[other_evolved]

Originally Posted by ASAP

again i say... show both... gdp w and gdp without...

as far as metrics... peoples poor understanding of unemployment and underemployment to show a full picture if what been happening is a prime example... you need to see both to see the whole equation

revisions to employment are completely acceptable if within a few % points..not thousands of jobs... i work in lets say a sector of finance and if i made a revision like that, i'd be cooked...

They already do show both. For those of us that read the GDP reports, it is a very detailed set of data that separates out the various components that add/detract from GDP.

Consumption + Investments + Government Spending + Net Exports = GDP

[Watching The World Burn]

Originally Posted by DrVenture

Take particular note of this potential/prediction from Barron's, "The CME FedWatch now projects 3 rate cuts in 2025 (based on fed fund futures trading data), but some think that there may be more cuts if the economy slows down too much."

This is a strong indication, when coupled with the sketchy outlook for stocks, that bond funds are going to continue (and even accelerate) their current outperformance. Smart money should position accordingly.

What bond funds do you recommend? I just went into a ultra short term bond (can't remember the name to be honest, will have to look up) for a little bit to park money.

[dumptruck]

I admire your optimism.

[2000cs]

On the GDP reporting, the only issue is what the headline is since most people don’t read the actual reports (or much of the articles about it). If your goal is to report what the non-government economy is doing then you would exclude gov’t spending (but that is imperfect for a lot of reasons); if you use government spending to prop up the numbers or claim economic success for your agenda, then you would prefer the full GDP/GNP numbers. Thus, it is political.

Worth noting that other measures have had the reference numbers (headline numbers) changed over time. Inflation measures and money supply measures come to mind as examples.

I think it is really just propaganda (political); those with the interest to read the details already look at the full suite of reporting.

[2000cs]

On GDP currently, the administration would greatly reduce government spending, which would lower GDP and likely result in “recession” headlines. If the private sector is growing (perhaps not fast enough to fully offset the decline in gov’t expenditures), is it really a recession that requires some fiscal or FED intervention? That’s the economic issue; the political issue is obvious and I won’t go further down that path due to forum rules.

[2000cs]

Originally Posted by DrVenture

Barron's 3/10/2025 highlights:

Pg 6: The U.S. global paradigm shift doesn’t favor the US stocks. In the new world order, several countries in Europe, Asia and elsewhere will be weaned out of their (military and/or financial) dependence on the US. Tariffs will punish friends and foes. The US Government will be downsized. The dollar’s role will be redefined. Global uber-rich may get the US residency with $5 million Gold Card. Lost in this blizzard of activities is that these moves won’t be good for the US stocks. Other countries will adjust to this global power vacuum financially and militarily and there may be some global disturbances. These countries would gradually reduce their purchases of US defense equipment. China already trades more with most countries than they do with the US.

The SP500 is near 200-dMA, but Nasdaq Comp, R2000 and DT Transport are now below 200-dMA. Beyond tariffs, there may be a government shutdown on 3/14/25. A defensive posture may be appropriate for investors."

Pg 10: The new tariff and immigration policies may hurt HOUSING affordability. Lot of lumber is imported from Canada, drywall from Mexico, appliances from many countries (mostly from China). Immigration policies will hurt the housing construction industry; many undocumented workers are just skipping work. Inflation has made housing materials and labor more expensive. Mortgage rates are in the 6-7% range. Housing wasn’t doing great, but now the outlook is worse despite the efforts to cut regulations and lower rates. The US has a housing shortage that will take years to fix. But now a slowdown in housing construction is coming. Privatizing Fannie Mae and Freddie Mac will also raise mortgage rates as those lose their GSE status. ETFs ITB and XHB are lagging the market.

