Some of the world's biggest economies are on the brink of recession
cnn.com
cnn.com
https://asia.nikkei.com/Business/Industry-in-focus/Virus-hit...
65% of 1,506 Chinese SMEs surveyed in early February expect to run out of cash within 1 month, 85% within 3 months.
Chinese small business which account for 99.8% of registered companies in China and employ 79.4% of workers, according to the latest official statistics. They contribute more than 60% of gross domestic product and, for the government, more than 50% of tax revenue.
https://www.zerohedge.com/economics/jpmorgan-now-expects-chi...
JPMorgan Now Expects China Q1 GDP To Drop To 1%, Crash To -4% If Coronavirus Is Not Contained
Or is the best strategy to just buy low (during recession) and sell high (after recession)?
If you can time the market you can always get rich. The trouble is timing the market.
I didn't realize it was impossible to become insolvent just by spending money.
Also no two recessions are 100% alike. Most importantly - will the next one be deflationary or inflationary? Even that is hard to say. Growth in credit suggests deflation, but then if we face mass bailouts then gold and oil will be the places to be. Also, the virus thingy may be quite inflationary (disruption of supply chains, no more stuff from China!) if it materializes. I guess what I'm trying to say is that it's not about "crisis/not crisis", but rather "what is currently severely mispriced, and will correct when the market volatility rises?". This can be either up or down in price.
Finally, if the world temperature goes to, say, +5*C or the virus is really super bad then this is risk that's not hedge-able via capital markets, because it will fuck up capital markets themselves. Think of this as counterparty risk.
So just use a spread?
No. You get less on the other side. You should look up Black-Scholes to understand how option pricing works.
A put option's value comes from integrating the underlying lognormal distribution between 0 and the strike price. A spread's value comes from integrating the underlying distribution between the two spread strikes. Both heavily depend on IV (i.e. the sigma of the log-normal distribution).
Also, always think about the guy on the other side of the trade. Why would he sell you a spread cheaply if it's obvious that the underlying is very shitty and volatile? Options are bets on the probability distribution of some asset. High IV means "anything is possible". And if anything is possible then it stands that there's little money to be made on a move like "give me insurance against it going up/down". There is some money to be made on "I can underwrite the risk of it going down/up", i.e. on selling the options, i.e. selling the IV.
Rolling options orders are the only way. Plus, depending on the spread in-month you can probably hedge your hedge, and buy a call on the other side.
Today on the other had was a very, very good day.
In case of deep recession your counterparty can just go bankrupt and you would have to take losses (sell their assets at after-recession prices).
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173. A hundred Zuz [invested] in business, and every day meat and wine; a hundred Zuz [invested] in land, and salt and vegetables (Jeb. 63a; D. 463).
The Jews seem at one time to have had a disinclination to acquire much land, possibly on account of the uncertainty of tenure in the time of persecution. Cf. the wording of proverb no. 130. The opinions on the question of landed property differ very widely. Ben Sira says: "Hate not laborious work, neither husbandry, which the Most High hath ordained" (Ecclus. vii. 15). The fact that "husbandry" is specially mentioned is in keeping with Ben Sira's general view, shared by the Greeks, that occupation with the soil led to boorishness. A Rabbi of the second century AḌ. gives it as his opinion that there could be no worse occupation than agriculture, and on seeing a field ploughed across its breadth he exclaimed sarcastically, "Plough it also long-wise, and still you will find that to engage in commerce is more profitable" (Jeb. 63a). Rab, who lived in the third century, noticed the ears of corn being fanned by the breeze, and declared "However much you may fan, it is better to devote oneself to commerce" (ibid.). On the other hand, it is also said, "A man who does not possess a piece of land is not fit to be called a man" (ibid.); and another Rabbi adopts a middle course by advising "Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve" (B. M. 42a).
You borrow a security at price $X, and sell it immediately. The price declines to $X - $Y. You buy it for $X - $Y, and return the security to the original owner. You just made $Y.
So if you think there will be a recession, all you need to do is short the assets that will experience a decline in value as a result. The trick, as mentioned elsewhere in this thread, is knowing exactly when that will happen. If the price goes up instead of down in the time period you agreed upon with the lender, you lose $Y.
Another technique mentioned elsewhere is via options. You can buy the right (or "option") to sell a security at a later date at a fixed price. This is known as a "put" option [2].
It's a very volatile high risk product.
I remember channel-flipping past all of the outrage on daytime talk shows (Jerry! Jerry!) because they were trash, but that low-quality/short-sighted outrage somehow made its way into the news cycle over the decades. AI/ML filters will be a boon for information curation. Bipolar insights have no value whatsoever.
I love the extreme tension this sentence creates. Both within itself and with the rest of the authors post.
You could go your whole life without information like that and not be missing a thing.
Record low unemployment, highest stock indices, highest household incomes, low hispanic and african american poverty rates etc. etc.
Also, some of your negative indicators are the result of lower taxes = more wealth for tax payers.
All of those points are true before any bust. Juicing an already hot economy with tax cuts and low interest rates is just stupid, leading to excessive inflation, bubbles, and ultimately a bust. If adults were running things, they would use taxation and interest rate as a lever, cut when the economy is bad, but raised when the economy is good: this would provide relief during bad times and prevent good times from overheating.
Why don't we have annual dynamic taxes? I'm sure there is a lot of nuance that would have to be worked out, but it seems like an excellent method for smoothing volatility.
