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  • Recession protection

    Hi all. With Jim's permission, I write to give the White Coat Investor Forum an offer in return for feedback.

    My company has released a mass market version of our recession protection models, which combine the most reliable economic variables in to one holistic picture of the US economic cycle and subsequent probability of a recession occurring.

    I am looking for feedback on how well we have explained the importance and use of these models, and points on where we could improve.

    In return for your time, you get free access to the tools for a year, no catches, no credit card details or anything. You just need to spare a moment to send feedback to [email protected]

    So what you need to do:

    - go to www.recessionprotect.com

    - sign up for memebership and use the coupon code "whitecoat" at check out (it wont ask for your card details after coupon entered).

    - login and review the members section. If you also have a moment to spare, would appreciate a broader review of the site. Send your feedback to [email protected]

     

    Our goal is to basically bring a much needed service to the mass market at a very accessible price, but naturally our concern is that tools such as these generate a lot of skepticism, which is fair enough, so your feedback is important to us.

     

     

  • #2
    Hi Rex,

    We make no such claims, but as any good economist knows, an economic cycle can be measure in age via the maturity of many individual economic data points. For example, it is statistically reliable that corporate profits tend to start falling before a recession. The yield curve is always inverted before a recession (although there are many times it is inverted when a subsequent recession does not follow). The corporate capex cycle starts to slow. Inflation pressures start to build and central banks begin hiking rates aggressively. There are numerous more reliable indicators that once proven as statistically significant in isolation, can be aggregated together to build a model which indicates the "age" and "probability" of a recession, based purely on the business cycle. Obviously it does not capture geopolitical shocks.

    You're welcome to immediately dismiss the tools, and that's fine. However, you can see our white paper here to learn more: https://www.recessionprotect.com/uploads/1/0/9/8/109805428/white_paper_-_recession_probability_economic_cycles_leading_ind icators.pdf

     

     

     

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    • #3
      It would appear disagree. Thanks for your best wishes though!

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      • #4
        If you can really predict recessions with any degree of certainty you should be meeting with Blackrock and Goldman, not posting on WCI forums.

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        • #5
          Tough crowd.

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          • #6
            Thanks for the offer; will go try it out and 'kick the tires' this weekend. 

            Yes, tough crowd - kind of baked into the genes of docs and throw financial conservative tendencies into it -- always weary of a promise.

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            • #7
              @RP - did your models accurately predict the last 5 recessions AHEAD of them? 1980, 81, 90, 01 and 07?   What have they been saying with the most recent Bull run that's accelerated since November?  Did it say to move to safety anytime during 2016-17?

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              • #8
                I do think that while it may not give one a tight time frame economic indicators can help identify when the probability a recession is nearing. However, the tools necessary and a ton of work in the area has already been free to anyone interested. Sure, lots wont care to do any work themselves.

                Im sure you'll find some interested parties, but lots of people are already doing very similar things and most of the models are freely available to anyone looking.

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                • #9




                  If you can really predict recessions with any degree of certainty you should be meeting with Blackrock and Goldman, not posting on WCI forums.
                  Click to expand...


                  As others have pointed out, lots of free tools out there if you are into that.  I remember in '07/'08 alot of folks stating we were in recession, yet took a fair amount of time for the numbers to catch up to the reality on the ground.  Prediction of a recession is not terribly difficult imo, an understanding of the drivers, length, depth, breadth are all needed to make portfolio level decisions (again if you are a timer of some stripe).

                  I get RecessionProtect is attempting to provide folks information to both interpret for themselves and potentially act up from a investment perspective.  But who are you/your team?  What are your credentials to make me want to pay to see this information?  A bio/cv that starts with PhD..... Tell me how your product is a better mousetrap than everyone else's.

                  IMO, someone who has a 100k - 250k retirement portfolio would not bother, and the folks who have a portfolio north of $1M are either a. have portfolio/process that works and is successful, or b. hire the JPM's/NT/Goldman's who have there own staff for which they are paying an AUM fee.

                  I recall a macro-economist I worked with professionally stating 'The Fed has the largest number of Economist's in captivity'.

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                  • #10







                    If you can really predict recessions with any degree of certainty you should be meeting with Blackrock and Goldman, not posting on WCI forums.
                    Click to expand…


                    As others have pointed out, lots of free tools out there if you are into that.  I remember in ’07/’08 alot of folks stating we were in recession, yet took a fair amount of time for the numbers to catch up to the reality on the ground.  Prediction of a recession is not terribly difficult imo, an understanding of the drivers, length, depth, breadth are all needed to make portfolio level decisions (again if you are a timer of some stripe).

