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Discussion Starter #1
It's the economy, stupid. It always is. In 2008, Bush was in power, the GOP got swept out in disgrace, and Obama won because the economy was an absolute mess. Obama won re-election because the economy was improving year over year in 2012. In 2016, it didn't have the same feel of optimism, even though more people were working and by all objective measures, the economy was better. It was still good enough that the Democratic Party candidate won the EC vote by more than some Presidents who were elected to one or more terms. So, the economy still works as a predictor, even though it didn't predict the EC outcome until you look at economic change, district by district. Now, housing starts may have peaked. Multi-family has certainly peaked. Even in overheated Seattle, there are apartments sitting empty and landlords are resorting to incentives to fill new buildings. Newly built apartments may start being sold off a condos, which will put pressure on the new house market. Existing house sales are stagnant, not rising or falling. That means new house construction will be stagnant and then start to fall. Which means the economy is cooling. Put that along with some closing margin spreads and interest rates and you have some distant early warning signs. Recession isn't imminent, but it is on the horizon. Maybe a year and a half out. It also means the rate of change is about to turn negative, which makes things feel like they are getting worse, even though they are not.

The joker in the deck is trade. Tariffs will have no positive impact on the economy, but they could have a negative impact. If the administration's little trade wars turn into big trade wars, we could have an ugly economic shock similar to the 1970s, with rising prices and a falling economy. Oil lit that one off. Something else will light this one off if it happens.

What this means for politics is this: It hasn't bit yet. I doubt very much that the GOP will lose its Senate majority. The House is so gerrymandered that it would take a 57% or so Democratic Party blowout in the popular vote for the GOP to lose its majority there. The majority will be thinner, and I won't be surprised if there are a few defections, just as Democrats defected to the GOP in the zeros in red states. Which leads to 2020. Keep an eye on the Democrats who are running. I am doubtful that the factors that got Trump in the White House will keep him there. We may even see a primary challenge if the economy falls apart sometime in 2019. In the mean time, expect a court system packed with wingnuts who think it's just fine to turn the clock back to when certain people were counted as less than a whole person and women couldn't vote. 1804 never looked better to those who need a tilted field to keep power.
 

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Discussion Starter #3
Pro-cyclical explained. I don't expect the disaster this guy seems to be predicting, but I also don't think the current fiscal policies are very bright. Paul Ryan has been exposed as the partisan fraud that he is, blowing up the deficit with ineffectual tax cuts for rich people in an expanding economy, while whining about deficits when demand was falling and the government should be running a deficit. We voted for these clowns as a nation. We get what we deserve.
The Next Recession Could Be a Bad One
 

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the scary thing is a lot of people who watch the economy for a living are all sending out warnings of a massive hit like the 2008 hit. been seeing a lot of talk about a housing bubble again along with home prices falling all over the country. all of the warning signs are aligning the economy is about to tank again. if it does, kill all trump supporters on purge night.
 

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Discussion Starter #6
Sure, there's always lots of doom and gloom. We will have a downturn, but I expect more like 1992 than 2008. I also don't expect it in 2019, although I do expect things to start leveling off in 2019. The actual slowdown will happen about 18 months from now, according to the cloudy plastic ball I regularly consult. Some of those other guys might have real crystal balls, but I kinda doubt it. They have more information than I do, but then again, plenty of people thought the boom times in the zeros would power right along. I could see the recession coming as early as 2007. I never thought it would be as deep or last as long as it did, though, so I can hardly boast about special insights.
 

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Discussion Starter #8
Mostly, just ride it. Trying to time it all means you will shoot yourself in the foot. Plus, you will pay taxes on the income. Capital gains are still taxed, in spite of the Republican efforts to eliminate taxes that fall primarily on wealthy people. Taking a tax hit generally costs more than the gains associated with timing the market correctly. Being broad based and steady is probably the best strategy unless you are a whole lot smarter than the market. Statistically, even hedge fund types aren't going to beat the market for all that long, in spite of how smart they think they are. If you are about to retire, then think about taking profits, if you have them, and moving away from owning stocks and mutual funds. If you are reasonably young, then you have plenty of time. Even the Great Depression only lasted about a decade, and the Great Recession didn't last quite that long. Both saw a reasonably good rebound from the lows within a few years.

My opinion is that the market is inflated a bit now, partly due to demographics (large numbers of aging baby boomers will be pulling cash out of the market over the next few decades), partly due to global money flows (there's just not that many places to park wads of unproductive, cowardly cash), and partly due to fiscal policy (corporate tax cuts have led to one time profitablity increases that won't continue and stock buybacks that inflate stock price without much reason other than they have cash to burn). I don't know how much weight to put on any of these factors, and as a practical matter, I'm ignoring them and plowing on as though the stock market will continue to prosper. It's also not my day job to pay attention, and I have other hobbies like music and motorcycles to pay attention to, so I don't sweat out all the factors that cause the market to move one way or another. What I do continue to do is monitor things from a distance and look at various trends that have an effect one way or another and the leading indicators that could cause rises or falls in economic activity.

