
Charts That Scare Wall Street - JumpCrisscross
http://www.bloomberg.com/news/articles/2016-10-27/these-are-the-charts-that-scare-wall-street?cmpid=BBD102716_BIZ
======
jknoepfler
I honestly don't care about anything a news rag says about our nebulousy
defined dire economic prospects unless they've taken out an appropriate
corresponding short position against the market and have a record of making
winning forecasts.

To be fair, I used to play poker professionally, so my disposition to this
kind of talk is that it's useless bathroom chatter unless the writer(s) are
willing to make a quantitative prediction about the distribution of likely
market futures which they would make a corresponding non trivial bet on (which
market anyway? The article doesn't really operationalize anything).

~~~
s_q_b
Investment news is interesting for the metadata.

Professional politicians don't watch CNN because they lack information that
CNN can provide. They watch CNN so they know what the public is being told.

Professional investors don't look to Bloomberg News for information. They look
to know what other, lesser informed, market participants are being told.

Awareness of the ambient information supplied to the masses is valuable in
both scenarios.

~~~
hash-set
That is correct. It's like that shill, what's his name? Cramer. That guy's
advice is worthless, but he was put on tv for a reason.

Doesn't it bother anyone else that our media today merely exists to message
lies?

~~~
digler999
> That guy's advice is worthless

how could it be useful ? How could there be a single strategy that could be
broadcast on national TV that could be profitable for literally everyone
watching it ? What would such a strategy look like and how would not be self-
defeating or feedback induced bubble-producing ?

I think Cramer is not only interesting but he makes learning the markets fun.
He teaches noobs how to think (or at least, _one_ possible philosophy out of
many). How to act like a trader and how NOT to make stupid decisions. He's not
there to make you money as your personal "pick-em" advisor. Because even if he
was right the whole market would follow him and instantly correct itself.

Hes a coach telling you keep your knees bent, keep your eye on the ball, stay
in shape, etc. What else would you expect from a one-size-fits-all tv program
?

------
a13n
Relating to tech, it's definitely significantly harder to raise series A and
beyond then it was a year ago. Seems like a lot of companies aren't getting
the next round they were expecting to and as a result there's been a focus on
building profitable businesses rather than investing hard in just user growth
(eg. snapchat).

You can see this trend by the significant uptick in acquisitions and layoffs
lately... If founders can't raise they have to look for an exit or downsize.

Feels like the market is still pretty spooked from oil and China in Q1 and
then Brexit in Q2. Will be interesting to see what happens next!

~~~
peburrows
How very unfortunate that they must now focus on "building profitable
businesses". You know, there was a time when that was the very point of
running a business.

~~~
disc
Agreed, though it wasn't very long ago that growth was valued much higher than
profitability. Maybe our opinion is (slowly) evolving? Perhaps growth-by-all-
means is a perfectly valid play in an extremely network-effected market, while
other markets might be better served by focusing on profitability?

~~~
kesselvon
Maybe they're realizing that growth doesn't always translate into
profitability. See twitter for example

------
jpmattia
My personal favorite is not listed:
[https://fred.stlouisfed.org/series/M2V](https://fred.stlouisfed.org/series/M2V)

M2V is the velocity of M2, roughly: How fast money is changing hands via
transactions.

~~~
packetized
I love how none of these charts use 0 as a base for the y-axis. Lies, damned
lies, statistics...

~~~
chirau
What article are you reading? If we are reading the same article then look at
the charts under the following subheadings:

David Doyle, economist at Macquarie Capital Markets Ltd.

Torsten Slok, chief international economist at Deutsche Bank AG.

Jordan Rochester, foreign-exchange strategist at Nomura.

Barnaby Martin, European credit strategist at Bank of America Merrill Lynch.

Fielding Chen and Tom Orlik, economists at Bloomberg Intelligence.

