Guest Post: Who Moved My Recession?

Tyler Durden's picture


Submitted by Alexander Gloy of Lighthouse Investment Management,

Lakshman Achutan, ECRI (Economic Cycle Research Institute) made a recession call for the US on September 30, 2011 (and confirmed it multiple times since then).

Gary Shilling, titling his August letter “Global Recession”, says “We are already in a global recession.”

However, equity markets don’t think so, with the S&P 500 trading less than 10% away from a new all-time high. Only one side can be right. Could this be a repeat of October 2007, when the S&P 500 hit new all-time highs mere six weeks before the “Great Recession” began? Are so-called leading indicators, as used by the Conference Board, still reliable?



SUMMARY: Established leading indicators incorporate questionable input. While there is no perfect indicator, a combination of the ones tested above, weighed by accuracy, confidence and timeliness should produce a good reading.

The higher-confidence indicators say that 2011 was a “close call”, but we are currently not in a recession. However, a lot of lower-confidence indicators are showing readings consistent with a severe recession.

It is entirely possible we narrowly avoided a recession in 2011 and are heading towards another one in 2013. Currently, however, combined indicators suggest only a 10% likelihood of being in a recession at this point (September 2012).

The US economy is experiencing the slowest recovery of the past 50 years (both from an employment perspective as well as from GDP growth). After looking at total credit market debt outstanding I concluded this was due to a decline in the marginal utility of additional debt (see this post). Some readers have mistaken me for an advocate of more quantitative easing. I should have been more clear about this: I do not think printing money is an appropriate remedy for economic woes. Enabling the government to finance fiscal largess at artificially low rates is unlikely to cure problems related to excessive debt levels.


Full report (PDF):

105644251 Lighthouse Special Report Who Moved My Recession

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 09/11/2012 - 20:24 | 2783716 boogerbently
boogerbently's picture

....inverse yield curve.

Tue, 09/11/2012 - 21:26 | 2783869 AldousHuxley
AldousHuxley's picture

for 0.1%...recession ended when Fed began QE

for 99.9%....recession never ended as unemployment rate is > 5%


Tue, 09/11/2012 - 21:53 | 2783932 Meesohaawnee
Meesohaawnee's picture

and just think if they do QE3

Wed, 09/12/2012 - 00:41 | 2784260 rocker
rocker's picture

Gary is mostly right. Bonds are still good to his play. Copper is short to him too. Now, time to read his stuff.

Wed, 09/12/2012 - 01:56 | 2784352 hedgehog9999
hedgehog9999's picture

25% of Americans have been in recession for a few years now, the other 65% are only having a slow down, as for the top 10% what is a recession? ............hence SPX at 1400+

Wed, 09/12/2012 - 03:33 | 2784442 trebuchet
trebuchet's picture

In this new normal unemployment is not coming back down to 5% again


The fed's long run trend growth for US was lowered: its 2.2 %.  => 6% -6.5 % as "full employment" mandate

Tue, 09/11/2012 - 20:25 | 2783717 Snakeeyes
Snakeeyes's picture

Sure looks like US/Euro recession to me. And China is slowing too.

Tue, 09/11/2012 - 20:25 | 2783718 surf0766
surf0766's picture

moved it?  gas just hit $3.89 here. up 11 cents in 2 days. economy is grinding to a halt.

Tue, 09/11/2012 - 20:57 | 2783802 adr
adr's picture

Gas was $3.69 near me yesterday, $3.99 today. $.30 overnight. Did a whale fart in the gulf?

I drove 15 miles south, $3.69, another ten miles, $3.99. I guess the one station didn't get the memo.

Seriously, what the capital F is going on?

Tue, 09/11/2012 - 21:07 | 2783826 surf0766
surf0766's picture

velocity and debasement

Tue, 09/11/2012 - 21:45 | 2783917 AldousHuxley
AldousHuxley's picture

gas buddy heat map


on the coasts, it is  > $4.20 /gln


Oil is America's largest import...up to 30%.


Cost of oil in Gold VS US DOllars:


so Arabs made a move away from US banksters to Euro and set their own bourse:


Thus war against "terrorist Iran"


Here is the countries are the ones with oil under the ground not bunch of paper in bank balance sheets.

Wed, 09/12/2012 - 06:52 | 2784696 Ayn NY
Ayn NY's picture

Rich countries have a lot of oil in the ground AND no regulations to prevent them from accessing it. We have plenty of oil and natural gas in this country.

