Deutsche Bank Makes the Case for Recession, All Four Warning Signals Have Been Activated

The last time all four of Deutsche Bank’s warning signals for recession failed was in 1986, which was a very weird time for the world as the Reagan swag and morning in America optimism beat back the bears like the devil dogs they were. Also, it’s worth noting, just one year hence the stock market crashed and it was only by the grace of God that it didn’t lead to a deleterious economic downturn.

The Germans are out with stats and charts this morning, trying to warn you cheese doodle eating Americans to the storm that is coming.

How much of an anomaly was 1986? Deutsche Bank has the answers.

a) 1986 was the only episode over the past 60 years in which U.S. corporate margins declined (from 8.6 percent in the second quarter of 1984 to 6.7 percent in in the fourth quarter of 1986) without this leading to a recession

b) it was the only episode over the past 40 years during which capex growth turned negative (driven by falling energy investments) without this leading to a recession

c) it was the only episode over the past 30 years in which speculative default rates rose meaningfully above 5 percent without this leading to a recession.

Personally, I’m waiting for the yield curve to invert as my warning sign, which is part of the reason why I’m long TLT. The interesting thing about this rot of an economy is that it’s accompanied by rigged stats using rigged central banks, making those who warn of shit like recessions look like fucking lunatics.

Nevertheless, you’ve been warned.