ACHUTHAN: THE SLOW-DOWN WILL CONTINUE
As everyone focuses on the debt ceiling and how far the politicians will take this game of chicken, the economy continues to slow. In a recent interview Lakshman Achuthan of the ECRI, one of the few people who predicted the recession, economic recovery and the recent slow-down, still believes the economy will remain weak. Achuthan described the environment as I have described it over the last few years. The US economy is growing, but exogenous shocks are creating outsized risks. The key takeaway here:
“I’d watch the growth rates of the leading indicators. The key takeaway for everybody watching is that they haven’t turned up. Until these things turn up in a pronounced, pervasive and persistent way, which you can watch; until that occurs, we are still going to be slowing. And when we’re slowing, we’re more vulnerable to unforeseen shocks or maybe foreseen shocks. Unforeseen and foreseen shocks, shocks one way or another.”
Source: Reuters
From what I understood from Bernanke’s exit strategy recently, his plan was to unwind the FED’s balance sheet over the course of the next 3 to 5 years depending how the market reacts.
Having so many assets he had to take on during the crisis he now has to get rid of them.
That process won’t be easy and will slow down the recovery (if any).
So for me it is a no brainer that we won’t see a robust recovery, because even if it happened the FED would use any opportunity to get rid of all those MBS and other crap they purchased and put a drain on any positive signals from the market.
He was on Bloomberg this morning too, a bit more extensive comments.
http://www.youtube.com/user/Bloomberg#p/u/4/t_rhuRzj540
What excellent commentary! Thanks to Cullen and MS.
The profits without hiring is a trend for years, no way the US can grow jobs at a good enough rate considering the future growth of the work force, and the lack of new large scale manufacturing. The newer industries like Google, Facebook, Craigslist, and Apple, are not large scale employers. The service industries will weaken as internet marketing grows. Healthcare will try to grow in response to an aging population, its jobs can’t be easily exported, but where will the money come from? Lower tax revenue will keep the politicians resisting more help for the unemployed. Not a pretty picture.
I am newcomer to this site over the last few weeks and have found it incredibly helpful to understand the nuances of MMT and the economy. My takeaway is that the combination of gov’t spending cuts, the eurozone, slowing growth in emerging markets, increasing uncertainty, and declining confidence will lead to a recession sometime in 2012 if not sooner…my question is at what point does the market start to reflect this and when is it time to go short?
Cullen plays his cards close to the vest but does occasionally announce when his algo is risk on versus risk off. particular trading strategies are sometimes revealed by commentators, but this site does not give the type of reccs that you may be looking for.
The market reflects “this” when you are no longer solvent trying to guess when the market is going to reflect “this”……. lol. good luck!