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Strategies & Market Trends : Classic TA Workplace

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To: mishedlo who wrote (127923)	1/10/2006 11:47:03 PM
From: Win-Lose-Draw	Read Replies (1) of 209892

Care to show a chart going back to say 1970 forward that proves your claim. It's not my claim - it's the claim from the very people who did the study you've been citing!!! Haven't you read Estrella's and Mishkin's work? It's in the probability table every yield-curve blogger on the internet has been quoting for the past month. Simple inversion -> one in four chance of recession is the same thing as saying simple inversion -> three in four chances of the bond market being on drugs ( 1 - 1/4 = 3/4). Estrella put it most succintly a couple of years later: "too many false signals". There is also the huge red flag that their coincident indicator does NOT work for many, many first-world economies. Frankly, that's beyond a red flag, that's a latex slap across both cheeks. BTW, the 1 in 4 from the original study, coupled with the hugely wide windows of their study, amounts to the equivalent of a coin toss. Why? Because the odds of a recession appearing in a random 12-18 month window are - you guessed it - about 1 in 4.

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