A month and a half ago, with the S & P 500 to 1350 points, heading week of financial Sole 24 Ore, signed by Walter Riolfi , proposed an analysis of the situation economic prospects and equity markets that attracted my attention. At every step
Riolfi saw "signs of hope " to the point of surrender the confession that a U.S. recession was a scenario that left him " unconvinced." For the stock, according to him, " a good recovery" was to be taken into account.
That article seemed so dissociated from reality, so based on the analytical data from partial or distorted to make me write a post very critical and sometimes ironic, entitled Recession, Bags and optimism in Il Sole 24 Ore .
Five weeks later, on the eve of Easter, I again came across the book Riolfi .
What I found? An article with an encouraging opening words (" Ci sono segni di un positivo cambiamento nei mercati finanziari ”), uno svolgimento incentrato sulle positive ricadute che il salvataggio della banca Bear Stearns , orchestrato dalla Federal Reserve , avrebbe finito per avere sulla psicologia degli operatori e una conclusione lapidaria:
“ La recessione non fa più paura, non perché sia improbabile, ma perché è data per certa e, quindi, già scontata nei prezzi. ”
Ma guarda un po'. Tra i prezzi, aggiungo io, spicca quello dell’indice S&P 500 , che ha chiuso la settimana di Pasqua a 1330 – come mostra il grafico qui sotto, taken from Stockcharts - or just 1, 5% more down to where it was when Riolfi saw signs of optimism everywhere.
Between Saturday, February 16 and Saturday, March 23 I have not read the financial week - or, to be honest, I feel very inclined to do now that effort. So I do not know what happened in the head of its author.
The fact remains that the 'S & P 500 to share 1350 allowed him to consider the remote possibility of a recession, while the S & P 500 at an altitude of 1330 finally led him to write a recession is "certain and therefore already discounted in the prices . "
A recession, for Riolfi, that is 20 points short of S & P500?
More generally, what pushes Riolfi apodictic conclusions so that, from month to month, playfully dancing remains a mystery to me.
Given the track record, it is possible that the colleague can read the future. But the present and the past seem to remain obscure.
For this, simply comparing the interpretations of our eccentric and far more stable predictions made by the contract USrecession.08 (see chart below) traded in the market Intrade - as I have repeatedly written on this blog tool that enables easier and more reliable estimates on the perceived risks of recession in the U.S..
The graph shows that from mid-February - when Riolfi considered unlikely scenario of a recession - to March 22 - when the recession has become, according to him, a "certainty already discounted prices in " - little has changed in the perception of punters who place their bets on Intrade.
If the chances of recession were then estimated at about 65%, today they are 70% . A period of contraction of the U.S. economy is therefore very likely, although there is no certainty for now.
trend (see the brown line of the graph, which represents a moving average 25 days) is still essentially to point upwards, but even here there is not much new: it is about three quarters in perception of investors, the risk of recession are intensifying.
for the past, I would rather go back to my post stock markets and the risk of recession last September, where I quoted William Hester analysis for the management company Hussman Funds, according to which the 1950 to Today the average life of a bear market stock, along with an economic recession, has been in the U.S. 491 days (over 16 months).
The average decline from peak to bottom, was close to 30% , but overvalued markets (1968, 1973, 2000 - and the current cycle is rightfully part of this group) the decline has always exceeded the 35% and on two occasions three went over 40%.
The decline in progress, always measured by reference to the S & P 500 was 20% per hour of and lasted five months and a half . The bear market - according to historical comparisons - Is, in short, still in its initial phase .
argue that even if the recession is certain, it is therefore too early to proclaim that he is already in the prices.
It seems to me that the sign of a reckless rush to do this is to discount those who, until a month ago, with the reference stock index almost at current levels, the recession did not even put into consideration.
What to say? Excluding a priori hypothesis that the unacceptable Il Sole 24 Ore has a secret interest in having to tell his commentators that the stock market is always a bargain (in February because there was no recession in March because the recession has passed), the impression I have left - but only the fuzzy feeling of a casual reader - is that Riolfi like to spend time in impromptu games of interpretation by the hermetic solutions.
If so, the title week financial appears, for his column, a very apt choice. Why not call it, however, Week puzzles?
will not be an original name, but at least is clear. Readers will understand immediately what you can find: no market analysis but puzzles and abstruseness.