Tue, 09/11/2012 - 21:13 | 2783838 Dasa Slooofoot
Dasa Slooofoot's picture

shot up 25 cents by me over night.  i thought i misread the sign at first. 

Tue, 09/11/2012 - 21:20 | 2783853 surf0766
surf0766's picture

Anyone have an idea on the real reason for the spike?  Other than them trying to cause a crash to postpone the election...

Tue, 09/11/2012 - 21:56 | 2783942 Meesohaawnee
Meesohaawnee's picture

and just think if they print more.. whoopaa

Wed, 09/12/2012 - 00:45 | 2784278 dbomb12
dbomb12's picture

I pay 20 cents a gallon for gas, when I trade 2 pre 1964 silver dimes for some worthless dollars.

Tue, 09/11/2012 - 21:36 | 2783881 Ineverslice
Ineverslice's picture

$4.35 for reg at mine.

    Aloha Baby.

Tue, 09/11/2012 - 21:57 | 2783943 Meesohaawnee
Meesohaawnee's picture


Tue, 09/11/2012 - 23:59 | 2784181 Colonel Klink
Colonel Klink's picture

I keep misspelling it, I thought it was Shitcago.

Wed, 09/12/2012 - 01:51 | 2784358 hedgehog9999
hedgehog9999's picture

everybody shit cagos

Tue, 09/11/2012 - 20:26 | 2783719 BORT
BORT's picture

On July 30, 2012, President Obama’s Chairman of the Council of Economic Advisers, Alan B. Krueger, delivered remarks on “Six Challenges for the Statistical Community” at the American Statistical Association’s 2012 Joint Statistical Meeting in San Diego, California.

In his remarks, Chairman Krueger gave six challenges that are important for the statistics and policy communities.

Tue, 09/11/2012 - 23:58 | 2784178 Colonel Klink
Colonel Klink's picture

Krueger, Krueger....

Nope, got nothing.  I'm sure he's at least another Ivory Tower economist who's done DICK except academics and pushing papers.

Tue, 09/11/2012 - 20:26 | 2783720 Yes_Questions
Yes_Questions's picture



Why wouldn't median wages against (real) inflation factor in?

Doesn't disposible income actually count for something in a consumer economy?

Or is the presence of consumer credit over the prior decade some type of substitute for disposible income?


WTF? Who moved my important data?

Tue, 09/11/2012 - 20:42 | 2783770 LetThemEatRand
LetThemEatRand's picture

"Or is the presence of consumer credit over the prior decade some type of substitute for disposible income?"

That is exactly the bill of goods sold to the Western middle class.  The banks that own Congress managed to convert the largely unsecured or otherwise bad debt into future taxation of the middle class (the wealthy by and large have little taxable "income") while they compete over which of them has the largest yacht.  And now the corporate owned media frames the debate over which "entitlements" should be eliminated.  The blue pill taking public sits in their eventually-to-be-foreclosed homes watching the NFL on their paid-for-with-credit big screens, debating which immigrant group or class of welfare recipients or union is to blame.

Tue, 09/11/2012 - 21:55 | 2783937 AldousHuxley
AldousHuxley's picture

watching the NFL on their paid-for-with-credit big screens, debating which immigrant group or class of welfare recipients or union is to blame.


this is real America....

in America, you have food stamp receiving $20/hr illegal immigrants with broken big screens which break right after 2-3 year warranty (manufacturers used cheap immitation parts to save pennies on capacitors which end up damaging the entire LCD display) angry at Walmart that they can't watch MundoFox.

Tue, 09/11/2012 - 20:29 | 2783727 realtick
Tue, 09/11/2012 - 21:41 | 2783906 Zero Govt
Zero Govt's picture

too right

Wed, 09/12/2012 - 01:42 | 2784346 Just Ice
Just Ice's picture



Its efforts are not simply futile.  They are destructive.  Our Fed, by being the great destroyer of American purchasing power via QE, threatened QE, ZIRP, is succeeding in ripping off not only the society's prudent, the savers, but also society's poor.  Loss of purchasing power is harmful to importers, (and US does import more than it exports), workers who receive dollar based paychecks, unemployed who receive unemployment or disability checks, elderly who receive social security checks.  Even those receiving food stamps lose out from dollar debasement since their EBT cards acquire less and less actual food for family consumption.  Debasement and devaluation is flatly a destroyer of purchasing power and standard of living. 

