U.S. recession odds rise to 40-45% in six months: DoubleLine's Gundlach | Hacker News Reader

U.S. recession odds rise to 40-45% in six months: DoubleLine's Gundlach

reuters.com

24 pointsmataug20 comments

I'm surprised this sort of thing is on HN's front page.

Yes, we are on the tail end of a long expansion cycle, and a recession is inevitable. However, prediction headlines like this have been on the front page of CNBC, MarketWatch, etc every other day for FIVE YEARS now.

On the alternating days, there are headlines about how the expansion has a xx% chance of continuing for another two years.

Financial news is the lowest form of clickbait trash.

> a long expansion cycle, and a recession is inevitable

Not necessarily - Australia has an expansion ongoing for the last 30 years.

I'm surprised ____________ is on HN's front page.

Just don't be and read something else then.

Expect to see more of it.

With national elections looming in the US, perception of the economy is of strategic importance.

Sad to say, maintaining a strong economy does not transcend politics. Expect leading headlines from both directions.

Yield curve inversion != recession, as most people on HN have clarified numerous times. it's not even the top 10 predictors.

US has THE strongest economy in the world right now. You'll see depression in China (already happening), and recession in Japan/EU/Canada/Mexico first. US has the lowest unemployment rate in 30 years, wage growth, 3% gdp growth, and foreign direct investments going through the roof.

soo is the wage growth lowest or going thru the roof?

Well actually it has always been followed by a recession for quite a while now. So it's certainly a good predictor. But sometimes one had to wait as much as a few years, that's why SPY is not tanking.

Article's still trash. This guy is forecasting a 6% yield on 10 year treasuries, yeah sure:

https://www.multpl.com/10-year-treasury-rate

>US has the lowest unemployment rate in 30 years, wage growth, 3% gdp growth, and foreign direct investments going through the roof.

This really has nothing to do with whether a recession is around the corner or not. They don't just gradually come about over the course of years; they happen in an instant. Before anyone is even aware of what's happening the layoffs start piling up and it becomes exponential, as decreased business spending and consumer confidence feedback into each other. Fall of 2007 was the peak of irrational exuberance with a multi-decade low in unemployment and all time market highs, but by spring of '08 there was mass panic and people had lost everything.

the 2008 recession was characterized by 0% interest rate and bad mortgage loans. the 2000 recession was characterized by threats of emerging jobs offshoring and bad investments into internet companies that don't make money. the 1990 recession was characterized by threats of sky high oil price, and so was 1980.

Nothing like that exists to hurt US economy right now

>...bad investments into internet companies that don't make money.

Uhh

>it's not even the top 10 predictors.

What’s your criteria for “top”? AFAIK every recession in the past century was preceded by a yield curve inversion. Also, what are the top 10 predictors?

I would love to see a reply to this.

Low unemployment rate is another great predictor of a recession, as it's a sign of misallocation of capital. It's a good thing and bad thing at the same time.

Nobody really knows when the next recession will be or how bad it will be. Whenever it does arrive, the most interesting impact will be on the pension funds. A terrible but short recession e.g. 50% equity decline for 1-2 years after which the Fed re-inflates the market is not as bad as a prolonged period of stagnation e.g. 20% equity decline and then no growth for 5-10 years. In the second scenario, trillions of dollars worth of pension funds head towards insolvency.

There will be a concerted effort to tank the economy before the second half of 2020, I would be willing to take bets on it, particularly if the extended faffing about in the wake of the Mueller report's failure yields nothing and Democratic candidates continue to be this underwhelming.

It so happens that it's very easy to bet on that and put your money where your mouth is. Just buy some LEAPS puts on SPY. Don't even need margin for that.

For example the SPY 2020/09/18 $230 put trades for ~$5.6 a share.

I've never tried this -- how would I do this using ETrade or similar?

Just to be clear - I think you're wrong, so I don't recommend it.

You need stock options permissions (don't know where is that in ETrade), and then you need to find options on SPY. Here are quotes on Yahoo: https://finance.yahoo.com/quote/SPY/options?p=SPY, select desired expiration date. Wait for VIX to be low so that premiums are cheap, and load up on those puts.

And again, I do not recommend it. You'll quite likely lose 100% of the option premium you paid.

Understood, not planning to do this immediately.

I've also considered trading the VIX, but the only ETFs I've found seem somewhat uncorrelated or less volatile. Can VIX be traded directly?

You can go long or short on VIX but read what "contango" is and what happened during the volpocalypse.

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