The recession will be over sooner than you think.

[JMapleton]

http://www.voxeu.org/index.php?q=node/2785

I absolutely see no reason why the recession will last longer than another 12 to 18 months. These economists think even sooner.

 

[StageLeft]

That's it? He bases this all on some fear index. Like that's basically all of it. Not convinced, however he has a promising career working for the Federal Reserve with attitudes like his.

Hopefully somebody will bump this in 6 months for lawls.

BTW the authors to this essay are an "assistant professor" and a "PhD Candidate".

 

[dawp]

ya better provide some sort of comment or this will get locked

 

[JMapleton]

Originally posted by: Skoorb
That's it? He bases this all on some fear index. Like that's basically all of it. Not convinced, however he has a promising career working for the Federal Reserve with attitudes like his.

I understand it's the "cool thing" to be a pessimist and claim you know "what really goes on."

However, if such an index has been correct in all previous recessions, why should it be different?

On the outside, a fear index may seem to be not very telling of the where the economy truly is. But the point made in the article is that companies fear uncertainty and freeze hiring when no end of a recession is in sight, thus prolonging recessions.

It should not be long until the dwindling of uncertainty becomes noticeable and companies begin to hire again, which would create a ripple effect that will end the recession. I give it until next holiday season when holiday sales rebound and consumer confidence rebounds and creates a clear message to companies that it's safe to hire again.

BTW the authors to this essay are an "assistant professor" and a "PhD Candidate".

I would guess that more credibility than you have or almost everyone else on anandtech.

 

[Kadarin]

Sometimes I think these "economists" (assistant professor + PhD candidate in this case) pull this stuff out of their asses.

 

[StageLeft]

Originally posted by: JMapleton

Originally posted by: Skoorb
That's it? He bases this all on some fear index. Like that's basically all of it. Not convinced, however he has a promising career working for the Federal Reserve with attitudes like his.

I understand it's the "cool thing" to be a pessimist and claim you know "what really goes on."

However, if such an index has been correct in all previous recessions, why should it be different?

On the outside, a fear index may seem to be not very telling of the where the economy truly is. But the point made in the article is that companies fear uncertainty and freeze hiring when no end of a recession is in sight, thus prolonging recessions.

It should not be long until the dwindling of uncertainty becomes noticeable and companies begin to hire again, which would create a ripple effect that will end the recession. I give it until next holiday season when holiday sales rebound and consumer confidence rebounds and creates a clear message to companies that it's safe to hire again.

BTW the authors to this essay are an "assistant professor" and a "PhD Candidate".

I would guess that more credibility than you have or almost everyone else on anandtech.

And that's why it will be so much funnier to lawl when they get this wrong, won't it. Being an assistant professor and aspiring to get a PhD hardly merits one as a captain of industry, if we're going to measure dicks, and even if we were there are plenty of people with magnitudes more credentials than these guys who fvcked up in this.

 

[chess9]

Originally posted by: JMapleton
http://www.voxeu.org/index.php?q=node/2785

Let's hope their model is right.

-Robert

 

[Robor]

Originally posted by: JMapleton
http://www.voxeu.org/index.php?q=node/2785

I absolutely see no reason why the recession will last longer than another 12 to 18 months. These economists think even sooner.

I predict this thread will be bumped in a year or so.

 

[heyheybooboo]

Originally posted by: Kadarin
Sometimes I think these "economists" (assistant professor + PhD candidate in this case) pull this stuff out of their asses.

This.

I need something more definitive than the ""implied volatility on the S&P 100"" with banks functionally insolvent, home values still falling, foreclosures increasing, retirement savings crushed, job losses mounting ...

Originally posted by: JMapleton

I understand it's the "cool thing" to be a pessimist and claim you know "what really goes on."

I have no idea what this means. Is this your invention? Don't tell me ...

We are in a mental recession, right?

Go out and shop and everything will be fine ...

 

[JMapleton]

Originally posted by: Robor

Originally posted by: JMapleton
http://www.voxeu.org/index.php?q=node/2785

I absolutely see no reason why the recession will last longer than another 12 to 18 months. These economists think even sooner.

I predict this thread will be bumped in a year or so.

I'll remember to do that. But I will state ahead of time what the responses will be. Complaints about how the fixed economy was built on credit or how "it's still coming." Excuse after excuse from people who despite evidence to the contrary will have reason after reason for the next "Great Depression" to come.

 

[StageLeft]

More articles by nick bloom, assistant professor

Not actually that bad, the few pertaining to this current situation seem on so far, although writing an article in June08 predicting a recession is really not hard considering it was clearly several months earlier there would be one.

He sure does like the S&P volatility index, though--he uses it for everything!

 

[Genx87]

Uncertaintly does play a role in the markets. Does this mean we will start to see growth by mid 09? I hope so but am not that optimistic.

I'd like to go back and correlelate recessions with change in administrations that will have differing economic policy.

Carter --> Reagan
Bush -->Clinton
Clinton-->Bush
Bush-->Obama

Recessions landed right through the transition or within a stones throw. I think there is something to be said about uncertaintly in the private sector. And it probably has to do with a change in economic policy in the executive branch.

Recessions may even be able to predict presidential elections. Business's can sense when a change in the guard is going to happen. For instance as bad as Bush looked in 04 he survived and our economy was hot in 04. The economy took a dump in late 07 as the republican primary was wrapping up and it was obvious a democrat was going to be in the white house. And with it a change in policy.

 

[StageLeft]

Originally posted by: Genx87
Uncertaintly does play a role in the markets. Does this mean we will start to see growth by mid 09? I hope so but am not that optimistic.

I'd like to go back and correlelate recessions with change in administrations that will have differing economic policy.

Carter --> Reagan
Bush -->Clinton
Clinton-->Bush
Bush-->Obama

Recessions landed right through the transition or within a stones throw. I think there is something to be said about uncertaintly in the private sector. And it probably has to do with a change in economic policy in the executive branch.

Recessions may even be able to predict presidential elections. Business's can sense when a change in the guard is going to happen. For instance as bad as Bush looked in 04 he survived and our economy was hot in 04. The economy took a dump in late 07 as the republican primary was wrapping up and it was obvious a democrat was going to be in the white house. And with it a change in policy.

As early as 2006 it was clear that the gig was up, though. Mortgages were resetting, housing values were topping out or even dropping in some areas. I remember buying my current house at the end of 06 and remember clearly that the market was already on its way down by then.

 

[Genx87]

The market was drying up in late 05 but the economy was still doing fine until late 07. Much like the stock market started weakening in 2000 but the economy didnt take a dump until 2001. It is just an observation on my part anyways.

 

[GTKeeper]

To the op.

If you think that we are more than half way through this recession you are out of your mind. If its 12 to 18 months then either a) we are out of it, or b) we will be out of it in June of this year.

Good luck with that.


Let's look at recently reported numbers and see how 'magically' they will start correcting themselves in the next 6+ months (as per your argument that the recession will be 18 months at max)

Germany just posted a -2.1% GDP growth for Q1 = 8.4% annualized = 1.6% away from what we call a depression

China exports are down 17% from Q1 of last year
Japan exports are down 34% from Q1 of last year

The US banking system is essentially insolvent, and even a republican this morning Linsdey Graham said that nationalization is still on the table.

US is still losing 600k jobs a month
House prices are still falling

GM and Chrysler are 1 step away from BK (don't be surprised of GM BKs this week)

Commerial Real estate is on the verge of collapse (think sub prime mortgage crisis part deux)

The Alt A Near Prime / Teaser / Jumbo Loan bubble worth about as much as sub prime is going to burst this year, with aftershock next year.

And if thats not 'rosy enough' for you, think of this. Once house prices bottom out, what we will see is that ALL THE HOUSES bought between 2003-2006 (if not more) that had HONEST borrowers who put 20% down on a fixed mortgage end up being upside down because on 'average' houses will have fallen more than 20% from those year's levels.

No amount of reduction of this so called 'fear index' will fix this crap. Get ready for a once in a lifetime experience.

Based on your research here, I am assuming you are doubling down on the market right now? Buy some equitites, go ahead, see where you are at at the end of the year.

 

[JMapleton]

Originally posted by: GTKeeper

Based on your research here, I am assuming you are doubling down on the market right now? Buy some equitites, go ahead, see where you are at at the end of the year.

Warren Buffett wrote an article in our newspaper about 4 months ago saying he was 100% in stocks because it was such a great time to buy. I think that speaks for itself.

 

[StageLeft]

Originally posted by: GTKeeper
To the op.

If you think that we are more than half way through this recession you are out of your mind. If its 12 to 18 months then either a) we are out of it, or b) we will be out of it in June of this year.

Good luck with that.


Let's look at recently reported numbers and see how 'magically' they will start correcting themselves in the next 6+ months (as per your argument that the recession will be 18 months at max)

Germany just posted a -2.1% GDP growth for Q1 = 8.4% annualized = 1.6% away from what we call a depression

China exports are down 17% from Q1 of last year
Japan exports are down 34% from Q1 of last year

The US banking system is essentially insolvent, and even a republican this morning Linsdey Graham said that nationalization is still on the table.

