Light

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Re: Next Recession is already here
« Reply #15 on: March 21, 2020, 09:15:18 AM »
Technically, a recession is 2 consecutive quarters of negative economic growth.  I don't think we've had a single negative quarter yet (though it seems likely that this quarter would be given the impact of coronavirus), so the earliest we would know if we were in a recession would be sometime this summer.

The NBER, which is what officially declares recessions in the US, does not actually agree with this definition. Probably precisely because by definition the "recession" would always lag the actual economic conditions by half a year, which is not the most useful thing. They are looking for "a significant decline in economic activity lasting more than a few months". Depending on how confident they are that we're in that situation they could potentially declare we're in a recession tomorrow.
That definition is too subjective for my tastes.

John Galt incarnate!

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Re: Next Recession is already here
« Reply #16 on: March 21, 2020, 09:42:14 AM »
A depression is technically a 10% drop in real GDP.  Several places will be closed for weeks.  I wonder if we hit that milestone?



The economy will be in an economic depression  if the 10%  drop persists for   ~1 year or more.

It does appear that a depression-level contraction of GDP is in the offing (the next quarter or two).

dividendman

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Re: Next Recession is already here
« Reply #17 on: March 21, 2020, 09:51:48 AM »
A depression is technically a 10% drop in real GDP.  Several places will be closed for weeks.  I wonder if we hit that milestone?

The economy will be in an economic depression  if the 10%  drop persists for   ~1 year or more.

It does appear that a depression-level contraction of GDP is in the offing (the next quarter or two).

Well, let's do some quick math.

Small business is about 40% of GDP. Let's say they get wiped out 80% during this lockdown. So we only get 8%.

The rest is 60% of GDP and they go down 50% during the lockdown. So we only get 30%.

That's 38% of "normal" GDP, a 62% decline for the lockdown months.

Let's say the lockdown lasts 3 months, 1/4 of the year. And for simplicity let's say this first quarter wasn't really impacted much.

So we have 1/4 at 100%, 1/4 at 38%, and 1/2 at 80% because we won't recover to 100% immediately.

So we're looking at ~75% of our normal GDP this year, or a 25% drop.

Depression - yep.

Sultan58

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Re: Next Recession is already here
« Reply #18 on: March 21, 2020, 06:11:06 PM »
Full shut down for March April May.....nope...doubtful...we will inch back to productivity as soon as we hit peak infection and start down the other side. The market will try to anticipate early...as usual.

80% of small businesses lost? .....please....they are about to be handed a huge handup

I don't expect a V at all.....only a few small v attempts that turn into a jagged U recovery taking a year or more..so a healthy recession...but not a depression. (assuming we have our arms around this within 90 days)

What I'm more worried about is politicians handing out trillions in helicopter money to save their own asses....and trying to assuage everyone who thinks they deserve tens of billions in borrowed money.  Sorry but the strong will survive and the weak businesses (20%) that were not cash flow positive before should not expect taxpayer bailouts.

Stack 2 trillion --(not in tax dollars--those are already spent)---but stack 2 trillion or more in more issues debt on top of what was going to be a 1.2 trillion deficit and you can kiss your quick recovery goodbye.

And for those expecting an infrastructure bill?  really?  we couldn't afford it before....what makes you think we can do it now?

Get ready for plenty of fraud and insistent whining by those who think printing money solves everything. 

vand

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vand

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Re: Next Recession is already here
« Reply #20 on: March 26, 2020, 06:50:12 AM »
3.28m. Geesh.
Markets took it on the chin quite well, though.

soccerluvof4

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Re: Next Recession is already here
« Reply #21 on: March 26, 2020, 07:56:08 AM »
3.28m. Geesh.
Markets took it on the chin quite well, though.


But the whisper numbers were obviously much higher which makes sense. Yesterday California was over a million already.

To the OP's question yes were going to see a recession BUT like so many other terms being used in this Pandemic so many of them are nothing more than that as well as so many records are being broken. My point, labels and names really dont matter as much as how are we going to come out of this like a V, a U or and L... And thats anyones guess

vand

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Re: Next Recession is already here
« Reply #22 on: March 26, 2020, 08:46:46 AM »
3.28m. Geesh.
Markets took it on the chin quite well, though.


But the whisper numbers were obviously much higher which makes sense. Yesterday California was over a million already.

To the OP's question yes were going to see a recession BUT like so many other terms being used in this Pandemic so many of them are nothing more than that as well as so many records are being broken. My point, labels and names really dont matter as much as how are we going to come out of this like a V, a U or and L... And thats anyones guess

expected number was "between 2.5-3.5m" so we printed toward the upper end of the range. But it goes to show that when markets are really pessimistic, little short of armageddon will send them lower.

Actually though, I think the markets have begun to see a potential end to the first wave of the virus as the rate of growth is now past the peak in some of the most prominent countries.

American GenX

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Re: Next Recession is already here
« Reply #23 on: March 26, 2020, 03:15:28 PM »

LOL.   I never doubted there was going to be a recession.  I'm also not surprised about a temporary hike in the S&P 500 over a few days, but it's temporary, because the far worst of the coronavirus effect is yet to hit the country causing much greater economic damange, and I fully expect another big drop in the S&P 500 below the recent low.

dividendman

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Re: Next Recession is already here
« Reply #24 on: May 21, 2020, 12:22:28 AM »

LOL.   I never doubted there was going to be a recession.  I'm also not surprised about a temporary hike in the S&P 500 over a few days, but it's temporary, because the far worst of the coronavirus effect is yet to hit the country causing much greater economic damange, and I fully expect another big drop in the S&P 500 below the recent low.

It's been a couple months, when is that drop you're expecting going to happen?

dresden

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Re: Next Recession is already here
« Reply #25 on: May 21, 2020, 10:08:17 AM »

LOL.   I never doubted there was going to be a recession.  I'm also not surprised about a temporary hike in the S&P 500 over a few days, but it's temporary, because the far worst of the coronavirus effect is yet to hit the country causing much greater economic damange, and I fully expect another big drop in the S&P 500 below the recent low.

It's been a couple months, when is that drop you're expecting going to happen?

The stock market is pricing in a V-shaped super fast recovery, more stimulus, low rates, a fast vaccine, a fast return to full employment, supply chain returns to normal, etc.   If the market's optimism is justified it may never drop or continue up.  In 2006 I was in Florida - ground zero of the housing bust and it seemed real bad here with people walking away from houses, etc. but stock prices kept going up for over a year before the market dropped 50%.  I don't know if we will see that type of delayed reaction this time but I share the skeptism that things are as good as the market is pricing.

At the same time I am not declaring when or even IF the market will drop because we all know even the experts are often wrong about that.  One common technical definition of depression is negative 10% GDP growth and I would be shocked if we didn't already hit that #.  To me it seems crazy to not to consider/believe this is an unprecedented and there are significant stock market risks right now.

If you want to come and remind people they are wrong you should definitely give it more time, because the market was very slow to react last time around and just like now there was no shortage of people predicting a continued boom right before stocks crashed in 2007.

From a very long-term perspective we can be almost certain stocks will be up 20 years from now.  The only time that didn't happen was the great depression and that seems very very unlikely.

 

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