Trader: "The US Is Closer To A Recession Than You Think"

Turn on the TV or spend any time on Twitter and you will be comfortably, numbly, reassured that everything is awesome - stocks are up (well FANGs are up), confidence is up (as is credit card debt), and the economy is "SOARING" (as long as you don't pay attention to the weakness in income growth). However, reality is that the so-called economic data that the mainstream relies upon is 'soft' survey-based perceptions skewed by 'hope' and 'expectations', and while that is rising once again, 'hard' real economic data continues to languish awkwardly unchanged from the start of President Trump's reign..

And while facing reality, especially as cognitive dissonance is running so hot, Bloomberg's Jacob Bourne has a timely warning that many will choose to ignore -  Despite the momentum in the U.S. economy (solid jobs data, a robust earnings picture, fiscal stimulus), markets are trading like the next recession is drawing closer.

Bloomberg's markets recession model, which translates how various asset classes are trading into recession probabilities, now flags the next recession to take place in 12-24 months. More importantly, the start of the recession is more likely to be in the next 12 months rather than in two years.

Of course, this will not be discussed among the 'experts' because - simply put - there is always a risk that this becomes a self-fulfilling prophesy; after all, if enough people worry about a recession and shun riskier assets, they end up raising funding costs for corporations, resulting in the recession they were so worried about -- the perennial problem of the Keynesian beauty contest that characterizes the global economy.

With markets the ultimate judge of the contest, it all depends on how the world’s central banks react to the market signals... and if they do react, will that shatter the veil of ignorance so many traders rely on when they BTFTWD!!??


bshirley1968 directaction Tue, 07/10/2018 - 09:30 Permalink

What this tells us is, the "soft data " rules.

As long as the sheeple "believe" and act as if Everything is Awesome, then the show can go on.

Those of us who have awakened to the reality of the hard data have forgotten what it is like to be oblivious to the danger hanging over willingly lay ourselves out to be carved and fed upon. But as long as 80-90% of the sheeple are just going to get in line day after day and tell each other how great things are, the ruse will continue.

+100 on the oil depletion. Even sheeple can't ignore that one.

In reply to by directaction

shizzledizzle Tue, 07/10/2018 - 08:41 Permalink

We've BEEN in a recession, you know what comes next. Due to central bank interventions markets are completely decoupled from the well being of the nation as a whole. Only when our currency becomes worthless and people can no longer borrow will things change. 

hotrod Tue, 07/10/2018 - 08:45 Permalink

Never in the history of recessions have I ever heard all the talk about the next recession, housing bust, stock melt down etc. etc.  In the past they just happened unexpected yet now we are planning for them.  I can only recall 1 housing bust in my 50 plus years of living.  I guess 2008 has made everyone paranoid.

Giant Meteor hotrod Tue, 07/10/2018 - 08:52 Permalink

I ponder this a good bit as well. The only thing I can come up with will be the main retort that no one ever heard , "Everyone saw it coming." to be followed by "nobody really gave a shit .." Even CNBC will pile on ... Whyyyy it was so so obvious even Kramer saw it coming .. and the POTUS will appear and say, "See folks, I told you it was a bubble all along."

When a nation reaches this level of potemkin-ness , well no one should really be surprised by anything at this point ..

In reply to by hotrod

schrock hotrod Tue, 07/10/2018 - 09:57 Permalink

Are you kidding me? There has been very little talk about a recession or a housing bubble except for little places on the Internets like ZH. Hardly a whisper in the MSM. During 05 and 06 there was at least a little talk of these thing by the MSM. You can search googles news history to refresh you memory.

In reply to by hotrod

Ron_Mexico hotrod Tue, 07/10/2018 - 10:17 Permalink

still, when I see houses in my 'hood selling for more than twice what they were going for in 2005 (before the housing bust), it gives me pause.  Do you think the average buyer is making twice as much money as they were in 2005?  Seems to me the net effect of this is much like the effect of high student loan debt:  it sucks disposable income out of the economy. Longer term, the economy weakens until something breaks . . .

In reply to by hotrod

yellowsub hotrod Tue, 07/10/2018 - 10:24 Permalink

No, it's the fact that they pretty much removed and stop enforcing any lending standards since 2008 when it was impacting home sales negatively...

Same reckless lending that caused it will only inevitably cause another one...   

Greedy humans never learn or don't care since they won't be impacted by the next crash in the comfort of their own bunkers.

In reply to by hotrod

lnardozi Tue, 07/10/2018 - 08:46 Permalink

I like Trump, but why haven't we heard the phrase, 'workforce participation rate' since he started? Fuck, all I really want is some honesty. I feel like Billy Joel for Christ's sake.

MuffDiver69 Tue, 07/10/2018 - 08:56 Permalink

Convenient whoever the next President was after Obama that interest rates were going up and the little mentioned balance sheet being unwound...The current FED chair wrote in 2012 this scenario would mess up the economy and we don’t need geniuses like this Bloomberg tool to jump in...Perhaps more articles on the fraud that was the FED policy under Obama and the price to be paid because the chosen one couldn’t be made to look bad...

Money_for_Nothing Tue, 07/10/2018 - 09:11 Permalink

The US is closer to the biggest economic boom in the recorded history of the world than the author of this article thinks. Every $USD ever created is coming back to the US or die trying.

LawsofPhysics Tue, 07/10/2018 - 09:12 Permalink

Please, using actual mark to market accounting and in nominal terms the U.S. has in fact been in a depression for 10+years!!!

"Full Faith and Credit"

same as it ever was!

Byrond Tue, 07/10/2018 - 09:34 Permalink

It's that funny tingling you get when you're standing on the edge of the Grand Canyon and Trump is right behind you swinging a sledgehammer (you being the US economy). 

Chief Joesph Tue, 07/10/2018 - 09:54 Permalink

"The US Is Closer To A Recession Than You Think".  Of course!.  We never left the 2008-2009 recession, Dummy!

Also, these market charts don't say anything about how the rest of the country is doing. Its only about markets, and markets are only played by people who have money to gamble, but not by the rest of the general populace. 

Notice too, None of the charts have any stochastic analysis or predictive analysis along with them.  Wish ZH would publish someone who is competent in statistics, rather than fly-by-night authors who just throw up meaningless, and sometimes unrelated charts. 

wholy1 Tue, 07/10/2018 - 10:24 Permalink

LOL - "recession".

The PRIVATELY-held [NOT]Federal[NO]Reserve seed of the GreatER Depression sprouted 2007-08 and the pernicious weed's underground invasive root system will eventually choke any other beneficial plant life.