‘Totally Avoidable’ Recession Ahead

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Tomanyiron
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‘Totally Avoidable’ Recession Ahead

Post by Tomanyiron »

-caused by Fed mistakes that will ‘go down in the history books’.
Mistakes the Fed made:
1-Mischaracterizing inflation as transitory. By that, they meant "it is temporary, it’s reversible, don’t worry about it.”
2- Second mistake came when the Fed recognized that inflation was “persistent and high”. And “They didn’t act. They didn’t act in a meaningful way.”
3- Third mistake, is that after not easing off the accelerator last year, “they are slamming on the brakes this year.

Jerome Powell himself has gone from “looking for a soft landing to soft-ish landing to now talking about pain,” And That's the cost of a Federal Reserve being late.
"The Fed had made mistakes of historical proportions: The last two years are one of the biggest policy mistakes in the 110-year history of the Fed, by staying so easy when everything was booming.”

“They were way too easy through 2020 and 2021, and now ‘there're going to be real tough".

Now the Fed must not only overcome inflation, but repair its damaged reputation, as well.
https://fortune.com/2022/10/09/recessio ... -el-erian/

jimmyk
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Re: ‘Totally Avoidable’ Recession Ahead

Post by jimmyk »

Here is another take I found interesting. It is a longer read but really outlines some of the challenges the Fed is facing in the nearish term over the bond markets and energy. Really tough spots.

https://www.lynalden.com/october-2022-newsletter/

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Scarfinger
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Re: ‘Totally Avoidable’ Recession Ahead

Post by Scarfinger »

There has been around 12 or 13 recessions since world war II. I am guessing someone in each period argued that they were avoidable. Recessions are just a cycle in our economic system according to Investopedia.

However, for better or for worse, all modern, capitalist economies include banking systems based on fractional reserve lending coordinated by central banks that routinely and continuously issue new fiduciary media into the economy. As long as this is the case, then the cycles of boom-and-bust that we regularly experience, as described by ABCT (Australian business cycle theory), will unfortunately be inevitable. Given the ubiquity and entrenched position of the current monetary arrangements, for the time being recessions are just part and parcel to the way our economy works.

https://www.investopedia.com/ask/answer ... inevitable.
I am just an average Joe. I have no clue to what the market will do.
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jimcasada
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Re: ‘Totally Avoidable’ Recession Ahead

Post by jimcasada »

Lots of banks reporting this week. They can't be doing well right now with such a rapid rise in interest rates. Who wants to finance anything now at a rate that is double of what they could have got just a could have had just a couple months ago? I'll probably stay in G at least all this week, but I do have another interfund transfer I could use by the end of this month.

wingchaser
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Re: ‘Totally Avoidable’ Recession Ahead

Post by wingchaser »

jimcasada wrote: Mon Oct 10, 2022 11:52 am …but I do have another interfund transfer I could use by the end of this month.
I have two (2) more bullets left to fire, Positive ROI for the year lookin’ rather bleak…

Best of Luck (everyone) in all you choose to endeavor!!!
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t... pays it.” ~ Albert Einstein

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bloobs
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Re: ‘Totally Avoidable’ Recession Ahead

Post by bloobs »

Cathie Wood has capitulated.

https://www.cnbc.com/2022/10/10/arks-ca ... -bust.html

Just waiting for the last Robin Hood retailers to give it up, since their stimulus checks (and margin accounts) have just all been expended.

jimmyk
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Re: ‘Totally Avoidable’ Recession Ahead

Post by jimmyk »

Is a recession totally avoidable?? I do not agree with that statement. I do agree with the basic premise put out by Scar, that the market goes through boom and bust cycles as a result of human action. This is certainly well documented. Just for the record, it is Austrian not Australian economics just to be clear. Surprised you haven't received a bunch of posts from irate Austrian folks on the board!

Unfortunately, we do not follow Austrian economics (Menger, Von Mises, Hayek, etc) which basically says the economy will right itself without government intervention. The US is following a Kenysian approach (central bank) that say the government must step in and direct (manipulate) the economy using fiscal and monetary policy. Have they done a good job of that? I leave that to others to debate.

Scar, your statement implies that these cycles occur regardless of government intervention. You are correct on that point but to suggest government policies have no impact on the potential length or severity of the cycle or other problems policy causes is not correct either. This is going to be an interesting ride to say the least.

I would rather focus on how best to navigate this bust/recession cycle. I have been through several recession cycles over my investing career. Unfortunately, I have been heads down saving during those since they were early in my career and I did not pay much attention. I am not convinced index investing is going to give great returns in the near future.

Now as I am getting closer to expecting a return of my money, I am more tuned in to market/economy happenings. Trying not to make dumb mistakes down the home stretch. This is probably a good opportunity to generate wealth over the long term if it can be played right. I sure could use a crystal ball right now.

Good discussions.

Best.

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jimcasada
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Re: ‘Totally Avoidable’ Recession Ahead

Post by jimcasada »

At 66+ years old, I've been through quite a few hard times myself. I think the main thing all recessions have in common is some kind of credit crunch. Going all the way back to the crash of 1929, when investors only had to put down $10 to buy $100 in stock on margin, the markets became artificially inflated on money that wasn't really there. More recently in the 2008 housing collapse, a lot of folks were extended mortgage credit that they really couldn't afford, thus the housing market became highly inflated on money that wasn't really there. Currently, many corporations have taken out a lot of loans to pay for stock buybacks and such, rewarding upper executives & board members. This is all money that has to be paid back, but on the bright side, these were loans mostly made at dirt cheap interest rates. So what does the future hold? It's hard to say. I think everybody agrees that a market pullback was way overdue, but I've never seen a recession occuring with such low unemployment rates and a strong dollar overseas. It's all about supply & demand. Keep your eye on the dollar.

