Yesterday I picked up on the recession call meme that’s been making the rounds and related it to the earnings recession, something I think is really important to pay attention to.
To be clear, I don’t make recession forecasts (as I do not think I am qualified and there isn’t much value in it anyway).Also, it doesn’t actually matter what the NBER says and when they say it – go talk to 100 people (business owners, old people, twenty-somethings) and 70 will tell you it feels like a recession, So whatever.
But we are constantly monitoring economic data and assigning probabilities based on it. The most frustrating aspect for many people is in how slowly things move and how many false positives there are in the absence of an obvious trend. The US economy is in stall speed, rocking back and forth on a fence. Three reports coming out in the same week could give you three very different impressions, it’s very difficult to have strong convictions here. So we don’t.
But I posted the evidence yesterday indicating that a contraction is likely within the next 18 months. The caveats are many (fiscal cliff resolution, Chinese stimulus takes hold, Greek exit from the euro finally followed by massive money-printing, etc), anything is possible – we simply think the probability of a recession has gone higher.
Jeff Miller at Dash of Insight, a friend and fellow blogger, takes issue with the way many are reading the Professor Piger chart – the one with the 100% recession implication everyone’s talking about. Jeff goes hard at the blogger who first began propagating it, the entire post is a tour de force (even though I remain unmoved as to the big picture). Rather than excerpt from it, I’m sending you there for the whole thing: