A friend of the blog writes:
This thread!
I read it and think back to my own woes 20 years ago after I graduated from college. People were being laid off in my chosen field, so there were no jobs for new grads. Some of my cohorts refused to take jobs that they were also qualified for, but with way less pay. Not me. I took a low paying job, worked a bit, went to my manager’s boss, showed him my resume, talked about my skills. He looked up my recent review and gave me a raise. I then added two other part time jobs that were actually in the field for which I had a degree. Eventually, one of those became full time. And eventually, I became a manager.
I am so struck by how many of my cohorts, and most of today’s millennials, think promotion, good pay, etc, all happen immediately. It is something you work to, you demonstrate your worth, demonstrate your willingness to work, then pay happens. Then promotions happen. The cohorts that I know who wouldn’t work for less pay, lesser jobs are still mostly not working full time, still complaining that life is unaffordable.
My parents are the Silent Generation, so I think they instilled this in me. I am generally thought of as not an optimist, but I have to believe that the children of millennials will rebel against their parents and actually get back to work, show much better work ethics.
After college, it took me seven years and a career change to earn over $20K a year (after inflation, probably 35ish today). It was because of choices I made – going into an industry that was awful for entry-level wages even before it died – and I knew it at the time. Figured it was worth it for a shot a the big time.
I think kids today figure the big time will come to them…
When I was a landlord renting to college students, I was struck by the number of humanities Majors who wanted to work in a cubicle for a non-profit. saving the world was more important than making a lot of money, although, of course, they wanted to be able to pay their loans, have a car, a decent apartment, money for Starbucks and concerts, etc.
Humanities majors who want to save the world and be well paid while doing it!
Hey I want someone to explain inverted yield curves. Thing is its supposed to mean what it means… in this case that a recession comes in 12-24 months… maybe… but the journalistic talk is absent an investor psychology that I can understand re the mechanics of it all.
So to be inverted means the 2 yr bond pays a higher yield than a 10 yr bond. Cuz we assume the natural state is where the 10 yr bond pays more…okay.
Mechanically thing being you start with a baseline of bonds trading at par, but investor demand means bonds are bought at a par plus premium that basically subtracts from their % rate yield. Ya know, so then if the 2 and 10 year bond both have base rates of 4% but there’s more demand for the 10 and the premium is bigger, it means its yield is lower. Imverted there.
Okay dokey…. so what does a flight to 10 year bonds mean in terms of investor psychology…. and does a portfolio commitment to 10 year bonds really mean anything when they are liquid anyway.
JK, the inverted yield curve is a technical indicator, in the sense of correlation but not causation. This is a decent rundown. Mini-skirts and victors of the Super Bowl used to be as well.
great…. “An inverse yield curve predicts lower interest rates in the future as longer-term bonds are demanded, sending the yields down.”
I’m not sure I understand apparent editorial remark, but yes, the quote is true.
I mean thanks.
You gave me a link with a real answer 1st time, which hardly ever happens on the internet anymore.
So, I’m going to keep acting like this is an open thread…
I’m thanking you for that answer. You get kraep for wisdom on the internet these days mostly.
Say you have a car symptom…. you feel like your blinkers are noisy and need blinker fluid… and you go to the internet to try and figure this out.
First 10 query returns are generic car part web storefronts, second 10 query returns are hokey commercial DIY Q&A pages, and then maybe, maybe in the third 10 query returns you might find links to an old message board discussion that might be pertinent and help you.
Don’t get me started on FB groups… You can pose a question and say explicitly, I’m not interested in particular answer X because I understand answer X’s relevance and its not applicable….and first guy to comment will give answer X.
Yes, but how does this affect Al Franken?
You’re welcome, JK. No problem.
What I would like to see is numbers showing that any financial expert predicted the financial crisis of 2008. Based on superior knowledge, not luck.
Nobody knows nuttin’.
^ Fair to say there were some ignored points of view that saw the housing crisis coming in 2008.
Now, I am looking for doom casters that can articulate their vision of a downturn with a 2008 feel of credibility. I’m not seeing it. Housing is hot but arguably not overpriced vs demand.
JK, Trump is president… oh, sorry, you were looking for credibility. I’m sure one or the other E-boys are working on something.
I flunked out of the U of M circa 2011 and had to build my resume up so I started working at Jimmy Johns. That was hard considering I saw most of my peers graduated with solid 30-40K a year jobs but here I am 8 years later at a company I could see myself staying at the rest of my life, and Im making about 35K a year before taxes. Now Im in a better position than most of my peers with a BA or BS and I dont have anywhere near the crippling student loan debt. Flunking out of the U is still honestly the best thing that has ever happened to me and I still tell people that to this day
John Kraephammer/jdm: I think it’s difficult in the QE era to determine if old signals mean the same thing they did before the crisis. With central banks now owning so much of the supply — the supply demand curve has been altered. I just know that just like QE, all of these negative interest rates should be signaling a broken system. Not sure why it’s seen as “normal”?
