SocGen: "65% Probability Of US Recession"

Tyler Durden's picture

On Monday, Goldman was the first bank to go ahead and hike its recession odds for the US from 30% to 40% (needless to say assigning probabilities to a non-linear outcome is utterly ridiculous but we'll play along), additionally saying that both France and Germany will enter a recession shortly. Promptly, Wall Street followed. Yet despite the glaringly obvious, still nobody dares to assign a majority probability to a recession in America. Until today. French bank SocGen is once again the trailblazer in telling the truth, with its economics team being the first to make the bold (for a bank) claim that America now has not only a majority, but a two thirds chance of recession. To wit: "the recent financial shock, if it continues, is already large enough to derail the cycle prematurely. Our financial conditions index is at a tipping point and, all else equal, suggest 65% probability that the economy will enter recession in the next 12 months" (and to all those who point to record corporate profitability as the strawman which will never allow the US to enter a recession, SocGen has this response: "the recession that began in December of 2007 occurred in the face of very strong corporate profitability.").


In an effort to capture the ‘new normal’ in our recession variables tied to consumer leverage. Even so, the models continue to point to low recession odds over the next year. Simply put, this cycle is too young to die a natural death. This does not mean that a recession cannot happen, but it is unlikely to originate organically within the US private sector. A recession needs a trigger. Unfortunately, the recent financial shock, if it continues, may already be large enough to derail the cycle prematurely.



Financial conditions are already at mild recession levels. Our financial conditions index (FCI), which is constructed to have a mean of zero and a standard deviation of one, now stands at -2.25 which is a new cyclical low. With the exception of 1998, shocks of this magnitude put the US economy in recession  with a relatively short lead. 1998 was the exception, but that shock occurred in the context of robust economic growth which provided a strong buffer. Needless to say, there is no buffer in place today. Converting the FCI into a recession probability using the probit model suggests 65% probability of  recession in the next 12 months. This is a significant risk to our stall-speed scenario. With no improvement in conditions in the next month, we may be forced to revise our forecasts down further.


It is important to note that next year’s outlook is also highly sensitive to the fiscal situation. At the moment, we assume no new stimulus beyond extending payroll tax cuts and emergency unemployment benefits. Failing to agree on these measures would almost certainly put the US in a recession; however there is also the possibility that we may see stimulus if President Obama manages to push through at least a portion of his jobs plan. We will continue to monitor  fiscal developments in the next two months and adjust our forecasts accordingly.

And on that note: short squeeze on.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Pladizow's picture

Rose colored glasses?

Stax Edwards's picture

Hey Pladizow, are you the resurrection of Slaughterer?  

Harlequin001's picture
SocGen: "65% Probability Of US Recession"

and 100% probability that they won't survive it...

Troll Magnet's picture

so we are going from depression to recession? hooray! this is bullish!

trav7777's picture

well, the 30yr mortgage rate is now below 4% according to some news blurb.

I gotta ask why the fuck do people have to PAY a banker for the use of this money?  It sure as shit ain't to compensate for risk, as the house is collateral and the fuckin banks just get bailed out anyway. 

ratso's picture

Oh right, SocGEn is a real truth teller.  Next lie please.

AldousHuxley's picture

SocGen on a rainy day: "65% chance of rain"


Turn off the "reality" TV and just look out the window.


Ruffcut's picture

I calculated more like 68.2%. I use the math designed from ratings agencies.

Jeff Lebowski's picture

Uh.  Yea.  Give me a sec...  I'm coming up with 32.33 (repeating of course) percentage of survival.

CreditcalMass's picture



Hephasteus's picture

Nobodies model has leeroy jenkins factors in it.

Jim Cramer's picture

Wow, I am confused!  How can you put percentage odds on a recession happening when you are in one already, wouldn't that make the probability 100%?  I win, I nailed it, stupid banks.  Shouldn't I get paid for that assesment?



akak's picture

It means that there is a 65% chance that the USA will enter a recession, after the end of the current depression .... sometime in 2018 or so.

chunkylover42's picture

You are to be paid in fiat dollars. 

Good luck.

Manthong's picture

The other part of that report gave a 20% probability of it going from light to dark tonight.

Linus2011's picture

20% probability means 20% +/- 10%

65% probability means 65% +/- 5%

the guy must be french. on any american or german university he would not have received a degree.


some more numbers from me:

probability of right prededictions of SocGen in the past: 0%

capital lost within half a year: 1 trillion eur

probability of crying for "save me, save me..." any time soon: 100%


IQ 145's picture

"A trailbralzer in telling the truth"---oh, really. I didn't know anyone was that naive. There is no "truth" on these kinds of "predictions"; they're just talk. I wouldn't believe SocGen if they said the Sun was coming up in the morning; and neither would any other reasonably sophisticated person.

falak pema's picture

 I wouldn't ...and neither would any other reasonably sophisticated person.

now hows that for narcissism personified...? And an IQ of 145. Sophisticated lady and intelligent as a hammer head.

kito's picture

your new avatar sucks pladizow. bring back the breasts!!!!!!!!!!!