...haters are going to hate, I suppose.

~~~
sesqu
What all of those graphs have in common is that they depict datapoints near or
below zero, so they necessarily must include the zero. The only exceptions to
this rule are Chen and Orlik's graph, for which the data only goes down to 1,
yet they decided to start at 0, and Sen's graph, which ranges from 1.8, yet he
went all the way down to 1.

For comparison, Feroli's data has a strictly positive range, but the graph
starts at -5. Martin even went so far as to include two y-axes on the same
graph, yet only one of them started at 0.

------
the_duke
That one would worry me:

[https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i1TYqnmbkGC...](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i1TYqnmbkGCM/v0/-1x-1.jpg)

> `"We are investing less than four cents of every dollar we earn back into
> our nation’s productive capacity," Feroli notes. "The economic possibilities
> for future generations will not be promising if we stay on this path." `

------
cvgraham
We should note the selection bias here. The author specifically asked
economists for graphs that would "scare" them as part of a halloween themed
post. So we are only getting the curated "scariest" charts someone could take
out of all the macroeconomic data out there and not a real opinion of what
they think of the market as a whole.

~~~
misja111
Exactly. Scary headlines sell. Nobody would read an article that announces
that everything looks normal and nothing spectacular is going on.

~~~
ianai
I think the give away was how many of them focus on the UK.

------
pastProlog
During the 2008 recession, Monthly Review put together some scary 1960-2008
charts on economic indicators not mentioned in this article (
[http://monthlyreview.org/2008/12/01/financial-implosion-
and-...](http://monthlyreview.org/2008/12/01/financial-implosion-and-
stagnation) ).

Often overlooked is the capacity utilization rate - at what rate is capital
plant being utilized. This number has been falling since the early 1970s. On
the latest dwindling bounce of the ball, it hit a peak in November 2014 with
78.9%, and has since fallen to 75.4% (
[http://www.federalreserve.gov/releases/g17/revisions/Current...](http://www.federalreserve.gov/releases/g17/revisions/Current/table1b_rev.htm)
).

So the 2009-2016 industrial capacity peak was 78.9%. I don't have the data in
front of me, but my recollection is from World War II to the early 1970s, the
industrial capacity of the US never dipped as low as 78.9%. So the modern
capacity utilization peaks are less than the old historical lows.

------
dmoy
Without much background in finance, I have a hard time knowing if these graphs
are all meaningful, or if they're just cherry picked. Is there any way to
tell?

~~~
JumpCrisscross
The % of GDP invested chart gave me pause [1].

Silicon Valley'a bedrock was laid when we invested 12¢ of every dollar of GDP.
Now we're down to 4¢.

[1] [http://www.bloomberg.com/news/articles/2016-10-27/these-
are-...](http://www.bloomberg.com/news/articles/2016-10-27/these-are-the-
charts-that-scare-wall-street#media-17)

~~~
kitd
There was a very good article in the London Times a week ago (paywalled sadly)
which highlighted the consequences of low investment / GDP. The UK hasn't been
that high in that regard for a few decades now, but it is expected to drop
post-Brexit.

------
sndean
Some of those charts do look concerning, and some of them are pretty clear,
especially the delinquency rate on loans chart.

But are those three peaks all we have go off of? Does anyone know what it
looked like prior to 1990 and if that era's delinquency rates too correlated
with economic downturns?

3/3 is concerning, 10/10 is terrifying.

Edit: Can't find any earlier than 1987:
[https://fred.stlouisfed.org/series/DRBLACBS](https://fred.stlouisfed.org/series/DRBLACBS)

------
Animats
"Real estate share of output near an all-time high" indicates that a new real
estate crash is likely.

Median house price / median income is getting high again. Historically, that's
around 2.2. Much higher, and people can't make the mortgage payments.[1] Then
the mortgage default rate starts climbing. Then the bubble pops.

But it takes a long time. The time constants in real estate are many years
long.

[1]
[http://www.economist.com/blogs/graphicdetail/2016/08/daily-c...](http://www.economist.com/blogs/graphicdetail/2016/08/daily-
chart-20)

~~~
cft
I recently read about a house sold in San Francisco for 19.1m. This is the
first time it has been on the market since 1971, when it was sold for 131k,
which is 991k "inflation adjusted". Either there's more inflation than the
official statistics, or there is a systemic bubble that will lead to the first
default of the entire US economy in 35-40 years.

~~~
thetrb
I highly doubt you can make these generalized assumptions from the sale of a
single house.

~~~
dilemma
Sure, but it can point you in a direction for inquiry.

