This article is scaring me. [Roubini predicting depression]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
KlangFool
Posts: 16569
Joined: Sat Oct 11, 2008 12:35 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by KlangFool » Wed May 27, 2020 3:22 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm


If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
HEDGEFUNDIE,

A) Trust XYZ in order for the strategy to work optimally.

B) Zero trusts. It will work well enough under any combination of circumstances.

That is the philosophical difference. Optimizer versus "good enough".

By the way, if we follow your line of thought, the logical conclusion would be we should buy Gold/Silver. It has a long history and deserves your trust.

KlangFool

bigskyguy
Posts: 140
Joined: Sat Jan 24, 2015 4:59 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by bigskyguy » Wed May 27, 2020 3:27 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm
bigskyguy wrote:
Wed May 27, 2020 2:47 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:35 pm
bigskyguy wrote:
Wed May 27, 2020 2:25 pm
Never say never. This time may be different. I'm 71, and in those years, unemployment has never reached 20%, the federal deficit has never exceeded 3 trillion dollars (and counting), the Fed has never rescued investors in ETFs, MBSs, and corporate bonds, the national economy and the stock market has never been totally reliant upon the Fed keeping it from completely tanking, local restaurants have never closed for months on end, my neighbors have never walked by me wearing masks in public, my grandkids have never had to be in classes from home for months on end, the hospital I worked at for 38 years never had to shut down all elective procedures for months. My guess is that if you could get Jerome Powell in a quiet corner and ask him if Roubini might just be right, you might get a look that would terrify you.
"In FED we trust" needs to be on every dollar being printed.
At the top of every dollar it already says “FEDERAL RESERVE NOTE”

Not sure what you’re implying is new here...
Two very different statements, no?
If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.

EnjoyIt
Posts: 4173
Joined: Sun Dec 29, 2013 8:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by EnjoyIt » Wed May 27, 2020 3:29 pm

SilverGirl wrote:
Wed May 27, 2020 12:16 am
[Thread title edited by moderator oldcomputerguy]

https://www.google.com/amp/s/amp.thegua ... able-covid


Boglehead perspective? Please tell me this has some major holes?
If you don't look for and read scary articles, you won't have nightmares.
A time to EVALUATE your jitters. | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418

User avatar
nedsaid
Posts: 13437
Joined: Fri Nov 23, 2012 12:33 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by nedsaid » Wed May 27, 2020 4:20 pm

KlangFool wrote:
Wed May 27, 2020 8:40 am
nedsaid wrote:
Wed May 27, 2020 8:19 am
You have to learn to develop strong convictions, otherwise you will be scared spitless whenever you read such articles. Lots of these people like Roubini are pretty much broken records, they make the same predictions over and over, sooner or later they will be right about something and then proclaim themselves geniuses. Problem is, they made one right prediction versus many other predictions that never panned out.
nedsaid,

I disagreed. Regardless of a person's conviction, if the person has zero or minimal EF and 100% stock, the person will capitulate as soon as the employer announced a layoff. He/she needs the money to feed the family.

It is rational to be scared with 40+ million unemployed and we may not be going back to "Business As Usual" any time soon.

Preparation is the key. A conviction may come after that. If not, the person is either overly optimistic or illusional.

KlangFool
I was not putting down the original poster in any way. There are the same doom and gloom people that put this stuff out every year and at some point you need to tune them out. It is rational to be concerned about the economy and future employment. With the change of future prospects, the OP might consider a lower risk profile (more bonds, less stocks).
A fool and his money are good for business.

KlangFool
Posts: 16569
Joined: Sat Oct 11, 2008 12:35 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by KlangFool » Wed May 27, 2020 4:38 pm

nedsaid wrote:
Wed May 27, 2020 4:20 pm
KlangFool wrote:
Wed May 27, 2020 8:40 am
nedsaid wrote:
Wed May 27, 2020 8:19 am
You have to learn to develop strong convictions, otherwise you will be scared spitless whenever you read such articles. Lots of these people like Roubini are pretty much broken records, they make the same predictions over and over, sooner or later they will be right about something and then proclaim themselves geniuses. Problem is, they made one right prediction versus many other predictions that never panned out.
nedsaid,

I disagreed. Regardless of a person's conviction, if the person has zero or minimal EF and 100% stock, the person will capitulate as soon as the employer announced a layoff. He/she needs the money to feed the family.

It is rational to be scared with 40+ million unemployed and we may not be going back to "Business As Usual" any time soon.

Preparation is the key. A conviction may come after that. If not, the person is either overly optimistic or illusional.

KlangFool
I was not putting down the original poster in any way. There are the same doom and gloom people that put this stuff out every year and at some point you need to tune them out. It is rational to be concerned about the economy and future employment. With the change of future prospects, the OP might consider a lower risk profile (more bonds, less stocks).
nedsaid,

<<I was not putting down the original poster in any way. >>

I know that.

<<There are the same doom and gloom people that put this stuff out every year and at some point you need to tune them out. It is rational to be concerned about the economy and future employment.>>

It is obvious to me that OP's need more preparation before the conviction exists.

KlangFool

Tommy
Posts: 185
Joined: Mon Mar 07, 2016 11:47 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by Tommy » Wed May 27, 2020 4:56 pm

I don't think that all points in the article actually bad, like deglobalisation or re-shoring production and accelerating automation (if today we x number people in China making some goods and we will take production of those goods in US, we won't employ the same amount of people as in China today but still more than we employ today in US (what is 0 )), but this article looks for me as pure political paid thing, especially given the fact that it published by Guardian.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by HEDGEFUNDIE » Wed May 27, 2020 5:43 pm

bigskyguy wrote:
Wed May 27, 2020 3:27 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm
bigskyguy wrote:
Wed May 27, 2020 2:47 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:35 pm
bigskyguy wrote:
Wed May 27, 2020 2:25 pm
Never say never. This time may be different. I'm 71, and in those years, unemployment has never reached 20%, the federal deficit has never exceeded 3 trillion dollars (and counting), the Fed has never rescued investors in ETFs, MBSs, and corporate bonds, the national economy and the stock market has never been totally reliant upon the Fed keeping it from completely tanking, local restaurants have never closed for months on end, my neighbors have never walked by me wearing masks in public, my grandkids have never had to be in classes from home for months on end, the hospital I worked at for 38 years never had to shut down all elective procedures for months. My guess is that if you could get Jerome Powell in a quiet corner and ask him if Roubini might just be right, you might get a look that would terrify you.
"In FED we trust" needs to be on every dollar being printed.
At the top of every dollar it already says “FEDERAL RESERVE NOTE”

Not sure what you’re implying is new here...
Two very different statements, no?
If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.
The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world

Snowjob
Posts: 1632
Joined: Sun Jun 28, 2009 10:53 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by Snowjob » Wed May 27, 2020 9:13 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 5:43 pm
bigskyguy wrote:
Wed May 27, 2020 3:27 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm
bigskyguy wrote:
Wed May 27, 2020 2:47 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:35 pm
At the top of every dollar it already says “FEDERAL RESERVE NOTE”

Not sure what you’re implying is new here...
Two very different statements, no?
If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.
The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world
He's not complaining, he is simply remarking how different things look in the world around him than any other point is his life and that that fed action saved / is saving us. Even if the fed is doing what we expect it to in the modern era, that doesn't diminish how critical of a role it plays