U.S. has an official "strong dollar" policy.  These idiots who have been entrusted with the oversight of the dollar need to start taking steps in support of that policy before they succeed in total decimation of the U.S. economy, and its people.

Those connected cronies who've received the freshly created monies first, or hold huge stock portfolios, have of course had their purchasing power maintained by virtue of the stock market prop job (by presidential working group, Fed, QE counterfeit, whatever).  As if all the bailout malinvestors and propped stock market beneficiaries will ever spend efficiently or sufficiently to set the economy right.   

Tue, 09/11/2012 - 22:00 | 2783952 AldousHuxley
AldousHuxley's picture

it is not just obama but neo-liberal economists advising both parties' presidents last 30 years.


all it was subsidy to financial sector so banksters can get rich.


you can't shift manufacturing overseas and then at the same time import millions of unskilled labor from Mexico.

Wed, 09/12/2012 - 00:48 | 2784284 dbomb12
dbomb12's picture

Not unless you are trying to overload and collapse the system, Thanks Cloward and Piven

Tue, 09/11/2012 - 20:32 | 2783738 Winston Churchill
Winston Churchill's picture

Data is so..o...o last century.

Never fear,Uncle Ben is here..

Tue, 09/11/2012 - 20:32 | 2783739 yogibear
yogibear's picture

Doesn't matter Bernamke and the Fed will keep the QE going and encourage banks/dealers to buy stocks the indexes with the printed money.

Print and print and print, up stocks go. Dollar keeps declining.


Wed, 09/12/2012 - 01:03 | 2784307 Clashfan
Clashfan's picture

Mojo Nixon called it years ago:

Tue, 09/11/2012 - 20:33 | 2783743 DCFusor
DCFusor's picture

All time highs?  Oh, priced in fiat, not something real like oil or gold - or food.  I get it - agenda.  We've been in an actual recession for quite some time now...

Tue, 09/11/2012 - 20:37 | 2783753 e-man
e-man's picture

Moving economic downturns is part of the electoral process.  Hey, we should have elections every year!

Tue, 09/11/2012 - 21:45 | 2783915 Zero Govt
Zero Govt's picture

how about we drop the goon squad (politicians) and make our own decisions

Tue, 09/11/2012 - 20:37 | 2783755 youngman
youngman's picture

Just vote me as one who has a very strange feeling about the stock market....volume way down...HFT´s...I just do not see the value....but it keeps going up...I am gold and silver...on the sidelines...

Tue, 09/11/2012 - 20:38 | 2783759 The Watchman
The Watchman's picture

Dude where's my job?

Tue, 09/11/2012 - 20:41 | 2783767 Westcoastliberal
Westcoastliberal's picture

Forget "recession", with 43 million on food stamps and real unemployment at 24%, if we're not in a depression then the word needs re-definition, or come up with a new word for the widespread suffering of Americans in the current decade.

Tue, 09/11/2012 - 22:07 | 2783970 Ponzi_Scheme
Ponzi_Scheme's picture

46 million on food stamps.
112 million receiving government assistance in some form.

Who cares ?.

Wed, 09/12/2012 - 02:07 | 2784375 Assetman
Assetman's picture

The fallacy-- as the original post seems to miss entirely-- is that one should build a higher reliance on some indicators over others because of what has happened in recent past recessions.

In reality, we have entered a period where our monetary and fiscal authorities have virtually FLOODED the system with unprecidented stmulus and liquidity-- only to see economic activity stall WELL BELOW any accepted peak capacity utilization levels-- this is far from your ordinary inverted yield curve recession-- though that's how we entered 2008.  This is globally-driven economic weakness in an already very slack, very highly deflationary environment.  So why should we rely on the old "tried and true" indicators that worked well under VERY DIFFERENT conditions?

Ben Bernanke undertands the challenges of this current crisis, though he probably uses the Great Depression as too much of a guide to shape policy and prescribe solutions that actually deal with the heart of the problem (too much debt).  As such, his solutions are feeble attempts to derail the inevitable.  

But the stock market is up, so that will help consumer confidence.  And there in no such thing as structural unemployment in this economy. </sarc>.


Wed, 09/12/2012 - 07:05 | 2784731 Ayn NY
Ayn NY's picture

That's the point of food stamps, to hide the decline. We are conditioned to believe that a depression means soup lines and men selling apples on every corner. Those conditions are there but hidden by the use of monopoly money.

