from Hacker News

Market Moves Suggest a Recession Is Unavoidable

by crunchlibrarian on 12/6/18, 7:27 PM with 112 comments

by aliston on 12/6/18, 7:51 PM
How can something "suggest" a recession is "unavoidable." If its a suggestion, then by definition it isn't unavoidable.
These articles are silly. You'll find them for every time the market sneezes.
October 2015, World Faces a Recession Next Year: https://www.cnbc.com/2015/10/13/citis-buiter-world-faces-rec...
June 2016, The Next Recession is Already Here: https://www.cnbc.com/2016/06/21/the-next-recession-is-alread...
There might be a recession next year, but the Fed might cut rates, Brexit might not happen, the EU might resume easing and the stock market might double in the next 5 years. Nobody knows.
by jamestimmins on 12/6/18, 8:02 PM
Things that keep me up at night as a software contractor/freelancer: if there's a recession, are contractors the first to go? One counter-argument is that contractors can be a cheaper way for companies to build products (since it's not full time), which might mean companies favor contractors. On the other hand, companies who are reluctant to lay off full-time staff may start by canceling contract relationships.
by Symmetry on 12/6/18, 7:57 PM
If you could know a recession was inevitable some time soon from publicly available information then that recession wouldn't happen in the predicted time frame. Everybody would see it coming, take their money out of the market, and it would happen instantly.
by wil421 on 12/6/18, 7:39 PM
Would it be wise to wait a year before buying a house? If a recession hits it might turn my areas buyers market into a fire-sale.
I guess if the fed isn’t raising rates then it’s not an issue. Waiting would also allow someone to increase their down payment.
by 2bitencryption on 12/6/18, 8:07 PM
What scares me is how everything nowadays is available to purchase through financing.
A toaster form BestBuy.com? Finance it for $4/month. New iPhone for $1000? How about monthly installments instead? It's not even the exception anymore, it's the norm.
Even without exorbitant interest rates, the idea that there is supply or demand for financing all aspects of life does not bode well for people's long-term wealth...
by reasonablemann on 12/6/18, 8:03 PM
Recessions are a necessary part of the business cycle. A lot of people would argue that global central banks have gone too far trying to avoid a recession and thus the next recession will be particularly brutal.
Like laws designed to encourage forest growth, when the fire eventually comes it burns far brighter than the fire that burns in a forest left alone.
by ryansmccoy on 12/9/18, 7:49 PM
Only a portion of the yield curve inverted, and based on recent history, its predictive ability for the US economy is not what it used to be.
IMO, The important indicator to keep an eye on is earnings growth, which in the most recent quarter was (from what I recall) sales growth +8% and EPS growth +25%.
One headwind to keep lookout for next year will be tough comparison because of the tax cuts.
Also, like others have mentioned, doomsayers are a dime a dozen. Personally, I like to see what people with skin in the game have to say/are doing to their portfolio allocations.
by 40acres on 12/6/18, 8:26 PM
I was in high school during the last recession so I have no idea of what to expect, but how does one take advantage of a recession? Do you invest in blue chip stocks that you assume will ride out the recession and bounce back? (Apple in Google in 2008 would've been solid investments), do you take advantage of rising interest rates and buy bonds in addition to boosting your savings account? Do you buy a house? What's the m.o?
by ry4n413 on 12/6/18, 8:13 PM
IMO, market is down because of increase discount rate (risk), not a decrease in earnings (fundamentals)
by cwperkins on 12/6/18, 7:51 PM
Given the projected IPOs next year (Lyft, Uber, AirBnB) I think this is a little pre-mature. I think the bull market has another year in it. That being said I'm shifting some of my assets out of the market.
by malvosenior on 12/6/18, 7:35 PM
If this is true, where is the best place to invest 10k-100k USD today?
by kolbe on 12/6/18, 7:50 PM
His main justification: "Just about everyone I talk to in the capital markets, including erstwhile bulls, acknowledges that things are slowing down." And "everyone knows it is coming." And "everyone knows that inverted yield curves are the most reliable recession indicators."
He talks about home builders "getting crushed," which means they're trading at levels last seen in 2017. The large tech stock haircuts he refers to means most are at levels they traded at earlier this year.
I'm not saying he's wrong about a recession coming, but if you're looking for some real substance to justify that stance, you won't find it in this article. Just a guy copying Trump's tactic of saying "everyone knows" instead of offering evidence.
by rchaud on 12/6/18, 8:14 PM
> "We have lost sight of the fact that a recession has cleansing properties, helping to right the wrong of the billions of dollars allocated to bad businesses while getting people refocused on investing in profitable enterprises."
If this were true, loss-making companies would never IPO. There is such a thing as a normal boom and bust cycle. The "bust" portion is the recession, the hangover after the bull market effects of the US tax cuts have petered out.