Has the recession begun?

numbercruncher · 21 December 2007

Google search volume for keyword " recession "

Awesomandy · 22 December 2007

I'm not sure if this is a sign of an imminent recession, but having talked to a few cabbies in Sydney, most of them say that this Christmas has been relatively very quiet. Shopping malls used to be busy from about the end of October, but this year, it's been very quiet until the start of December. Also, this year, there are much much less parties then past years. My company has cut everyone's bonus by a percentage, because they can't afford to pay us. We also have no Christmas hampers this year: last year, they packed in 2 bottles of wine and some very lovely cheese. This year, we've got a small box of Cabury chocolates, and I'm working in a multi-national company. I don't know how other states are going, but in Sydney, signs are not good.

dhukka · 22 December 2007

Barry Rotholtz at the BIG PICTURE had an interesting post yesterday citing Paul Kasriel's work on Interest Rate Spreads and Leading Indicators as a predictor of Recessions:

Wonk Attack: Interest Rate Spreads & LEIs

I have previously mentioned Paul Kasriel's work with interest rate spreads and leading economic indicators.

Paul notes that if you don't like the reconfigured LEIs -- and I was critical of the white wash the cheerleaders at the Conference Board did to cover up the inverted yield curve -- you can still derive value from them.

His suggestion: Corroborate the LEI signals by also looking at the negative spread between the yield on the Treasury 10-year security and the federal funds rate (on a four-quarter moving average basis) and a year-over-year contraction in the quarterly average of the CPI-adjusted monetary base.

Let's call these two charts the Kasriel Recession-Warning Indicator:

The 1966 LEI signal was false, but the Rate Spread should have kept you out of trouble.

Regardless, the combo of both of these have flipped negative, suggesting that the economy is slowing down . . .

chops_a_must · 22 December 2007

I think there are a few things people are forgetting. One: we are mainly a consumerist nation, driven largely by retail and service industries, not mining. Two: we are one of the most indebted countries in private sector debt, of anywhere in the world. Any type of credit crunch will hit us very hard.

And three: because we have been at such dizzying heights economically for so long, any pull back will be like a hard hit anyway. Interesting times ahead.

vishalt · 22 December 2007

You guys seriously believe this recession garbage?

Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.

Amazing, recession? Lets just forget the Dow and the ASX literally went up in a straight line for one year and the media/money managers needed some excuse to scare the panties off you and cause a correction.

And what retail spending slowdown in Australia? Go down to Paramatta and shopping hubs in the city, David Jones, MYER, Jb Hi-Fi all packed to the rim, we've also had a year where Australians bought more consoles than ever before.

It takes many months of faltering retail spending to consider it a recession - and that would just be a consumer recession anyway, resources looks like it'll be strong for a very long time.

Miner · 22 December 2007

Yes in USA as per Allan Green Span.
As per economics reports in press - Japan is already in recession.

wayneL · 22 December 2007

vishalt said:
You guys seriously believe this recession garbage?

Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.

Amazing, recession? Lets just forget the Dow and the ASX literally went up in a straight line for one year and the media/money managers needed some excuse to scare the panties off you and cause a correction.

And what retail spending slowdown in Australia? Go down to Paramatta and shopping hubs in the city, David Jones, MYER, Jb Hi-Fi all packed to the rim, we've also had a year where Australians bought more consoles than ever before.

It takes many months of faltering retail spending to consider it a recession - and that would just be a consumer recession anyway, resources looks like it'll be strong for a very long time.

Businesses that foresee economic cycles (both booms and busts) are the ones that prosper in the long term.

Most businesses climb aboard a boom and imagine things will never change... real dumb. They go broke in busts.

People buying **** today doesn't necessarily mean people buying **** tomorrow. A wild animal senses the approaching winter and starts growing a winter coat.

Read up on Kondratiev... or any Austrian economics texts, winter is coming.

vishalt · 22 December 2007

It's Alan Greenspan.

Japan still continues to fight deflation and its central bank policy of 0% interest rates murdered growth. It's very hard for that country to grow as it has an aging population, tricky immigration policies, and its companies poison pill each other so its too hard to do M&A there.

If you read press reports since 2003 there have always been mentions of a US recession.

Still not here!

numbercruncher · 22 December 2007

vishalt said:
Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.

Oh ... that wouldnt happen to be the report from ShopperTrak RCT that showed sales were down .4pc compared with 06 and traffic was down 8.9pc for the week ending dec 15 ?

wayneL · 22 December 2007

vishalt said:
It's Alan Greenspan.

Japan still continues to fight deflation and its central bank policy of 0% interest rates murdered growth. It's very hard for that country to grow as it has an aging population, tricky immigration policies, and its companies poison pill each other so its too hard to do M&A there.

If you read press reports since 2003 there have always been mentions of a US recession.

Still not here!

Because credit has been expanding... ludicrously. You may have noticed some problems in this area lately.

dhukka · 22 December 2007

vishalt said:
You guys seriously believe this recession garbage?

Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.

Amazing, recession? Lets just forget the Dow and the ASX literally went up in a straight line for one year and the media/money managers needed some excuse to scare the panties off you and cause a correction.

And what retail spending slowdown in Australia? Go down to Paramatta and shopping hubs in the city, David Jones, MYER, Jb Hi-Fi all packed to the rim, we've also had a year where Australians bought more consoles than ever before.