All that said, the things I thought could be a problem back in July still apply. There are some other factors to watch now as well.

1. Tariffs. Those are going to start biting sooner or later as they cause inflation in consumer goods and depress certain productive sectors of the economy. Agriculture is already getting hit. Steel and aluminum are benefiting, but all the industries that use steel and aluminum, from construction to automobiles to aerospace to beer, will get hit and their costs will go up. Which means price rises and, most likely, weakened demand.

2. Interest rates. The Fed is raising rates, which Trump doesn't like, but considering that the GOP threw a massively ineffective tax cut onto a near capacity economy, the likelihood of rates continuing to rise is near 100%. That will cause houses, cars, motorcycles, and everything else that is more expensive than a trip to the grocery store to cost more even if the prices don't go up. People who have credit card balances will get hit hard, as will younger home buyers. And so will renters, because now landlords will need to raise rents to keep up with their expenses if they have loans out on the property.

3. Overlending. I have seen credit card applications and loan offers far too frequently for my tastes. When too many lenders push too much money at too many people, things go bad eventually.

Add these to the narrowing margin spreads and other, similar leading indicators, and I think we are getting to an inflection point. If the economy slows after the 2018 election cycle, and the Democrats do well, you know that the GOP will whine, stamp their feet, and blame the Democrats for the mess the GOP always makes when they have power. No surprise there. It's what they always do. It's what they did in 2009 after all.

Some things are predictable. Other things, like the exact timing and what the market will really do, are not. Which means the best fiscal policy for any of us as individuals is avoid getting into debt unless it's for something that will pay off in the long run. Avoid too much debt even for those things that will pay off. Don't borrow for operating expenses if you can help it. Save money and put it into broad, low cost mutual funds like index funds. Don't panic when things go sideways and don't get overexcited when they go up sharply. Be conservative and not reactionary. Those are very different approaches.
 

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Discussion Starter #9
Resurrecting a zombie thread, mostly because I'm interested in this stuff. The yield curve is now inverted for certain bond maturities. The rest are really close with the exception of bonds that are so close to maturity that they hardly count. We may or may not have an all-out recession in the next couple years, but I think a slowdown of some kind is inevitable. It's going to take a bit more than bluster to keep the economy puffing along like it is now. The business cycle has not been repealed.

The good news, if you are a borrower, is that interest rates aren't going up for the time being.
 

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Discussion Starter #10 (Edited)
A little channeling of the late, lamented and sorely missed BHD.

Here's a chart to think about:



And then there's the yield curve, which is flattened out and close to inverting. It can stay there for a long time before it inverts, though. It's still not a sign that the market thinks we are going to have rip roaring growth.



There's some kids who are about to walk into a lousy economy. I feel bad for them, because they will get sawed off before they get started. They don't remember 2009, because they were just kids at the time. My son is almost 30. He remembers it, because he was in college and had to deal with the fact that nobody had any money, including his parents.
 

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I"m just not that interested in trying to analyze the stock market. I've come to the conclusion that large pieces of it are purely emotional. As an example, the dip in Boeing stock was wholly an emotional reaction to the 737 Max fiasco. There's just no reason for the only American maker of large commercial aircraft to dip. Their P & O has been incredibly strong: returns are ridiculously high; and backlog of orders is enormous.

I buy just two stocks: I have Berkshire and an S & P index stock through Vanguard. I just try to let things do what they do. And I've done pretty damned well. Long term and short.

I will concede I bailed out back in the fall of '18 when the market really tanked. I got out early enough to miss the decline and got back in to take advantage of the recent upticks. No skill on my part, to be certain. Just flat out luck.

I had a "financial advisor" for years but I jettisoned him about two years ago because he was no damned good at taking care of my little portfolio, and I also found out that he had a sweetheart deal with certain mutual funds which were crappy. So, he took a piece of my portfolio every quarter as well as the mutual funds themselves. So I said Fuck 'em and fired the whole lot of them.

Vanguard is where small investors should be. Very fair in their dealings and they don't take but a tiny bite of the portfolio. I mean really small, like < .5% for most everything. And you don't get some bullshit advisor confusing you when you have a question.
 