Inflation in the Bay Area is around 20% YoY, based on price increases in the
housing market.

~~~
foota
This pretty much seems reasonable. Housing demand should probably depend
mostly on the amount of wealth (maybe this should be income?) in the area. It
seems possible that wealth in the valley is growing at 20%.

~~~
mintyfresh
20% growth would mean the wealth in the area would double every 3.46 years.

This morning, it was announced that the US GDP grew at an annual rate of 2.9%
last quarter, accompanied by the WSJ headline "US Economy Roars Back" [1].

20% growth is nowhere near "reasonable".

[1] [http://www.wsj.com/articles/u-s-economy-grew-2-9-in-third-
qu...](http://www.wsj.com/articles/u-s-economy-grew-2-9-in-third-
quarter-1477657992)

~~~
foota
GDP is a measure of income, not wealth. It makes sense that wealth matters
more for house prices than income, because it's a ~ one time purchase.

------
secfirstmd
Oh dear, we are heading for a recession worse than the last but with even few
economic instruments to recover from it and even less political will and
stability.

~~~
mrep
And this is based off of?

~~~
jazzyk
\- The US debt is almost _double_ of what it was in 2008.

\- Interest rates are already close to zero.

The Fed is out of ammunition this time around...

~~~
empath75
If US debt were a problem, interest rates would rise.

~~~
adnzzzzZ
Rates can't rise without significant damage to the economy. They've been 0 for
so long for a reason. Last year they went up by 25 basis points and 2 weeks
later the stock market plunged and stayed in that state for months.

------
M_Grey
It would be darkly amusing- in that "throw yourself from the nearest bridge,"
sense- if we ended up in another great depression in roughly the same portion
of this century as we did in the last. That we have a new generation of robber
barons is probably not a coincidence.

~~~
hash-set
The repeal of Glass Steagall had a great deal to do with our current
predicament. That occurred during Bill Clinton's Presidency.

The whole finance industry has much to atone for. Their greed has brought this
nation to its knees. I don't need a chart to tell me that.

~~~
M_Grey
It did have a lot to do with it, but it's hardly the only problem. We didn't
waste trillions in Afghanistan and Iraq because of investment bankers after
all. We haven't spent the decades since Reagan gutting education and mental
health infrastructures in this country because of investment bankers either.

------
ej_campbell
Another Scary chart:
[http://dangerousminds.net/comments/spurious_correlations_bet...](http://dangerousminds.net/comments/spurious_correlations_between_nicolas_cage_movies_and_swimming_pool)

------
SFJulie
You can add this one [https://www.aar.org/pages/freight-rail-traffic-
data.aspx](https://www.aar.org/pages/freight-rail-traffic-data.aspx)

Monthly Rail Traffic Data

How can USA be selling and consuming as much products as in 2007 if the
railroad traffic is still 10%~15% less? And this year looks bad.

~~~
adventured
Half that drop is solely from the reduction in coal carrying by rail in the
last ten years. 1/3 of the entire coal industry in the US no longer exists vs
2006. Its biggest companies have gone or are going bankrupt. Production of
coal has gone from a high of near 1.2 billion tons between 2007-2008 to maybe
800-825 million for 2016.

If you follow railroad companies or railcar builders, you know how big of an
impact the drop in coal has caused.

~~~
tomwalker
You can exclude coal and grain from the charts linked from your parent
comment. There is still a significant drop.

------
oli5679
Talk is cheap!

The market price of assets and their derivatives should normally be more
informative than financial market chatter.

The offers a strong incentive for accuracy, the second rewards rhetoric and
decisiveness over nuance and caution.

------
TimJRobinson
I don't know much about investing. If I'm worried the economy is going to
collapse where is the best or safest place to put my money? Just keep it in
cash? Exchange it for Swiss francs? Bonds?

~~~
jcomis
No one really knows this answer unfortunately because it is highly dependent
on how the "collapse" happens.

------
6stringmerc
Unfortunately Missing: Chart (preferably Gantt) that shows how TBTF banks can
be effectively broken up into loosely affiliated regional entities within the
next two years.

------
fractal618
That x-axis label is terribly formatted, very hard to tell where they years
start and end.

