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United States will enter recession in 2017

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United States will enter recession in 2017

Unread postby Observerbrb » Sun 03 Jul 2016, 17:08:27

The odds have risen dramatically.

According to Deutsche Bank, there is a 60% chance that United States will enter recession during the next 12 months. This possibility is the highest since the last financial crisis.

The mathematical and economic model developed by the German Bank has been able to predict all the last recessions. They occur when the different treasury yield curves (3 mo, 1 YR, 2 YR, 5 YR, 10 YR and 30 YR) begin to converge towards the same profitability value.

When the spread between bond values is 0, recession is imminent. The following graph shows the spread between the 10 YR - 2 YR yields. Shadow areas indicate recession. In some cases, the curve becomes inverted (there is less confidence in the future due to the imminent recession).

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As we can observe, the spread between these two yields was only 0.91 at the beginning of this June, down from more than 2.6 points two years ago. Right now, the spread is just 0.85 points.

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This trend is also manifesting itself when we look at the current spread between the whole set of treasury yields and the flattening yield curve.

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According to the Deutsche Bank, if the 10 YR yield (right now at 1.45%) falls to 1.00%, recession will become almost unavoidable.

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Since the UK referendum the US yield curve has flattened to new post-crisis lows. The 3m10y spread is now 115 bps compared to 210 bps at the start of the year, and the 2y10y spread is just 85 bps versus 120 bps on January 1.

This relentless flattening of the curve is worrisome. Given the historical tendency of a very flat or inverted yield curve to precede a US recession, the odds of the next economic downturn are rising.

In our probit model, the probability of a recession within the next 12 months has jumped to 60 percent, the highest it’s been since August 2008. The model adjusts the 3m10y spread by the historically low level of short rates and it suggests that on an adjusted basis the curve has already appeared to be inverted for some time.

The yield curve had successfully signaled the last two recessions when the model output rose above 70 percent. If 10y yields rally to 1.00 percent and the 3m rate is unchanged, the implied recession probability from our model will reach that number. At current market levels, the market is just 40 bps from that distinct possibility.


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This link is from 2 weeks ago:

https://mishtalk.com/2016/06/14/us-rece ... ank-model/

Whereas this one is from today:

http://www.zerohedge.com/news/2016-07-0 ... calculates
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Re: United States will enter recession in 2017

Unread postby Plantagenet » Sun 03 Jul 2016, 19:25:33

Observerbrb wrote:The odds have risen dramatically.

According to Deutsche Bank, there is a 60% chance that United States will enter recession during the next 12 months. This possibility is the highest since the last financial crisis.


Almost all modern recessions occur just after a jump in energy prices.

There is no sign of an imminent jump in energy prices.

The US might still fall into recession even without a jump in energy prices but the chances of that are low.

Recession-Always-Follows-Oil-Price-Increases

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Re: United States will enter recession in 2017

Unread postby StarvingLion » Sun 03 Jul 2016, 19:49:28

There is no sign of an imminent jump in energy prices.


And there never will be. They will 'lay off' (fire) all of Europe and Japan and outsource every last bit of the energy system.

Meanwhile, the Walmart and Dollar Store Dullards will look at the low prices and convince themselves they are wealthy.

The alternative is REALITY: that the real prices of energy is 10x what is on the energy bill. In other words the housing stock would be a write off and the entire Fiat Money Scam goes Poof Into the Night Forever.
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Re: United States will enter recession in 2017

Unread postby Cog » Mon 04 Jul 2016, 01:55:41

Could be. The USA has rather frequent recessions.

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Re: United States will enter recession in 2017

Unread postby AdamB » Mon 04 Jul 2016, 08:42:23

Observerbrb wrote:The odds have risen dramatically.

According to Deutsche Bank, there is a 60% chance that United States will enter recession during the next 12 months. This possibility is the highest since the last financial crisis.


Business cycles be business cycles. Plus, the last one was a GREAT buying opportunity, nothing like waiting for the sheeple to all stampeded to devalue things that will come back upon recovery.
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Re: United States will enter recession in 2017

Unread postby Observerbrb » Wed 05 Oct 2016, 12:49:13

A recession looms in 2017 if the U.S. economy maintains its current course, according to Bank of America Merrill Lynch.

Some of the bank's favorite early-warning signs are signalling "evidence of an imminent recession," according to a team led by Head of U.S. Equity and Quantitative Strategy Savita Subramanian.

"While the range of signals is wide, in aggregate they do suggest that, if data were to continue to weaken in line with the recent pace, history would point to a recession in the second half of 2017," she added.

