The Case for a Recession

The economic data indicate that U.S. economic growth is slow and slowing, but it appears that it’s still positive. But a few analysts are asserting that the U.S. already is in a recession, including Lakshman Acuthan, John Hussman, and Mike Shedlock. Shedlock does a good job of collecting all the data and arguments in one blog post with links to some other sources and embedded video. These three actually have been saying we’re already in a recession for at least a few weeks each, and they assert that the data issued since then confirm their conclusions. Shedlock followed with another post that contains an e-mail he received from Hussman regarding a few points. The first post gets into a bit of a side discussion over whether Acuthan was early in his forecast or changed the forecast start date of the recession after an initial call was wrong. The second post also discusses that issue and, I think, clarifies it.

Hussman has been labeled a “permabear”. So have I. So has Dave Rosenberg. So have many others. It only seems that way. The reality is Hussman, I, and Rosenberg were bullish at the March 2009 bottom.

However, the market shot up so far, so fast, that valuations became quickly stretched.

I cannot speak for the others, but I surely underestimated the effect of global coordinated liquidity move by central bankers virtually everywhere (US, EU, UK, China, Australia, Canada, etc.).

The result was we had a 10-year stock market rally in three years. Those patting themselves on the back for their “no recession” call were correct only because of  a massive coordinated liquidity pump by central bankers worldwide.

Unless the “no recession” callers specifically counted on that, then they were lucky with their forecast.