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"The Entire West Is In The Yo-Yo Years"

Tyler Durden's picture




 

ECRI's Lakshman Achuthan holds firm to his belief that "a recession started around the middle of last year" and even as he notes consensus expectations for payrolls tomorrow at 160-170k, "year-over-year payroll jobs growth will go to a 16-month low." In this Bloomberg TV interview, the embattled prognosticator explains how "the entire West is in the yo-yo years. They have all been having growth stair-stepping down. It is very weak growth with higher cycle-volatility which will give you more frequent recessions." Critically he notes, "Economies do not hang out at 0.5% or 1%. They do not get this low growth steady state muddle through recession-free kind of growth at 1%, which everybody seems to think might be possible. It is not possible. Free markets have economic cycles. they accelerate and they decelerate. if you are doing it at a very low growth rate, the odds of a slowdown going into recession are very high." Some excess truthiness in this brief clip.

 

 

 

Achuthan on how he defines stall speed:

"That is a concept we do not use that often. The Fed uses it because they are using models. We do not use models. We use leading indicators. The Federal Reserve board in 2011 came out with a study examining the idea of stall speed, you look at GDP and gross domestic income, the counterpart, which should statistically be actually the exact same thing. When they looked at all the different measures, they found that the two quarter annualized GDI growth rates going below 2% was a signal of an economy slipping into recession. When you look at that measure now, what you see is that in the second quarter of 2012 it fell below 2%. It went to 1.5% and then in the third quarter, it fell further to 0.4%. By last fall, when the unemployment rate was plunging and people did not believe it was plunging and then the Fed came out and said, hey, we will give you q-ternity... It kind of makes sense in the context of their own recessionary stall speed."

On whether the U.S. is in a recession now:

"I think that a recession began around the middle of last year. The reason I think that is because number one, the stall speed and GDI last year, and also when you look at the weakness in the indicators that define a recession -- output and income and sales -- initial jobless claims are not used to define recession. You actually use overall employment payroll or household employment, and there, if you simply look at year-over-year growth rates, what you see is they are falling. Right now on the Bloomberg I think the consensus is 160-170 for tomorrow. Even if that is true, you are going to see year-over-year payroll jobs growth go to a 16-month low. It's going the wrong direction. The headlines say jobs are improving but they are actually going down."

On what it would take to admit that he is wrong about the U.S. being in a recession:

"I think some facts, right? I am pointing out that the GDP number that you have from Q4 is recessionary. Central banks are now going to be targeting nominal GDP fairly soon, right, because in theory, they could impact the cash economy. You see nominal GDP growth by Q4 year-over-year at 3.5%, even with your marginally higher revision. Any time in the 65-year history of GDP growth it has been below 3.7, you have been inside a recession... The other thing is, you are not in a 2% economy. Everybody keeps saying it, but just because you are saying it does not mean it is true. You're in weaker than a 2% economy."

On whether a recession can exist with 0.5% GDP growth:

"Economies do not hang out at 0.5% or 1%. They do not get this low growth steady state muddle through recession-free kind of growth at 1%, which everybody seems to think might be possible. It is not possible. Free markets have economic cycles. they accelerate and they decelerate. if you are doing it at a very low growth rate, the odds of a slowdown going into recession are very high."

On whether he's going to move to London:

"No, I'm not, but the entire West is in the yo-yo years. They have all been having growth stair stepping down. It is very weak growth with higher cycle volatility which will give you more frequent recessions. Did anyone notice that in q4, it's the G6, Canada did not report. They all contracted? This is after $11 trillion worth of stimulus."

On how to explain the housing recovery:

"How do we explain it? We called it. We called it back April 2012. We said there was a home price upturn. But that does not preclude a recession. In 2001 you had a home price upturn and we actually had a recession."

On whether his critics are wrong to strictly associate him with recession:

"I think, no. Look, when we call a recession we will be associated with recession. That is fine. That is what we do. We don't call the market. We call the business cycle. I think people forget it is not easy to recognize it recession when it is happening."

