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The Recession Is Coming   (April 2007)

Correspondents (Jed. H. and James D.) referred me to Mish's 3/30/07 post on "Foolproof Recession Indicators." I have long been a reader of Mish and recommend his blog highly--and this entry especially, for the charts are very compelling.

Since Mish has tied up the chart-based evidence with a silver and gold ribbon, I've assembled indicators which may appear anecdotal but which are just as foolproof.

1. Fed Chairman Ben Bernanke has reassured the nation and the markets that "recession is unlikely." The fact that the Chairman feels the need to offer such assurances on a daily if not hourly basis reflects nothing more than his deep conviction, of course...

But one does have to wonder just how far and fast the global stock markets would fall if Mr. Bernanke were to pause and then announce, "Actually, a recession is guaranteed, baked in, coming down the pike, in the works, right around the corner, choose any analogy you like--in fact, it's already started." Perhaps 10%? Maybe 20%? Or is 30% a more reasonable estimate of just how much the market would plummet if the Fed Chairman spoke the truth?

2. Frequent contributor U. Doran sent in this link to a sure-fire, never-fail recession indicator-- the sawmill.

3. Doran's comments on auto sales are also an eye-opener:
My favorite leading indicator is in the 81 & 91 recessions Porsche went from 45,000 to 5,000 sales. See notes here on delusion / denial of cars on consignment vs dumping. Subprime Mortgage Collapse Eviscerates California Headquarters.
4. Mr. Doran also provided three other important recession indicators:

emerging markets swoon

Tech IPOs sagging

Oil markets tightening, Oil to rise over $65/barrel
Iran's Long Term Energy Problems

5. And everyone's favorite subject of denial, the subprime mortgage meltdown:

Mortgage crisis hits million-dollar homes

Observations on the Coming Financial and Economic Hard Landing (subprime contagion spreading quickly)

Asset Deflation 6: The Death of Real Estate (written by a real estate broker in N. Calif.)

But there won't be a recession, so just move along, folks, nothing to see here but a typical subprime meltdown spreading like wildfire to all other debt. . . oops I mean, being "contained" safely by "experts." So just get out there and spend, spend, spend like you have every month for years, and rest secure in the knowledge that should we need a couple hundred billion dollars to smooth things over then we'll just sell our good pals in China, Saudi Arabia and Japan another mountain of Treasury bonds and ticking mortgage-backed securities and CDOs.

For more on this subject and a wide array of other topics, please visit my weblog.


copyright © 2007 Charles Hugh Smith. All rights reserved in all media.

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