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by HEDGEFUNDIE » Wed May 27, 2020 9:16 pm

Snowjob wrote:
Wed May 27, 2020 9:13 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 5:43 pm
bigskyguy wrote:
Wed May 27, 2020 3:27 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm
bigskyguy wrote:
Wed May 27, 2020 2:47 pm


Two very different statements, no?
If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.
The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world
He's not complaining, he is simply remarking how different things look in the world around him than any other point is his life and that that fed action saved / is saving us. Even if the fed is doing what we expect it to in the modern era, that doesn't diminish how critical of a role it plays
He’s suggesting we are at the precipice of the end times. If you believe that I have a Costco-sized package of toilet paper to sell you.

bigskyguy
Posts: 140
Joined: Sat Jan 24, 2015 4:59 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by bigskyguy » Wed May 27, 2020 9:31 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 9:16 pm
Snowjob wrote:
Wed May 27, 2020 9:13 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 5:43 pm
bigskyguy wrote:
Wed May 27, 2020 3:27 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm


If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.
The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world
He's not complaining, he is simply remarking how different things look in the world around him than any other point is his life and that that fed action saved / is saving us. Even if the fed is doing what we expect it to in the modern era, that doesn't diminish how critical of a role it plays
He’s suggesting we are at the precipice of the end times. If you believe that I have a Costco-sized package of toilet paper to sell you.
Feel free to disagree with me. I may well be proven to be completely wrong, and can live with that. Lord knows I have been many times before, and will be many times again. I do, however, object to your trivializing a reasoned albeit differing opinion. I would not do so to you, and only expect the same from you. Both of my parents survived the Great Depression, and were permanently changed by it. I would not, and do not wish a recurrence of their experience for anyone. Today in the US, 30% of children are nutritionally challenged, and 20% of us are out of work. These are not normal times, and to think otherwise is ignoring reality.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by HEDGEFUNDIE » Wed May 27, 2020 10:06 pm

bigskyguy wrote:
Wed May 27, 2020 9:31 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 9:16 pm
Snowjob wrote:
Wed May 27, 2020 9:13 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 5:43 pm
bigskyguy wrote:
Wed May 27, 2020 3:27 pm


My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.
The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world
He's not complaining, he is simply remarking how different things look in the world around him than any other point is his life and that that fed action saved / is saving us. Even if the fed is doing what we expect it to in the modern era, that doesn't diminish how critical of a role it plays
He’s suggesting we are at the precipice of the end times. If you believe that I have a Costco-sized package of toilet paper to sell you.
Feel free to disagree with me. I may well be proven to be completely wrong, and can live with that. Lord knows I have been many times before, and will be many times again. I do, however, object to your trivializing a reasoned albeit differing opinion. I would not do so to you, and only expect the same from you. Both of my parents survived the Great Depression, and were permanently changed by it. I would not, and do not wish a recurrence of their experience for anyone. Today in the US, 30% of children are nutritionally challenged, and 20% of us are out of work. These are not normal times, and to think otherwise is ignoring reality.
12 years ago the financial system almost shut down. Companies literally didn’t know if they were able to access the ultra short term lending they relied on to make payroll, pay suppliers, etc.

Now that was an actual crisis situation where the plumbing of the modern financial system was at risk of failure.

20% unemployment is bad. But it’s not the financial system collapsing all around us bad.

I trivialize your reasoning for the same reason I trivialize Roubini’s reasoning. It’s bad reasoning, driven by short memories. If it saves one Boglehead from selling stocks out of fear, I will have done my job.
Last edited by HEDGEFUNDIE on Wed May 27, 2020 10:13 pm, edited 2 times in total.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by HEDGEFUNDIE » Wed May 27, 2020 10:12 pm

KlangFool wrote:
Wed May 27, 2020 3:22 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm


If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
HEDGEFUNDIE,

A) Trust XYZ in order for the strategy to work optimally.

B) Zero trusts. It will work well enough under any combination of circumstances.

That is the philosophical difference. Optimizer versus "good enough".

By the way, if we follow your line of thought, the logical conclusion would be we should buy Gold/Silver. It has a long history and deserves your trust.

KlangFool
No trust is necessary. If the government that controls the most powerful military in the world tells me my dollars are worth something, who am I to disagree?
Last edited by HEDGEFUNDIE on Wed May 27, 2020 10:52 pm, edited 1 time in total.

User avatar
Random Musings
Posts: 5702
Joined: Thu Feb 22, 2007 4:24 pm
Location: Pennsylvania

Re: This article is scaring me. [Roubini predicting depression]

Post by Random Musings » Wed May 27, 2020 10:41 pm

I think Roubini's comments should be passed along to the small cap value stocks. Either they weren't told or they are just plain ignoring him.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ

bigskyguy
Posts: 140
Joined: Sat Jan 24, 2015 4:59 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by bigskyguy » Wed May 27, 2020 10:44 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 10:06 pm
bigskyguy wrote:
Wed May 27, 2020 9:31 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 9:16 pm
Snowjob wrote:
Wed May 27, 2020 9:13 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 5:43 pm


The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world
He's not complaining, he is simply remarking how different things look in the world around him than any other point is his life and that that fed action saved / is saving us. Even if the fed is doing what we expect it to in the modern era, that doesn't diminish how critical of a role it plays
He’s suggesting we are at the precipice of the end times. If you believe that I have a Costco-sized package of toilet paper to sell you.
Feel free to disagree with me. I may well be proven to be completely wrong, and can live with that. Lord knows I have been many times before, and will be many times again. I do, however, object to your trivializing a reasoned albeit differing opinion. I would not do so to you, and only expect the same from you. Both of my parents survived the Great Depression, and were permanently changed by it. I would not, and do not wish a recurrence of their experience for anyone. Today in the US, 30% of children are nutritionally challenged, and 20% of us are out of work. These are not normal times, and to think otherwise is ignoring reality.
12 years ago the financial system almost shut down. Companies literally didn’t know if they were able to access the ultra short term lending they relied on to make payroll, pay suppliers, etc.

Now that was an actual crisis situation where the plumbing of the modern financial system was at risk of failure.

20% unemployment is bad. But it’s not the financial system collapsing all around us bad.

I trivialize your reasoning for the same reason I trivialize Roubini’s reasoning. It’s bad reasoning, driven by short memories. If it saves one Boglehead from selling stocks out of fear, I will have done my job.
Good day, sir.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by HEDGEFUNDIE » Wed May 27, 2020 11:14 pm

The doom-and-gloomers in this thread and all over Bogleheads these days are falling into a common fallacy, one I don't see called out very often. I'm going to call it the all-things-being-equal fallacy, or the if-nothing-else-happened fallacy.

Yes, if an overleveraged housing market is securitized and the risk concentrated at our largest banks and the bubble pops and nothing else happens, the financial system would collapse and we would all go back to bartering gold and silver.

Yes, if a pandemic strikes and the entire world is forced to stay at home and unemployment skyrockets to 20% and nothing else happens, we'd be back to the Great Depression.

Yes, if you left your stove on by accident and went out to do some post-pandemic partying, and your house catches on fire and nothing else happens, the entire city would burn down, Great-Chicago-Fire style.

See the fallacy? Things happen as a result of bad things happening. We have entire institutions set up to respond to crises and emergencies. Yes, every time is always slightly different, and yes, the institutions are imperfect.

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?

Things happen. Count on it.

Topic Author
SilverGirl
Posts: 83
Joined: Sun Oct 15, 2017 8:55 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by SilverGirl » Wed May 27, 2020 11:40 pm

OP here.

Klangfool I appreciate your offer to post my info and ask for help but I really feel like I don’t need to. I have learned so much the past couple of years coming on here that I feel confident that I am headed in the right direction, even if I have a way to go.

I consider myself an intelligent person, I was a software developer and then opened a preschool. I know how to run a business successfully. But the understanding of large financial systems and the major issues at play right now, well Bogleheads, you have to realize that 99 percent of the world can’t follow your conversations on these topics. I’m proud to follow them after reading them twice some times. I don’t think of myself as a dumb person, but reading an article like the one I posted can make me feel that way. I think In this case part of the issue was that the author was introduced as ‘the person who predicted the great recession’ or something like that. So perhaps I gave him undue credibility.

So I read something that scared me and came here for perspective from the smartest people I know on the internet and got exactly that! Thank you!

As for me personally , I am a middle aged married mom with a lot of kids. We are your typical high earners, high spenders. But after reading this forum for a few years, we changed our spending habits, invested more in low cost funds, and increased our emergency cash fund from one month to at least 6. We also have assets in brokerage funds outside of our 401k that could be used as EF.

Again, thank you!!

Always passive
Posts: 512
Joined: Fri Apr 14, 2017 4:25 am
Location: Israel

Re: This article is scaring me. [Roubini predicting depression]

Post by Always passive » Wed May 27, 2020 11:51 pm

When I run into an article like this, I check the author's backgroung and once I find that he/she can contribute to my understanding of the situation, I carefully read the views. It is easy to hide behind personal convictions (like I read in some of the responses), but it is much better to learn from others, and then form opinions. Roubini is far from being a fool man, he is just an authority in a very unprecise field, economics (I happen to know that having a Doctor in Economics). They do not hire just anyone at NYU.
Observing what is happening in the real economy, not the market, many of his points resonate with me.
Since capitalism is about consumption, pay attention to the University of Michigan Consumer Sentiment index, see below. It has improved since last month, giving some hope that the consumer has started to feel better, but it is very low and many things, like a second wave next winter, can change everything. Which observing the careless behavior that we are seeing in some parts of the country, like this is done and over, it may happen. Would that not be really bad! Locked in at home for 6-8 weeks.
Bottomline, do not discount Roubini. He was right on in 2007.

https://tradingeconomics.com/united-sta ... confidence
"The University of Michigan's consumer sentiment for the US rose to 73.7 in May 2020 recovering slightly from the previous month's eight-year low of 71.8 and above market expectations of 68, a preliminary estimate showed. Still, it was the second-lowest reading since December of 2011."

User avatar
cashboy
Posts: 455
Joined: Tue Sep 11, 2018 5:03 pm
Location: USA

Re: This article is scaring me. [Roubini predicting depression]

Post by cashboy » Thu May 28, 2020 11:43 am

SilverGirl wrote:
Wed May 27, 2020 12:16 am

Boglehead perspective? Please tell me this has some major holes?
the future is unknowable.

can one make 'educated guesses' about what 'might' happen? sure; but they are 'guesses' based upon the 'views' of the guesser.

so, for your consideration:

not reading articles likes this might be best
and
do not look under the bed at night. :happy
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CDs - CASH - Canned Beans - Rice - Bottled Water)

Fallible
Posts: 7404
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: This article is scaring me. [Roubini predicting depression]

Post by Fallible » Thu May 28, 2020 12:25 pm

EnjoyIt wrote:
Wed May 27, 2020 3:29 pm
SilverGirl wrote:
Wed May 27, 2020 12:16 am
[Thread title edited by moderator oldcomputerguy]

https://www.google.com/amp/s/amp.thegua ... able-covid

Boglehead perspective? Please tell me this has some major holes?
If you don't look for and read scary articles, you won't have nightmares.
Ignorance is bliss??
The first principle is that you must not fool yourself – and you are the easiest person to fool. ~Richard Feynman

garlandwhizzer
Posts: 2848
Joined: Fri Aug 06, 2010 3:42 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by garlandwhizzer » Thu May 28, 2020 1:54 pm

Roubini is in a constant never ending state of preparation for the next black swan event. Like a broken clock he's rarely correct. He always sees the glass as half empty rather than half full. Often IMO he sees an almost full glass as almost empty. His is merely one man's opinion and that man is extremely risk averse. No one, without exception, knows what the future holds. Almost all predictions about the future say a lot more about the predictor than about the future. There is always risk and uncertainty in the market and always expected long term reward. IMO it's best to determine where to set you own risk/reward balance and invest likewise, paying as little attention to "expert" opinions and the financial media as possible. If you want more insight classic books on investing/economics are a good place to get it, not the latest article in financial media. Financial media opinions largely reflect the financial motives of the authors and may not be an accurate picture of reality. This is especially so when they tell you what's going to happen in the future. A coin flip regularly beats most "expert" market prognosticators.

Garland Whizzer

Iridium
Posts: 706
Joined: Thu May 19, 2016 10:49 am

Re: This article is scaring me.

Post by Iridium » Thu May 28, 2020 2:54 pm

willthrill81 wrote:
Wed May 27, 2020 9:08 am
Iridium wrote:
Wed May 27, 2020 1:27 am
Issues 1,2,8, and 10 may well be real. They are also things that have been well known for years, so presumably are already priced in.
After seeing the market continue to go up in February when the second largest economy in the world was experiencing an outbreak of a novel virus that was forcing them to shut down their economy, I'm even less convinced by the 'already priced in' argument than I was before.

It's not outside the realm of possibility that a global depression will arise. It's happened before, and it can happen again. Predicting when one would happen with enough accuracy to be actionable is the problem.
In late February, the virus was thought to spread mostly from symptomatic people, such that temperature checks and washing hands would be enough to control the spread, it was only known to be widespread in the country best equipped to deal with it, the most highly impacted democracy was controlling things with tests rather than shutdowns, articles repeatedly noted that democracies would never put up with a China style lockdown, and the CDC had so many test kits available, it had announced plans to work with its influenza monitoring network to proactively check negative flu samples.

In March, the vast majority of virus spread was via asymptomatic or presymptomatic carriers, the virus was endemic is virtually every country, China was hoarding PPE, the US and Europe were in heavy lockdown, the CDC test kits turned out to be contaminated, and it looked like doctors would have to choose who gets a ventilator.

"Priced in" means that the prices reflect available information. The extent of asymptomatic transfer was a HUGE finding, and given that the CDC was advising in February that this mode of transfer was unlikely to be significant, it caught the market by surprise. I don't think it was irrational for the market to expect this virus to go the way of SARS, which was contained to Asia and did limited general damage to the economy. If you read back through the threads and news in February, virtually all the concern was about China and supply lines that relied on them. The fact that the market shrugged off that news turns out to have been the right call: China's manufacturing recovered quickly and, other than PPE, I have not heard of any supply line difficulties. That this became a global pandemic was always possible, but wasn't particularly likely until we learned what we found out in March. After all, other severe coronaviruses such as SARS and MERS also looked like they were going to cause enormous issues, until humanity geared up and controlled them, and in February, we were using new technologies to gear up faster against 'Novel Coronavirus' than any prior outbreak.

