Is This Indicator Showing Us That We Are Close To The Next Recession?

in money •  3 months ago

RECESSION INCOMING_.jpg

Will the Interest Rates Invert & Shortly Thereafter Cause a Recession?

I know there are plenty of you out there that say you can never predict a recession. To just continue investing because none of us are Nostradamus'.

But, and hear me out, what if the signs are all there and you just sit in cash for a little bit to see what happens? I'm not just talking about one thing, but a whole bunch combined. Isn't it prudent to take a step back and consider it?

Personal debt levels are once again at all-time highs, and debt means that future consumption has to decrease to pay it off.

Consumer Debt.png

Warren Buffett is sitting on more cash than ever before. Other big investors have been moving to cash as well. These guys are professionals, why not follow their lead?

The Shiller PE ratio is over 30, higher than it was during the 2008 crash and is only lower than just before the Great Recession of 1929 and the Dot-Com bubble.

Shiller PE.png

Unemployment is very low, around 4% currently. Whenever it gets low like this, a recession soon follows.

Unemployment rates.png

The 10 2 Treasury Yield is close to inverting. Historically, an inverted yield has preceeded most US recessions. Some say that an inverted yield is the best predictor of economic recessions.

10-2 treasury yield.png


When so many indicators are present, isn't it time to re-evaluate?

I've been moving more to cash and investing less in the normal sectors. Maybe I am wrong and will lose out on some gains. However, silver has been beaten up so much that I see it as a very interesting sector right now. In times of fear, gold may lead but silver often catches up and returns a better gain.

But I am also still in the market with what I have.

I don't know what the future holds, but I want to be ready with some dry powder when it comes.

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I think BTC's position will be more important in the next financial crisis. BTC is not a currency, it is not a commodity but people will choose BTC to keep their money and transfer to all over the World.

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I don't know about the transfer bit, I think BTC will take on a role similar to gold, which I kinda feel it already has. People will use it as a store of value, but for actual transfer and usable currency, I don't think so. The transfer times and fees are prohibitive for actual use as a payment method. Maybe we will see something like Steem (hopefully) become a real usable form of currency that people use for payments and transfers.

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I think BTC shares most characteristics with commodities. Today it’s more commodity than money. Although it might become money in the future.

I've been saying this for a long time. The next financial crisis is coming, and it's coming very soon. Resteemed for being a genuine post.

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Agree @schattenjaeger, the next big depression is incoming, the span between rich and poor is widening, unemployment is skyrocketing, and people here in Germany are poorer than ever.

Some outrageous dude has built the autobahn and created jobs the last time the economy crashed, it is not impossible.

If there is a will there is a way.

Some mighty people up there want this, because if they hold all the stakes and the rest don't, that makes them even more powerful.

Question to @getonthetrain: Do you remember me? How do you suggest we overcome this? Not as a society but as individuals? Buying gold?

I personally always work to become more self-reliant, currently looking for a cheap solution to grow foods indoor.

Already grew cannabis in the past but thats a little expensive endeavor and I don't like cannabis anymore, makes me lazy. In my new apartment I will have a garden outside, maybe I can grow some foods there.

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Of course I remember you.

I do think that precious metals will do well, I mean they are so beaten down right now. This will be the first recession with crypto, so it will be interesting to see how it all does.

I don't think the world will collapse, but it is always good to become more self-sufficient and independent. So learn things, grow things, and save up so that you can buy investment things when they are the cheapest in the cycle.

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Thank you, that is exactly what I am doing.

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Appreciate it

The problem with the yield curve inversion is it does not always work as a predictor and it throws up false positives. Added to your other data is the way to go.

I presented some data in one of my recent posts - on U6 Rate and on credit spreads on high risk bonds. I think the U6 rate is more compelling than unemployment as it shows where employers can find workers - in the under-employed and it also shows a bit more spread. From 7.5 to 4 are quite a lot of under-employed people that could be employed.

http://mymark.mx/U6Rate

I like credit spreads more than the yield curve inversion as it shows more broadly when the markets are saying that high risk debt is getting too risky - i.e., the tide has turned already.

https://mymark.mx/RiskIndex for the full chart with data back two recessions

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Thanks for this input. When that option adjusted spread next spikes, I would be VERY wary of a recession soon after.