SGS's picture

But MS is recovering and Deceptobama said everything is green and okay...

PaperBear's picture

More like 100%

Ned Zeppelin's picture

Correction: "suggest 100 % probability that the economy will enter recession in the next 15 minutes. "

kaiserhoff's picture

I would agree, but don't we have to climb out of the depression before we can fall into..., whatever.

Racer's picture
US Treasury Secretary Geithner says there is 'no risk' for US in swap lines with ECB

Translation: Fasten your seatbelts as even more massive risk taken by US

Ned Zeppelin's picture

Just like there was "no chance" of a US rating downgrade. Timmah, you Eraserhead buffoon, sit down and shut the F up.

HelluvaEngineer's picture

This means that it's already happening.  Did anyone watch the back door?

Ruffcut's picture

WHo needs to watch the back door, when you leave the front door wide open, all the time.

Jim Cramer's picture

There is no back door to watch since we are all already bent over with their d**ks shoved so far up the back door minus the lube.

Don Smith's picture

No, there's a 35% chance that we are already in it.  It's semantics, you see.  

FunkyMonkeyBoy's picture

More jew confetti please Ben!

Deadpool's picture

that is Sooo 20th century of you, FuMoBoy

baby_BLYTHE's picture

Just so people don't think you're joking...

Adolf Hitler himself in his book, Mein Kampf, makes many references to the German debt and the negative consequences that brought about the inevitability of "National Socialism". The inflation also raised doubts about the competence of liberal institutions, especially amongst a middle class who had held cash savings and bonds. It also produced resentment of bankers and speculators, whom the government and press blamed for the inflation. Many of them were Jews, and some Germans called the hyperinflated Weimar banknotes Jew Confetti.

Stax Edwards's picture

Funky Monkey Boy hates America, but he is a big fan of Iran and N Korea. Right FMB?  

Tell us again how much better it is over there.

SheepDog-One's picture

I hold an equal opportunity despisement of all humans in general as well. And I show it by making up words as I go, fuck it.

DCFusor's picture

Big plus, SheepDog.  Same here.  The challenge is not to let it blind you to the rare human not worth despising.

SheepDog-One's picture

Oh sure Ive got 100% friends, but theyre pretty rare these days.

Smiddywesson's picture

I hate all humans equally.

LOL Funk, the simple honesty of that statement brought a tear to my eyes.  Oh, the humanity!

"Johnson, Navin R." Sounds like a typical bastard!

Hephasteus's picture

"Funky Monkey Boy hates America, but he is a big fan of Iran and N Korea. Right FMB?  

Tell us again how much better it is over there."

No iran and North korea absolutely suck. On account of constantly being attacked by jews. They got white phospher and shit.

Deadpool's picture

why would you have that excerpt so quick at hand? put down the remote from 24 hour Hitler channel and go be productive....

trav7777's picture

this term originated apparently in bavaria...producers refused the judenfotzen as they referred to it.

It's no accident that it was blamed on bankers and jews, as they were in charge of the banking system at the time and after Weimar, somehow, the nation of Germany ended up under 100% jewish ownership.  Even after YEARS of anti-semitic divestiture and legislation, by the time Hitler truly came to power, that level of control had only dipped to 33%.

The Versailles Treaty was institutional usury against a nation.  Same shit as was tried against Iceland and other sovereigns recently.  When the debt compounded faster than the economy, the creditors who conjured the money from thin air moved in to seize collateral, AKA the German nation.

This phenomenon CONTINUES to recur throughout history and is the origin of the Christian prohibition against usury.  Jews do not have such a prohibition; in fact, they have the opposite in their Torah, that of an affirmative commandment TO lend to gentiles at interest.  They are supposed to lend to their kin at 0% but always charge interest to gentiles.  Any progressive or liberal should immediately identify this as racism and should condemn it and the religious doctrine that sets it forth, branding both as hate crimes.

DosZap's picture


Christians do not (NOT) believe in charging  interest .They may charge interest to everyone/anyone,they so desire.

Even a fellow Beleiver,if they wish.

SMG's picture

More accuratly Lucifer/Horus confetti.   Who do you think the eyeball triangle is?

Deadpool's picture

Hugh McColl, Ken Lewis, Angelo Mazzilo, Dick Fuld, Jimmy Kayne, John Mack, Phil Purcell, Franklin Raines, Hank Paulson, Stan O'Neil. Dumb ass goiys can be greedy too.

trav7777's picture

no question at all...the Rocks and Morgans joined the unholy alliance that made the Fed, along with jews such as Warburgs and Rothchilds, Goldman Sachs, and so forth.

Yeah, if you're a Rock, you're in.  But the Rocks don't help generic "white people" like the tribe helps generic tribers.  The main difference is the institutionalization of racism among various clans.  Doubtlessly, some bootlicker will come along and blame that on white people.

The notion of a clan is itself supposed to be inherently racist,

NoClueSneaker's picture

No need to ... Tricheur just kicked the turbo-print in Frankfurt. GS cashes the shorts, EU-Bank-llamas go bakrupt inspite, Deutsche Shithouse borrows from Ben without limit.


Alles wird gut.