COVID is a completely different situation from, say, population loss. There is pretty much uniform agreement among demographers that population growth will radically slow down over the coming decades, and in their biannual updates, the predictions change, but not radically, especially not out 40 years (predicting the population in 2100 is just guessing, but it is also not particularly relevant to my investing time horizon). Compare that to the multitude of COVID death models that are off by an order of magnitude from each other making predictions less than a year out. While all the impacts of population growth slowdown are unknown, and we could see a secular shift on expected rates of return (could demographics be one of the reasons why interest rates have been on a decades long decline?), it seems unlikely that the market will wake up one day and decide to go into a tail spin because of it.

Yes, a global depression is possible. However, I do not believe that the author has made a convincing argument that it is any more likely in the next decade than at any other time past or future, or that if it happens, it will be for one of the reasons he identified.
magicrat wrote:
Wed May 27, 2020 8:58 am
Iridium wrote:
Wed May 27, 2020 1:27 am

Issue 7: What backlash against democracy? Rather, I see people using their right to vote to support populist candidates, whom the author evidently doesn't support. I won't comment on the impact of populist politicians on the economy. However, this represents an enthusiastic embrace of the democratic right to vote, not a backlash against it.

The right to vote is not the only hallmark of democracy
If only the author had been specific, it would be possible to evaluate whether the issue is likely to cause an economic impact and whether such backlash is actually a mainstream part of the populist platform at risk of gaining steam or whether it reflects a particularly loud but tiny minority that is unlikely to have much real world effect. On the other hand, I suppose if he had been more specific, it might be against forum rules to discuss it (for the very good reason that talking possibilities in politics is a fools errand likely to lead you astray).
Last edited by Iridium on Thu May 28, 2020 3:15 pm, edited 2 times in total.

effigy98
Posts: 60
Joined: Wed Sep 25, 2019 8:57 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by effigy98 » Thu May 28, 2020 2:58 pm

Just put 100% of your money in the market and you will get backstopped by the fed. Seems like a win win situation except for those fools that think the economy should be fair and just.

prioritarian
Posts: 112
Joined: Tue Jul 16, 2019 6:00 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by prioritarian » Thu May 28, 2020 5:20 pm

garlandwhizzer wrote:
Thu May 28, 2020 1:54 pm
Roubini is in a constant never ending state of preparation for the next black swan event.

Not true at all. Roubini was bullish early following the Great Recession and stayed that way for years.

FWIW, I personally have no certainty about our short/medium-term economic future but am relatively sanguine due to my treasury bond positions (which I have held and re-balanced for many years).

bostonboglehead123
Posts: 24
Joined: Wed Sep 05, 2018 9:16 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by bostonboglehead123 » Thu May 28, 2020 5:30 pm

Just don't listen to all doom and gloom folks and you'll be fine.

Folks like El Erian, Ray Dalio, Howard Marks etc are a pretty good start if you want to get market timey even though they're clearly not right 100% of the time.

02nz
Posts: 4647
Joined: Wed Feb 21, 2018 3:17 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by 02nz » Thu May 28, 2020 5:30 pm

willthrill81 wrote:
Wed May 27, 2020 9:29 am
carolinaman wrote:
Wed May 27, 2020 9:26 am
Personally, I like the idea of selectively onshoring critical products and services needed for our nation's well being and self defense. Our country must have control of these things and cannot rely on China, Russia or other bad actors for these items. That does not mean we do not continue to trade with them, but we need to be smarter in how we do that.
:thumbsup

I have not heard one person say that 80% of the U.S.'s medications being made in India and China is a good idea.
It's not a good idea. Or rather, it wouldn't be a good idea if it were true. It's not: https://reason.com/2020/04/06/why-you-s ... rom-china/

(Short version: A GAO report says "nearly 40 percent of finished drugs and approximately 80 percent of active pharmaceutical ingredients (API) are manufactured in registered establishments in more than 150 countries" but that got distorted into "80% of our medications are made in India and China.")

User avatar
willthrill81
Posts: 19038
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: This article is scaring me. [Roubini predicting depression]

Post by willthrill81 » Thu May 28, 2020 5:37 pm

02nz wrote:
Thu May 28, 2020 5:30 pm
willthrill81 wrote:
Wed May 27, 2020 9:29 am
carolinaman wrote:
Wed May 27, 2020 9:26 am
Personally, I like the idea of selectively onshoring critical products and services needed for our nation's well being and self defense. Our country must have control of these things and cannot rely on China, Russia or other bad actors for these items. That does not mean we do not continue to trade with them, but we need to be smarter in how we do that.
:thumbsup

I have not heard one person say that 80% of the U.S.'s medications being made in India and China is a good idea.
It's not a good idea. Or rather, it wouldn't be a good idea if it were true. It's not: https://reason.com/2020/04/06/why-you-s ... rom-china/

(Short version: A GAO report says "nearly 40 percent of finished drugs and approximately 80 percent of active pharmaceutical ingredients (API) are manufactured in registered establishments in more than 150 countries" but that got distorted into "80% of our medications are made in India and China.")
Very interesting. Thank you for sharing that.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

protagonist
Posts: 6441
Joined: Sun Dec 26, 2010 12:47 pm

Re: This article is scaring me.

Post by protagonist » Thu May 28, 2020 5:40 pm

manatee2005 wrote:
Wed May 27, 2020 12:35 am
SilverGirl wrote:
Wed May 27, 2020 12:16 am
https://www.google.com/amp/s/amp.thegua ... able-covid


Boglehead perspective? Please tell me this has some major holes?
Step 1. Stop reading the guardian.
Step 2. Read this. https://www.newyorker.com/magazine/2005 ... -an-expert

User avatar
Toons
Posts: 13630
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: This article is scaring me. [Roubini predicting depression]

Post by Toons » Thu May 28, 2020 6:03 pm

Depression?
Handle it..
Like everything else in life
Opportunity
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Fallible
Posts: 7404
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: This article is scaring me.

Post by Fallible » Thu May 28, 2020 8:42 pm

protagonist wrote:
Thu May 28, 2020 5:40 pm
manatee2005 wrote:
Wed May 27, 2020 12:35 am
SilverGirl wrote:
Wed May 27, 2020 12:16 am
https://www.google.com/amp/s/amp.thegua ... able-covid

Boglehead perspective? Please tell me this has some major holes?
Step 1. Stop reading the guardian.
Step 2. Read this. https://www.newyorker.com/magazine/2005 ... -an-expert
Thanks. Great book review, although I favor most the very last sentence:
But the best lesson of Tetlock’s book may be the one that he seems most reluctant to draw: Think for yourself.
My own general thought about forecasts is that even when a forecaster is right, or mostly right, about a prediction, there are rarely, if ever, followups to see if the reasons for the prediction were accurate. So someone predicts a pandemic for certain reasons and it turns out there is a pandemic - but not for the reasons he said it would happen. Was the prediction really accurate?
The first principle is that you must not fool yourself – and you are the easiest person to fool. ~Richard Feynman

User avatar
willthrill81
Posts: 19038
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: This article is scaring me.