On equities going to record highs right now:

"Here's the thing. In 80% of the last 15 recessions you have had an associated bear market. That is why if you hear the word recession, you say, oh my gosh, we have to run to the hills in the equity market. But in three out of those 15 recessions, we had stock prices rise through the recession. You did not have an associated bear market. That is 1980, a pretty short recession, 1945, coming out of World War II, and 1926-27, which was smack dab in the middle of the Roaring 20s. Avery different economy, a very different market, but to say that stock prices cannot rise during a recession is actually not true."

On what his weekly indicators say that most indicate the vectors toward recession:

"All the growth rates are coming down in our broad indicators. Look, let's be clear -- the Fed told you they are targeting financial assets as part of their monetary policy. They have specifically called out people's 401k's as something that they are looking to target. So, I submit perhaps some of the market prices, as they pertain to economic fundamentals, may be a little wacky, which is why when we look at leading indicators, we do not have all eggs in one basket."

 

 

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Thu, 03/07/2013 - 20:39 | 3310715 RhoneGSM
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I truly admire his ability to suffer these fools and their questions without his head exploding.

Thu, 03/07/2013 - 20:53 | 3310749 CPL
CPL's picture

The fact he assumes "the west" lol ...no.

 

Lol fuck him and the horse he rode in on.

Thu, 03/07/2013 - 21:52 | 3310894 Ham-bone
Ham-bone's picture

thanks for your insight...really great you punched out those keys for this gem.

Fri, 03/08/2013 - 05:32 | 3311418 AldousHuxley
AldousHuxley's picture

they bring out the doomers when market heats up, so banksters can buy the dip.

 

It will be well past your life time before US empire crumbles against Chinese one and even still will be top 10 in the world.

 

 

Thu, 03/07/2013 - 20:54 | 3310752 jeebus
jeebus's picture

I don't think I could do it.

 

http://www.youtube.com/watch?v=n3Ql8BzsxwU

I'd probably end up getting violent on national TV like this Greek Nazi dude.

Thu, 03/07/2013 - 21:11 | 3310786 King_of_simpletons
King_of_simpletons's picture

New definitions are needed for the "New Free Market"

Let's start with Recession.

Recession: A joyous time during an economic cycle where lot of money is to be made in the stock market.

Thu, 03/07/2013 - 22:07 | 3310928 Coke and Hookers
Coke and Hookers's picture

Recession: The asset transfer phase of the asset harvesting cycle.

Thu, 03/07/2013 - 21:11 | 3310793 McMolotov
McMolotov's picture

"Yo, Ding Dong, man, Ding Dong. Ding Dong, yo."

http://www.youtube.com/watch?v=0M4ozR8Edbs

Thu, 03/07/2013 - 21:28 | 3310833 WmMcK
WmMcK's picture

Long real physical Ring Dings.

Thu, 03/07/2013 - 22:21 | 3310954 Cult_of_Reason
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Lakshman Achuthan reminds me 16th century Nicolaus Copernicus, who correctly stated that the Sun, rather than the Earth, was at the center of the universe, but the 16th century "scientific community" ridiculed him.

Thu, 03/07/2013 - 20:40 | 3310717 world_debt_slave
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I believe cycles (economic, business) are a keynsian economists construct Austrian economists call bubbles.

Thu, 03/07/2013 - 20:41 | 3310719 Hohum
Hohum's picture

Funny, though, how GDP/total credit market debt hasn't been cyclical at all for many decades.

Thu, 03/07/2013 - 20:41 | 3310720 tony bonn
tony bonn's picture

"...Free markets have economic cycles..."

bullshit....centrally planned economies with fractional reserve banking have economic cycles.....

Thu, 03/07/2013 - 21:06 | 3310779 LongBalls
LongBalls's picture

People just don't get it. Your words are succinct. I want to tatoo that on my face.........

