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That's right @elle, that is why economists are saying it isn't here yet, so do I.  We aren't there yet.

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Seems like only 1 in 3 think we will have a recession next year.  The consensus is for 2021/2.  I agree economists are usually wrong, mostly because the economists surveyed are in he employ of the financial companies and the last thing they want is a flight of capital out of their funds.  To call the end of the bull or a recession or worse is a one way trip to your own personal recession, which is why they don't do it.  You have to look for the lone voice in the wilderness, the Dr. Doom types.

Maybe they are all wrong and we will indeed slip into recession this year!  Who knows, that is the point of the thread really, to keep it in mind and be watchful, not to trust to economist surveys.

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@elle, Another good post.👍🏾

@Mercury, I agree. You make a good point.

If one keeps saying or predicting there will be a recession then eventually there is going to be one. We all know that and it is part of the economic cycle which has existed for many years now. They may get the timing wrong by a few months or years! Then they will take the credit for saying they predicted a recession. 

Just be ready to short the market when the recession arrives and profit from it. 

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I think recession is declared or not it already started to step into.The all over situations in world shows that we are just into the first phase of recession which followed by some kind of ease or feeling good factors for some time ,then suddenly starts to get pushed into the deeper recession from on 2020 may last over for next three years. Only indexes are showing on top but from retail to manufacturers started feel the turmoil. The gold is running high,interest rates sliding ,consumption of metals get jittery due to demand decreasing, all these signs shows that recession slowly entering into the system , which will be start to feel hardly during later 2020.

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On 22/08/2019 at 04:46, Caseynotes said:

image.thumb.png.6339002b331527b87c5f0f5b09e5acea.png

 

LOL to this. This is so true. 

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@tehka,

If you look at the number of times it is being reported there are US-China trade tensions. Then Trump will tell the media that he thinks there will be a deal soon. Then both countries amend their tariffs. Then they have YET another meeting, followed by Trump again stating a deal will be done, months later no deal. This is market manipulation of the highest order. Either they agree and do a deal or just tell the media they cannot agree and there is no deal. End of. To keep the world guessing for months on end is all part of the plan as both countries know that announcing no deal would cause havoc amongst world markets so they are controlling the markets indirectly by playing this game. Eventually there will be a deal! LOL. 😀

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Picking up on the recent comments in the SP500 one way bet thread:

If you want to hear it from a professional desk trader, check out this Real Vision interview.  You don't need to understand all of it to get the gist and realise that the whole financial system is effectively feeding on itself.  The interviewee effectively says this himself.  Throw in a dose of Trump and corporate buybacks and you get a clear picture of the rickety (is that a sub prime scandal type events I see before me?) nature of the financial markets.

Also sheds some light on why so many moves on stocks indices seem to happen out of hours (i.e. the hedging occurs in the futures market rather than the real stocks market).  Does talk about having a bet on the scenario where it all turns out ok and momentum gets a boost, interesting that the pros can call it either so have to play scenarios...  And references the "beggar thy neighbour" stuff that is going on.  And this trader seems to think that Fundamentals are not the critical factor.  Seems to me like a hopeless case...

https://www.realvision.com/tv/shows/investment-ideas/videos/the-late-cycle-contrarian

Oh and watch out for October!  It seems...

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Everyone focused on Trump Tweets and such like and then comes a ISM manufacturers PMI reading below 50...  Is that a Black Swan?  Probably not but it was sure not expected by the great Financial houses analysts (51! Oh Oh).  Last time we saw ISM PMI readings for the US below 50 was in 2015/16 period, I am sure you will remember that this wasn't a great time for stocks.  But the economists have already told us not to worry, this is JUST a manufacturing recession.  So long as the consumer and services stay strong everything will be fine, yeaaaahhh...

Oh and BTW, ISM reading less that 50 is supposedly bad for the USD and sure enough we are seeing a bit of a rally in currencies against the USD...  

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A Real Vision interview with Stockman.  He is certainly a PermaBear but perhaps with good reason; and he certainly has credentials.  He suffers from the "boy who cried wolf" syndrome, just a Roubini did before the credit crunch.  There is a malaise in the economic/capitalise world such that anyone who questions the logic and veracity of the mainstream consensus is vilified.  Happens on this forum too...  But it is these contrarians that get it right, in the fullness of time.  Challenge for the rest of us is to time it right and be prepared to take advantage.  To do this we have to be open minded and at least listen to the alternative views.  Not to do so is an extreme version of bias and is being exhibited across the patch right now.  If the crash is never seen before it happens then perhaps it is this bias that is the reason (and BTW some few people do spot it in advance and make out like bandits!).  It is human nature to deploy the ostrich tactic, we don't want to hear bad news and less so bad omens) and this nature repeats itself over and over again, which is why technical analysis, coupled with fundamentals assessment, works in terms of identifying these biases as zig zags and key turning points.

The point of this thread is to show examples of bad omens and discuss, not to project a particular bias.  In so doing perhaps we can at least be aware.

Stockman has been banging on about this for a long time but that doesn't mean he is wrong, just that the resultant crash hasn't happened yet.  Roubini was the same about the credit crunch and ultimately vindicated.  For my money this will end the same was and perhaps this time it will be different but not in the way the mainstream keep trying to sell us...  It's not like they don't have a vested interest in sell that particular world view is it?

 

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Not a big fan of MSM shows but there are a few interesting point within this clip including:

  • Watch the Russell as a leading indicator for large caps, which is something I do
  • S&P500 gets cut in half in a recession
  • Once we see that we are actually in a recession it is too late (contra argument to the don't panic boys who say things like an yield curve inversion MAY be a year and a half ahead of an actual recession)
  • Oh and BTW, maybe the recession will happen sooner, especially if the current bull is asset price driven, which it is...  If markets start to fall the wealth effect will be negative

There are some "it all be alright folks" comments too so not at all one sides.

 

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More bad retail news, it just keeps mounting up...  Additional bad news for jobs and housing market embedded within this, US housing having topped out and started a decline phase.

The notion that it is all down to a shift online is too simplistic I think and in any case, even if this was the cause, there will still be a recessionary knock on effect on jobs and tax take.  No such thing as a free lunch, even thought the internet companies are trying to belie that but governments are waking up to this threat now, cue cut in online giants meager profits.

https://www.bbc.co.uk/news/business-49654281

 

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On 05/09/2019 at 12:10, Mercury said:

Not a big fan of MSM

Nothing they say can be trusted.

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You don't trust anyone do ya?

Serious thought I agree with you if we are talking about MSM opinion but when they are just reporting the facts then ok.

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Interesting historic relationship between a Repo crisis and a major markets event...

 

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Yes, the last crash was what David Harvey described as a wave of accumulation by dispossession, where wealth is taken away from working-class and minorities and given back to the wealthy.  There was a wave of house repossessions and job losses in the states that disproportionately affected blacks, single mothers etc.  Idle capacity and idle workers standing side-by-side doing absolutely nothing until the 'financial wizards' could agree on a new dispensation (lots of free money for the City and the Street).

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Don't know if you can access this without a registration for Hedgeye (it is free to register and then you get the emails direct) but it is a simple message: slowing earnings = bad for stocks.  We have slowing earnings in the US large caps and the expectation is for this to continue.  At some point we reach the tipping point, some people think it will be this Autumn.  It is a fact that most major down turns on stocks occur in the Autumn months (both the initial turns and the subsequent crashes, which can take a further year or so from the initial turn.  Interesting take on the GM strike.

https://app.hedgeye.com/insights/77838

See also this local article that summarised the strikers position.  Notice this is politicised in an election year.  It is about the gap between rich and poor.  It is about the unresolved blame for the credit crunch and the subsequent bail out of Wall St, which is why Trump got elected in the first place but the Democrats are the ones all over this in a bid to take back their traditional base.

https://eu.freep.com/story/opinion/2019/09/24/uaw-strike-workers-gm-dingell-debbie/2432795001/

If you are looking for a Black Swan look no further...

Oh and the Trump impeachment debacle or course.  Makes China trade talks a sideshow...

