Recession in 2008 ?

[pedorrero]

Here a recent thread (The coming tax increases) and some articles in the financial media have me thinking ... how likely is a recession in 2008? Let's look at the facts, or more precisely, my unproven assertions

The near-certainty of a Democratic President and Congress beginning in 2009. Increases the chances of tax hikes and other stupid stuff beginning in January 2009. The traditional "goose the money supply" trick the FED uses in election years would seem to have no point for 2008.

The housing market is clearly on the skids, and likely to continue well into the future. Add compounding effects (increased defaults on mortgages, foreclosures, unemployment in the industries, etc.), and idiotic government band-aid measures, stir gently, and let rise...

The markets, amazingly, are still near all time (nominal) highs...for how much longer?

Just the prospect of tax hikes alone would seem to give weight to a sell off sometime in 2008.

Any ideas?

 

[CybrMike]

could have come up with 100 reasons why we should have had a recession for the last five years. Who knows.

 

[RetireeRobert]

Here a recent thread (The coming tax increases) and some articles in the financial media have me thinking ... how likely is a recession in 2008? Let's look at the facts, or more precisely, my unproven assertions

The near-certainty of a Democratic President and Congress beginning in 2009. Increases the chances of tax hikes and other stupid stuff beginning in January 2009. The traditional "goose the money supply" trick the FED uses in election years would seem to have no point for 2008.

The housing market is clearly on the skids, and likely to continue well into the future. Add compounding effects (increased defaults on mortgages, foreclosures, unemployment in the industries, etc.), and idiotic government band-aid measures, stir gently, and let rise...

The markets, amazingly, are still near all time (nominal) highs...for how much longer?

Just the prospect of tax hikes alone would seem to give weight to a sell off sometime in 2008.

Any ideas?

What goes up must come down---sometime. 2008 as good a year as any.

 

[LOL!]

A lengthy well-reasoned article in the most recent S&Ps The Outlook puts the chance of recession around 33% in 2008. Some of the analysis presented shows how some (but not all) historical dips in housing accompanied recessions, how the Fed changed interest rates to avoid recessions when housing dipped.

Read the article online or at your local library.

But since I would not personally change what I do whether a recession occurs or not, I see no reason to worry at all about it.

 

[rs0460a]

But since I would not personally change what I do whether a recession occurs or not, I see no reason to worry at all about it.

Agreed! I don't use my home as an "ATM", am debt free, and have 3-4 years in cash (I'm retired). The flux in the market don't mean as much to me these days.

- Ron

 

[donheff]

The near-certainty of a Democratic President and Congress beginning in 2009. Increases the chances of tax hikes and other stupid stuff beginning in January 2009.

Now there is some nice flame bait. Lets think back. The last democratic admin led to a massive reduction in the deficit and corresponded with the greatest boom period in memory (note, I don't really give them credit for it). Then the Bush admin cheats its way in hocks our childrens' future to the tune of trillions of dollars in a psychotic misadventure that has actually increased the terrorism threat... And you are worried about "stupid stuff" when the dems take over?

 

[ziggy29]

A recession will definitely take root in 2008...unless it doesn't.

Seriously -- who knows? One can look at all kinds of economic indicators and try to make guesses, but all too often, people trying to preemptively "outsmart" the market wind up getting burned. Just keep the discipline, stay well diversified and ride it out.

 

[HFWR]

Recession, as in two or more consecutive quarters of contraction, barring black swans:

2008 - 20%
2009 - 50%

Prof. HFWR

All-knowing, all-seeing suppository of wisdom...

 

[utrecht]

I think its quite far from a "near certainty" that a Dem will win the Presidency. If they had a front running white male candidate it might be a different story but there is a huge percentage of the population who will never vote for a woman or a black man...just because.

Im not one of them..just stating a fact.

 

[ziggy29]

I think its quite far from a "near certainty" that a Dem will win the Presidency. If they had a front running white male candidate it might be a different story but there is a huge percentage of the population who will never vote for a woman or a black man...just because.

If you look at the "big three" Dem candidates, I'd much sooner vote for a woman or a racial minority than for a trial lawyer. It's not even close, and I am definitely *not* a Democrat.

 

[OAG]

It is not the people who DO NOT VOTE who elect our President. If you stay away on election day you FORFEIT your vote. Maybe you meant they will vote for the other "guy"? Unfortunately, IMHO, that is exactly what is going to happen in November 2008. Lowest voter turnout in history (just my guess).