Tue, 09/11/2012 - 20:45 | 2783776 q99x2
q99x2's picture

Those who control the indicators control the recession (depression.)

Reality is in the eyes of the beholder but this time even God's confused.

He usually throws a fit when that happens.

Tue, 09/11/2012 - 20:52 | 2783784 pamriallc
pamriallc's picture

2013 will be the new 1969-1974 for stock market disruption.

Tue, 09/11/2012 - 20:58 | 2783799 DormRoom
DormRoom's picture

It really depends where are you are on social economic spectrum.

If you're part of the long term unemployed, it's felt like a depression.

If you're middle class, and have been laid off, it feels like a recession.

If you're a 1%, you're ilikely n jubilee, because Central Banks are providing unlimited liquidity, that has flowed into the markets.

tl;dr  If you have surplus capital, you're doing great.  If you're using up capital to get by, you're struggling. If you have no capital, and are surplus labor, you are f*cked.   Each year the gaps get wider.

Tue, 09/11/2012 - 21:00 | 2783807 dryam
dryam's picture

I'm so ready to short the following:


1)  Apple

2) Apollo Group (University of Phoenix)

3) GM

4) Toll Brothers

5)  SPY

6) Tried to short Groupon at 13, but couldn't get any shares

Tue, 09/11/2012 - 21:13 | 2783839 DoctoRx
DoctoRx's picture

To be fair, Achuthan said a year ago that the US was tipping into recession.  He didn't get pinned down an a time frame.  He may just be blowing smoke now b/c he couldn't delay said recession call onset any longer, but his latest comment was that the US went into a mild recession this spring (understood, w/in the greater down-cycle, but he's limited to NBER's definition) which probably would not be recognized until, say, December (wouldn't the President like that timing!).

So, he has put ECRI's reputation on the line-- and again for ZH, he is saying that NBER is going to recognize that a recession began this spring.  This has gone beyond forecasting that a recession will begin-- where an  85% historical batting average for ECRI is great. 

Either ECRI will prove marvelously accurate or very lucky; or it has dug itself a very big hole. 

Re Mr. Gloy's point about WTF re stock markets rising despite alleged recession, well that's what they do when the expect lots more money printing.  Big deal.  Tyler's been onto that since he/they founded ZH.  Equity markets rise nowadays during recession specifically because recessions eventually end, but the money printing remains.  Gloy obviously has not been watching the gold:equity ratio, which does not show the equity market rising apart from the jejune aspect he's looking at by measuring stocks in fiat currency units.

Sorry, this post is a FAIL.  Tho it is big of Tyler to let someone post who refers to stocks in nominal terms w/o tying them to gold.

Tue, 09/11/2012 - 21:21 | 2783858 miker
miker's picture

The 'bottom' 95% are all feeling various levels of pain.  Retirees aren't making anything on their savings and cost of living (food, energy, medical) continue to rise.  Close to retirement are sweating it becasue they likely haven't saved enough even if they have steady employment.  Middle aged workers don't have any savings and with younger families are sweating rising prices.  Recent college grads and 20 somethings are screwed; working minimum wage jobs even with college degrees.

The country is in Depression.  Our government leaders have made a decision to lie about it in hopes that people won't notice.  And of course Bernanke and the banks have bankrolled the stock market rise to produce wealth effect (which is only seen by the top 5% who don't need it anyhow.

I think alot of these numbers are manipulated and a few probably outright lies.  Depending on the source of data, even the President could issue a secret order for government control/manipulation of the data based on national security. 

The whole thing is quite crazy-making if you're a person that likes to follow along with what is happening as well as predict where things might be headed.  94% of the population doesn't do this so the government can get away with the manipulation.

I think there is a real possibility for what I term an economic stall.  That is to say that economic demand continues to drop and will reach a point where the drop will rapidly accelerate as people collectivley realize we're all screwed.  As that realiziation accelerates, demand will fall away and business that have been squeaking by will fail.  Even large corps will see huge drops in demand and have to layoff more.  Then the spiral will feed on itself. 

I think this scenario is possible in spite of what the Fed and or Congress might try to do with monetary or fiscal policy.  In essence, once the veil has been lifted for enough people to accept our predicament, the economy will crash. 


Do NOT follow this link or you will be banned from the site!