Thu, 03/07/2013 - 23:12 | 3311056 Too Late To Cancel
Too Late To Cancel's picture

bullshit....economies with fractional reserve banking have economic cycles.....

 

fixed

Fri, 03/08/2013 - 01:12 | 3311237 GMadScientist
GMadScientist's picture

Please point out a single period in history when we had banks but not fractional reserve banking.

Fri, 03/08/2013 - 09:23 | 3311620 falak pema
falak pema's picture

when hammu met rabi!

They invented a code and it was all about barter and the only bank in town was the hammurabi charter.

Fri, 03/08/2013 - 07:35 | 3311484 e-recep
e-recep's picture

google kondratieff.

Thu, 03/07/2013 - 20:43 | 3310723 davidsmith
davidsmith's picture

ECRI is not incompetent because they deviate from the consensus.  They're incompetent because they are too close to the consensus.  They're flunkeys of the system and use bogus concepts.  Their concepts of recession and growth are from the dark ages.

Thu, 03/07/2013 - 22:01 | 3310914 disabledvet
disabledvet's picture

you can argue this and be quite correct actually....and i applaud you for doing so. i happen to agree VERY MUCH with this recession call but indeed "the problem itself could be whether there is any meaning in 'growth' at all." imagine if we ditched the idea of GDP altogether...what a FAR better world we would be in. no more "trillion dollars for this" and "trillion dollars for that." instead when people would speak they would have to talk in a language people can understand. something like "we now grow asparagus in our back yard and it is quite good. would you like some?" since that IS what economics actually IS...not "quantitative easing" or the "LTRO" or "reverse repos" or "wild option plays." seriously...economics is nothing more than HOUSEHOLD management...and everything else is a pile of b.s. in other words "it's having a rabbit named Harold and taking a liking to the fellow for some strange reason."

Thu, 03/07/2013 - 20:45 | 3310732 jeebus
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Lakhshan doesn't know how to explain the housing bubble that is just basically companies like Blackstone buying up foreclosed homes. 

Thu, 03/07/2013 - 22:34 | 3310953 Law97
Law97's picture

A quick anecdote:  A good friend of mine has a lot of inherited oil wealth.  He has been plowing money into buying forclosed single family residences.  These are fairly nice middle-class homes that sold for around $300K at the peak.  Now he is buying them in bulk for around $100K each and turning around and renting them, sometimes even to the former "owners."  He just closed another deal in December for 83 homes in one large purchase and he is on the prowl for more deals. 

In the last 15 years his income has increased 10-fold without making a single investment decision since inheriting his wealth.  He makes well over $1 mil/year now after taxes (almost all dividend income) and has told me he literally doesn't know how to spend it all.  Last year, I suggested distressed properties and making them rentals, and he took my advice.  By the way, he said that his income only had a slight hiccup in 2008-2009 and now his income is 50% more than it was in 2007.  

So it's not just the Blackstones but a lot of wealthy investors who have loads of excess capital thanks to the stock market. 

The Fed is enabling the already wealthy top 1% to vacuum up the assets of the former middle class for pennies on the dollar. 

Thu, 03/07/2013 - 23:44 | 3311123 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Housing prices depend on location.  Prices mean reverted in places like Phoenix, Florida and some parts of California.  But in many places like San Francisco, Seattle, Washington DC and New York prices are still way above mean on a cap rate basis.

Fri, 03/08/2013 - 01:49 | 3311163 Lord Of Finance
Lord Of Finance's picture

LAW97-Your frien would make Robert Kiyosaki proud. Said friend is also puting a lot of middle class people to work with the rehabs and remodels. The top 1% is getting penny on the dollar deal. The downside is that the middle class will soon be getting the inverse of that deal. By that time your friend will be following Marselles Wallaces advice and be kickin it in the Carribean with Butch.

Fri, 03/08/2013 - 04:02 | 3311380 Notarocketscientist
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I bet the blonde tart on the bloomberg interview would go for it if your buddy offered her 10 grand cash.   Grab a kick ass room - a couple of sacks of blow - some champagne - she'd be ALL OVER DAT!