Woolly: 1929 and 2008 are remarkably similar as the flaws in neoclassical economics ensure no one sees the problems developing. The same problems develop as everyone think inflating asset prices is creating real wealth and no one is looking at the debt building up.
Austerity seems like the solution when you use neoclassical economics, but history tells us the economic hardship drives political extremism. This is what happened in the 1930s.
No one knows what is wrong and they stumble around looking for solutions like devaluing their currency and putting up tariffs as the tensions keep escalating until you get to the final destination.
“1929 and 2008 are remarkably similar as the flaws in neoclassical economics ensure no one sees the problems developing.” <– this is not a statement about economics.
It's also weird because it states that "no one see the problems developing," and it then proceeds to describe the problems that are developing.
Garbage in, garbage out. If you haven't mastered reasoning, you have nothing to say about economics.
I think it’s difficult in the QE era to determine if old signals […] seen as “normal”?
Oh, baloney.
The basic truth of economics is that people like to make money. They like to sell labor they value at ten bucks an hour for fifteen bucks an hour. They like to sell for a dollar something that they paid ninety cents for. They like to sell methylamphetamine that cost them a dollar to make for two dollars, or even $1.10.
This is as true in totalitarian communist societies as it is in laissez-faire capitalist societies.
It is not difficult for society to produce wealth. Just turn people loose and they will do it. The eternal question is how much capitalism a society can unleash without destroying the things that we, as a society, value.
Even believing that we are duty bound to preserve for posterity a clean, healthy environment much like the one we inherited is a social value. The Soviets didn’t believe in it. Poor countries today don’t believe in it. The Victorians didn’t believe in it.
Speaking of the Victorians, it is a common belief that the Victorians (in the New World and the Old World) were poor. This is true, but only when compared to the current age of plenty.
The Victorians were incredibly wealthy compared to the people who lived a century earlier. World GDP increased by a factor of nineteen between 1800 and 1900.
That doesn’t mean that everybody was better off in 1900 than their ancestors were in 1800. It means that the large majority of them were.
Wages for an English agricultural worker circa 1800 were a penny a day. That was enough to buy a big loaf of bread, a small chicken, or a candle. By 1900 the wage of an English ag worker had increased ten fold.
just: It’s questionable whether the yield curve would even be inverted without monetary easing policies. Long term yields have been artificially suppressed for a long time now and central banks are controlling pretty much both ends of the curve.
The Pavlovian relation between market participants and central banks is an acute problem. Once the tail wags the dog we have a problem. The curve inversion is now based on multiple factors not only including pessimistic financial data.
For a better understanding of terms such as yield and inversion I would recommend this explainer from Vox.
https://www.vox.com/2019/8/14/20805404/yield-curve-inversion-recession-10-year-2-year
There is a good dispute in NRO’s The Corner between Kevin D. Williamson & Michael James Dougherty (it begins here, https://www.nationalreview.com/corner/is-this-about-avocado-toast/ with Dougherty criticizing Williamson’s take on the current options for America Workers).
Williamson has, like many #nevertrumpers, moved towards the libertarian end of the spectrum. His growing belief that man is economic man needs more criticism.
Since the election, Williamson colleague at NRO, Jonah Goldberg, has written a book deploring human tribalism called Suicide of the West. Williamson has recently published his own book, The Smallest Minority. Put them together and you have human beings living only as individuals against the Leviathon state. We know who would win that battle, and so does the Left. That is why it has been working hard to destroy any social or religious or community organizations that stand between the individual and the state.
A strong sense of national identity — which Williamson and Goldberg oppose — is what allows an individual to judge the state as being insufficiently patriotic, of putting the class interests of politicians and bureaucrats ahead of the interests of the nation.
Vox? Matt Yglesias? Isn’t Vox a YA chat room? A look at Yglesias’s CV shows that the only thing he knows about economics is how to spend investor money.
Yglesias attended NY’s exclusive Dalton School. He graduated cum laude from Harvard with a degree in philosophy.
“Until today I thought Evelyn Waugh was a woman, because his name is ‘Evelyn’ and that is typically a woman’s name.” –Mat Yglesias.
Talk about Ad hominem..
Simple question: Is the Vox explanation of yield and inversion accurate or not.
Trump’s Chief Economic Advisor Larry Kudlow also has no degree in economics. His only degree is a BA in history.
What is it with Trump? How does he do it? It takes a perverse kind of genius to put the absolute worst person in charge of literally everything.
Emery, you are presenting Yglesias as some kind of authority on economics. I disposed of that foolish notion. If you think Yglesias knows more about economics than your barber, please explain why you believe such a thing.
Okay, here is kudlow’s bio:
Financial analyst for the fed, financial analyst for Bears Stern. After a stint in Regan’s OMB, Kudlow returned to Bear Sterns as their chief economist. Kudlow then became a economic pundit for several media companies, then went to work for Trump.
Contrast with Yglesias bio:
Editor and columnist for several progressive publications.
An even-handed discussion of the term “inverted yield curve” at investopedia: https://www.investopedia.com/terms/i/invertedyieldcurve.asp
Takeaway is “An inverse yield curve predicts lower interest rates in the future as longer-term bonds are demanded, sending the yields down.”
The entire article is worth reading and is not very long. The author is James Chen. James Chen “. . . is Director of Trading & Investing Content at Investopedia and former Head of Research at Gain Capital (NYSE: GCAP). For two decades, he has been heavily involved in the financial markets as a trader, investor, investment adviser and global market strategist.
James is the author of the books, “Essentials of Technical Analysis for Financial Markets” (John Wiley and Sons, 2010) and “Essentials of Foreign Exchange Trading” (John Wiley and Sons, 2009), as well as author/speaker for the instructional video series, “High Probability Trend Following.”
He has served as a guest expert for CNBC, Bloomberg TV, Forbes and Reuters, among other key financial news media, and is a featured speaker at major trading/investing seminars and conferences.
A graduate of Tufts University, James is a Chartered Market Technician (CMT), Certified Financial Technician (CFTe) and Registered Investment Adviser (RIA), as well as a former Commodity Trading Advisor (CTA). He has extensive market expertise in stocks, ETFs, options, commodities, fixed income and currencies.”
Are you purposely posting stupid or is it your natural demeanor?
Sheesh — when you find yourself in a hole quit digging..
Simple question: Is the Vox explanation of yield and inversion accurate or not?
I didn’t say that Yglesias’s explanation wasn’t correct, I said that Yglesias has no proven expertise outside of his fields of expertise (philosophy of some kind and writing/editing left wing talking points). Yglesias has, in fact, demonstrated jaw-dropping ignorance about fields outside his area of expertise. I was not attacking Yglesias or his article, I was attacking you, Emery, and your shabby methods of “researching” economic topics.
Keep in mind that the Fed rate of 2% is still 200 basis points higher than the IQ of the Trump economic team.
Since you insist on bringing up Kudlow’s ‘bio’….
“Larry Kudlow is usually wrong and frequently absurd”
In December 2007, he wrote: ‘Bush Boom Continues’ (National Review)
“There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.” ~ Larry Kudlow 2007
Note the date of the article. (December 10, 2007) The recession started in December 2007
Also in 2007, Kudlow also wrote: ‘A Stock Market Vote of Confidence for Bush’
“I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today’s stock market message is an unmistakable vote of confidence for the president.” ~ Larry Kudlow
But wait: There’s more. Here’s one from 1993: “There is no question that President Clinton’s across-the-board tax increases on labor, capital and energy will throw a wet blanket over the recovery and depress the economy’s long-run potential,” ~ Larry Kudlow
What happened next? The U.S. economy began an eight-year expansion, creating 21 million jobs—and the federal budget was balanced.
Read more at https://www.calculatedriskblog.com/2016/12/larry-kudlow-is-usually-wrong.html#RhfmFw5Z0b48pXC4.99
You are entirely missing the point, Emery.
I said nothing about Kudlow other than that his economic credentials are far superior to those of Matt Yglesias. Why would you listen to Yglesias and not Kudlow? Are you in the habit of seeking out people with a BA in philosophy when you want to find out the consequences of a “negative yield curve”?
If being wrong means that your IQ is zero, perhaps you could explain Krugman’s remarks about Trump bringing on eternal economic depression, or your own prediction on SITD that Hillary would win over Trump by a landslide.
You keep picking arguments, being made to look foolish, and then you move on to another argument and make yourself look foolish again.
I provided a link to a Vox piece on yields and inversion. I said nothing about the author or his politics. You claimed his piece was “correct”.
“You claimed his piece was ‘correct’.”
How should I know? I didn’t read it. I don’t read psychologists opinions about the varying albedo of Jupiter, either.
Emery accusing someone of posting stupid things. Methinks yes both protest too much
Emery will use citations from Daily Kos now too. Since they are the same level of fairness. Impartial journalism as Vox
My problem isn’t with Vox or Yglesias. It is with Emery referencing non-authorities like Yglesias as though they were authorities.
Predicts. How well?
Doesn’t say.
Emory ” I think it’s difficult in the QE era to determine if old signals mean the same thing they did before the crisis. With central banks now owning so much of the supply — the supply demand curve has been altered.” I agree, this is my instinct as well. Other thing is modern bond trading is to trade bonds like equities. If the par + premium value is going down, everyone is going to unload just cuz they are slave to the whatever spread is most important on their excel spreadsheet, it isnt really about ‘finance’… Is this really a rock solid indicator of recession down the road?
I love Kevin Williamson and Matt Yglessias. Williamson more I’d say, but you listen to Yglessias’ podcast and read his stuff … you can not really miss that he’s a capitalist / mercantile-ist and knows that free-market truisims are ‘true’. A great much of their discussion of policy, him and Klein and whoever else, is colored by free market critique of the left’s wish list. That said, yes, whatever it is they are, they’d like a very stiff tax regime, which is very lefty.
Yglesias is a smart fellow. He’s parlayed an unmarketable Ivy League degree into a very lucrative career. Copying and pasting twaddle on subjects he has no expertise in attracts low IQ Dunning Kruger sufferers like Hemorry who then copy and authoritatively past it elsewhere…it’s a galaxy brain move, really.
I provided a link to a Vox piece on yields and inversion.
The demise of Sesame Street sent Dunning Kruger sufferers scurrying for new sources of information to impress their betters with. It’s why sources like Vox, Slate, Buzzfeed and MotherJones crop up in discussions with scary smart leftists covering everything from artificial intelligence to global warming.
Leftist propaganda rags operate as much on the psychological insights of PT Barnum as the operational tactics of Saul Alinsky.
See, I don’t think the Vox yield curve article is a bad article. I think its good as far as it goes. There’s not anything there that propagandizes for lefty policy.
The first problem I have with citing yield curve analysis to criticize the Trump administration is “causation.” How do we know Trump’s policies “caused” the inverted yield curve? Which policies? Why did they have that effect? If we reverse the policy, will that reverse the curve and how do you know?
How do we know it’s not a coincidence, or the result of Democrats talking down the economy, or the result of mindless computer-driven traders, or the down stage of an inevitable economic cycle?
The second problem I have is citing yield curve analysis as a dependable predictor. How strong is the “correlation” between inverse yield curve today and recession in the future?
If someone could show me historical evidence that every inverse yield curve in the past has invariably resulted in a recession 22 months later; and that the point spread of the inverse yield has a 92% correlation with the length and depth of the recession, I’d be concerned.
If all they’re saying is “the inverse yield curve means there’s a 50-50 chance we might have a recession in a few years, which could be a bad one,” well, I can get that kind of prediction from a fortune cookie.
Anybody got a link to persuasive evidence of Causation and Correlation?
All who support Kudlow show your hands — and kindly explain how an economy that is built on ridiculous debt and loose monetary policy for the last 10 years — is a sound one to bet on for the future.
It’s as if Navarro and Kudlow are the secret weapon of those who are intent on totally discrediting Economics as a serious field of study: The long march through the institutions. And they are doing a stellar job, 100% wrong all of the time is an impressive performance, almost too good not to raise suspicion about their true motives. In any case, we all know now that the recession is coming.
Kudlow has zero credentials in the areas of either Economics or Finance. No degree, no training.
And Navarro is not respected by the majority of economists, and not because he’s a thoughtful heterodox economist, but because he’s an idiot.
So, yeah
“Kudlow has zero credentials in the areas of either Economics or Finance. No degree, no training.”
Kudlow was a financial analyst and then the chief economist for Bear-Sterns. Between those two jobs he was in Reagan’s OMB.
You are beclowning yourself, Emery.
Perhaps you should follow the advice of the NY Times columnist Thomas Friedman, commentator on all things, political and economic: “The first rule of holes is when you’re in one, stop digging. When you’re in three, bring a lot of shovels. “
I see the Dow is up nearly 300 today.
Good thing I don’t believe I am smart enough to time the market!
If I had sold when Trump won in 2016, I’d be down about $260k. That extra “Trump bump” is making it possible for me to retire at age 60.
Constant squirrel tosses — I can see why Trump appeals to you.
Yeah, I definitely trust and believe what these bozos have to say, don’t you?
You toss squirrels more than anyone else here other than Penigma Emerty. Those in glass houses should not throw stones, or in your case boulders.
And I trust those “bozos” more than you or your sources. Heck Id trust a high schooler taking their first econ class more than you.
I am trying to figure out how I will spend my time after I retire (at age 60!). I won’t have a lot of money — but I’m widowed, so I don’t need much. Current Obamacare rules say I have to keep my income below about $48k/year after my COBRA expires.
Before that I’ll buy a house in a little town on the Saint Croix. I’ll buy a second motorcycle, probably a BMW so I can do some touring in the summer. A small sloop like a Snark so I can sale around the lakes in the summer. In the winter I’ll do CC skiing. January or February I’ll head to Florida or Mexico.
Two more years of the good life, thanks to DJT!
MP I just turned 33 yesterday, enjoy the government benefits because I guarantee that by the time Im your age it will all be gone, Im going to have to use my own resources.