Greenspan’s Real Conundrum: Is US Recession Dead Ahead?

In one of the recent reports, Merrill Lynch had a graph of YoY change in Conference Board’s Leading Economic Indicators (LEI) and the future growth rate of the US GDP in approximately 6 months. They show a high correlation.

At the time of ML report the latest LEI data was not out. Here is the recent history:

Growth Rates of Conference Board’s Leading Economic Indicators

2000 1.00%

2001 -0.80%

2002 2.20%

2003 1.30%

Apr'04 4.9%, YoY

Mar'05 -0.80%, YoY

Jun'04-Mar'05 -1.6%, Annualized

The growth rates for 2000-2003 are taken from a source that does not specify if the rates are YoY at the year-end or average growth rate during the year.

My best guess is that it is the latter and some of the data confirms it.

I am sticking to my forecast of last October of recession in 2005 and depression in 2006. Recession might begin as early as June 2005. There is a 75% chance of recession to begin in 2005H2.

Ignore the soothing words of soft-patchers. One of the soft-patches may be a prelude to quicksand. Please don’t take Greenspan and ECRI seriously about their forecasts of the US economy. I can document their bullish bias.

GREENSPAN, THE PICKPOCKET & BUSH TURKEY WITH GREEFI GRAVY

I am watching Todd Buchholz talking about the American E-Con. Earlier he said, “I hold on to my wallet when Greenspan opens his mouth in public.”

Then he took out his wallet and held it tightly in his hands. You better hold it with both hands.

To call Greenspan a mere pickpocket is to call Hitler a street thug.

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Over the past 3 years, Americans have been served a very dry Bush E-Con turkey with a generous serving of Greefi Gravy. What is Greefi? It is the home refi cooked in Greenspan’s, E-Con witchdoctor’s, voodoo pot.

Everyone knows the role that Greefi Gravy has played in keeping the E-Con above water over the past three years. Well, all good things must come to an end; pretty soon the E-Con will run very low in Greefi Gravy as can be seen from the attached charts (thanks, Bruce, for the data source).

Fingerprints of Greenspan’s easing and tightening are easily seen in these graphs. Greefi as a percent of the GDP is heading down from the high of 30% to 3% in coming quarters. Oh, boy!