Economic DEATH SPIRAL?!?!

[DrDonkeyLove]

From CNBC

The global economy seems trapped in a "death spiral" that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi strategists have warned.

Some analysts — including those at Citi — have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S.

"The world appears to be trapped in a circular reference death spiral," Citi strategists led by Jonathan Stubbs said in a report on Thursday.

"Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)... and repeat. Ad infinitum, this would lead to Oilmageddon, a 'significant and synchronized' global recession and a proper modern-day equity bear market."...The world economy grew by 3.1 percent in 2015 and is projected to accelerate to expand by 3.4 percent in 2016 and 3.6 percent in 2017, according to the International Monetary Fund. The forecast reflects expectations of gradual improvement in countries currently in economic distress, notably Brazil, Russia and some in the Middle East.

By contrast, Citi forecasts the world economy will grow by only 2.7 percent in 2016 having cut its outlook last month.

So, 3.4% growth of the world economy in 2016 is OK but 2.7% is a death spiral? WTF?

[seeahill]

No one holds these clowns responsible for their predictions. So if it turns out we are not in an economic death does CNBC then ask them how they could possibly have gotten it so wrong? They do not.

You could tape a day of CNBC while the market is open. Play that tape six months from now and pretty near every prediction is just plain wrong or seriously off base. The one guy who got it right will be interviewed ("Here's the guy who called the housing upswing.") And the guy makes a prediction that, in all likelihood, will look entirely stupid six months from now.

[The Ginger Beard Man]

I'm convinced that the "recovery" of the last several years is bullshit and it's basically all a house built on sand.

[seeahill]

Ginger,
You work in an upscale joint. Do you have more business now or less? No snark here, I'm just curious.

[The Ginger Beard Man]

Ginger,
You work in an upscale joint. Do you have more business now or less? No snark here, I'm just curious.

We dropped off this year from the one previous. Main issue for us has been the strong dollar keeping tourists away. Also, about a year ago, a manager was told by some guys at JP Morgan that they had had limits put on their corporate cards for the first time ever.
Of course, for us that means gross sales dropping from over $26 million to under $26 million. I'm not exactly suffering.
But if there is a crash, I will be.
I've seen several posts here over the last couple years about how China's economy isn't nearly as strong as it seems, and the Chinese are a huge part of our business. Add to that a possible tech bubble and a likely reinflated housing bubble and I think there's just cause for pessimism.
Also, I believe my fiancé read something to me a couple nights ago about bad loans to the shale industry that aren't being paid because of the way the price of oil has cratered.
I hope I'm wrong; I'm known to be a gloomy motherfucker. I blame the Icelandic genes.

[Pinky]

You could tape a day of CNBC while the market is open. Play that tape six months from now and pretty near every prediction is just plain wrong or seriously off base. The one guy who got it right will be interviewed ("Here's the guy who called the housing upswing.") And the guy makes a prediction that, in all likelihood, will look entirely stupid six months from now.

This is correct. Macroeconomic predictions of this sort cannot be trusted. Respectable macro types acknowledge this and do not make such predictions.

The IMF projections for 2017 are particularly hilarious.

[j-cubed]

I don't know about a death spiral, but the industry I work in involves advanced manufacturing, and the sales of heavy machinery for this industry I consider a leading indicator for the upcoming economy. Machine sales are down, manufacturing indices are down, less work is being released to manufacturers.

I am not smart enough to know about a death spiral, but I believe our next President will have some hard financial times to weather.

[powerlifter54]

The Big Money is sitting waiting and watching for somebody to blink.

They don't know what is happening, so my working theory is nobody else really does either. 2.2% growth rate is pretty piss poor, but again this is an election year. But then again so was 2007.

Good time to be prepared to move to cash. Free and absolutely worth the price advice: Market will get back to around previous high levels before a drop. Yellen will not raise interest rates and if Dems start polling badly against Rep frontrunner prepare for more QE. Worsening economy and even Palin could get elected.


YMMV

[DikTracy6000]

T Boone PIckens just recently called the bottom on Oil, with likely $60 a bbl at end of 2016. Of course he admitted to getting it completely wrong last year.

[Alfred_E._Neuman]

Unless the global economy starts to taper off into recession territory, I don't see oil holding the $30 range for much longer. Fundamentals just don't point to oil companies being able to pull it out of the ground at current demand for a reasonable profit at $30.

I figure the Saudis will have to cut production at some point to bring the price to a profitable level. Right now they're pumping full bore to fuck Iran. That can't last forever.

Safe bet to buy now and ride the price up to $60+

[Fuzzy Dunlop]

Re the corporate card use drop off... Theres a fuck ton of new regulation and compliance departments are growing like weeds. Businesses are scared of scandal. Card usage is being watched for those reasons. Not necessarily an indication of bad business, but could be.

The Arabs are hemorrhaging assets to raise cash but they've dug themselves into a hole by refusing to be the first to cut production this time around. They've fucked a lot of operations in the US by holding supply steady and driving down prices. The high elasticity of supply is whats keeping prices down, it was artificially low before because of collusion in the ME. Now that there other sources (west TX, i believe, is a big one) that can produce at 60-90 bucks a barrel, demand needs to grow or else the oversupply will continue to hold prices down. I dont see that happening because of the move towards alternatives. Unless those sovereign wealth funds get into serious trouble and put pressure on the producers to revert to supply control i cant see any reason for oil to rebound.

[Sangoma]

There are several hundred economic predictions each week. One of the fuckers will get lucky and guess it more than two times in a row and will become a celebrity/guru for a few months. Then will drop into oblivion. Abby Cohen is prime example: predicted bull market of the nineties and was quoted everywhere. Then luck ran out and she stayed bullish through every subsequent stick market decline, including 2008.