Edited by Mercury
for to add a point

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It would be easy to think that Thomas Cook was the only company problem out there.  Having met some of the management a few years ago it is my opinion that the failure was as much one of management (massive egos) as of environment, although the latter played a big part no doubt.  The notion that it had anything to do with Brexit is laughable.  But there are other things happening that just adds to the general sense of an economy in decline:

https://www.bbc.co.uk/news/business-49822845

https://www.bbc.co.uk/news/uk-northern-ireland-49818156

Uber bulls will attempt to talk this away but over the pad year or more the news has been a constant wave of these things with very little good news.  Corporates have been cost cutting and leveraging to buy back shared for 5 or 6 years now, which is one reason wages have not kept pace.  The very definition on untenable that is the basis for the GM strike action.  Employment is strong but that is always the high water mark before a cyclical downturn and the jobs this time are not very secure gig economy based; they can evaporate overnight.  The only "good news" stories we seem to see are all about another App based business going to IPO with losses rather than profits as a rack record.  And when you think about it they aren't even truly disruptive!  Uber is just a taxi service with less well trained drivers than, say, London black cabs (which have their issues it is true, nothing a good recession couldn't fix).  WeWork is basically, in my humble opinion, a Ponzi scheme, or at best ill structured, and it's not like there aren't loads of actual property companies in the office space already; you know, companies that actually own the assets they are leveraging...  These IPOs smack of another dotcom bubble, this is exactly what was happening in 1999.  The only issue is we also have exactly what was happening in 1987 too.  Glup!

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US ISM PMI reading in at 47.8 (less than 50 is recessionary contraction).  This after a 49.1 last month and against a vainly hopeful 50.1 analyst consensus (was that ever an example of FS industry bias or what!).  Net result?  Stocks dropped off a cliff, USD drops as well (I assume the idea is the Fed will have to slash rates now).  I wonder what another poor US NFP might do...?

 

Oh and UK High Street stalwart John Lewis does a radical management shake up to save costs...

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https://www.bbc.co.uk/news/business-49919189

In the above article there is a statement of data, in the form of UK PMI being below 50 (i.e. contraction) but conversely a quote that PMI "has a tendency to overreact relative to reality"...  We have lived through years of bad news is good because it drives central banks to push QE and cut rates, which fuels financial engineering (not the actual economy!) and the rich get richer.  At some point the data is the data though right?  At some point bad news is bad news right?  I am wondering whether we have tipped into a period where the central banks lose control and markets stop hanging on their every word ("we stand ready to do whatever is necessary..." Blah Blah Blah!).  I am wondering whether the PMI data is now more important than the US NFP and Fed policy?  Jobs are last to go.  Contraction in economic activity leads to job cuts, not the other way around.  Then the job cuts and pay freezes fuel the crash.

From a PMI perspective, Germany is in recession and Germany is manufacturing heavy as an economy.  Therefore the EU is in recession (just not officially declared yet).  If the UK has also slipped into recession (again not yet declared) and is more a services sector led economy and the US is following (Manufacturing and various other indicators are suggesting this is near, if not already upon us) then that is a lot of recession.  Knowledgeable market participants are saying that China is in recession, certainly in manufacturing one and they are nowhere near shifting their economy to a consumer/services based one (pipe dream).  Check out the current Real Vision China/Hong Kong series if you have access.  Basically you cannot trust the official data.

In such a macro situation, if proved true, is "buy the dips" and "never bet against the Fed" bias of the past 10 years still the right play?  We might get one last hurrah but surely the time of the great Fed put is over...

At some point the data is the data and bad news is just bad.  The perma bulls who can't change their long held bias and swing with this are gonna get crushed.  But that's how markets work, the Bears "need suckers to the the other side of their trades".  And for the Bears, when right, they tend to be in the minority at the beginning so there are masses of suckers, which is why people who call it right get seriously rich in a Bear market.

The analyst consensus for US ISM manufacturing PMI of 50.1 is a clear indication of playing a game of keepy uppy.  The people working in FS are desperate to keep the train on the tracks until bonus time.  50.1 after a 49.1 print the month before?  You can just see their bosses screaming at them to just get it above 50.  And then the big slap down because the data is the data and forecasts are bull (I use the term advisedly...).  The consensus for the Sevices PMI today is 55.0 but why is the story not "hey that is down from 56.4 actual last month, why so gloomy?  What happens if we get 55?  It is still down.  What happens if it is anything lower than 55?  Oh Oh!

But hey, "Just buy the Ffing dips!", err maybe no this time..?

For the record I am "well Short" from the turns on Tuesday and holding to see which of my scenarios plays out (see my "are we there yet" thread for details if interested).  I do not know which way this plays out (yet) but given the nature of the moves over the past few days the odds are shifting to the end game.  A poor, maybe even as expected PMI today could be the final nail in the coffin.  Interesting times!

 

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1 minute ago, Mercury said:

But hey, "Just buy the Ffing dips!", err maybe no this time..?

 

Keep watching for turning signs near the bottom, and 'hop on my son'.  Otherwise, get short, shortie 😺

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Hot on the heels of a major management restructuring, John Lewis are now taking on landlords in a Mike Ashley style approach to further reduce costs.  Not before time really the property market is hugely overprices, mostly driven by their key performance indicators related to yield, no yield on the cost of the property but the latest valuation and so high property prices lead to high rentals.  In my local area we have just had a notice from a childrens club that they are closing their doors after 8 years due to inability to renegotiate rental with the landlords and "swinging rates".  This was a service (not manufacturing folks!) that was very popular, with a waiting list!  What future for the high street under such conditions?  In order for retail to be viable long term we need to see much lower rent and rates.  To get that we need a recession that crashes property prices because the turkeys don't vote for Christmas.  Just a matter of time now really.

https://www.bbc.co.uk/news/business-49918002

If the mighty JL is struggling in the UK then who is making any money in retail?  JL have an online presence, albeit their packaging and shipping is simply not as good as Amazons, but outwith that I would still buy typical JL stuff at JL and not on Amazon so online cannot be the full story here.

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https://techcrunch.com/2019/10/02/robinhood-e-trade-schwab-ameritrade/

 

Question: Is this just a competitive reaction or are these brokers just finding it hard to encourage investors to buy stocks?  Can the big boys really be that concerned by RobinHood?  There is always a catch to free anything isn't there?  Upshot is that if businesses like Schwab can't make any money their share price collapses and they sack people who can't buy stuff and certainly can't trade with the brokers who laid them off int he first place.

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When asked recently what it would take for central banks to realise that negative rates are a bad thing, Jim Rodgers replied "catastrophe".  He went on to say that Alan Greenspan has done more than most people to "ruin the world".  The answer to Rodgers is wide scale bankruptcy with the USD and Gold spiking initially but when the dust settles he is switching to the Yuan and maybe also Singapore...  He doesn't own any US shares because the valuations are just too high...

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Negative rates encourage savers to stop hoarding cash and put it out to good use. 

The wealth should be transferred to people who can use it productively (ordinary people for example).

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That's the theory but it isn't working.  The man on the street has no spare cash and is worried about paying the criminally high rent, cos he can't buy a house.  Even if he could buy a house the cost of repayments will bankrupt him.  The real hope of the academic economists was that corporates would invest but all they have done is M&A, share buybacks and inflate their remuneration.  Upshot, the rich got richer as NIRP and QE goosed financial assets while real assets (commodities) fell.  The unwind will be the reverse and the man on the street will pay the price, as usual.  In the UK,enter Corbyn and an already disproved ideology, exit all real wealth and capability (brain drain).  Hopefully we will avoid that particular catastrophe in the UK or we will wind the clock back to the 50s.

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UK house prices go negative in September according to the HBOS data.  If house prices represent consumer confidence, as many believe, then this is another recessionary signal.  The house price fall during the credit crunch was nothing compared to the 1987 crash, which only bottomed out around 1994/5 and left people in negative equity for over 10 years.  Given the level of house price appreciation (bubble) this time the fall could be much further than the 80s and last longer.  There is at least hope for the youth now but I'd be worried if I had leveraged the equity in my house, which I haven't.  The post 1987 crash saw changes to mortgages, such as an end to 100% mortgages, which then crept back in later as politicians wanted to goose the housing market and repayment type mortgages were superseded by interest only.  Connected to this there was the endowment mortgage misselling scandal, followed by the payment protection misselling scandal and now another one is potentially going to emerge, just in time for the next crash?

https://www.ft.com/content/bf426410-f7fc-11e8-af46-2022a0b02a6c

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