US is still losing 600k jobs a month
House prices are still falling

GM and Chrysler are 1 step away from BK (don't be surprised of GM BKs this week)

Commerial Real estate is on the verge of collapse (think sub prime mortgage crisis part deux)

The Alt A Near Prime / Teaser / Jumbo Loan bubble worth about as much as sub prime is going to burst this year, with aftershock next year.

And if thats not 'rosy enough' for you, think of this. Once house prices bottom out, what we will see is that ALL THE HOUSES bought between 2003-2006 (if not more) that had HONEST borrowers who put 20% down on a fixed mortgage end up being upside down because on 'average' houses will have fallen more than 20% from those year's levels.

No amount of reduction of this so called 'fear index' will fix this crap. Get ready for a once in a lifetime experience.

Based on your research here, I am assuming you are doubling down on the market right now? Buy some equitites, go ahead, see where you are at at the end of the year.

Fear monger!!

But really, what is the definition of the recession being over. Let's say the US GDP is $14T for 2008 and then by June of 2009 it's on pace for $12.5T. If in August it increases just ever so slightly so that it's on pace for $12.6T, is that the end of the recession? Is the recession the bottom at which point things do not sink down, or is it recovery to where we were before? I think it's the bottom, which makes the end of the recession obviously a lot closer than a real recovery up to where the economy was before it started to fall.

In any case, yeah, I don't think its trough will be this summer. There are plenty of economists who see unemployment continuing to go up until 2010. Maybe they are under or over but there are no good indicators anywhere to give optimism.

 

[StageLeft]

Warren Buffett wrote an article in our newspaper about 4 months ago saying he was 100% in stocks because it was such a great time to buy. I think that speaks for itself.

It does, but the market has since fallen considerably so he's already lost a vast sum in that investment. Some say that the stock market is ahead of the economy by 6 months. Its fall has certainly slowed, though it's not necessarily at its bottom.

 

[GTKeeper]

Originally posted by: JMapleton

Originally posted by: GTKeeper

Based on your research here, I am assuming you are doubling down on the market right now? Buy some equitites, go ahead, see where you are at at the end of the year.

Warren Buffett wrote an article in our newspaper about 4 months ago saying he was 100% in stocks because it was such a great time to buy. I think that speaks for itself.

Yes, Buffett is in stocks, but his 'stocks' are quite different than what you and I buy. When he bought a few billion of Goldman Sachs, it was a) preffered shares, b) with a massive 10% dividend on his investment. Definitely not a deal that you and I can cut with our E-Trade account.

But go ahead, load up on some S&P 500 ETFs or something else and then watch the S&P 500 post the first collective quarterly loss EVER and see what happens.

Have you even done your due diligance on the current state of the market?

 

[Moonbeam]

I know nothing but I'm betting on inertia. Remind me in six months how I did.

 

[blackangst1]

Originally posted by: heyheybooboo

Originally posted by: Kadarin
Sometimes I think these "economists" (assistant professor + PhD candidate in this case) pull this stuff out of their asses.

This.

I need something more definitive than the ""implied volatility on the S&P 100"" with banks functionally insolvent, home values still falling, foreclosures increasing, retirement savings crushed, job losses mounting ...

Originally posted by: JMapleton

I understand it's the "cool thing" to be a pessimist and claim you know "what really goes on."

I have no idea what this means. Is this your invention? Don't tell me ...

We are in a mental recession, right?

Go out and shop and everything will be fine ...

I think what he means is, especially on this board, many like to armchair quarterback the economy and think they can look at an overall picture of a few indicators and assess the situation accurately. When in fact, like it or not, economists at Stanford have more insight and knowledge of econ than we do. Agree or disagree, they are MUCH more qualified to comment on things than most of us.

 

[GTKeeper]

Originally posted by: Skoorb
Fear monger!!

But really, what is the definition of the recession being over. Let's say the US GDP is $14T for 2008 and then by June of 2009 it's on pace for $12.5T. If in August it increases just ever so slightly so that it's on pace for $12.6T, is that the end of the recession? Is the recession the bottom at which point things do not sink down, or is it recovery to where we were before? I think it's the bottom, which makes the end of the recession obviously a lot closer than a real recovery up to where the economy was before it started to fall.

In any case, yeah, I don't think its trough will be this summer. There are plenty of economists who see unemployment continuing to go up until 2010. Maybe they are under or over but there are no good indicators anywhere to give optimism.

The recession will end once we have quarter to quarter growth again which could be August, but who knows. Now, where this growth will come from, I don't know. The amount of collective debt between the financial system, business entities, and the house holds is now at 300% GDP, about 2x what it was back in 1980.

You cannot unwind this massive amount of debt overnight. This is why the previous recessions were 'mild' compared to this massive 'thing' we are in now becaue we were able to 'inflate' the economy through the internet in 1995-2000 and houses starting in 2002.

What makes this particular recession different also is that it is the bursting of the credit bubble AND asset bubble. What the market has priced in right now via the Dow and S&P is an 18-24 month U shaped recession that does not get much worse than it is right now. I think it will get worse.

 

[GTKeeper]

Originally posted by: blackangst1

Originally posted by: heyheybooboo

Originally posted by: Kadarin
Sometimes I think these "economists" (assistant professor + PhD candidate in this case) pull this stuff out of their asses.

This.

I need something more definitive than the ""implied volatility on the S&P 100"" with banks functionally insolvent, home values still falling, foreclosures increasing, retirement savings crushed, job losses mounting ...

Originally posted by: JMapleton

I understand it's the "cool thing" to be a pessimist and claim you know "what really goes on."

I have no idea what this means. Is this your invention? Don't tell me ...

We are in a mental recession, right?

Go out and shop and everything will be fine ...

I think what he means is, especially on this board, many like to armchair quarterback the economy and think they can look at an overall picture of a few indicators and assess the situation accurately. When in fact, like it or not, economists at Stanford have more insight and knowledge of econ than we do. Agree or disagree, they are MUCH more qualified to comment on things than most of us.

I disagree with all these 'great economists'. If they are so fucking right, then how come only a few people saw this shit coming down the pipe? Do you know why? Because these guys are good at coming up with theories that SOUND good and win them nobel prizes. The guys I trust are the few guys that did see this, and do you know what they invest in right now? Cash!

Greenspan, who can be viewed as a great economist or someone who is very knowledgable on the economy said 'I thought the free market would be able to police itself' WRONG. Keynesian economics and behavioral economics are making a strong comeback because in any market you have people running it who are greedy, naive, and stupid at times.

I can tell you that in the consulting space, i.e big 5 and smaller firms, there is VERY little work coming down the pipe beyond Q1 of this year. I don't see how firms, people, and small businesses will suddenly see demand rise so the economy will start growing again.

 

[StageLeft]

Originally posted by: blackangst1
I think what he means is, especially on this board, many like to armchair quarterback the economy and think they can look at an overall picture of a few indicators and assess the situation accurately. When in fact, like it or not, economists at Stanford have more insight and knowledge of econ than we do. Agree or disagree, they are MUCH more qualified to comment on things than most of us.

Yes, but since there are people with plenty of qualifications and experience who see this thing in completely antithetical ways, it's going to take a lot more than an assistant professorship to strongarm me into deference, especially when we have a chief economist from ML who probably wouldn't agree with these two.

 

[dullard]

1) This is already one of the longest recessions on record. That alone is a sign that it is due to end. But that doesn't actually mean that it will end any time soon. Try not to mix up the two. What happened in the past might not happen in the future.

2) That article is over a month old. There isn't much detail there (note: I didn't look up their other papers to see the detail). But from that article alone, it implies that there are problems when the VOX is at 40 or above. That article mentioned that VOX dropped from the 80s to the 40s. Since then, it stopped falling. It is still in the 40s. So, yes it dropped. But it is still at the danger zone as highlighted by the Gulf wars, Asian crisis, 9/11, Worldcom & Ecron, and Russian & LTCM default in their graph. From their VOX argument alone, I still don't see us being out of the woods, yet. Note: the VIX is newer and supposedly better than VOX, but they are both acting the same in this recession.

3) I believe this recession is two-fold. First, we have the end of easy to get money. This end isn't reversible - no matter how many government laws or stimuluses are passed. Why? Because even if the credit market is flowing freely, people still have used up most of their equity. They just can't keep taking out home equity loans because they've already used it up. We will have a PERMANENT 7% decline in consumer spending due to this fact. However, that portion of the recession might be over. Once it has declined, it won't decline again; it was a one time cut in consumer spending. Consumers can still cut back more, but that will be related to business: ie are they hiring and are they giving raises? But we are entering the second phase of the recession: cutbacks in business spending. I believe that this phase of the recession will last the typical 6-12 months. And it is just starting.