Based on the trends in the yield curve, ISM manufacturing index, building permits, growth in temporary help employment, and commercial and industrial loan growth, the thresholds that have, in the past, heralded an economic downturn will be breached by around October 2017.


http://finance.yahoo.com/news/bofa-mark ... 27060.html
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Re: United States will enter recession in 2017

Unread postby vox_mundi » Wed 05 Oct 2016, 13:24:38

IMF warns of financial stability risks

http://www.bbc.com/news/business-37563160

The International Monetary Fund (IMF) has warned that risks to financial stability are growing. It warns about what it calls "medium-term" dangers in both emerging and developed economies, in its twice-yearly report. https://www.imf.org/external/pubs/ft/gfsr/

It expresses particular concerns about Europe, Japan and China.

Looking further ahead, the IMF sees growing risks. A key factor is bank profits.

The good news is that banks are in some respects stronger than they were before the financial crisis. They have more capital, a kind of financial buffer that enables them to survive losses. Their liquidity has improved, which means they have more chance of coping if they suddenly have to find funds quickly.
But they are struggling to make money. Weak profitability makes it harder for them to build up their capital (which they can do by holding on to some profit rather than giving it all to shareholders as dividends). It also makes it harder for them to expand lending to business and consumers, as is needed to support economic recovery.

Outside the rich countries, China is seen as a potential trouble spot. The report says that rapid credit growth and the expansion of "shadow banking" (lending done by firms that are not banks) "pose mounting risks to stability".
The rapidly growing financial system in China is becoming increasingly "interconnected", the report says. The extent to which firms in the sector are interconnected - that is, have transactions with one another - was identified as a key factor in the financial contagion that was a feature of the international financial crisis.
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Re: United States will enter recession in 2017

Unread postby vox_mundi » Wed 05 Oct 2016, 15:52:12

IMF says global debt tops $152 trillion, urges some to spend more

The world is swimming in a record $152 trillion in debt, the IMF said on Wednesday, even as the institution encourages some countries to spend more to boost flagging growth if they can afford it.

Global debt, both public and private, reached 225 percent of global economic output last year, up from about 200 percent in 2002, the IMF said in its new Fiscal Monitor report.

The IMF said about two thirds of the 2015 total, or about $100 billion, is owed by private sector borrowers, and noted that rapid increases in private debt often lead to financial crises.

While debt profiles vary by country, the report said that the sheer size of the debt could set the stage for an unprecedented private deleveraging that could thwart a still-fragile economic recovery.

"Excessive private debt is a major headwind against the global recovery and a risk to financial stability," IMF Fiscal Affairs Director Vitor Gaspar told a news conference. "Financial recessions are longer and deeper than normal recessions." (WTF?)

The report comes as IMF managing director Christine Lagarde is urging the Fund's 189 member governments that have "fiscal space" - the ability to sustainably borrow and spend more - to do so to boost persistently weak growth

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Re: United States will enter recession in 2017

Unread postby Observerbrb » Sun 21 May 2017, 16:46:40

C&I loans are tightly connected to the real economy. They’re an indication of what businesses are up to, from a shop needing a loan to buy a piece of equipment to the multinational funding its receivables. C&I loans show whether companies in aggregate are expanding their needs and activities or whether they’re curtailing them.

The chart below shows how any significant decline of C&I loans outstanding in the debt-addicted US economy is associated with recessions. Note the turning points:


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Ooppss, this wasn't supposed to happen with oil prices going down so much - Any reasonable explanation?
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Re: United States will enter recession in 2017

Unread postby Cog » Sun 21 May 2017, 16:57:18

Business are expanding and need credit to do so.
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Re: United States will enter recession in 2017

Unread postby Observerbrb » Sun 21 May 2017, 17:00:51

Cog wrote:Business are expanding and need credit to do so.


The abovementioned graph is telling that lending rates in Commerce and Industry are virtually flat since 6-7 months ago.
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Re: United States will enter recession in 2017

Unread postby copious.abundance » Wed 24 May 2017, 19:37:16

I think you probably have to wait some more before deciding whether or not that chart is really going to show a sustained downturn. It could still be a temporary halt that continues resuming upward. Even if all it did was go sideways for a while, still might not indicate a recession.

Furthermore, it's always a danger relying on just one indicator to predict a recession, because you never know when that one indicator might do something it's never done before. The best method is to devise an index composed of several indicators, such as this one here or this one here. Neither are flashing a recession in the next year or so. That said, I think most economic data nerds will probably agree we are somewhere in the late stages of the current cycle. But that could still mean more expansion for another two years, or more.
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Re: United States will enter recession in 2017

Unread postby Cog » Wed 24 May 2017, 19:59:45

I typically look at SNAP data to see if claims for food stamps is going up or down. Also new unemployment claims which have been trending downward. Don't really see anything disturbing going on with either.
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