Pg 22: Hecker cautions that Russia-Ukraine peace may be farther away than most believe. The EU security guarantee won’t work without the US security guarantee (and the presence of US businesses alone isn’t a security guarantee – there are many examples of the US businesses nationalized or confiscated in many places, Russia included). The EU would eventually follow whatever the US policy is for Ukraine and Russia. Putin thinks that he has been winning and may now think that his hand is stronger with the new US Administration. This mineral deal is puzzling – it may be symbolic only as both TRUMP and ZELENSKY would be very old by the time any minerals mined flow from Ukraine to the US. He also thinks that sanctions tend to be sticky and is watching if some of the Russian sanctions would actually reverse. Russian economy is in a bad shape and ruble has collapsed. But if there are elections in Ukraine, Russia will make every effort to tilt the future government towards it (and the US will try to tilt it towards the US). New book, “Zero Sum – The Arc of International Business in Russia”, 03/2025.

Pg 24: WHEAT rallied just after the Russia-Ukraine war started but has dropped 55% since then. Now there are supply issues due to bad weather (for wheat crops) and supply disruptions from continuing Russia-Ukraine war. Global inventories of wheat are also low. The biggest exporters are Russia, US, Ukraine. Conditions are right for wheat to rally. The ETF is WEAT.

Pg 24: There is lot of debate on how tariffs will affect the economy. But their effects will be through consumer behavior and spending. So, watch consumer and business confidence measures. Author Leonhardt recently visited Vietnam and saw how the global supply-chain are shifting from China and elsewhere to Vietnam. The new US tariffs will also apply to these production shifts in Asia and Lat Am (only onshoring would work, not near-shoring or friend-shoring). The new tariffs will start to affect the data in April. Torsten SLOK/APO says that they may increase inflation by +0.5% and reduce the GDP growth by -0.4%, but the bigger impact will ne in consumer confidence and spending. Consumer sentiment has been falling. Inflation expectations by business are also rising, +3.5% by manufacturing businesses, +4% by service businesses. Higher inflation-expectations may pull some spending forward, so the near term Q1 data may not show much, but Q2 and Q3 data may suddenly show sharp downturns. The CME FedWatch now projects 3 rate cuts in 2025 (based on fed fund futures trading data), but some think that there may be more cuts if the economy slows down too much. (Elsewhere, a FUNDS piece worries about the Fed raising rates, so there is just too much uncertainty.)\

Pg 50: J.W. MASON, CCNY and Roosevelt Institute (NYC think tank). Official INFLATION statistics don’t capture the pain of the public. The inflation data is based on baskets of goods and services but (i) the public doesn’t use the same baskets for households, and (ii) many things aren’t included in these baskets. Lawrence SUMMERS and his coauthors point out that missing from the BLS inflation data are interest expenses, asset purchases, financial transactions (?), etc. Other distortions are when the housing is accounted for through the OERs (owners equivalent rents) since 1983, and substitutions, seasonal adjustments and revisions. Because of many of these changes, the historical data on inflation aren’t very useful (inflation today isn’t your grandfather’s inflation). As an exercise, Summers et al applied pre-1983 inflation methodologies to the present and found that inflation today is much higher than that reported by the BLS. But those old methodologies were discarded because of problems. So, a better conclusion may be that the inflation pre-1983 wasn’t as high as reported then. Anyway, Summers et al present some good food for thought.

Pg 51: DOGE cuts at SSA are causing alarms. But SSA is a lean operation already and slashing staff will only cause delays in processing complex benefit cases (this despite the reports of rather quick payouts for WEP and GPO that could be processed with automation). People shouldn’t panic and file early unless they really need Social Security for living expenses. For couples, the lower-earning spouse can file early, while the higher-earning spouse can delay up to 70. Eventually the Congress will have to fix Social Security before drastic cuts are triggered in less than 10 years.

Typical Barron’s article. I gave up on them decades ago (they are late and often wrong in their predictions). One example: Pg 10 ignores the impact on housing demand of removing illegal immigrants. A housing price decline seems more likely, especially in cities. Mortgage rates already have ticked down a bit. If the FED cuts rates as Barron’s anticipates, mortgage rates will fall further, affordability thus improves.

