In each case ccpi > 2.0 and Fed is raising rates.
Bond yields spike before every recession. This raises interest rates and changes the social mood which causes the downtrend in economy.
Yield Spike:
Recession indicators:
Other indicators are not reliable.
History does not repeat itself, but it rhymes…Mark Twain
Unfortunately, we live in a new era although similar to Rome. Politics today is a flag in the breeze. Politicians do not understand what’s different today than other periods like the 1930s :
None of this requires employment. Thomas Piketty notes that only 2 resolutions are available: war and deflation/depression. BUT deflation can’t occur with the Fed’s infinite balance sheet and nuclear peace prevents war. The closest analogy to the quagmire is Japan’s economy from 1990-onwards:
Aside: TLT falling means yield spike which leads to a recession….
Even though a TLT run is possible in Jan, the best conditions are:
see Jun-Sep 2011, and Jan 2015, and Nov-Dec 2008!
As fed rates are > 0.25, TLT not a play. SPY short is the preferred plan when fed increases rates/tightens.
Mark Blyth discusses correlation and leverage to increase including smart beta strategy!
minutes 13:00-19:00
AND 39:00-42:30…
FXC is a great leading indicator for January short! See Jan 2014, Jan 2015, and Jan 2016. So the setup for SPY short is perfect starting Jan 3!
Now later in the year…longer SPY shorts will be entertained as recession is near. So the idea is to short SPY in Apr/May when RWms occurs and selling end of October 2017. For a truly large return, recession must occur. Economy is overdue for one and the rest of the world is in one at the moment. BUT UIC YoY change must reflect this early in the year.. by going positive +…
Even though money can be had with long TLT at certain times, the policy is to play SPY short. TLT will become a play again perhaps in Nov/Dec if SPY falls 25% or more, ccpi > 2.0 and fed rates have dropped to 0 (theses are ideal conditions for TLT run).
The rcp model was the closest…so once again the simplest model works the best…
http://acsh.org/news/2016/11/09/election-polls-were-wrong-and-why-rcp-better-nate-silver-10423
”
RealClearPolitics’ Simple Model Is Superior to Nate Silver’s Algorithm
That sounds impressive, until one considers that RealClearPolitics (my former employer), nailed 49 states. Their prediction only got Florida wrong. They don’t use magic sauce; instead, they do a simple (though statistically incorrect) arithmetic average of polls. But it’s good enough. Occam’s Razor would advise us to accept the simple RCP model over Mr Silver’s fancy model. If the more complex model does not yield substantially better results, then perhaps the added complexity is nothing more than smoke and mirrors.“
Crazy politics is a consequence of a slow growth / debt fueled economy. As debt goes up gdp slows:
FROM LINK ABOVE: “Doom Loop” of cheap financing leading to excessive debt growth followed by busts, bailouts, and more cheap credit to continue the cycle.
The doom loop…I couldn’t have said it better. Total debt becomes associated to public debt as the government keeps bailing out the private debt. Also global debt becomes an issue in the sense that debt growth in China drives KFC and Disney products in China and thereby US exports. From McKinsey &Company:
ASIDE:
I say recession next year. Good news that this article also confirms recession-
http://reason.com/archives/2016/09/07/making-the-most-of-the-next-re
Trump is unlikely without a market crash and yes Reagan was a joke as well as George W BUT they both had market mayhem and bad economy pushing for them. I believe the odds Hillary 66% and Trump 33%. If Trump were to get in and got out of line, he would be impeached anyway.
Recessions can occur after president is elected…see 1980 Q2. -7% GDP quarter (the worst Q of the period due to Fed tightening as well).
Also Nixon election 1973 lead to economy nosedive into a recession starting Q3:
Jill Stein here also states the plight of young people in the economy…hence more future instability. BUT what’s interesting is they’re implying she will sabotage Hillary!
“For young people…You have no future…you are mired in debt…why bother?”
As there’s no FPC, Hillary will most likely win as the market will not fall significantly. In Dec, Fed will raise rates and market downtrend starts Jan 2.
SPY short is the plan on Jan 2. The sell point will be 1st Friday in January. Then buy TLT on 2nd Monday Jan 9 and sell Fri at open Feb 10. As TLT will be a stronger uptrend next year, the pullback in the 1st week Jan will be a buying opportunity as it rebounds up through Jan-Feb.
As for 2016 election, house will remain republican regardless of Presidency so no significant policy changes…from real clear politics:
Most likely there will be no FPC (Fed Policy Change) on Sep 21. Yellin’s comments of a rate rise this year imply a Dec rate rise not Sep.
The market will still go down in October due to the election but not enough to justify a play. A lack of Sep FPC leads to the SPY short / TLT hybrid strategy on Jan 2 after rate rise in Dec.
Credit Flow Investor 