Thu, 03/07/2013 - 20:46 | 3310735 AldoHux_IV
AldoHux_IV's picture

Free markets have economic cycles. they accelerate and they decelerate.

We do not live in times of free markets. The numbers do not reflect reality. That is all.

Thu, 03/07/2013 - 20:48 | 3310737 wtf.gov
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One glaring hole in this gentleman's theory, there are no free markets.

Thu, 03/07/2013 - 20:51 | 3310745 gould's fisker
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Don't worry, BLS will fix everything tomorrow, for another month.

Thu, 03/07/2013 - 20:53 | 3310750 Seasmoke
Seasmoke's picture

It's a fucking Depression !

Thu, 03/07/2013 - 21:14 | 3310801 SusanJ
SusanJ's picture

The truth will set you free:

"The other thing is, you are not in a 2% economy. Everybody keeps saying it, but just because you are saying it does not mean it is true."

"You see nominal GDP growth by Q4 year-over-year at 3.5%... Any time in the 65-year history of GDP growth it has been below 3.7, you have been inside a recession.

"Look, let's be clear -- the Fed told you they are targeting financial assets as part of their monetary policy. They have specifically called out people's 401k's as something that they are looking to target. So, I submit perhaps some of the market prices, as they pertain to economic fundamentals, may be a little wacky."

Thu, 03/07/2013 - 21:19 | 3310810 MoneyThangs
MoneyThangs's picture

However Achtuan said this on Bloomberg and then his comments got re-printed by ZH causing even more shorts to enter the market which means we will have another huge short squeeze soon, just BTFD and stop trying to be a smartass

Thu, 03/07/2013 - 22:05 | 3310920 disabledvet
disabledvet's picture

this could be very true as well. all, the Weight of all that oil and natural gas sitting in storage. hmmmm....http://www.youtube.com/watch?v=sjCw3-YTffo

Thu, 03/07/2013 - 21:21 | 3310815 NoDebt
NoDebt's picture

So we're in another recession right now?  Compared to what?  Last year?  The year before?  The year before that?  I can't tell the difference any more.

How would you like your horsemeat burger?  Medium-shitty or extra-shitty?

 

Thu, 03/07/2013 - 21:22 | 3310821 gould's fisker
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I'd like mine with a little cat tartar with a side of Tuna shit.

Thu, 03/07/2013 - 21:44 | 3310866 q99x2
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Laksmi lower than the commentors on ZH. He's gotten to the bottom of everything.

Thu, 03/07/2013 - 23:51 | 3311138 rustymason
rustymason's picture

Macroeconomics is just this side of voodoo.

Fri, 03/08/2013 - 01:50 | 3311277 dunce
dunce's picture

This is what the people voted for. Had they voted for Romney, we would be picking up speed already. I am not real fond of Romney but he has real cred as an able administrator and no one doubts he loves our country.

Fri, 03/08/2013 - 01:52 | 3311278 KingTut
KingTut's picture

I've been following ECRI for nearly 10 years, and they are sopt on.  They have a little bit of a mainstream perscpective, but never spin their numbers.  They have BIG money riding on their calls (Greenspan was reputedly a fan), so mistakes will hurt a lot.

LA is hugely brave to make a ressecion call when Bernanke is printing a green Tsunami of nonsense money.  It's going to have an effect, yet he has stuck to his guns.  We ned A LOT more honest guys like Lakshman.

Fri, 03/08/2013 - 02:20 | 3311300 Missiondweller
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Finally an economist who gets it. He's like a two eyed man in the land of the blind

Fri, 03/08/2013 - 04:05 | 3311381 jeebus
jeebus's picture

Sarah Eisen comes off as just looking so dumb in this clip I can't even stand it. I can't handle watching even short clips of this crap anymore.