[ASAP]

Originally Posted by DrVenture

The situation is evolving so rapidly, it is impossible to keep track. Canada threatening to cut off electricity supplies. The U.S. threatening to double tariffs on Canada and Mexico. It is almost as if this whole thing wasn't all that well-conceived. But, it is spiraling in the manner that many predicted.

A fairly comprehensive write-up on tariffs and their efficacy:

https://www.cnbc.com/2025/03/10/do-tariffs-protect-us-jobs-and-industry-economists-say-no.html

the only place where i could remotely see tarrifs working (outside of 200 years ago)... is if it was very industry specific and said industry had a fully developed backup at home that was potentially govt backed and it was an industry we truly wanted to build at home... this would alleviate some of the pricing worries and would give folks an immediate alternative...

in every other instance such as here... its pretty much a straight disaster

[LogicalApex]

Originally Posted by ASAP

the only place where i could remotely see tarrifs working (outside of 200 years ago)... is if it was very industry specific and said industry had a fully developed backup at home that was potentially govt backed and it was an industry we truly wanted to build at home... this would alleviate some of the pricing worries and would give folks an immediate alternative...

in every other instance such as here... its pretty much a straight disaster

Pretty much.

The only times tariffs really make sense, IMHO, for an economy as globally connected as ours is if they are done early and with extremely solid reasoning behind them. Meaning, they aren't intended to block trade and instead are setup to ensure fair trade.

To expand on that point a bit. One area China has used heavily in the past to accelerate manufacturing job loses in America was through artificially devaluing their currency. This was a major reason China would purchase and hold disproportionate amounts of US debt. That's not the only way China competes, but we're not going to have a PhD dissertation on US / China trade here... Back to the point. We could have levied tariffs on those goods in a focused manner to counter the currency manipulation and ensure the US manufacturers could compete on level ground.

Doing blanket tariffs this late is counterintuitive. You're going to struggle to build back the manufacturing base and its auxiliary suppliers. But even worse... by attacking our allies you're losing access to their markets too...

Best we can do is to seize on the world's growing concern around China with trade agreements that make our market more favorable to trade with while building an off ramp from China's manufacturing prowess...

Republicans and Trump can't do that though as the major trade pacts to do that, like the TPP, were signed by Obama. So instead we're setting ourselves on fire.

[T.R.S.]

Originally Posted by DrVenture

Which is essentially the exact opposite of what is now being done. And will likely produce the exact opposite result. Hampering our trade (exports and imports) with all parties involved. And leading to the inevitable strengthening of China's trade alliances with nearly everyone.

We are self-imposing economic sanctions on ourselves. The sort of thing that we have historically done to North Korea or Iran. Causing them to turn inward to try and create from scratch, in a manner of speaking.

All I know is that I have a boatload of dry powder and just need to seek out the point of maximum pain to re-enter certain positions. Another 5% down? Another 10? Who said, "never let a good crisis go to waste"?

Good luck trying to out-guess someone who is totally short sighted and reactionary, and who's only real goal is how do I enrichen myself here and now?

"Don't worry, it'll only hurt a li'l bit for a li'l while, then I'll make it all better!"

[Mani59]

Hello all,

A reminder to all that please do not post political posts. Such posts will / have been deleted and may lead to infractions / bans against members and / or this thread being deleted.

You can read more about this here.

Thanks, Mani

[ASAP]

are folks still doubting a recession?

[XutvJet]

Originally Posted by DrVenture

https://news.bloomberglaw.com/enviro...deadline-looms

The expectation is for 250,000 federal employee layoffs.

A government is naturally inefficient. Perhaps some jobs may be a bit cush, but most folks working in government are not paid extremely well. Now you're going to reduce the work force by a quarter million. Good luck motivating those that remain and trying to will them to work harder for the same pay. They're already disgruntled and worried about their jobs. Now you're going to ask them to work harder. Good luck with that. If you you thought government was inefficient, just wait. It will trickle down to the state and local governments as well.

Government cannot be run like a business.

[XutvJet]

Originally Posted by ASAP

are folks still doubting a recession?

I'm not, but this coming recession is a bit "manufactured" I would say.

[RickFLM4]

Originally Posted by ASAP

are folks still doubting a recession?

Yes

[2000cs]

Recession:
GDP is roughly $30T annually. Government spending (fed and state) is approx $5.1T. If DOGE is successful and cuts $1T from Government spending, the $24.9T of private economy will have to make that up to avoid a recession, and then some to have growth. That equates to about 4%, so it is possible but difficult. A recession used to be defined as two consecutive quarters of negative GDP growth, so using that, we can see that it is possible the timing of cuts in government spending and non-government growth might misalign, so a recession is possible. I’d call it a “technical recession”.

The last few years GDP growth was heavily impacted by increases in government spending, which is why the numbers were good but people didn’t feel it (they just felt the inflation). A technical recession as I described above also likely won’t be felt in the private sector. As with any macro analysis, those who lose their jobs (in this case mainly government employees) obviously do feel it severely.

IMO a recession is possible, but perhaps less than 50% probability, and will be concentrated in the government sector if it does happen. And it will be brief.

[WWM3]

Originally Posted by 2000cs

Recession:
GDP is roughly $30T annually. Government spending (fed and state) is approx $5.1T. If DOGE is successful and cuts $1T from Government spending, the $24.9T of private economy will have to make that up to avoid a recession, and then some to have growth. That equates to about 4%, so it is possible but difficult. A recession used to be defined as two consecutive quarters of negative GDP growth, so using that, we can see that it is possible the timing of cuts in government spending and non-government growth might misalign, so a recession is possible. I’d call it a “technical recession”.

The last few years GDP growth was heavily impacted by increases in government spending, which is why the numbers were good but people didn’t feel it (they just felt the inflation). A technical recession as I described above also likely won’t be felt in the private sector. As with any macro analysis, those who lose their jobs (in this case mainly government employees) obviously do feel it severely.

IMO a recession is possible, but perhaps less than 50% probability, and will be concentrated in the government sector if it does happen. And it will be brief.

Interesting analysis, but I disagree. It’s hard for me to comprehend a scenario where pain is just limited to the public sector.

When Delta Airlines says travel took a nose dive and partially blames government firings, there are reverberations that extend to many parts of the economy. It won’t just be government employees looking for jobs if we get any kind of recession IMO.

With regard to the market, earnings expectations need to come down. If SPY earnings are handicapped by 10% the market will need to come down a lot more to trade at a 18x valuation like in some recent pullbacks. Not predicting this, but I’m not especially eager to buy these dips with the current vision for economic policy since I expect earnings to come in lighter than the consensus.

[2000cs]

Originally Posted by WWM3

Interesting analysis, but I disagree. It’s hard for me to comprehend a scenario where pain is just limited to the public sector.

When Delta Airlines says travel took a nose dive and partially blames government firings, there are reverberations that extend to many parts of the economy. It won’t just be government employees looking for jobs if we get any kind of recession IMO.

With regard to the market, earnings expectations need to come down. If SPY earnings are handicapped by 10% the market will need to come down a lot more to trade at a 18x valuation like in some recent pullbacks. Not predicting this, but I’m not especially eager to buy these dips with the current vision for economic policy since I expect earnings to come in much lighter than the consensus.

I said “concentrated” in, not limited to, government sector. Of course there are “multiplier” effects but that is true for growth in non-government sectors as well. And to the extent the cuts are waste and fraud, the multipliers will be small.