It takes many months of faltering retail spending to consider it a recession - and that would just be a consumer recession anyway, resources looks like it'll be strong for a very long time.

Are you talking about last Christmas? Inflation adjusted consumer spending has been flat for the last 3 months. November Christmas shopping was decent. December has been the worst in 5 years, 3 consecutive weeks of negative chain stores sales growth so far in December. December will take back November's gain. Then we get into 2008 with slowing employment growth, rising defaults on Mortgages as more of them reset and now rising defaults on credit cards, falling home prices and a significant drop off in Mortgage Equity Withdrawls.

Remember you don't need consumer spending to fall off a cliff for a recession. Real Consumer Spending didn't go negative at all in the last recession, all you need is a slowdown in growth.

wayneL · 22 December 2007

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/21/bcnrecord121.xml

Private investors cash in shares in record numbers

By Paul Farrow
Last Updated: 12:17pm GMT 21/12/2007

Record numbers of private investors cashed in their stock market investments last month, providing further evidence that the credit crunch is beginning to hurt consumers.
# How to invest in 2008: Get the experts' full predictions

According to the Investment Management Association, November saw net outflows for the first time since its records began in July 1992.

Uncle Festivus · 22 December 2007

Recession - maybe, lawsuits - just the beginning! Why does a $400m loss sound insignificant these days?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/21/cnbanking121.xml

Barclays set to do battle with Bear Stearns

...........When the Enhanced fund spectacularly collapsed in July, Barclays was left without its principal amount, and was forced to include a worse-case scenario loss - thought to be around $400m - in its £1.3bn sub-prime write-down in November.

Sources suggest that since the fund's collapse, Barclays has done all that it can to find out what the residual value, if any, is of the Enhanced fund.
Bear in return is understood to have blocked such measures, leading to the lawsuit, in which Barclays is seeking the return of the principal amount plus damages and costs.

Central to Barclays case are two key allegations - that Bear knew of problems long before it informed the market, let alone investors; and that it used the funds as final resting places for assets that it could not otherwise sell on...........

Flying Fish · 22 December 2007

OMG 34 negatines and 6 undecided. lol guess its game set amtch thanks for comming positibve people lol

Awesomandy · 22 December 2007

dhukka said:
Inflation adjusted consumer spending has been flat for the last 3 months. November Christmas shopping was decent. December has been the worst in 5 years, 3 consecutive weeks of negative chain stores sales growth so far in December. December will take back November's gain.

And from what I can see, no shopping centres in Sydney is going to have 24 hour trading this weekend. They had those in the past few years, and the malls were still packed at 2am. So, it appears that, somehow, this year is just not worth the effort.

trinity · 22 December 2007

talks about recession but what I do not understand is how someone can take home US$68M paycheck this holiday season ...

Goldman's Blankfein collects $68M bonus
Payday in restricted stock, options and cash marks biggest ever for Wall Street CEO

http://money.cnn.com/2007/12/21/news/newsmakers/blankfein_bonus/index.htm?cnn=yes

finnsk · 22 December 2007

vishalt said:
And what retail spending slowdown in Australia? Go down to Paramatta and shopping hubs in the city, David Jones, MYER, Jb Hi-Fi all packed to the rim, we've also had a year where Australians bought more consoles than ever before.

I go shopping in Wahringah Mall on Sydneys northern beaches what I se is a lot of people walking around with very little or no shopping in there hands or shopping trollies, also parking is very easy at this time which is not normal.
At Woolworth and Coles there is no queues at the cash registres, which buy the way is great, also you see managers standing out side there stores and looking a bit worried.
Yes Jb Hi-Fi at Wahringah Mall is busy but not sure if customers is actually are buing other things than cds, movies ect.
I would think it will be the same in many other shopping centres in Australia.

numbercruncher · 22 December 2007

Consumer confidence has plunged to its lowest level in 12 years, stoking fears of an economic slowdown to come.

The GfK NOP barometer of UK confidence, released this morning, scored minus 14 in December, down from minus 10 in November.This is its lowest since December 1995.

http://www.guardian.co.uk/business/2007/dec/21/retail2

Seems consumer confidence is plunging everywhere !

dhukka · 22 December 2007

dhukka said:
You don't have to subscribe to the theory of decoupling to argue Australia could avoid a recession even if the US has one. We avoided a recession when the US had one last time around. I voted yes for a recession in the US but am undecided whether Australia will have one yet. It depends how deep the US recession is.

Just to clarify I actually VOTED for the second option "No, but it will soon" in terms of the US economy. I'm thinking 1st or 2nd quarter next year. Still undecided on OZ, depends on depth of US recession.

numbercruncher · 22 December 2007

Yes our outcome will depend alot on the depth of it in the US.

I read a few punters saying that the low USD will off set the damage with greater demand for made in USA, but if consumer demand is falling in many other western countries I dont see Chindia consumers picking up the slack .... I mean look at the average incomes in some of these places.

Sovereign wealth funds can pump as much as they like into US corporations if they like, but if the consumer is retreating (along with their real incomes via inflation) the only medicine will be the very poison that got us here in the first place, low interest rates and pathetic lending standards ! ...

Next year is going to be interesting im sure !

Has the recession begun?