Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

U.S. Recession 2013 100% Risks Follow On

Economics / Recession 2013 Dec 02, 2012 - 11:37 AM GMT

By: PhilStockWorld

Economics

Courtesy of Doug Short : Professor Piger updated his recession probability model that caused so much attention early November (See “Debunking 100% probability of recession“). As we forecast last month, the probability index undertook a “revision” of epic proportions as displayed below (01-Dec-12 vintage):


This is a classic real-world rendition as to why you cannot make “never before has recession probability reached 20% without a recession ensuing shortly after” type inferences with these Markov model readings, and why the developers of the model use 3 or more readings above 80% before making recession calls. Hopefully last month was the last time we see misinformed bloggers jumping to wild conclusions and scaring everyone witless with baseless inferences without doing their homework.

The reasons for the dramatic drop in recession probabilities were of course the inclusion of better data from September. Because of a two-month delay in the availability of the manufacturing and trade sales series, the probabilities of recession were also available only with a two-month delay. So the reading in early November we saw that caused so much fright applied to the economy as at August 2012. We had one set of extra data readings since the scary reading was published that were not yet incorporated into the model. As we stated last month, this data was likely to have a favourable effect on the model and drop probabilities down to 10% from 19%. The reason the probabilities dropped even further is likely to do with the fact that Real manufacturing and Trade sales printed a new high at the September data point published in November:

(Chart courtesy of Doug Short)

It is with some interest that we noted ECRI pointing to Sales as having peaked in their defence of recession call last week. I looked very hard at their peak indicator of Sales published on their web site last week and struggled to find the remotest inference of a peak in their chart, no matter how creative I got with my geometry skills. With this latest print from Real manufacturing and trade sales forming a new high (it was published after ECRI did their rounds last week) I find this even more baffling. No doubt the November figure for the more timely monthly Retail and Food Services Sales[NAIC based] used by the NBER and our “NBER Model : Recession Confirmation of last resort” and published around the middle of December will be more telling. Whilst the chart below shows growth slowing (red line), the growth is still well above a negative print and the blue line offers absolutely no sound geometric reason for a peak inference right now.

I’m not denying recession risks right now, but do get a little frustrated when weak arguments for the case are put forward by industry professionals and broadcast on mainstream TV. It leaves the impression one is clutching at straws. You could trot out a half-dozen cases right now for recession far more compelling than a non-existent peak in retail sales (conversely we could roll out 2 dozen cases for expansion!) On that note, we have a full month of October data for our NBER model maintained for clients. On Friday we released the full report to them, but below is a snapshot of the recession probability section of the report:

The red dotted line is the “Never before” inference line ? in other words when probabilities exceed this line, recession has always followed very shortly thereafter, bar one occasion in 1966. If the red line were moved to 35% then you would have a level that has never made a false alarm (false positive) in the past. We can make these kinds of inferences as this model is not subject to the large revisions in the Markov models, it is merely subject to the data revisions themselves. As we have comprehensively researched in a prior note ? these revisions are not as dramatic as some would lead us to believe and have little effect around turning points for the NBER Model.

I am more inclined to think the levels posted by this Probit model (12.8%) or more representative of risk right now that the Markov models’ 3%. But we do not have to wait until the 15th Dec to get a comprehensive November view of the economy ? our Labour Report which gets published on 5th December will include a battery of BLS data that can be combined into a comprehensive and broad US economic composite. Its the earliest possible time to achieve a broad view of the economy status for the prior month. If you go to the OUR SERVICE menu you can download a copy of the report from last month to see what it is saying through the lens of the labor market.

Dwaine van Vuuren is CEO of RecessionALERT.com, a provider of investment research.

www.recessionalert.com

- Phil

Click here for a free trial to Stock World Weekly.

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2012 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PhilStockWorld Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules