Prepare for the "worst case"

[dazzwater]

Quote from blowingup2012:

When the line went under 2.5 in the past then it usually meant a recession wasnt too far away.

That is still technical analysis. You're using historical chart data and a
"break-through" line to indicate whether a recession is coming, without any other economic/fundamental backing for your reasoning.

I'm not saying you shouldn't be wary. Just that I don't agree with you. I'm still holding on to my long-term positions. The only reason I'll be wary in the short-run is that European bank downgrades may yet occur and cause a ripple effect on credit availability and hence equity markets. But I'm not worried enough to invest in short-term hedges.

 

[GTS]

Quote from blowingup2012:

This isnt a chart pattern Im describing, but a simple observation. When the line went under 2.5 in the past then it usually meant a recession wasnt too far away. Again though, this chart is updated monthly so there is no way to get an immediate edge.

Since this recovery was much weaker than previous ones and barely got above 2.5% having it go beneath that arbitrary level doesn't seem very telling.

Also isn't GDP data quarterly not monthly as you stated?

 

[tenthousandmen]

blowingup-

Take a sharpie marker

write on the wall "$160 k tax write off - $3k every year" - yes straight on the paint and plaster you haven't fully paid for yet

stare at it

go see a doctor (shrink)

 

[Rationalize]

Quote from dazzwater:

I don't think you can use technical analysis/chart patterns to predict a recession.

I don't think you can use technical analysis/chart patterns to predict.

2c

 

[blowingup2012]

Quote from GTS:

Since this recovery was much weaker than previous ones and barely got above 2.5% having it go beneath that arbitrary level doesn't seem very telling.

Also isn't GDP data quarterly not monthly as you stated?

There is nothing arbitary about it. The official definition of a recession is two consecutive quarters of negative growth. So if you get two negative bars on this chart then you have a recession. You can see very plainly on this chart what happened in the past before those two negative bars of growth.

 

[GTS]

Quote from blowingup2012:

There is nothing arbitary about it. The official definition of a recession is two consecutive quarters of negative growth. So if you get two negative bars on this chart then you have a recession. You can see very plainly on this chart what happened in the past before those two negative bars of growth.

I asked how you came up with the arbitrary rule of passing below the 2.5% level as a precursor to a recession not the definition of the recession.

This is what you said that I replied to:
"When the line went under 2.5 in the past then it usually meant a recession wasnt too far away. "

Context is everything - you need to look at how far the line dropped before it went under 2.5% in the past recessions; this"recovery" is obviously anemic compared to the others but there is nothing significant about the 2.5% level.

 

[blowingup2012]

Again, that is not an "arbitrary rule". You are entitled to your own opinion, but not observable fact. The fact is there were many times in the past where the line dipped below 2.5 and the vast majority of those times lead to a recession.

Now if you want to base your opinions off of delusion, Im going to stick to observable facts and statistics. Thats your choice to stick with delusions not mine.

 

[GTS]

Quote from blowingup2012:

Again, that is not an "arbitrary rule". You are entitled to your own opinion, but not observable fact. The fact is there were many times in the past where the line dipped below 2.5 and the vast majority of those times lead to a recession.

You can make the same argument for 3.0, 2.0 and 1.5 - like I said your decision to choose 2.5 is arbitrary and if you look at the graph where it went below 2.5 in the past its clear that the trajectory is more important than the actual value.

 

[blowingup2012]

I believe if it goes under zero then the "actual value" is going to be most important.

 

[Ghost of Cutten]

The USA is more likely to see a 4% GDP print in the next 1-2 years than a recession.

However, I agree with you that it's always wise to live your financial life as if a recession was just around the corner.