{"id":13052,"date":"2015-10-06T06:04:43","date_gmt":"2015-10-06T11:04:43","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13052"},"modified":"2015-10-06T06:04:43","modified_gmt":"2015-10-06T11:04:43","slug":"the-phrase-that-initiates-recessions","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13052","title":{"rendered":"The Phrase that Initiates Recessions"},"content":{"rendered":"

The Phrase that Initiates Recessions<\/a><\/h3>\n

It Can\u2019t Get Any Worse?<\/strong><\/p>\n

On Friday, shortly after the release of the payrolls report,\u00a0we asked half in jest<\/a>\u00a0whether the time had finally come for the market to interpret bad news as bad news, and not as an opportunity to speculate on more central bank largesse. As someone remarked to us later: \u201cYou had to ask<\/a>\u201d.<\/p>\n

\"three-light-switches\"Photo credit:\u00a0Paul Cross<\/a><\/p>\n

Apparently a slightly later released news item informing us that \u201cfactory orders hit the skids<\/a>\u201d was taken as a buy signal of the \u201cit can\u2019t get any worse<\/em>\u201d sort. Normally it is considered bullish when the market rises on ostensibly bad news \u2013 and very often, this is actually the correct interpretation of such market action. However, one must be careful when the fundamental backdrop is subject to severe deterioration. Readers may recall that commentary on the markets was brimming over with the same type of argument in late 2007 and early 2008. In October 2007, the market in its unending wisdom priced the shares of Fannie Mae at $73 for instance.<\/p>\n

\"S&P<\/a>SPX, 10 minute chart \u2013 after initially sliding on Friday, the market quickly recovered and has rallied quite a bit since then \u2013 click to enlarge.<\/p>\n

The point is this: Although as a trader one must always respect market action, especially in the short term, one must at the same time avoid to ascribe to the mass of market participants a degree of wisdom they simply don\u2019t possess. The\u00a0market very often \u201cknows\u201d nothing<\/a>\u00a0and frequently tends to get things completely wrong. If that were not so, there would never be any buying or selling opportunities, but plenty of those obviously exist.<\/p>\n

The \u201cThrowing of the Light Switch\u201d<\/strong><\/p>\n

Anyway, over the weekend we caught up a little on our reading, and\u00a0inter alia<\/em>\u00a0came across an\u00a0article at Wolfstreet<\/a>a friend had pointed out to us, which discusses the recent weakness in US manufacturing data.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

The Phrase that Initiates Recessions It Can\u2019t Get Any Worse? On Friday, shortly after the release of the payrolls report,\u00a0we asked half in jest\u00a0whether the time had finally come for the market to interpret bad news as bad news, and not as an opportunity to speculate on more central bank largesse. As someone remarked to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5728,9621,5984,7487,6170,1264,4255],"class_list":["post-13052","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-bad-news","tag-factory-orders","tag-fannie-mae","tag-pater-tenebrarum","tag-recession","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13052","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13052"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13052\/revisions"}],"predecessor-version":[{"id":13053,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13052\/revisions\/13053"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13052"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13052"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13052"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}