eyeore cheers up! ej next?

[jk]

nouriel roubini was crowned in an earlier thread as "king of the eyeores" [http://www.itulip.com/forums/showthread.php?t=445&highlight=roubini] because of his unremitting gloom about the u.s. economy and his certainty about the dire recession ahead. writes floyd norris of the ny times today:
"Worries about a United States slowdown have faded, and even the self-appointed pessimist on one panel of economists here, Nouriel Roubini of Roubini Global Economics, saw the threat in the United States as being a “growth recession” rather than a real recession." meanwhile, ecri's weekly leading index has risen to a 49 week high: no recession in sight. ej is apparently the last gloomster in the public eye. so, ej, any doubts?

[EJ]

Re: eyeore cheers up! ej next?

nouriel roubini was crowned in an earlier thread as "king of the eyeores" [http://www.itulip.com/forums/showthread.php?t=445&highlight=roubini] because of his unremitting gloom about the u.s. economy and his certainty about the dire recession ahead. writes floyd norris of the ny times today:
"Worries about a United States slowdown have faded, and even the self-appointed pessimist on one panel of economists here, Nouriel Roubini of Roubini Global Economics, saw the threat in the United States as being a “growth recession” rather than a real recession." meanwhile, ecri's weekly leading index has risen to a 49 week high: no recession in sight. ej is apparently the last gloomster in the public eye. so, ej, any doubts?

Ej remains the last bear standing. Why? I don't follow in emotion. I follow the numbers.

Remember, I was not with the Y2K crowd, nor am I with the Peak Oilers. I don't like to make negative prognostications. I am an entrepreneur, an optimist by nature, a realist by intellectual discipline.

The data point to recession. No doubts.

[jk]

Re: eyeore cheers up! ej next?

Ej remains the last bear standing. Why? I don't follow in emotion. I follow the numbers.

Remember, I was not with the Y2K crowd, nor am I with the Peak Oilers. I don't like to make negative prognostications. I am an entrepreneur, an optimist by nature, a realist by intellectual discipline.

The data point to recession. No doubts.

a pessimist by nature, i have to remain suspicious and skeptical of my own negative outlook.

[blazespinnaker]

Re: eyeore cheers up! ej next?

never be dogmatic.

[Jeff]

Re: eyeore cheers up! ej next?

Recessions is inevitable. The only question is when. Timing makes all the difference.

Similarly, all software is just ones and zeroes. The only question is in what order. Order makes all the difference.

[bart]

Re: eyeore cheers up! ej next?

nouriel roubini was crowned in an earlier thread as "king of the eyeores" [http://www.itulip.com/forums/showthread.php?t=445&highlight=roubini] because of his unremitting gloom about the u.s. economy and his certainty about the dire recession ahead. writes floyd norris of the ny times today:
"Worries about a United States slowdown have faded, and even the self-appointed pessimist on one panel of economists here, Nouriel Roubini of Roubini Global Economics, saw the threat in the United States as being a “growth recession” rather than a real recession." meanwhile, ecri's weekly leading index has risen to a 49 week high: no recession in sight. ej is apparently the last gloomster in the public eye. so, ej, any doubts?

My read on Roubini is that he's still very much in the bear camp, although he has gotten milder in the last month or so. Recession/slowdown prediction is in no way foolproof or even close to a science and the input data is also not terribly reliable, as EJ and John Williams and a few others have pointed out.

And it is possible to "create" enough money to forestall one too, as has been done many times over the decades. This is the key in my opinion, and at least so far, the various central banks are still pumping hard.

As far as ECRI, I have their weekly data going back to 1997 and their accuracy is not as high as many seem to feel. I can't post it since its copyrighted and proprietary, but for example - did you know that the index value in mid '97 was at the same level as both Oct '01 and Oct '02, or that their index didn't break trend until about April '01?


And then, as EJ noted, there are many raw facts that just plain don't look good.







The simplest and broadest single key to what's ahead in my opinion is credit creation changes... and so far they're mostly holding at a high level although a shorter term look also shows a potential trend break forming.