Fri, 03/08/2013 - 03:29 | 3311352 ebworthen
ebworthen's picture

The FED is intentionally crushing Precious Metal mining stocks, Gold and Silver, their own Treasuries, and concomitant savings and CD rates.

Not working on me jack-asses, no equities for me.

Fool me once shame on you, fool me twice...

Fri, 03/08/2013 - 03:42 | 3311362 Notarocketscientist
Notarocketscientist's picture

Love the DUMB BLONDE who keeps insisting the US is in recovery mode....  didn't she used to do HARD CORE porn before this gig?

Fri, 03/08/2013 - 08:45 | 3311560 smacker
smacker's picture

Yo-Yo years equal bouncing along the bottom. The proverbial dead cat bounce.

If huge amounts of central bank stimulus are having no visible beneficial effect at bringing economies out of flat-lining, there must be other causes for it. If those causes are a mixture of:

- virtually every free market is being rigged by stimulus.

- a collapse in confidence and trust of the political elites and in the banking & financial systems due to massive fraud, but not one single person held to account.

- ongoing deleveraging.

- serious lack of business and personal confidence in the future due to failure of said stimulus and reasons above.

Healthy economic activity is above all driven by trust and confidence in the markets and the future. All this has been destroyed by the political elites and their criminal bankster cronies. Yet they continue to apply the same old same old policies in the vague hope that it will work.

We are being governed by criminal madmen. THEY know how to clear the decks but they're in denial because the truth doesn't fit with their agendas.

Fri, 03/08/2013 - 08:52 | 3311569 Ghordius
Ghordius's picture

Yo-Yo is what I call churn. It's what trading desks of megabanks love, because they can extract profit from the movement - particularly by being the strongest hands around

imo the other way around: the criminal megabanksters and their paid political elites, a rot or cancer I still see centered on two great "trading places"

 

Sat, 03/09/2013 - 06:43 | 3314472 smacker
smacker's picture

Sure, churn happens when markets become volatile or - as in this case - bounce up and down along the bottom. There's always money to be made by astute people in these situations.

My earlier point was that what we're being told by the elites and their joker MSM economists each time a slight up-bounce occurs is that the economy is recovering. And when the next slight down-bounce accurs, they tell us we're slipping back into another recession. In the UK's case, the dreaded triple-dip. MSM play it out like a darned game show to get us on edge, cheering, or not. The morons on UK Sky News would have us believe that one more dose of QE might restart the engine of growth and we should be proud of the brave central bankers, ho-ho, when even the BoE itself (except Mervyn King of Inflation) admits that QE isn't working in this respect. So UK's Osborne is now bringing in Carney to turn on the QE spigot flat out. IE more of the same failed policy. Inflation disaster will follow. If it gets bad, worker unrest will follow.

As I posted here last week, they would have us believe that recession is like a light bulb...something that gets switched on/off from time to time, depending on conditions.

But it's political bunkum. The term "recession" is a political-economic construct with a very deliberately narrow definition (two successive quarters of negative GDP). But I challenge anybody to find many people or companies who feel good and confident about the future when GDP shows a +0.1% rise compared to a -0.1% fall in any quarter. In truth there is virtually zero difference between these two conditions.

The economies of the West virtually collapsed c2007-8 due to bankster and political fraud. Since then they've been bouncing along the bottom with no sign of any meaningful recovery, despite $trillions being pumped into the markets to create a false feel-good factor. It is precisely this lack of meaningful recovery that must mean the problem in the economies is not caused by liquidity problems, but something else. IMHO that is a mixture of ongoing deleveraging ('time' is the only cure for that), a complete collapse in trust and confidence in the banking system and in the political elites. The cure for the latter was always to bring the fraudsters to account to clearly show the populations that financial crime doesn't pay. But since the elites are fully paid-up members of the crime syndicate, they will never do this. So, we will continue watching the central bankers and elites doing the wrong things to solve the wrong problems and destroying our savings and wealth in the process.

This is the stuff that gives birth to revolutions.

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