The real issue is whether the non-government economy is growing and will continue to grow. I think so. I also think the FED will cut rates and there might be a “DOGE dividend” and other tax cuts that help further stimulate the non-gov’t sectors (especially consumer), but that all remains to be seen. (I think this is the real reason the FED wants to go slow on rate cuts, so the economy isn’t over-stimulated) On the other hand, if the tax package from the first Trump administration is allowed to expire at the end of 2025, as is currently law, we will need massive FED rate cuts to offset the fiscal anti-stimulus or 2026 will be really bad. Taken together, the FED will be doing a dance with the administration to maintain balance and a growth bias through all of this.

[WWM3]

Originally Posted by DrVenture

Not "predicting" in an uncertain and chaotic environment is a good plan. Usually, I'd be ready to buy after a 10% drop in S&P and a Nasdaq down 14%, but that seems optimistic to me at this time.

I agree that cuts in government spending are only one piece of the equation. I think that tariff inflation, job losses and export headwinds are likely to weight more heavily in concert.

I'm with you.

[ASAP]

Originally Posted by DrVenture

Anyone looking strictly at the circumstances would be hard pressed to "doubt" anything. Some may be looking at the market drops (or their portfolios) and hoping it is just a blip. Some may want to believe there is a plan and method in place, for personal reasons.

"Austerity" is what The EU practiced after the Great Recession, and more recently, which led to them lagging the U.S. pretty badly. It led to lower GDP, rising unemployment and lower inflation. This is essentially austerity. Perhaps there is a lesson in there somewhere? But, it was not coupled with lower exports and/or tariffs, which may not help inflation.

Is the lesson that there is no free lunch? Both literally and figuratively? I am all for containing our spending in a methodical and comprehensive fashion. Trying to unwind decades of overspending all at once, with a chainsaw, and ignoring the biggest contributors, is going to get interesting.

it's a bit hard for me to believe that ONLY current policies are driving this...

if you look at the unemployment report over many months, you'll see most job growth and hiring came from GOVT and Healthcare... white collar / professional jobs have not been good for at least 2 years.... and the number of people I know across ALL industries that I talk to that have been laid off is massive... with very little prospects in finding another good job that pays as well.

So fundamentally a huge part of the employed population is now slowly starting to be unemployed and losing the wage growth they've had... all while inflation has slowed down albeit still not within any accepted targets.

Housing market is effectively frozen right now as well...

All of those things have been true for months now... with only the stock market rolling up until the last month... now I think things will get worse but the downturn didn't start a month ago... unless folks solely look at their 401k... of which most america does unfortunately because they aren't well educated...

now none of these things define a recession... but if gdp turns negative.... then it will be seen in many metrics... i continue to be of the mindset that nothing since Covid has been real as prices are finally catching up to most consumers

[Mech Spec]

Originally Posted by ASAP

it's a bit hard for me to believe that ONLY current policies are driving this...

Desperately grasping for reasons that are not the obvious and demonstrable ones.

The only thing injecting uncertainty into the economy is the executive.

Originally Posted by ASAP

now I think things will get worse but the downturn didn't start a month ago...

Correct, it started around 2 months ago, cant really remember what happened to kick it off but I'm sure someone will remind me.

[ASAP]

Originally Posted by Mech Spec

Correct, it started around 2 months ago, cant really remember what happened to kick it off but I'm sure someone will remind me.

I feel you didnt read my post... if you look at the economy in vaccuum... ie stock market then you are right...

if you look at the economy as a whole which you should be... i've provided at least few examples above why it hasnt been rosy for months...

[kudos]

Anyone doubting recession and using GDP as a factor into their analysis perhaps may want to change course.

https://www.opb.org/article/2025/03/...economic-data/

The government recently disbanded two outside advisory committees that used to consult on the numbers, offering suggestions on ways to improve the reliability of the government data.

“You know the Commerce Department runs the statistics of GDP,” Lutnick told Fox News. “Governments historically have messed with GDP. They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”

God help us all in figuring out the markets going forward.