Posted on 11/10/2012 7:44:19 AM PST by Kaslin
On 30 October 2012, a recession forecasting model developed by Marcelle Chauvet and Jeremy Piger reached what appears to be a critical threshold for anticipating a recession in the U.S. in the very near future.
The Reformed Broker's Joshua Brown comments (HT: Abnormal Returns):
Do you see the percentages on the left side of the chart? 20% is the line in the sand. We've never hit that level and NOT had a recession. In 2006 we got close (18%?) but that particular Great Recession would be a year and half in the making. Note that we're back at that 20% line again. And I can't think of anything that keeps the leading indicators from going through it to the upside - the Fiscal Cliff stuff could only speed its ascent.
One thing we should note is that the data in the chart only covers the period through August 2012 - this is a delayed reaction to a developing situation. The probability of recession in the U.S. suddenly surged to the 20% level from the 2% level recorded a month earlier.
As it happens, we have another indicator which gave a slightly earlier signal that the U.S. economy is trending toward recession: the number of publicly-traded companies that have acted to cut their dividends. Here is what that data showed through the end of September:
We'd like to be able to update the chart through October 2012, however the aftermath of Hurricane Sandy has impacted Standard and Poor's operations, which has delayed the update of S&P's dividend action report [Excel spreadsheet].
As soon as that report has been updated, we'll post an updated version of our chart. In the meantime, we should note that this trend toward recession would seem to be occurring independently of whatever noise is going on in Washington D.C. with respect to the so-called fiscal cliff, which is confirmed by the Chauvet-Piger recession forecasting model, which does not consider that scenario.
We'll close by noting that what we're seeing in dividends now is not a result of the reactions to what we've described as the "dividend cliff". Here, there's really no hurry for companies to announce dividend cuts this year. Instead, the incentives are such that companies would more likely be announcing special dividend payments to beat the clock on the higher taxes for dividend income scheduled to begin in 2013, delaying the announcement of any plans they might be developing to cut dividends until the new year.
Our previous posts on the rising likelihood of recession based on the number of U.S. companies acting to cut their dividends, presented in reverse chronological order:
Chauvet, M. and J. Piger, "A Comparison of the Real-Time Performance of Business Cycle Dating Methods," Journal of Business and Economic Statistics, 2008, 26, 42-49.
Standard and Poor. Monthly Dividend Action Report. [Excel spreadsheet]. As last updated 28 September 2012.
Hit ‘em their pocketbooks. Boycott known liberal bastions like New York City, Washington D.C., Chicago. Don’t vacation in Colorado, Las Vegas, California, etc. Let their tourist industries survive on the obama voters. Shop at local restaurants that you know are run by conservatives. Build up conservative businesses and let liberals support their own.
It truly is us against them.
When possible, avoid the most liberal establishments like Starbucks, Macy’s, J.C. Penneys (YES Penneys) etc. Go Galt. Avoid ANY large purchases that you can defer. Make that car last. Live with the noisy dishwasher.
And above all do NOT attend any movies. Hollywood is feeling smug right now. Do NOT make the excuse that you need some escape entertainment. Watch DVD’s you’ve already purchased or share w/ friends.
The gop is the 21st century Whig party. They’ll hang onto what power they have for as long as they can, but they’re essentially a dead party walking.
The gop is the 21st century Whig party. They’ll hang onto what power they have for as long as they can, but they’re essentially a dead party walking.
Didn’t need economic indicators, as soon as 0bama hit 270 EVs, not just recession, but DEPRESSION, was inevitable.
We really do need a “red business” identification system.
Who needs actuaries when everyone gets exactly the same insurance at exactly the same price regardless of age and risk?
Just out of curiosity, do you know who he voted for?...
Respectfully, I don't need the government to tell me how bad the economy is.
You have one person that listens. I did a little buying when you were buying with both fists last fall :~)
I lived in Michigan for 40 years, bartering and under the table work are a way of life in the permanent recession state. One the nice things about growing up in the rustbelt is that one learns how to make things through learning industrial processes and manufacturing techniques. One of the results of this education is the subject of gun confiscation. Detroit used to be the arsenal of democracy, and the knowledge gained from that did not disappear. A word of advice to the government: don’t piss off the people who design and build your weapons, we keep the best designs for ourselves.
Red for Red state (Did you notice the Left hung red on us way back when "because we always use red for the incumbent", unless of course he actually is a communist)
The ¢ sign as a symbol of what makes sense (*groan*, I know), and frugality, and a c for conservative. As well as something of a derivative of Ayn Rands gold $ symbol.
Millions for defense, not one cent for tribute...
Just my 2¢
*sigh* hit post too quickly.
Meant to say:
Millions for defense not One Red Cent for tribute.
I like it. Easy to produce. Anyone could print it and put it in their window.
But, Obamaphone girl does
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