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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (76154)	12/19/2006 11:29:23 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 110194

Exactly. Keynes had it right. I recommend this short paper by the IMF's Prakash Loungani: "The Arcane Art of Predicting Recessions". It explains why no one on Wall Street every predicts a recession: imf.org Excerpt: Only two of the 60 recessions that occurred around the world during the 1990s were predicted a year in advance. That may seem like a tough standard to impose on forecast accuracy. Maybe so—but two-thirds of those recessions remained un-detected seven months before they occurred. If this still seems unreasonably harsh, we can lower the bar even further. As late as two months before each recession began, about a quarter of the forecasts still predicted positive growth for the country concerned. In addition, they were too optimistic in 50 out of the 60 cases. This "predictive failure" is well known in the case of US recessions. Even Alan Greenspan, chairman of the Federal Reserve, told his colleagues in late August 1990—a month into a recession—that "those who argue that we are already in a recession are reasonably certain to be wrong". Earlier US recessions were also missed by forecasters, as Victor Zarnowitz, an expert in the assessment of economic forecasts, pointed out in a 1986 paper. The evidence for other countries shows that US forecasters are not alone in their inability to predict recessions. Indeed, in absolute terms, the magnitude of forecast errors tends to be larger for developing than for industrialised countries. However, it must be pointed out that the economic growth of developing countries is much more variable than that of industrialised ones. Why are recessions so difficult to forecast? One theory is that the information needed is lacking: forecasters either do not have access to real-time information or lack reliable models for translating information into predictions of a recession. Another is that there are few incentives for producing an "outlier" forecast-a recession or a period of strong growth. For example, some researchers and private forecasters argue that the incentives are tilted against predicting a recession. Mr. Zarnowitz wrote that "predicting a general downturn is always unpopular and predicting it prematurely—ahead of others—may prove quite costly to the forecaster and his customers". Gary Shilling, a private forecaster, stated in an interview this year with Euromoney magazine that "whistle-blowers are unemployable".

To: russwinter who wrote (76154)	12/20/2006 7:53:50 AM
From: Real Man	Read Replies (1) \| Respond to of 110194

Russ, how can you protect yourself in current "market"? Shorts don't seem to work. In my view, the Fed has fully demonstrated what they are after - preventing and covering up a systemic derivative meltdown at all costs. The derivative market is totally out of control - the fails don't even matter anymore. The question is, where does this leave us? Gold and oil? Personally, I think a meltdown won't happen right now, since 10-year rates and spreads are so low, so the "pig men" have succeeded to keep the system together, for now. That's why the coupon passes - no danger to rates now, although there is a potential for the dollar crisis if USD falls below 80. Ben Fed always does that. They demo "care" parade about the dollar at bonds breakdown point. I fully agree with your Brazilification of America. So, perhaps, Brazil-style currency meltdown will be the final outcome of current Fed action. I just don't see them changing their course, no matter what, since prudent action on their part will result in a derivative meltdown of epic proportions.