November | 2012 | RecessionAlert

Archive | November, 2012

On the cliff’s edge

By RecessionALERT on November 16, 2012 in Reflections

Industrial Production was slowed by hurricane Sandy and its growth rate is now in recession territory. Bear in mind, for our “NBER Recession Model of last resort” we use a much faster smoothed growth here than the standard 12-month rate of change and therefore many other studies you observe on Industrial production may not be in recession territory yet. We have found the faster growth rate window deployed by our model to work the best for our composite model though. A recession signal from Industrial production […]

Read full story · Comments are closed

Debunking 100% probabilities of recession calls

By RecessionALERT on November 8, 2012 in Reflections

The latest buzz on the internet is a FRED chart published by the Federal Reserve of St. Louis of Chauvet and Piger’s dynamic factor Markov recession probability index. Its currently jumped from less than 1% to 18%. Inferences are being made that recessions have always been underway or occurred very shortly after a reading of 18%. Suddenly the 18% probability went to 100% based on this inference. Why this inference is so ludicrous is also aptly described on Jeff Millers’ […]

Read full story · Comments are closed

IMPORTANT DISCLAIMERS: Although many of our models rely heavily on back-testing, optimisation and probability methods, please note that past performance is NO GUARANTEE for future returns. No system devised by man can predict the future, let alone the future of the markets and economies. What we have are sets of mathematical models that use historical data and varying theories to pinpoint places in time when the STATISTICAL LIKELYHOOD of calling the start and end to recessions is the greatest. In the midst of all the best mathematical models, you can have geo-political events, wars, terrorist attacks, natural disasters and even nuclear accidents that tip everything upside down. This is always a risk factor you need to factor in on any recession call no matter how confident you are in a signal. The SuperIndexes are created through mathematical and statistical optimisation techniques that best fit the historical NBER data. There is no guarantee that out-of-sample performance will match that of prior in-sample performance.