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Discussion Starter #12
I'm not looking at this in terms of stock market analysis. I'm thinking about it in terms of how it affects people in various industries. GM is closing plants, laying off workers, and that will have an effect. When GM stops building sedans, the factories that build them will close. It will also decrease demand for parts and supplies that went into producing them. It's a big web. Construction is moving along, but it's not increasing like it was, and residential construction is beginning to taper off. Those are the guys who drive big pickups with "Trump" stickers. The guys building skyscrapers are more likely to be union members and may or may not be Trump supporters. When the economy falls, they will all be out of work, because that't the nature of the business cycle.

It's a predictor of how elections go, too. If you think about what happened in 2016, there were some localized slowdowns. Obama was a Democrat, and he held the Presidency. Those slowdowns were in the areas where Trump beat Hillary by a bit, namely Michigan, western Pennsylvania, etc. Obama took those areas in 2008 and 2012. In a way, it may be OK that Trump won, because if the economy turns, he will be a one termer, and will go out with his tail between his legs. Maybe frog marched because he refuses to accept defeat, but he will likely be out for economic reasons. There's still about eighteen months before the general election, and the economy is chugging along, but it's less insistent about it than it was. This recovery is getting pretty old, and is a couple months away from being the longest since 1945, maybe longer. Trump has a habit of roiling things, and that's not what the economy runs best on. So, it's going to be an interesting ride, and one that's completely unpredictable. For all we know, the economy could take off again, and Trump will get reelected in spite of himself. It is one of the reasons I watch this stuff pretty closely.
 

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Discussion Starter #14
Buckle your seat belts. The 3-month and 10-year t-bill yields inverted today. Never mind the Mueller report, this is economics. The likelihood of a recession before the 2020 election day just went way up.
 

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"Lock her up!" The mantra of the idiot class.

Just saw Buttigirg's announcement for Prez. Pretty impressive. So far, he's the most impressive speaker I seen yet for the Democrats. I'm hoping for a youth movement, needless to say.

 

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"Lock her up!" The mantra of the idiot class.

Just saw Buttigirg's announcement for Prez. Pretty impressive. So far, he's the most impressive speaker I seen yet for the Democrats. I'm hoping for a youth movement, needless to say.
I haven't heard much in the way of policy detail from Mayor Pete so far. But I have seen him on a couple of talk shows. He seems very well spoken, knowledgeable, speak several languages, and very smart. His heart seems to be in the right place. I like him a lot.
 

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How can anyone not like a guy who learns Norwegian just for fun and is willing to run against a guy who can't even spake English properly.

Pete's perfect. Midwestern sensibilities tied to action. Knows what Midwesterners who voted for Trump are thinking and has a track record of success in South Bend. Smart as a whip, a vet, and young.
 

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Mayor Pete is going to make a good VP our Secretary of State.

The economy is what’s important and the GOP spent most of there time saying the economy was weak, which was not true.

However, race bating by Trump and Russian’s convincing young people Hilary was not worth the vote is what tipped the election. She didn’t help herself and should have picked Bernie as s running mate, but Bernie was a bit bitter so not sure he would have said yes.

Overall, we are in record territory in months of economic expansion, and at some point, these tax cuts are going to hurt. Government spending IS a component in the economy.
 

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Discussion Starter #20 (Edited)
What's happening now is a pro-cyclical economic stimulus. I don't know exactly where or when it ends, but when that happens, it will be difficult to deal with. It's odd that the GOP, who puff themselves up as fiscally prudent, were willing to sacrifice the well being of Americans on their quest for austerity when the economy needed stimulus, but are now busy borrowing and spending like drunken sailors when the economy is good. Now is the time to not be deficit spending. And, instead of blowing it on things like farm subsidies that became necessary due to misguided trade policy, we should be spending money on long term investments in infrastructure that will help the economy grow and compete in the future. The jobs report that came out today was a strong one, so the economy is clearly still chugging along. The jobs report was almost as good as the ones I remember from the Obama era. The GOP won't look at it that way, but unlike the average voter, some of us remember all kinds of things.

We are seeing data points all over the map lately. The economy is growing and people are being hired. Manufacturing is softening, farm prices are lower, and fuel costs are on their way up. There have been personal income gains, more or less in line with inflation. Construction is still pretty good, but appears to be softening. Single family construction is still at a lower level than normal. Young people are saddled with massive student loan debts. It is not a predictable economy.

Election cycles typically hinge on economic performance. This may be an election cycle that's different. Trump may not win re-election despite a good economy. Then again, 18 months from now, we may or may not have a booming economy. The economy fell off the cliff pretty fast in 2009. I don't expect that to happen this time around. I do expect slower growth, even if we doing dip into technical recession before the election. Then again, I was surprised by how long the Great Recession lasted. I could be surprised again.
 
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