Post by willthrill81 » Thu May 28, 2020 9:28 pm

Fallible wrote:
Thu May 28, 2020 8:42 pm
protagonist wrote:
Thu May 28, 2020 5:40 pm
manatee2005 wrote:
Wed May 27, 2020 12:35 am
SilverGirl wrote:
Wed May 27, 2020 12:16 am
https://www.google.com/amp/s/amp.thegua ... able-covid

Boglehead perspective? Please tell me this has some major holes?
Step 1. Stop reading the guardian.
Step 2. Read this. https://www.newyorker.com/magazine/2005 ... -an-expert
Thanks. Great book review, although I favor most the very last sentence:
But the best lesson of Tetlock’s book may be the one that he seems most reluctant to draw: Think for yourself.
The big problem with that is that high-level thinking is hard. I'm dead serious. There's a reason that those who use their brain usually get paid much more than those who use their muscles. And generally speaking, human brains tend to be lazy. They employ numerous short-cuts to problem solving. These short-cuts often work well, but they can represent a substantial impediment to high-level, creative thought.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

New Providence
Posts: 240
Joined: Fri Mar 27, 2020 7:10 am

Re: This article is scaring me. [Roubini predicting depression]

Post by New Providence » Fri May 29, 2020 7:27 am

HEDGEFUNDIE wrote:
Wed May 27, 2020 11:14 pm
The doom-and-gloomers in this thread and all over Bogleheads these days are falling into a common fallacy, one I don't see called out very often. I'm going to call it the all-things-being-equal fallacy, or the if-nothing-else-happened fallacy.

Yes, if an overleveraged housing market is securitized and the risk concentrated at our largest banks and the bubble pops and nothing else happens, the financial system would collapse and we would all go back to bartering gold and silver.

Yes, if a pandemic strikes and the entire world is forced to stay at home and unemployment skyrockets to 20% and nothing else happens, we'd be back to the Great Depression.

Yes, if you left your stove on by accident and went out to do some post-pandemic partying, and your house catches on fire and nothing else happens, the entire city would burn down, Great-Chicago-Fire style.

See the fallacy? Things happen as a result of bad things happening. We have entire institutions set up to respond to crises and emergencies. Yes, every time is always slightly different, and yes, the institutions are imperfect.

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?

Things happen. Count on it.
If we ought to take comfort on the fact the government will reduce or eliminate risk in situations of financial stress, shouldn't our tax system reflect so?

In another words, profit reflects labor and risk. One could possible argue that corporate taxes should be higher to pay the gov't for the risk transfer. No "nothing happens". Something happens and that is, as you argue, gov't taking corporate default risk.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by HEDGEFUNDIE » Fri May 29, 2020 8:28 am

New Providence wrote:
Fri May 29, 2020 7:22 am
HEDGEFUNDIE wrote:
Wed May 27, 2020 11:14 pm
The doom-and-gloomers in this thread and all over Bogleheads these days are falling into a common fallacy, one I don't see called out very often. I'm going to call it the all-things-being-equal fallacy, or the if-nothing-else-happened fallacy.

Yes, if an overleveraged housing market is securitized and the risk concentrated at our largest banks and the bubble pops and nothing else happens, the financial system would collapse and we would all go back to bartering gold and silver.

Yes, if a pandemic strikes and the entire world is forced to stay at home and unemployment skyrockets to 20% and nothing else happens, we'd be back to the Great Depression.

Yes, if you left your stove on by accident and went out to do some post-pandemic partying, and your house catches on fire and nothing else happens, the entire city would burn down, Great-Chicago-Fire style.

See the fallacy? Things happen as a result of bad things happening. We have entire institutions set up to respond to crises and emergencies. Yes, every time is always slightly different, and yes, the institutions are imperfect.

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?

Things happen. Count on it.
If we ought to take comfort on the fact the government will reduce and eliminate risk in situations of stress, shouldn't our tax system reflect so?

In another words, profit reflects labor and risk. One could argue the gov't should taxes should be higher to pay for the risk transfer. No "nothing happens". Something happens and that is, as you argue, gov't taking corporate risk default.
Taxes are only one way to finance public debt. Bonds are the other. Who pays for it? Everyone pays for it, even foreigners, who hold almost half of outstanding Treasuries. And judging by the interest rates we are willing to accept, we are all happy to pay for it.

But my comment was not about who pays for it, it was about the mere fact that there is a reaction to every action. Not thinking through the reaction (as these market naysayers are doing) is just lazy thinking - I can assure you the hedge fund trading algorithms have this gamed out 10 steps ahead. And what those algos are doing now is buying.

KlangFool
Posts: 16569
Joined: Sat Oct 11, 2008 12:35 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by KlangFool » Fri May 29, 2020 8:56 am

HEDGEFUNDIE wrote:
Fri May 29, 2020 8:28 am

But my comment was not about who pays for it, it was about the mere fact that there is a reaction to every action. Not thinking through the reaction (as these market naysayers are doing) is just lazy thinking - I can assure you the hedge fund trading algorithms have this gamed out 10 steps ahead. And what those algos are doing now is buying.
HEDGEFUNDIE,

Conversely, to assume that every reaction will solve the problem as opposed to making the problem worse may be lazy thinking too.

This is a personal finance forum. We are an individual investor.

A) We do not have to take either extreme positions of "All hell will break loose!" or "All is well!".

B) We should have a strategy that will work out well enough for us regardless of what could happen next.

C) In summary, be balanced and measured in our preparation. Do not take any extreme measures and/or assumptions like "All hell will break loose!" or "All is well!".

<<I can assure you the hedge fund trading algorithms have this gamed out 10 steps ahead. And what those algos are doing now is buying.>>

Complexity is not necessarily better. I have a fixed AA of 60/40. I bought stock with my bond in March because my 5/25 band trigger and I have to rebalance. It works in 2008 before the crash too. I was forced to sell my REIT because of my 5/25 band trigger before the crash.

KlangFool

protagonist
Posts: 6441
Joined: Sun Dec 26, 2010 12:47 pm

Re: This article is scaring me.

Post by protagonist » Fri May 29, 2020 3:50 pm

Fallible wrote:
Thu May 28, 2020 8:42 pm
protagonist wrote:
Thu May 28, 2020 5:40 pm
manatee2005 wrote:
Wed May 27, 2020 12:35 am
SilverGirl wrote:
Wed May 27, 2020 12:16 am
https://www.google.com/amp/s/amp.thegua ... able-covid

Boglehead perspective? Please tell me this has some major holes?
Step 1. Stop reading the guardian.
Step 2. Read this. https://www.newyorker.com/magazine/2005 ... -an-expert
Thanks. Great book review, although I favor most the very last sentence:
But the best lesson of Tetlock’s book may be the one that he seems most reluctant to draw: Think for yourself.
My own general thought about forecasts is that even when a forecaster is right, or mostly right, about a prediction, there are rarely, if ever, followups to see if the reasons for the prediction were accurate. So someone predicts a pandemic for certain reasons and it turns out there is a pandemic - but not for the reasons he said it would happen. Was the prediction really accurate?
The economy, as well as the market, are complex systems with countless variables. Thus they are subject to principles governing complex, nonlinear systems....including exquisite sensitivity to initial conditions. What are the initial conditions at this point in time? Can we pinpoint all those countless variables with precision? Of course not...and the smallest error can result in a huge difference down the line. Predicting the future, beyond a very short window, is futile because the noise will very rapidly overwhelm the signal.

Don't worry, Fallie. Be happy. The chips will fall as they may, and there may be plenty of time for worrying or rejoicing later depending on how the future unfolds. But if anybody believes any of the hype by the "forecasters". who are really no better at predicting the future than you or I or any of our "heroes", you are only opening yourself up to potential anger and disappointment if they get it wrong. And they are just guessing, and finding ample justification for their guesses. There are so many potential variables that it is always easy to find a consistent rationale for one's predictions.

If Roubini is right, he was just lucky.

garlandwhizzer
Posts: 2848
Joined: Fri Aug 06, 2010 3:42 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by garlandwhizzer » Fri May 29, 2020 7:18 pm

prioritarinan wrote in response to my comment that Roubini's market pessimism:

Not true at all. Roubini was bullish early following the Great Recession and stayed that way for years.
The recovery from the Great Recession actually started in early March 2009 when the S&P 500 Index was at its low about 735. By May of that year, only 2 months later it was at 1102, a rise of 50%. Roubini in an interview in May 2009, did not trust this rally. The following quote is in Wiki regarding Roubini's point of view at that time. Bear in mind he's already missed a 50% advance.
By May 2009, he felt that analysts expecting the U.S. economy to rebound in the third and fourth quarter were "too optimistic".[18] He expected the full recession to last 24 or 36 months, and believed in the possibility of an "L-shaped" slow recovery
But his pessimism wasn't over. Even in May of 2010 when the S&P 500 was at about 1280, up by 575 points, he was still pessimistic. Again, direct quote from Wiki:
In 2010, he again warned that despite an improved economy with rising stock markets, the crisis was not over and new bubbles were on the horizon.

We have to start to worry about the solvency of governments. What is happening today in Greece is the tip of the iceberg of rising sovereign debt problems in the eurozone, in the UK, in Japan and in the US. This ... is going to be the next issue in the global financial crisis:
Even now in the midst of bear market the S&P 500 has more than doubled since that comment and that is without the effect of dividend re-investment. To state that Roubini was bullish "early in the Great Recession" is factually incorrect. Of course it depends on how you define early. He was pessimistic for at least the first 14 months of the bull market which started in March 2009 and missed out on gains that with dividends re-invested would have gone up about 100% in that short time frame. At some point as the market kept galloping upward, he gave up his predictions but even then he focused not on the market's gains but on the seeds for next great global financial crisis. That crisis didn't happen for a decade and it wasn't caused by sovereign debt in solvency. In fact it was caused by the unexpected appearance of COVID-19. There is a reason why he is called Dr. Doom.

Garland Whizzer

rockthisworld
Posts: 272
Joined: Wed Oct 17, 2018 9:37 am

Re: This article is scaring me. [Roubini predicting depression]

Post by rockthisworld » Fri May 29, 2020 7:41 pm

I believe this article but just know that if the next decade or so looks bleak keep investing that money will grow and we will eventually see a recovery. Yes wall st is rigged but it’s being rigged in our (the investors) favor lol.

JBTX
Posts: 6304
Joined: Wed Jul 26, 2017 12:46 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by JBTX » Fri May 29, 2020 8:24 pm

There is no doubt he has been perpetually doom and gloom and wrong for over a decade. Nonetheless I still read his articles. I can't dismiss any of his assertions. They are all plausible. I guess the biggest hole, if you will, is he has listed a laundry list of risks, but not taken into account various unknown advances and other positive events that may offset some risks.

On the surface it is hard to be positive long term given the massive acceleration in money creation and debt, coupled with large unfunded pension and other liabilities - coupled with turbulent geopolitical outlook. But nonetheless, nothing ever plays out like you expect, so all you can do is save abundantly, invest conservatively but with appropriate asset allocation, and hedge your bets to a degree with things like EF, Ibonds, TIPS and maybe EE bonds. Maybe even some gold/silver although I just can't get myself to go there.

rockthisworld
Posts: 272
Joined: Wed Oct 17, 2018 9:37 am

Re: This article is scaring me. [Roubini predicting depression]

Post by rockthisworld » Fri May 29, 2020 10:15 pm

JBTX wrote:
Fri May 29, 2020 8:24 pm
There is no doubt he has been perpetually doom and gloom and wrong for over a decade. Nonetheless I still read his articles. I can't dismiss any of his assertions. They are all plausible. I guess the biggest hole, if you will, is he has listed a laundry list of risks, but not taken into account various unknown advances and other positive events that may offset some risks.

On the surface it is hard to be positive long term given the massive acceleration in money creation and debt, coupled with large unfunded pension and other liabilities - coupled with turbulent geopolitical outlook. But nonetheless, nothing ever plays out like you expect, so all you can do is save abundantly, invest conservatively but with appropriate asset allocation, and hedge your bets to a degree with things like EF, Ibonds, TIPS and maybe EE bonds. Maybe even some gold/silver although I just can't get myself to go there.
Thank you for spreading the wisdom!! Couldn’t have put it any better.

User avatar
willthrill81
Posts: 19038
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: This article is scaring me. [Roubini predicting depression]

Post by willthrill81 » Fri May 29, 2020 10:44 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 11:14 pm
The doom-and-gloomers in this thread and all over Bogleheads these days are falling into a common fallacy, one I don't see called out very often. I'm going to call it the all-things-being-equal fallacy, or the if-nothing-else-happened fallacy.

Yes, if an overleveraged housing market is securitized and the risk concentrated at our largest banks and the bubble pops and nothing else happens, the financial system would collapse and we would all go back to bartering gold and silver.

Yes, if a pandemic strikes and the entire world is forced to stay at home and unemployment skyrockets to 20% and nothing else happens, we'd be back to the Great Depression.

Yes, if you left your stove on by accident and went out to do some post-pandemic partying, and your house catches on fire and nothing else happens, the entire city would burn down, Great-Chicago-Fire style.

See the fallacy? Things happen as a result of bad things happening. We have entire institutions set up to respond to crises and emergencies. Yes, every time is always slightly different, and yes, the institutions are imperfect.

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?

Things happen. Count on it.
I agree very much with your general premise. The very notion that something as complex as the global economy can be wholly accounted for with just a handful of variables is beyond preposterous. Such an idea would make a chaotician guffaw.

That said, I suppose that I'm just a little less optimistic than you are. Over the long-term, I certainly believe that the global economy will recover from this. I just think that the baggage we collectively carry out of it may be a little heavy.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

jacksprat
Posts: 31
Joined: Sun May 09, 2010 3:33 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by jacksprat » Sat May 30, 2020 8:56 am

.
Perspective is most important.

My parents lived through some awful conditions and ultimately thrived - and - yet were happier than most people I meet today.

I am not scared.

[quote=SilverGirl post_id=5276927 time=1590556565 user_id=126010]
[color=#800000][Thread title edited by moderator oldcomputerguy][/color]

https://www.google.com/amp/s/amp.thegua ... able-covid


Boglehead perspective? Please tell me this has some major holes?
[/quote]

Robot Monster
Posts: 304
Joined: Sun May 05, 2019 11:23 am
Location: New York

Re: This article is scaring me. [Roubini predicting depression]

Post by Robot Monster » Sat May 30, 2020 9:42 am

willthrill81 wrote:
Fri May 29, 2020 10:44 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 11:14 pm

<--snip-->

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?
<--snip-->

That said, I suppose that I'm just a little less optimistic than you are. Over the long-term, I certainly believe that the global economy will recover from this. I just think that the baggage we collectively carry out of it may be a little heavy.
So, if bad things happen, these can be neutralized by the Fed/Congress, but this creates "baggage". Presumably, one day there will be a reckoning, one that even the mighty Fed/Congress will be powerless to stop.