Could be right @getonthetrain. It will happen sooner or later as it always does ! Mainly to clean up excesses and balance things out. May be time to get in cash...like you said

Thank You for the INFO........@getonthetrain you know that JP Morgan will make 1 Billion Dollars on every Dollar Up Move on Silver once it is Released..........

I don't think that we are quite there yet as the bubble we are in is still inflating. There are warning signs so I do think you are right about a lot of it as it is very similar here to in regards the build up to the last recession. In my uneducated opinion it won't be for another five years at least.
Demand is still way above supply in terms of jobs and housing and the money keeps going up. Until these needs are met things will keep going up. It will come though. I just hope to be in a position to invest when it does.

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Oh, I am not saying it will be tomorrow. But to prepare for it as saving up a bunch takes time.

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That's definitely true. When we had the last recession here everything fell hard for years. You could buy houses in the city for a third of what they are today if you had the money.
When it happens again I would love to be in the position to buy a couple of houses as the rental income from 2 of them at the moment would equal my current wage. The plan has always been to set up multiple streams of revenue in the next few years so that eventually I won't have to work for anybody else. But as they say, money makes money.

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Indeed, the western world is likely to suffer a crisis, and this is mainly because most economic crises are really credit crises. What happens is that the banks open the tap and expand cheap credit throughout the economy, and then close the tap increasing the interest rate. And this is happening now, the Fed has been raising the interest rate, so it is not too crazy to assume that the US economy, and consequently, the rest of the world, will be hit hard.

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All the signs of a collapse are converging.

In my last post on my Signs of the Top series I put it out there that we won't get out of 2019 without a crash. Could be this year, but I think next year is more likely.

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Yeah. Maybe we have one more year left. Save up so that you can buy when it is all on sale.

Guessing this will be when steem becomes priceless !

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I've been telling people to stock up on crypto in preparation of the next financial crisis. Crypto should go up in value when fiat becomes worthless.

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Fortunately enough, glad to see ourselves on the greener side of the grass. People just don't want to evolve, even my friends and family still don't understand that fiat is a system that put's limitations on it's user. LOL I got into my dads bank account one day and bought him $3500 of ether when it was $8/eth and this dumbass calls the bank and tells them to reverse the transaction, which they couldn't.. So what does he do? Lies to the bank, get;s his money back and then coinbase shuts off his account . I kept telling him all along, " steem is where the value is ".

@getonthetrain, Yes, no one can predict the future but as you said, when we see the trends then it's better to hear the Inner Voice and to do effective preparation.

And we never know when the Economic Slowdown will occur, so we should be ready and stay alert and great to hold the Alternative plannings.

Wishing you an great day and stay blessed. 🙂

Honnestly, I am also confused about the economic trend. On my side, i think the economy, especially the cryptomarket is soon reaching to its through. Many people are so pessimistic about the market and tend to withdraw thier token as they wish.

Moreover, I believe in the near future, the crypto cycle will have to stop moving downwards but then upwards. This will depend on the general perspective of the worlds in regards to cryptocurrency. I can't really know much in the USA, but in Africa, people are now eager to know how crypto works and possible ways to invest in it.

The most important chart of these is the FRED chart above showing the inversion and then the recession afterwards. This is likely what will happen again but the recession WILL NOT happen until this inverts. Bull Steem Ahead, hehe. Followed!

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Yea, when it inverts I would be very cautious.

I agree with the direction your analysis is pointing at. I’m withdrawing my holdings from the stock market and keeping my savings in cash (and putting a part of it in gold, as a hedge against [hyper-]inflation).

On a personal front: a week ago I started an MSc programme in international financial analysis. In just one week I feel like I’ve learnt more about technics of investment and portfolio management that I did in the previous two years. And this is just the beginning!

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That's great! Just analyze the info though and come to your own conclusions. Don't want to become another regurgitation drone.

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Exactly. They just give us mathematical/statistical tools on how to do investment analysis. It’s up to us how to apply these tools. No ready-made conclusions are being fed to us, but some historical examples are highlighted. In fact, I’m surprised how self-critical and self-reflecting the financial literature turns out to be.

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Oh, wow that does seem like the way knowledge should be passed.

I hear that universities here teach what to think, not HOW to think.

To the question in your title, my Magic 8-Ball says:

Yes definitely

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