                    I get RecessionProtect is attempting to provide folks information to both interpret for themselves and potentially act up from a investment perspective.  But who are you/your team?  What are your credentials to make me want to pay to see this information?  A bio/cv that starts with PhD….. Tell me how your product is a better mousetrap than everyone else’s.

                    IMO, someone who has a 100k – 250k retirement portfolio would not bother, and the folks who have a portfolio north of $1M are either a. have portfolio/process that works and is successful, or b. hire the JPM’s/NT/Goldman’s who have there own staff for which they are paying an AUM fee.

                    I recall a macro-economist I worked with professionally stating ‘The Fed has the largest number of Economist’s in captivity’.
                    Click to expand...


                    Yes. Anyone serious about these things should already know how to get and properly visualize the important data from FRED and have an outlook that makes sense, or a relationship with someone that has similar. On the OPs website they are already concerned due to valuation, which yes is rich. However, economic data wise the whole world has turned positive recently and without a catalyst to make people fear something imminent, a flock to safety mentality will leave one behind.

                    Trends weaken before they turn, and ours is still strengthening in most regards and most in where its highly important. When those things change, guards will come up.

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                    • #11
                      By "recession" do you mean Market downturn?

                      The unemployment rate among physicians is essentially nil, even in recessions.   In a recession my intermediate and long term bond funds will rise. This is the reason I own them.

                      The smartest people on the planet are trying to predict the direction of the Economy and are consistently wrong. I am not sure what actions to take even if I knew a recession was sure to come.

                      http://www.etf.com/sections/index-investor-corner/swedroe-better-face-correction

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                      • #12




                        By “recession” do you mean Market downturn?

                        The unemployment rate among physicians is essentially nil, even in recessions.   In a recession my intermediate and long term bond funds will rise. This is the reason I own them.

                        The smartest people on the planet are trying to predict the direction of the Economy and are consistently wrong. I am not sure what actions to take even if I knew a recession was sure to come.

                        http://www.etf.com/sections/index-investor-corner/swedroe-better-face-correction
                        Click to expand...


                        This is the problem. Not predicting a recession, but what/where to do anything if one should in the first place. Is it systemic, deep, etc? Most people recall 2000/2008 but those arent typical nor were they similar outside of the markets reaction. More typical recessions are much shallower and associated with much smaller bear markets, and its certainly difficult to tell what sector gets crushed and where to 'flee for safety'.

                        I dont think identifying a slowdown, or that a recession is increased in probability over x months is actually terribly difficult. Its predicting/timing what the market will do and then correctly moving assets around to profit/protect from it. Thats the near impossible part.

                        Probably the best overall discussion and possible portfolio implementation done on the topic is over at Philosophical Economics blog about the perfect recession indicator. www.philosophicaleconomics.com/2016/02/uetrend/

                        Other excellent blogs if macro is an interesting topic to you are Fat Pitch and Calculated Risk. Both aggregate/interpret and give normalizing commentary in an exceedingly level headed manner about what each thing means, trends, what has any coincident indication and whats noise, etc....

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                        • #13
                          A PhD is not necessarily a good metric in determining the value of any modeling.

                          A good history lesson can be found in "When Genius Failed", regarding LTCM who almost singlehandedly took down the world's financial system. Seven (7) of the eight (8) Board of Directors we're PhD's from either MIT or the University of Chicago, with two of them Nobel Prize winners in economics.

                          Probabilities based on modeling are still just probabilities. You can still get whacked up the side of your head by fat tails and bit in the @$$ by a Black Swan.

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                          • #14




                            A PhD is not necessarily a good metric in determining the value of any modeling.

                            A good history lesson can be found in “When Genius Failed”, regarding LTCM who almost singlehandedly took down the world’s financial system. Seven (7) of the eight (8) Board of Directors we’re PhD’s from either MIT or the University of Chicago, with two of them Nobel Prize winners in economics.

                            Probabilities based on modeling are still just probabilities. You can still get whacked up the side of your head by fat tails and bit in the @$$ by a Black Swan.
                            Click to expand...


                            Kind of funny to see an anecdotal argument being used to discount the value of advanced degrees in determining probabilities and correlations of events in very complex subjects.

                            This argument is equivalent to saying Dr. X committed medical malpractice so an MD is not a good metric in determining the value of any medical treatment. My great grandmother says she cured her flu in two days by eating coffee grounds and orange peels, so I’m pretty sure I know where to go for my next check up.

                             

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                            • #15
                              Kind of funny to see an argument against an on point event when the main premise of my response was about fat tails and Black Swans. Not to quibble, but a well researched post-mortem analysis of the facts and circumstances of LTCM's demise is not an anecdote. It is ironic that you are disputing my basic premise with an analogy which never have any probative value.

                              I will state again, no matter how smart the people are, any model of of a chaotic system has a significant risk of fat tails and Black Swans.

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