User avatar
willthrill81
Posts: 19038
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: This article is scaring me. [Roubini predicting depression]

Post by willthrill81 » Sat May 30, 2020 12:08 pm

Robot Monster wrote:
Sat May 30, 2020 9:42 am
willthrill81 wrote:
Fri May 29, 2020 10:44 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 11:14 pm

<--snip-->

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?
<--snip-->

That said, I suppose that I'm just a little less optimistic than you are. Over the long-term, I certainly believe that the global economy will recover from this. I just think that the baggage we collectively carry out of it may be a little heavy.
So, if bad things happen, these can be neutralized by the Fed/Congress, but this creates "baggage". Presumably, one day there will be a reckoning, one that even the mighty Fed/Congress will be powerless to stop.
Maybe, maybe not. It's important to remember that nations with their own currency are not like individuals, corporations, or even states. Sovereign nations can (and do) create their own money out of thin air to repay their debts. However, even all but the most extreme supporters of modern monetary theory believe that there are limits to how much such nations can do this. The theory does not imply that nations can spend endlessly and freely without consequences as many believe the theory suggests. Experience has shown that uncontrolled expansion of the money supply leads to major problems.

Japan's debt to GDP ratio is about 238%, while the U.S.'s was about 107% last year. Yet Japan has not experienced crushing inflation or other severe economic woes, and the yen is hardly the globe's reserve currency the way that the U.S. dollar is. So there is evidence that the U.S. can at least keeping 'kicking the can' down the road for a long while yet.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

JBTX
Posts: 6304
Joined: Wed Jul 26, 2017 12:46 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by JBTX » Sat May 30, 2020 12:25 pm

willthrill81 wrote:
Sat May 30, 2020 12:08 pm
Robot Monster wrote:
Sat May 30, 2020 9:42 am
willthrill81 wrote:
Fri May 29, 2020 10:44 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 11:14 pm

<--snip-->

But at the end of the day, why is it a surprise that the Fed does exactly what it was created to do, and the markets respond positively? And if 20% of people are out of work for a prolonged period of time, what do you think Congress will do? And if after a few years of recession, inflation finally starts to rise, what do you think the Fed will do to respond?
<--snip-->

That said, I suppose that I'm just a little less optimistic than you are. Over the long-term, I certainly believe that the global economy will recover from this. I just think that the baggage we collectively carry out of it may be a little heavy.
So, if bad things happen, these can be neutralized by the Fed/Congress, but this creates "baggage". Presumably, one day there will be a reckoning, one that even the mighty Fed/Congress will be powerless to stop.
Maybe, maybe not. It's important to remember that nations with their own currency are not like individuals, corporations, or even states. Sovereign nations can (and do) create their own money out of thin air to repay their debts. However, even all but the most extreme supporters of modern monetary theory believe that there are limits to how much such nations can do this. The theory does not imply that nations can spend endlessly and freely without consequences as many believe the theory suggests. Experience has shown that uncontrolled expansion of the money supply leads to major problems.

Japan's debt to GDP ratio is about 238%, while the U.S.'s was about 107% last year. Yet Japan has not experienced crushing inflation or other severe economic woes, and the yen is hardly the globe's reserve currency the way that the U.S. dollar is. So there is evidence that the U.S. can at least keeping 'kicking the can' down the road for a long while yet.
You are correct on Japan as an example of how we can continue to stay above water. At the same time it is an example of how we may very well be treading water for a long time. Post 2008 there was a lot of noise out there about how slow economic growth was afterwards and that was unacceptable vs prior recessions. However that is generally inevitable following periods of high leverage. With government debt it is more controllable but nonetheless still holds true.

Japan for years was much more of a saver country than us and thus could withstand such levels better. As long as US is reserve currency we are probably in the same boat.

You can either stop on the gas and then crash, or slug your way forward at a below average growth rate. In our country a below average growth rate is deemed by many unacceptable thud leading to eventual stepping on the gas.

Fallible
Posts: 7404
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: This article is scaring me.

Post by Fallible » Sat May 30, 2020 12:35 pm

protagonist wrote:
Fri May 29, 2020 3:50 pm
Fallible wrote:
Thu May 28, 2020 8:42 pm
protagonist wrote:
Thu May 28, 2020 5:40 pm
manatee2005 wrote:
Wed May 27, 2020 12:35 am
SilverGirl wrote:
Wed May 27, 2020 12:16 am
https://www.google.com/amp/s/amp.thegua ... able-covid

Boglehead perspective? Please tell me this has some major holes?
Step 1. Stop reading the guardian.
Step 2. Read this. https://www.newyorker.com/magazine/2005 ... -an-expert
Thanks. Great book review, although I favor most the very last sentence:
But the best lesson of Tetlock’s book may be the one that he seems most reluctant to draw: Think for yourself.
My own general thought about forecasts is that even when a forecaster is right, or mostly right, about a prediction, there are rarely, if ever, followups to see if the reasons for the prediction were accurate. So someone predicts a pandemic for certain reasons and it turns out there is a pandemic - but not for the reasons he said it would happen. Was the prediction really accurate?
The economy, as well as the market, are complex systems with countless variables. Thus they are subject to principles governing complex, nonlinear systems....including exquisite sensitivity to initial conditions. What are the initial conditions at this point in time? Can we pinpoint all those countless variables with precision? Of course not...and the smallest error can result in a huge difference down the line. Predicting the future, beyond a very short window, is futile because the noise will very rapidly overwhelm the signal.

Don't worry, Fallie. Be happy. The chips will fall as they may, and there may be plenty of time for worrying or rejoicing later depending on how the future unfolds. But if anybody believes any of the hype by the "forecasters". who are really no better at predicting the future than you or I or any of our "heroes", you are only opening yourself up to potential anger and disappointment if they get it wrong. And they are just guessing, and finding ample justification for their guesses. There are so many potential variables that it is always easy to find a consistent rationale for one's predictions.

If Roubini is right, he was just lucky.
I do agree about those "potential variables" you mention and Roubini needing lots of luck to be right. Thanks again for the article, protag.
The first principle is that you must not fool yourself – and you are the easiest person to fool. ~Richard Feynman

JBTX
Posts: 6304
Joined: Wed Jul 26, 2017 12:46 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by JBTX » Sat May 30, 2020 12:42 pm

HEDGEFUNDIE wrote:
Wed May 27, 2020 5:43 pm
bigskyguy wrote:
Wed May 27, 2020 3:27 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:50 pm
bigskyguy wrote:
Wed May 27, 2020 2:47 pm
HEDGEFUNDIE wrote:
Wed May 27, 2020 2:35 pm


At the top of every dollar it already says “FEDERAL RESERVE NOTE”

Not sure what you’re implying is new here...
Two very different statements, no?
If you don’t trust the Federal Reserve which has printed our money for over 100 years I’m not sure why you would trust anything else like bonds or stocks.
My apologies, but I fear we are talking past one another. My point is simply that absent the remarkable intervention by the Fed, we’d be having a very different discussion today. And given the Feds actions, both it’s extent and it’s size, the implications for our economy and for the dollar going forward is not at all certain. At least that is the case for me.
The Fed’s job is to maintain stable employment and price levels. It’s purpose is exactly to intervene at times like this. Complaining about the Fed intervening during a time of crisis is like complaining about firefighters arriving to put a fire out.

And it’s not like the Fed hasn’t done this before. It was only 12 years ago that they embarked on three rounds of quantitative easing. Their balance sheet exceeded $4 trillion dollars at one point.

And what did it lead to? The lowest unemployment and inflation rates on record. Hardly the end of the world
The question becomes is there ever a limit to these strategies. Is there a point where we reach diminishing returns? Can we just borrow and borrow with no limit, and at the same time just keep buying the debt back? At some point these strategies are needed just to maintain modest growth even during non times of crisis (we may be already there)

I make no specific predictions as to what will or won't happen and I don't put all my money in a hole in the backyard. Nonetheless I'm trying to figure out how to reasonably hedge our bets if any of these scenarios play out.

As to stocks, and the whole inflation discussion, my theory is that inflation isn't what it used to be. No longer is it consumer price inflation due to lots of structural factors. The inflation now comes in asset prices, which is not considered inflation because these are investments vs consumption. This is partly due to rising GINI coefficients - higher income wealth families are more likely to reinvest additional liquidity vs spend it. With interest rates at zero, tons of infused liquidity, it would not shock me at all if we get to 2000 like valuations and maybe even approach Japan like valuations (not likely, but not dismissing it).

garlandwhizzer
Posts: 2848
Joined: Fri Aug 06, 2010 3:42 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by garlandwhizzer » Sat May 30, 2020 1:28 pm

JBTX wrote:

There is no doubt he has been perpetually doom and gloom and wrong for over a decade. Nonetheless I still read his articles. I can't dismiss any of his assertions. They are all plausible. I guess the biggest hole, if you will, is he has listed a laundry list of risks, but not taken into account various unknown advances and other positive events that may offset some risks.

On the surface it is hard to be positive long term given the massive acceleration in money creation and debt, coupled with large unfunded pension and other liabilities - coupled with turbulent geopolitical outlook. But nonetheless, nothing ever plays out like you expect, so all you can do is save abundantly, invest conservatively but with appropriate asset allocation, and hedge your bets to a degree with things like EF, Ibonds, TIPS and maybe EE bonds. Maybe even some gold/silver although I just can't get myself to go there.
1+

Sums it up well IMO. In Roubini's defense it has to be said that his caution about the economy was right in 2009-10. As he predicted US GDP growth was the slowest in history in recovery from a recession. Right about the economy--he's an economist--but not about the market. He did not take into account persistent aggressive FED action that kept rates low and drove money into stocks nor the impact of massive corporate stock buybacks which supported the stock market in the absence of robust growth. This is one thing that makes predicting the future hazardous: you might accurately anticipate the trouble coming down the road, but you don't foresee the corrective response by government and corporations will be to that trouble.

Same as today, but more so now--the economy has the highest unemployment in history, historical contractions of corporate profits, economy largely in lockdown, and yet the S&P 500 is only 10.1% from its all time high. Without hyper-aggressive FED action plus fiscal stimulus, it is entirely possible that either the GR or the current COVID-19 recession could have progressed into a decade+ GD scenario IMO. The stock market has dodged the bullet twice in 13 years, the economy less so.

Market optimism rather than pessimism is the preferable long term strategy. Like now, there has always been plenty to worry about, but those who accepted risk and tolerated fear through the tough times have always been rewarded in the long term.

Garland Whizzer

av111
Posts: 27
Joined: Mon Jan 26, 2015 1:27 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by av111 » Sat May 30, 2020 1:45 pm

KlangFool wrote:
Wed May 27, 2020 8:02 am
SilverGirl wrote:
Wed May 27, 2020 7:56 am
You are correct, I am not prepared for a depression. I feel like I am prepared for a recession. I appreciate all of the thoughful replies. I don’t usually read The Guardian but variations of this article have popped up for me a few places. Thanks for helping me put it in perspective. Incidentally Klangfool, what does being prepared for a depression look like to you? I guess the only difference is how big is your emergency fund?
SilverGirl,

<<what does being prepared for a depression look like to you?>>

If the stock market drops 50% and you are unemployed, how long can you survive?

A) With only EF.

B) With Fixed Income

C) Used up all your money.

I can last at least 5 years with (A) and (B). That means I could survive with minimal or no financial damage for at least 5 years. How about you?

You should start a new topic and we can help you to go through your numbers.

My EF is 18 months and I am increasing to 24 months. My annual expense is 60K. My portfolio is at 20 times my annual expense with an AA of 60/40.

I am putting 1% of my money into physical Gold/Silver too.

KlangFool

P.S.: In summary, increase your EF and adjust your AA in the 70/30 to 30/70 range until you can "Sleep Well At Night" (SWAN) even if we are in a depression.
KlangFool

Good plan. One risk that may not be covered adequately, I think, is that if dollar is removed from reserve currency status and then it depreciates quickly

Maybe higher percentage of gold or bitcoin? But I usually give up thinking at that point

Robot Monster
Posts: 304
Joined: Sun May 05, 2019 11:23 am
Location: New York

Re: This article is scaring me. [Roubini predicting depression]

Post by Robot Monster » Sat May 30, 2020 1:46 pm

garlandwhizzer wrote:
Sat May 30, 2020 1:28 pm


Market optimism rather than pessimism is the preferable long term strategy. Like now, there has always been plenty to worry about, but those who accepted risk and tolerated fear through the tough times have always been rewarded in the long term.

Garland Whizzer
And if the future behaves like the past that strategy will continue to be preferable, but there is of course no guarantee that the future will do so...

KlangFool
Posts: 16569
Joined: Sat Oct 11, 2008 12:35 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by KlangFool » Sat May 30, 2020 1:53 pm

av111 wrote:
Sat May 30, 2020 1:45 pm


KlangFool

Good plan. One risk that may not be covered adequately, I think, is that if dollar is removed from reserve currency status and then it depreciates quickly

Maybe higher percentage of gold or bitcoin? But I usually give up thinking at that point
av111,

As a minority, it may not be safe for my family to stay in the USA. So, in my case, I need to use the Gold/Silver to get out of the country. 1% is good enough for that purpose. Anything else would have to be dependent on my friends and families oversea.

In the end, your social network (friends and families) is the ultimate insurance/safety net.

KlangFool

KlangFool
Posts: 16569
Joined: Sat Oct 11, 2008 12:35 pm

Re: This article is scaring me. [Roubini predicting depression]

Post by KlangFool » Sat May 30, 2020 2:02 pm

Robot Monster wrote:
Sat May 30, 2020 1:46 pm
garlandwhizzer wrote:
Sat May 30, 2020 1:28 pm


Market optimism rather than pessimism is the preferable long term strategy. Like now, there has always been plenty to worry about, but those who accepted risk and tolerated fear through the tough times have always been rewarded in the long term.

Garland Whizzer
And if the future behaves like the past that strategy will continue to be preferable, but there is of course no guarantee that the future will do so...
Robot Monster,

What past?

Hundred of years of history or Thousands of years of history.

Any civilization/culture/community that survives and thrives for a very long time has a pragmatic view of the world.

Hope for the best and plan for the worst!

Neither pessimism or optimism will work. Preparation is the key.

KlangFool

Post Reply