Oh, a recession, maybe (I wonder how many know what one is).

 

[kombat]

If they had a front running white male candidate it might be a different story but there is a huge percentage of the population who will never vote for a woman or a black man...just because.

Im not one of them..just stating a fact.

I agree with you, for the most part. However, it should also be remembered that the demographic you're referring to would never vote Democrat anyway, and are usually die-hard conservative supporters.

Now, if the Republicans put forward a female/minority candidate, then those bigots would have a real voting conundrum on their hands.

 

[Bestwifeever]

Let's get Moderator Martha to run--she will keep us fiscally sound and who wouldn't vote for her?

 

[laurence]

It is not the people who DO NOT VOTE who elect our President. If you stay away on election day you FORFEIT your vote. Maybe you meant they will vote for the other "guy"? Unfortunately, IMHO, that is exactly what is going to happen in November 2008. Lowest voter turnout in history (just my guess).

Oh, a recession, maybe (I wonder how many know what one is).

Double AMEN Ding Ding! Just vote, people! It's terrible that 26% of the electorate picks who will run the country ( i.e. the majority of the 50% who vote). Dems and Repubs in Washington fight over everything, but one thing they both work on is disenfranchising voters. Blech.

Back on topic, I wouldn't place bets either way, but 2008 is too soon for us to turn to recession. 2009 would seem more likely. But like others said, the right things to do don't change. No debt, good savings, LBYM, diversify, yadda yadda.

One change I am looking to make is to move within my company to a job that is more recession/downturn proof. Where I am now has "higher highs" i.e. more potential salary/bonus. But where I'm looking to go is a position that turns the lights off. As long as there is any work for the company, they need that role filled. I wouldn't make this move solely for that reason, nor would I just to avoid a one time risk. It's more that the salary will be "enough" and reduces risk over the long haul of several downturns in the industry over my career.

 

[walkinwood]

Prof. HFWR

All-knowing, all-seeing suppository of wisdom...

HFWR - very funny! I hope you meant repository!!

 

[donheff]

Double AMEN Ding Ding! Just vote, people! It's terrible that 26% of the electorate picks who will run the country ( i.e. the majority of the 50% who vote).

Sometimes I wonder about this. If someone isn't engaged enough to vote, how valuable is their opinion in any event? It was probably formed by the last attack ad they saw on TV or by some off hand remark from a neighbor in the voting line. When I fill out my ballot I occasionally see races for obscure offices I have not followed. In those cases I leave that section of the ballot blank rather than sway things with my half-assed guess.

I think the better advice is to push people to try to pay at least minimal attention so they have some reason for their vote.

 

[twaddle]

Recession in 2008?

Here's one economist who says there's a 26% chance that a recession has already started:

Econbrowser: Recession probability index rises to 26.2%

(You never know you're really in recession until you've been in one for two quarters, but his probability index is intended to predict the start of a recession based on slow growth going into a recession. BTW, this is a UCSD economist who says that San Diego is already in a recession.)

 

[utrecht]

So hes 3 times as sure that it hasnt started?

 

[brewer12345]

Could be a recession or could just be an economic "brownout" with little or no growth for a while. Or BRICK/Chindia could pul the US economy up by the 'nads.

 

[Running_Man]

Doesn't BRICK include China and India?

I would be interested to hear how China and India will pull up the US economy. As of the end of 2006 there was only 55 billion in exports to China and none of the other BRICKS are in the top 5. Canada is tops with 230+ Billion. With GDP of 13 trillion I don't think the 55 billion would present enough of an opportunity for growth to offset the US from a recession were there to be the domestic forces to do so. A one percent decline would be 130 billion and require a 200% growth in exports to China to offset.

http://www.uschina.org/public/documents/2007/04/uscbc_us_exports_china_by_state_2000-06.pdf

 

[brewer12345]

You are looking in the rear-view mirror, RM. And China and India need not buy directly from the US to goose our economy.

A small, tangential example: China used to be a huge exporter of coal. They now import a little, net. At the same time, India and elsewhere are ramping up demand. The pac rim used to get its coal from Australia, Indonesia and China/India. Now they are tapping out Aus and Indo and competing with European buyers for South African coal. In response, European buyers are starting to buy up every ton of Appalachian coal they can get. And Korean and Japanese buyers have been running test loads of coal from the Powder River Basin to the West Coast so they can load the stuff on ships and bring it to their powerplants.

