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The long leading indicators: on the cusp of turning negative?

by New Deal democrat
The long leading indicators: on the cusp of turning negative?

A “long leading indicator” is an economic metric that reliably turns a year or more before the onset of a recession.

Geoffrey Moore, who for decades published the Index of Leading Indicators, and in 1993 wrote  Leading Economic Indicators: New Approaches and Forecasting Records identified 4:

  • housing permits and starts
  • corporate bond yields
  • real money supply
  • corporate profits

A variation of the above is Paul Kasriel’s “foolproof recession indicator,” which combines real money supply with the yield curve, i.e., the difference in the interest rate between short and long term  treasury bonds. This turns negative a year or more before the next recession about half of the time.

Another long leading indicator has been described by UCLA Prof. Edward E. Leamer who has written that “Housing IS the Business Cycle.”  In that article he identified real residential investments as a share of GDP as an indicator that typically turns at least 5 quarters before the onset of a recession

Several other series appear to have merit as long leading indicators as well.

Real retail sales in several forms also has value as a long leading indicator.  Doug Short has identified real retail sales per capita as another important metric.  In a similar vein, Steven Hansen of Econintersect has flagged retail employment vs. real retail sales as turning significantly in advance of recessions.

It also appears that the Fed’ Labor Market Conditions Index also turns negative serves as a long leading indicator, typically turning negative at least one year before the onset of a recession.

Finally, the tightening of credit conditions also appears to have merit as a long leading indicator.  Two measures, the Senior Loan Officer Survey, and the TED spread, are worth noting.

That gives us a total of 9 varieties of long leading indicators.  All of these economic series have a long term history of turning a year or more before a recession.

I haven’t examined these in detail since the beginning of July.  Then, I found them just slightly positive on balance.  In light of recent interest rate moves, now is a good time for an update.

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TARP and Twitter

I had an interesting web experience. My tweet noting that the US Treasury made a profit on TARP got a relatively large number of replies. Many people were outraged in many contradictory ways.

Twitter is damaging the discussion. Trump on twitter lowered the level of debate. I am now a carrier of Twitteritis into the Angry Bear community, because I am brining a tweet debate here.

The discussion starts with this tweet

tarptwitter

note it is the 5th of a series. Trying to summarize, I realize that I should quote

1. To those saying there is no such thing as a good Trump voter. Context man. Context
2. Imagine a scenario. You got two choices, as understood by you
. This is the key. This is how you see it, not how others think you see it
3. Vote for candidate
A) who will devalue you socially & economically
Or
B) who might devalue economically, but will value you socially
4. What will the majority of any group do? Including blacks & Latinos?
If you don’t give them SOMETHING to vote for they won’t vote for it
5. Mistake is thinking that Trump voters believe they are getting anything economically out of a Clinton administration. (TARP cough TARP)

I will briefly summarize my impresssion of @Chris_arnade thoughts on the topic expressed on twitter.

Overall the point is that it is possible to understand why people voted for Trump. Consider TARP. Anger at TARP (and NAFTA) helped Trump. I agree entirely, and think this is important. Hatred of TARP helped Trump.

I am trying to get to responses to my tweet

“@Chris_arnade TARP was a Bush admin initiative and a gigantic success. US gov made a profit”

They do not include anyone suggesting it is unfair to Consider Clinton responsible for TARP (I agree — she deserves credit only for her yes votes in Senate roll calls). The fact that TARP was a Bush administration initiative is clearly considered irrelevant to the question of whether Democrats should be punished for TARPing.

I’m going to put alll of my thoughts after the jump.

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Redefining Political Correctness to Include Criticism of Appointments of Wall Street, Banking and Fossil Fuel Insiders to Regulatory Bodies

And Extreme Pro-Corporate Lawyers and Judges to the Supreme Court and the Lower Federal Courts. Seriously.

So far, the Trump transition team does not seem particularly concerned, for instance, about a transition team staffed heavily with lobbyists from energy, agriculture, transportation, and banking.

“Frankly, one of the refreshing parts of it about the whole Trump style is that he does not care about political correctness. From a practical standpoint, I have heard lots of people say, ‘Why would we box ourselves out of the most knowledgeable policy people in the country?'” said one source close to the transition team.

Donald McGahn II, a partner at the firm Jones Day and Trump’s lawyer, is expected to play a central role in vetting nominees. So is Arthur Culvahouse, Jr., a partner at the firm O’Melveny & Myers, who helped vet vice presidential candidates and, according to a source, has been helping the campaign organize its White House picks.