Nobody knows the future, and economists are great... Explaining the past. Anybody older than thirty can remember at least a few grave forecasts, from the collapse of gold to burd flu wiping out humanity. Oh, yeah, Manhattan is apparently supposed to be under water. But i will grab any Sydney waterfront property if I can afford one.

Actually, every economist out there faiked to foresee the rally and subsequent bear run of the oil price in recent years. So, dont listen to these wankers, nobody knows.

[Turdacious]

There are several hundred economic predictions each week. One of the fuckers will get lucky and guess it more than two times in a row and will become a celebrity/guru for a few months. Then will drop into oblivion. Abby Cohen is prime example: predicted bull market of the nineties and was quoted everywhere. Then luck ran out and she stayed bullish through every subsequent stick market decline, including 2008.

Nobody knows the future, and economists are great... Explaining the past. Anybody older than thirty can remember at least a few grave forecasts, from the collapse of gold to burd flu wiping out humanity. Oh, yeah, Manhattan is apparently supposed to be under water. But i will grab any Sydney waterfront property if I can afford one.

Actually, every economist out there faiked to foresee the rally and subsequent bear run of the oil price in recent years. So, dont listen to these wankers, nobody knows.

That's like judging all doctors by Andrew Wakefield and Dr. Oz, and then saying medical science is shit because it hasn't found a cure for cancer after three decades of looking. Of coarse, you know I'm an expert because, even though I have no medical background,I just did some namedropping.

[The Ginger Beard Man]

Anybody notice the Quicken Loans Rocket Mortgage ad during the Super Bowl? We haven't learned a god damn thing.

[JohnDoe]

From The Onion a few years ago:


NEW YORK—According to a report released this week by Forbes magazine, every person who has regularly watched CNBC’s financial program Mad Money since its 2005 premiere is now a multibillionaire. “[Host] Jim Cramer turned out to be 100 percent accurate with every stock he said to buy, sell, or hold; I started out by investing $600, and now I have a net worth of $4.1 billion,” said former dishwasher Paul Welling from the plush 100-seat TV room aboard his custom luxury yacht. “All I had to do was follow Jim’s investment instructions and then sit back as the millions upon millions rolled in every day for the past eight years. And actually, I myself watched no more than three times weekly, and today I own a media conglomerate.” The findings reportedly came as welcome news for the cable channel following recent reports that over half the regular viewers of the morning show Squawk Box had died of exposure after winding up penniless and destitute on the street.

[TerryB]

Damn. Now I wish I'd have watched his show.

[Sangoma]

There are several hundred economic predictions each week. One of the fuckers will get lucky and guess it more than two times in a row and will become a celebrity/guru for a few months. Then will drop into oblivion. Abby Cohen is prime example: predicted bull market of the nineties and was quoted everywhere. Then luck ran out and she stayed bullish through every subsequent stick market decline, including 2008.

Nobody knows the future, and economists are great... Explaining the past. Anybody older than thirty can remember at least a few grave forecasts, from the collapse of gold to burd flu wiping out humanity. Oh, yeah, Manhattan is apparently supposed to be under water. But i will grab any Sydney waterfront property if I can afford one.

Actually, every economist out there faiked to foresee the rally and subsequent bear run of the oil price in recent years. So, dont listen to these wankers, nobody knows.

That's like judging all doctors by Andrew Wakefield and Dr. Oz, and then saying medical science is shit because it hasn't found a cure for cancer after three decades of looking. Of coarse, you know I'm an expert because, even though I have no medical background,I just did some namedropping.

You are comparing apples with bottle caps. Medical science is way more precise than economics. Economical forecasting should be rather with predicting the weather, except that the dismal accuracy of the latter is considerably better. The best predictions have been done by economists with constant views. Some were eternally bullish on gold, and lo and behold, around 2004 gold took off. Some were continuously bearish on the stock market - and they got their piece of glory a few times in the last decade. Like the proverbial broken clock.

I am not sure why people are so hung up on predictions, given such poor historical record of forecasts. All economic decisions are essentially gambles: you take a view and take the position based on it. If you're right - ride the profits, if wrong - cut your losses and move to the next deal. Successful stock market traders are not those who better predict the future. In fact, many of them have majority of their trades lose money. Two things make them successful: the size of the position (i.e. the risk) and what they do after they are in, which is stop loss and profit taking strategies. This approach is applicable to almost everything in life.

The only reason I mentioned Abby Cohen is because I had first hand experience with her predictions. In 2000 I was trading South African stock market futures, and when NASDAQ started its famous decline and traders were making wads of money on the short side of tech stocks, Cohen stayed bullish until it halved.

[Sangoma]

Anybody interested in economic forecasting should read Taleb's "Black Swan".

[JohnDoe]

And anyone interested in investing should look into Jack Bogle and Vanguard. Sort of like the IGX of investing, but, like, a way nicer guy. Simple and reliable and proven.

[Fuzzy Dunlop]

And anyone interested in investing should look into Jack Bogle and Vanguard. Sort of like the IGX of investing, but, like, a way nicer guy. Simple and reliable and proven.

Bogle and Vanguard now kind of at odds w each other given Vanguard's ETF business growth, no?

There's been some chatter lately about the nature of indexing causing stocks to become overvalued. The argument being that buying full slices inherently forces IMs to drive up the prices of some shitty securities.

Ackman also made some good points about ETFs and shitty corporate governance in his 2015 letter.