No doubt there are lots of other examples, and more to come with the USD having been bitch-slapped.

 

[laurence]

Good points. I would go further on the depreciation of the dollar. Any country that doesn't peg themselves to it artificially (China) will inevitably see a change in it's consumption of U.S. goods.

 

[Running_Man]

You are looking in the rear-view mirror, RM. And China and India need not buy directly from the US to goose our economy.

A small, tangential example: China used to be a huge exporter of coal. They now import a little, net. At the same time, India and elsewhere are ramping up demand. The pac rim used to get its coal from Australia, Indonesia and China/India. Now they are tapping out Aus and Indo and competing with European buyers for South African coal. In response, European buyers are starting to buy up every ton of Appalachian coal they can get. And Korean and Japanese buyers have been running test loads of coal from the Powder River Basin to the West Coast so they can load the stuff on ships and bring it to their powerplants.

No doubt there are lots of other examples, and more to come with the USD having been bitch-slapped.

Objects may be larger than they appear but they are not larger than they are. None of the latest coal statistics in the US appear to back up what you are saying, at least to any degree that would offset a recession in the United States caused by a slowdown in housing and automotive industries.

Coal News and Markets (Archive)

Also I do not view a dramatic drop in a currency as favorable to an economy. Indeed, strong economies almost always experience currency gains as China and Canada are doing now. It will be interesting to see the results in the foreign exchange markets if the Fed cuts interest rates a half percentage point tomorrow instead of a 1/4 point.

 

[brewer12345]

Objects may be larger than they appear but they are not larger than they are. None of the latest coal statistics in the US appear to back up what you are saying, at least to any degree that would offset a recession in the United States caused by a slowdown in housing and automotive industries.

Coal News and Markets (Archive)

Also I do not view a dramatic drop in a currency as favorable to an economy. Indeed, strong economies almost always experience currency gains as China and Canada are doing now. It will be interesting to see the results in the foreign exchange markets if the Fed cuts interest rates a half percentage point tomorrow instead of a 1/4 point.

*Sigh* I will stop trying to teach pigs to sing any day now, I am sure.

Again, you are looking in the rearview mirror. I have the (mis)fortune to follow the coal industry very closely. The US market has been in the crapper for over a year, no doubt. But everywhere else in the world is on fire. Central App coal prices are around $50 right now. Spot coal in South Africa and Australia today hit record prices of over $80 USD a ton. Coal for delivery next year in Europe went over $119/ton USD. You don't think that someone will look to exploit that large a price differential? I do, especially when most Central App miners are thrilled with a per-ton margin of $10 a ton, let alone $30 or $50.

And this story will in all likelihood play out in many, many other industries. Will it be enough to turn the light s back on for the US? I dunno, but between the Fed cuts and export demand, it will be at least a strong offset to the mortgage/credit woes that are rippling through the economy.

 

[Running_Man]

*Sigh* I will stop trying to teach pigs to sing any day now, I am sure.

Again, you are looking in the rearview mirror. I have the (mis)fortune to follow the coal industry very closely. The US market has been in the crapper for over a year, no doubt. But everywhere else in the world is on fire. Central App coal prices are around $50 right now. Spot coal in South Africa and Australia today hit record prices of over $80 USD a ton. Coal for delivery next year in Europe went over $119/ton USD. You don't think that someone will look to exploit that large a price differential? I do, especially when most Central App miners are thrilled with a per-ton margin of $10 a ton, let alone $30 or $50.

And this story will in all likelihood play out in many, many other industries. Will it be enough to turn the light s back on for the US? I dunno, but between the Fed cuts and export demand, it will be at least a strong offset to the mortgage/credit woes that are rippling through the economy.

.

And how do you propose to get it there? There is for the next 2 years a finite amount of shipping capability. Shipping if you can get a boat for ocean commmodities is now $80-100 per ton. That is why US prices are not going up. I know you know it is almost impossible to get ships for shipment of commodities such as coal and the spot rates on shipping is exploding. That is why the prices in Europe are up, there can be no competition. As the cost per ton to ship to Europe increases the cost per ton in Europe demanded by the coal producers will go up by a like amount as long as there is demand for their product.

The idea that the coal industry could help forstall a recession is illogical to me, and I do not need to be compared to a pig thank you very much.