Culvahouse declined a request for an interview. None of the lawyers in the political law practice at Jones Day returned POLITICO’S calls. Culvahouse has faced backlash from colleagues at his firm for working with Trump, according to people familiar with the situation, with one person saying the decision was “amazingly controversial” within the firm. Many top partners at O’Melveny, including Tom Donilon, were vocal Clinton backers.

Trump advisers steamroll Christie’s transition: The new, top-down approach is likened to how Dick Cheney ran the Bush transition., Andrew Restuccia and Nancy Cook, Politico, today

Just so you know, Culvahouse played a large role in turning the Supreme Court and lower federal courts into a proxy arm of the far-right Chamber of Commerce, including in Citizens United but also in ways most people have no idea about but would really care about.  These are not pro-union justices and judges, nor are they pro-employee, pro-consumer, pro small-business, anti-financial-industry-fraud, or ant-securities-fraud.  Nor anti-fossil-fuel-industry.  For starters.

So.  From a practical standpoint, who do you think are all those people who are saying to this source close to the transition team, “Why would we box ourselves out of the most knowledgeable policy people in the country?”  And might that source close to the transition team be Mike Pence, who is so close to the transition team that he heads it?

And how likely do you think it is that among the many people who are saying this to the source is, say, a blue-collar voter from Toledo or Youngstown?  Or any region of Michigan?  Or Erie, Pennsylvania?

Or anywhere?

We’re extremely close to down-the-rabbit-hole language of the Arbeit macht frei variety, folks—something I saw last Saturday and mentioned in the update to this post.

George Orwell and Lewis Carroll are laughing.  Really hard.

Good god.  This is the most successful Trojan Horse since the original one. And every bit as sinister.  But also funny, in that this is what’s now called a top-down approach. Always great to see a new euphemism for insider corruption.

They’re not gonna box themselves in, folks.  But massive, intensive publicity might.

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Donald and Deportations

This post is partly inspired by “The cracks are already starting to show between Donald Trump and Republicans” by Amber Phillips at The Washington Post. My general impression is that the article mainly shows that cracks are already starting to show between Donald Trump and Donald Trump. More generally, the fact that Trump and the other Republicans are lying a lot about what Obama has done makes it almost impossible to determine how they will change things.

A case can be made that there plan is to mainly stick to current policy (except by cutting taxes on rich people of course) and to rename the current policy and claim credit for what Obama has done and continue to claim he did something horrible. I wish I believed this is what will happen. I am sure they will make major changes. The point is that their statements are vague and often based on false factual premises, so it is impossible to figure out what they will actually do.

Consider deportation of undocumented aliens.

Trump: “What we are going to do is get the people that are criminals and have criminal records, gang members, drug dealers, a lot of these people, probably 2 million. It could even be 3 million,” he told CBS’s Lesley Stahl in a “60 Minutes” interview that aired Sunday. “After the border is secured and after everything gets normalized, we’re going to make a determination on the people that you’re talking about, who are terrific people.”

One plausible interpretation of this is “We are going to stick to current policy, and consider possible policy changes late in my second term”. Under current policy, people with criminal records are deported. Trump proposes sticking with that policy. He doesn’t explain how sticking with current policy will cause an increase in the rate of deportations. He doesn’t even claim that, under his policy, people will be deported at a higher rate than under Obama’s policies. He says 2 million people will be deported, but he doesn’t say when. According to ABC “President Barack Obama has often been referred to by immigration groups as the “Deporter in Chief.”Between 2009 and 2015 his administration has removed more than 2.5 million people through immigration orders, ” Trumps 2 maybe 3 million people claim is consistent with between two and three million in the next six years (with Trump assuming he will be re-elected).

The quoted statement is perfectly consistent with sticking to current policy including the conditions for deportation and the rate of deportations.

It is also possible that Trump proposing sticking with current policy but says the outcome will be bigly more winning, because Trump is a winner. He might argue that, because of his excellent management and winnerness, la migra will do things much more quickly.

It is fairly likely that Trump believes that applying the current policy will cause a large increase in the rate of deportations, because he doesn’t know what current policy is.

Finally, it is possible that he is just lying and plans to deport people who wouldn’t be deported under current policy.

Trump is so vague that it is not possible to prove that there is any “crack” separating Trump and Congressional Republicans. In fact, it is not possible to prove that there is any “crack” between Trump and Obama.

This also true of other policy issues. For example, Trump and the other Republicans agree that they will repeal Obamacare and replace it with something which protects people with pre-existing conditions and is based on consumer choice and markets. One reasonable interpretation of this is that they plan to replace Obamacare with Obamacare. This will come as no surprise to Obama who told us they would do this.

Also they continue to denounce the Obama stimulus and propose a big increase on infrastructure spending

McCarthy: McCarthy said on Fox News that “there is a place we could find common ground with Republicans and Democrats” on infrastructure. But he seemed unable to explain how Trump’s infrastructure spending plan differs from President Obama’s 2009 stimulus. “Obama never had infrastructure in his stimulus,” he said. (Infrastructure spending was a major part of Obama’s stimulus.)

So far this post has been wildly optimistic. Again, I don’t really hope that Republicans will mostly stick with Obama’s policies except for cutting taxes on the rich. I’m sure they will do horrible things. I am also sure that they haven’t told us what horrible things they will do, because they are still promising all things to all people. They haven’t switched from messaging to policy making yet. I hope wish they never make policy.

On the other hand, I think that the strategy of copying Obama while continuing to denounce him is likely to be politically successful. Republicans have managed to convince many Americans that Obamacare is horrible in some mysterious way. The hope was that people would notice that, for example, there aren’t any death panels. If Republicans stick with Obamacare but call it TrumpCare, there won’t be any new proof that Obamacare doesn’t have horrible provisions.

The public doesn’t know what current policy is. Many are convinced that Obama policy is extremly leftist and unsuccessful. This makes it easy for Republicans to convince them that the repealing Obama’s policies and replacing them with Obama’s policies is a huge improvement and that Republicans deserve credit for Obama’s gigantic accomplishments. The strangest thing is that I suspect that Obama is OK with that.

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Kellyanne Conway Plays With Matches

If Kelleyanne Conway wants to see truly massive protests, she should continue to threaten Harry Reid with (il)legal action for making fact-based allegations against Trump, while herself alleging that protesters against Trump are professional protesters—that they’re being paid.

She seems unaware that she’s playing with matches.  But she is.

 

 

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The Democratic Establishment Thinks the Lesson of This Election Is That the Way For Democrats to Win Over White Voters In the Industrial Midwest Is to Switch Sides in the Culture Wars. I Guess. [Updated.]

The race to be the next head of the Democratic National Committee has quickly turned into a proxy fight between liberals and establishment types about where the party needs to go in the wake of Hillary Clinton’s stunning loss at the hands of Donald Trump on Tuesday.

Liberals are insistent that Clinton’s defeat was the result of nominating a candidate who failed to excite the party’s base of progressives, African Americans and Hispanics. Establishment voices fret that nominating a liberal to run the party misses the point of an election in which Clinton’s loss can be directly traced to her inability to win over white voters in the industrial Midwest.

“The next DNC chair needs to understand what became painfully obvious in the election — that there are two different Americas and that Democrats are really struggling to bridge the gap between the two,” said Mo Elleithee, a longtime Democratic operative who runs the Georgetown University Institute of Politics and Public Service. “The fundamental problem is that the party stopped really communicating what it means to be a Democrat.” …

“This is suddenly a really important gig as one of the centers of opposition,” said one longtime Democratic strategist who spoke on the condition of anonymity to candidly assess the DNC race. “You can’t do it part time, and you shouldn’t do it while sitting inside one of the most despised institutions in the country.”

What the DNC chair race tells us about the fight for the Democratic Party’s future, Chris Cillizza, Washington Post, yesterday

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The Unfinished Parable of the Shepherd and the Starving Wolf Cubs

In the wilderness, far from anyone else, a shepherd and his flock come across a den of starving wolf cubs. A couple of days earlier, the shepherd found the body of an adult female wolf.  The female wolf was probably the cubs’ mama, and it looked like it had gotten killed by a bear.

The small orphans look pitiful, and they will surely die within the day if they have no food. The only food the shepherd has that the wolves will eat are his sheep, all of which he has raised from birth.

You are merciful. You are also the shepherd. Which act of social eugenics do you perform?

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Understanding American society: a few important bookmarks for a post-election Sunday

by New Deal democrat

Understanding American society: a few important bookmarks for a post-election Sunday

I wanted to bookmark a few facts that seem very important to understand American society in November 2016.

I. Econometric election models accurately forecast a very close election:

Figure 1

2. The working class blames Washington over Wall Street for their woes by a 2:1 margin:

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