For property taxes to play their secondary role of forcing people to put their property to productive use (as opposed to using them for speculative investing), the tax is perfectly able to go up and down depending on the assessed value of the property. Of course, local governments also depend on the revenue, which becomes their primary purpose these days. However, societies that lack a property tax (e.g. China) suffer from a lot more speculative bubbles, making the tax useful in itself even if its revenue wasn’t significant.
The economy isn't "hot" (obvious attempt to negate positive facts), it's healthy. "Juicing" it is improving it further and making the population wealthier. There's nothing negative about that.
The actual, real rate of unemployment is called "Civilian Labor Force Participation Rate" and covers all adults (16 or older) who are not working.
As you can see from the diagram on the BLS website, the participation rate is ~ 63% which is close to the lowest level in 40+ years.
Booming economy, for FAANG and Wall Street, perhaps. Just barely off the lows for most people, though.
Record fiscal deficit/gov debt - hard to judge without also looking at gdp + asset growth, which US is doing great in (stock, real estate). Also. US is safe haven for investors right now
Corp debt - record low interest rate.
But going up overall [1].
- crumbling of tightly integrated supply chains
- global recession
- financial systems (especially in EU) which have never been reformed after 2008
- droughts, floods, locusts, and wildfires
- immigration crisis
- never-ending war in ME
- rise of nationalism and xenophobia
- rampant spreading of mis-/disinformation
In the US alone, 10k people turn 65 each day (retirement age for Medicare eligibility and their full retirement age for collecting Social Security).
It’s a good thing; the world has too many people to sustain everyone at first world standards, so a managed decline in population (while respecting the rights of existing humans) is optimal policy.
It is only 65 for people born in 1937 or earlier. For people born in [1938, 1943] it goes up by 2 months every year. It is 66 for people born in [1943, 1954]. It then goes up 2 months per year until reaching 67 for people born in 1960 and later.
https://ec.europa.eu/info/business-economy-euro/banking-and-...
[1] https://www.economist.com/briefing/2019/01/05/the-euro-enter...
> Southern discomfort
At the same time, southerners feel they are bearing all the pain of recovery. The politics of monetary union is more febrile as a result. After eight years of eye-watering austerity, Greek GDP per person is still far below its level in 2007 in real terms (see chart 3). In 2015 Syriza, a left-wing party, came to power promising to end austerity, before spectacularly reversing course when it became clear that Greece needed a third bail-out.
IMO, number one thing should be the upcoming massive retirement population. First time where working population will be smaller than retiring population.
Also, looks like the modeling done for retirement plans are based off equal or greater population for the next generation. Life expectancy longer than when these were implemented. Boomers struggling to sell their massive rural houses.
Don't believe? Walk into a McDonald's and look behind the counter. You'd expect to see all these young inexperienced workers but majority of time I now see +45 workers back there.
https://www.reddit.com/r/WTF/comments/f7g85v/hailstones_caus...
Oddly enough, the trade war with China instigated by President Trump unintentionally has had a good outcome in light of the current coronavirus worries. Companies that went all in on offshoring to China started diversifying again where their plants happened to be located. That start to deleveraging might keep a few manufacturers afloat as some or all operations per company relocate.
That's why it's not mentioned.
The news this week is that the UK is looking to not honour the terms of the withdrawal agreement in order to avoid a Northern Ireland-UK border. This sort of behaviour is eroding trust not just with EU but Japan. Lack of a transition FTA for either would send the UK into recession.
Also look at UK's recent immigration policy announcement where they announced a move to a points based system. There is no low skilled visa for people who work in agriculture. That industry has already said they will see a significant decline over the long term.
You're saying that the solution is to withdraw further into our echo-chambers and filter bubbles?
Economic collapse is long overdue and filter bubbles are actually responsible for delaying it and for making it worse than it should have been.
I suggest watching "Bowling for Columbine"--here's a notable excerpt: https://www.youtube.com/watch?v=NiaxzBlFgmQ
Btw, I'd also recommend reading this https://www.rollingstone.com/culture/culture-news/columbine-...
IMHO, the best way to fight such fear is, among other things, to insist on educating the masses and to open science as much as possible to them as well.
I remember reading at some point (though I can't find it now) that portals were sort of considered a "failed experiment", but they've become some my favorite places to casually browse.
I jokingly say “it’s a news website where if you click on a link, you might accidentally learn something”
And at each window bar
He shouted to the folks inside
'DOING ALRIGHT SO FAR!
There is something to be said about self fulfilling recessions fueled by the media but I don't think this article warrants such critique. It is not much more than a statement of fact of the economic conditions of the biggest countries of the world.
It's a self fulfilling prophecy because they always predict it's comimg, ignoring when they're wrong.
We are way past the point where we should be worried; that point was probably 10 years ago. Everything everyone knows about the economy and value creation is wrong. It's a giant, fiat-fueled pyramid scheme and as soon as just a couple of semi-intelligent billionaires start to sell their stocks, it's going to collapse.
Unlike the 2008 crisis, this time, we don't even need to find a single specific cause. The next economic depression will have so many causes that it will be easier to explain what is NOT the cause.
I think recessions are just a normal, emergent vent in an oscillatory system. It seems like putting one off artificially will lead to a more severe depression.
Maybe the corona virus had an impact in terms of showing investors that big news can transcend filter bubbles and we are not immune from global panic.
And buy what, Tulips?
I do have TulipCoin trademarked.