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mjedlin66
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Re: ‘Totally Avoidable’ Recession Ahead

Post by mjedlin66 »

jimcasada wrote: Mon Oct 10, 2022 11:37 pm So what does the future hold? It's hard to say. I think everybody agrees that a market pullback was way overdue, but I've never seen a recession occuring with such low unemployment rates and a strong dollar overseas. It's all about supply & demand. Keep your eye on the dollar.
A strong dollar is a problem. There are a lot of 3rd world countries that take out loans in USD to grow their economies. Servicing their loans under a strong dollar is bankrupting them. Eventually their pain will be our pain.
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bloobs
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Re: ‘Totally Avoidable’ Recession Ahead

Post by bloobs »

Debt is the problem. Too much collective debt is always the root cause behind market crashes. Credit default swaps, foreclosures, whatever flavor--egged on by the fed during QE, and all the lower tier banks downstream who shill their easy peezy loans to greedy corporate executives, overly optimistic small business owners, and living-beyond-their-means individuals who just HAVE TO HAVE the McMansion/luxmobile/gadget dujour of their dreams so they can impress their neighbors--until they get foreclosed or repossesed that it.

In short it is all our fault. We (modern society) have earned it, sadly.

wingchaser
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Re: ‘Totally Avoidable’ Recession Ahead

Post by wingchaser »

bloobs wrote: Tue Oct 11, 2022 2:34 am …it is all our fault. We (modern society) have earned it, sadly.
Poor Policies are the problem; beginning with the bad decision making from the current Administration (1st day in office) to remove the US as THE GLOBAL LEADER IN OIL EXPORTS, to the recent delay’s in the Fed to curb the tide of Inflation. They could have acted much sooner, but for Political Reason’s (i.e. Chairman Powell comin’ up for re-election & not wanting to get on the wrong side of the new Administration), chose not to.

Best of Luck (everyone) in all you choose to endeavor!!!
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t... pays it.” ~ Albert Einstein

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TopNotch
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Re: ‘Totally Avoidable’ Recession Ahead

Post by TopNotch »

Can Congress or the President force the fed to halt these rate increases?
David Tepper - "There is a time to make money and a time to not lose money."

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Aitrus
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Re: ‘Totally Avoidable’ Recession Ahead

Post by Aitrus »

TopNotch wrote: Tue Oct 11, 2022 8:44 pm Can Congress or the President force the fed to halt these rate increases?
Not directly, and not to any great extent. The Fed is a pseudo-private institution.

These are the ways it's private:
- it isn't under the direct control of any federal entity
- it's board members and workers are not civil service government employees
- it makes all decisions independent of the Executive, Legislative, and Judicial branches
- the Fed considers itself "independent within the government" rather than "independent of government". In other words, it's an independently contracted private entity authorized by Congress (via the Federal Reserve Act) with sole monopoly to control most aspects of monetary and banking policy within the US
- It is the single largest holder of US national debt, to the tune of around $6 trillion currently (for comparison, China currently holds about $980 billion, or 3.2% of US debt). "Quantative Easing" the act of the Fed buying more US debt at rates that the Fed says it will set. It would be silly for the government to lend money to itself, so it created / authorized the Fed as an independent private entity to do the lending.

These are the ways it's federal:
- the President, with the advice and consent of the Senate, appoints the Board members for 14-year rotating terms. The Chair is appointed from among Board members by the President alone.
- the Fed derives it's governing / management / oversight / "Do what we say, or else!" authority from the Federal Reserve Act of 1913
- the Fed's board members can be impeached and removed from office

From wikipedia: "Although an instrument of the US Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or by anyone else in the executive or legislative branches of government, it does not receive funding appropriated by Congress, and the terms of the members of the board of governors span multiple presidential and congressional terms."

So yes, the President and Congress can ask / negotiate / beg / attempt to influence the Board in order to affect monetary policy. However, the only leverage that the President and Congress has is to threaten impeachment of individual members, or to refuse to confirm them for a second term. In reality, the Fed answers to nobody.

Disclaimer: All of the above is my own understanding of how the Fed operates and views itself. I'm not intimately familiar with it, so if somebody knows better than I, please chime in.
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bloobs
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Re: ‘Totally Avoidable’ Recession Ahead

Post by bloobs »

In short, I am of the opinion that since central banks (Federal Reserve et al.) are largely autonomous to nationalistic interests (the government of the country where it operates, much less its citizens) but it is ultimately beholden to the interests of the most powerful forces within the banking sector--regardless of nationality. Should not be a surprise to anyone by now, right?

Keep that in mind each time you get confused by a Fed announcement, plan, or action.

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IRQVET
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Re: ‘Totally Avoidable’ Recession Ahead

Post by IRQVET »

November cannot come soon enough. Hard to believe all this damage can occur in two years of mismangagement . . . not just in the WH, but trickling down through everyone “appointed” into key positions that drive the economy in the limited capacity they have economic control over. Energy markets and consumer confidence being the two biggest impacts IMHO.
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Disclaimer: The contents of this thread are known to the state of California to cause cancer. (As they always seem to know more than the rest of us)

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