Color me still as (below) ;) ... but still seeing many bullish areas too.

[jk]

Re: eyeore cheers up! ej next?

"It's not very pleasant in my corner of the world at three o'clock in the morning. But for people who like cold, wet, ugly bits it is something rather special."

[bart]

Re: eyeore cheers up! ej next?

"It's not very pleasant in my corner of the world at three o'clock in the morning. But for people who like cold, wet, ugly bits it is something rather special."

http://www.nowandfutures.com/grins/rimshot.mp3

and...

http://www.nowandfutures.com/grins/noticing_eeyore.wav ;)

[EJ]

Re: eyeore cheers up! ej next?

Discounting your own personality is the first thing you have to do before crystal ball gazing. First time I made a recession prediction in 2001, it was based on the analysis here. In sum, here's my prediction from January 2001, graded as "0" for neutral, "+1" for optimistic and -1 for pessimistic relative to how events came to pass:

1) The U.S. economy will experience negative GDP growth for Q1 and Q2 with possibly some moderation in Q3 but no return to positive GDP growth until 2002 at the earliest.

Source: Univ. Indiana

The recession officially started in Q1 2001 and ended Q4 2001. Off by a quarter on each end, but still more accurate than the "no recession" consensus. I give myself a "0" on that one. Close enough.

2) Unemployment doubles from 4% to 8% by the end of 2001.

Unemployment in high tech, ground zero of the recession, climbed to 25% in places like Boston and San Francisco. Overall, though, the official unemployment rate peaked at a nine-year high of 6.4% in June 2003. (Unemployment typically rises for several quarters after a recession ends.) However, as many have pointed out, there are serious flaws in the way unemployment is measured, and that 6.4% number likely understates real unemployment by at least two points. I give myself a "0" for that one, too.

3) The discount rate will be reduced to under 4% by December 2001.

This prediction had a lot of people telling me at the time that I was being pessimistic. As it turns out, I was optimistic. On December 13, 2001, the Fed had to lower the rate to a mind-blowing 1.25%. I never expected the downdraft from the bubble crash would require that level of monetary stimulus. I give myself an "1" for that one, too optimistic.

4) Evidence of a deepening recession by mid-2001 even as rates are cut will cause foreign investors to start to doubt the ability of the Fed to halt the economic contraction. At first foreign capital leaves the U.S. in search of better returns elsewhere. Later, as perception of default and currency devaluation risks rises, capital flows out of the U.S. in earnest.

Didn't happen... that time. I underestimated the willingness of the Fed via interest rate cuts and non-enforcement of lending rules, especially large scale predatory–otherwise known as "sub-prime"–lending, and by allowing the credit markets to run out of control, to create a housing bubble. Also underestimated the ability of Congress via tax cuts and war to run unprecedented fiscal deficits. But was that call pessimistic or optimistic? The darkest imagination could not have conceived that the Fed would permit anything as dangerous as a housing bubble to form, simply to help get the economy of of recession. That's like treating a methadone addict with heroin. On the other hand, I was event neutral on the foreign lending front, as private and institutional buyers of U.S. treasury and agency debt did go away, with foreign central banks stepping in to fill the gap, and now account for 80% of purchases. All in all, I give myself a "-1" on that call–too pessimistic. Never underestimate the power of global central banks working together on a coordinated reflation campaign.

5) The fiscal "surplus" of the past few years will turn out to be due primarily to capital gains tax receipts. As tax payers take capital gains losses against gains in 2001, tax receipts will fall by a greater extent than expected. Tax cuts, blessed by Greenspan last week and enacted to help the economy will create an enormous fiscal deficit for 2001. The bond market will price this in before the event, driving up interest rates in late 2001 and further stifling capital formation.

Correct on part one but too pessimistic on part two. In 2003, 70% of the fiscal deficit–fiscal, not trade–was financed by foreign borrowing, more than 60% of it from central banks. Should have known they'd do whatever it takes to keep the game going. I get a "-1" on that one.

6) The first stage of the depression is deflationary, the second inflationary.

I get a "0" for that.

So how pessimistic was that prediction? Let's get the average.

0 - 1 - 1 + 1 + 0 + 0 = -1/6 = -0.16

Slightly pessimistic.

In my Recession 2007 prediction, I therefor bake in one key lesson from my 2001 recession prediction: When the Fed says they're going to fight deflation, they are not kidding. They will do whatever it takes and so will global central banks. Deflationists like Rick Ackerman did not learn this lesson. I'm curious to see Ackerman's and Roubini's predictions of the 2001 recession to see how well these held up.

[bart]

Re: eyeore cheers up! ej next?

2) Unemployment doubles from 4% to 8% by the end of 2001.

Unemployment in high tech, grown zero of the recession, climbed to 25% in places like Boston and San Francisco. Overall, though, the official unemployment rate peaked at a nine-year high of 6.4% in June 2003. (Unemployment typically rises for several quarters after a recession ends.) However, as many have pointed out, there are serious flaws in the way unemployment is measured, and that 6.4% number likely understates real unemployment by at least two points. I give myself a "0" for that one, too.

Personally, I'd give you a +1 on unemployment and pretty much due to the statistical issues you mentioned. Although the broadly publicized unemployment measure (called U-3 by the BLS) did only go up to 6.4%, the broader U-6 measure moved from under 7% to 11%, an increase of 4% which matches your 4 to 8% difference.

Note also that the U-6 measure is the one to use when comparing against other countries since the definitions come much closer to matching.

And here's the chart, as usual. ;)

[Finster]

Re: eyeore cheers up! ej next?

nouriel roubini was crowned in an earlier thread as "king of the eyeores" [http://www.itulip.com/forums/showthread.php?t=445&highlight=roubini] because of his unremitting gloom about the u.s. economy and his certainty about the dire recession ahead. writes floyd norris of the ny times today:
"Worries about a United States slowdown have faded, and even the self-appointed pessimist on one panel of economists here, Nouriel Roubini of Roubini Global Economics, saw the threat in the United States as being a “growth recession” rather than a real recession." meanwhile, ecri's weekly leading index has risen to a 49 week high: no recession in sight. ej is apparently the last gloomster in the public eye. so, ej, any doubts?

What so gloomy about expecting a recession? Given the state of US consumption excess and indebtedness, a real, honest-to-god consumption-led recession would arguably be the outcome we should all be rooting for.

[Spartacus]

Re: eyeore cheers up! ej next?

I'm begging and praying nothing bad happens - no recession.

Precious metals have done well the last 4 years, with no recession. It's a big part of my investments.

but I think there will be one.

While I am naturally not the happiest person, I'm not negatively depressive either, so IMHO I don't have a huge dispositional bias either to massive, ruinous economic collapse or to eternal, above-average growth.

nouriel roubini was crowned in an earlier thread as "king of the eyeores" [http://www.itulip.com/forums/showthread.php?t=445&highlight=roubini] because of his unremitting gloom about the u.s. economy and his certainty about the dire recession ahead. writes floyd norris of the ny times today:
"Worries about a United States slowdown have faded, and even the self-appointed pessimist on one panel of economists here, Nouriel Roubini of Roubini Global Economics, saw the threat in the United States as being a “growth recession” rather than a real recession." meanwhile, ecri's weekly leading index has risen to a 49 week high: no recession in sight. ej is apparently the last gloomster in the public eye. so, ej, any doubts?

[spunky]

Re: eyeore cheers up! ej next?

What so gloomy about expecting a recession? Given the state of US consumption excess and indebtedness, a real, honest-to-god consumption-led recession would arguably be the outcome we should all be rooting for.

Nothing the matter with a recession , but ya know it is like saying socialism in this country.


To do certain jobs properly you must be emotionally detached. Keep it up EJ. Now excuse me while I add some irish whiskey to my morning coffee;it helps

[Spartacus]

Re: eyeore cheers up! what will be much more interesting

is whether the perma-cheerleaders admit they were wrong if we do get a huge recession.