David Rosenberg: The Coming Negative Export Shock
David Rosenberg has an indicator for us here that isn’t too mainstream. He says the correlation between exports and new orders could prove prescient in forecasting a recession in the US:
“I think that there may be a time, before too long, when we will walk into the office to find that they US prints a negative GDP reading on the back of a negative export shock that does not appear to be in any forecast – let alone the consensus. Look at the pattern of ISM export orders:
- April 59
- May 53.5
- June 47.5
- July 46.5
This is called a pattern. And this is a level that coincided with the two prior recessions. As the chart below vividly illustrates, there is a significant 81% correlation between annual growth in total US exports and the ISM new orders index (with a 4 month lag). So either the market has already priced this in or it is going to end up coming as a very big surprise….”
Source: Gluskin Sheff
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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24 Comments
DR’s become a stopped clock. Eventually he’ll be right about recession.
I would not use the period from late 1998 to early 2000 as analogous to the present period. If using that period as a proxy for things to come go right ahead, but irrational exuberance was rampant and fundamentals were terrible. The present time calls for a normalization of Fed policy. It is apparent by your comment that the Fed has caused moral hazard. If the Fed let things clear with minimal intervention, the global growth would most likely be a improving towards a US and Global recovery.
The hypocrisy of the Greenspan and Bernanke that they have or did not contribute to this mess is unconscionable. The are complicit in there actions, and we would all be better served if there was less not more monetary intervention. It does not solve the problem of too much debt globally, it masks it and eventually all the actions will have to be unwound.
Or we could be in a period like 1998 which showed the same magnitude of drop without a recessiom and one of the best years ever for the stock market. I’m just sayin…
Let’s be real – has there ever been a more talked about “recession” than the one we’re either in or entering (according to ECRI, Zero Hedge, Rosenberg and Hussman)????
has there ever been a more talked about “recession” than the one we’re either in or entering (according to ECRI, Zero Hedge, Rosenberg and Hussman)???? [Frederick]
Reminds me of all the silly talk of a dot com bubble or housing bubble. Another 50% decline in stock market is overdue…
Well, Frederick’s pointing out some pretty specific calls that were made some time ago and have been held on to simply out of hubris.
I think the fiscal cliff presents a fairly good chance of recession because of the degree to which *lack* of decisive action by congress can conflate the situation. If they had to act to make the situation worse, we’d be better off…
You’re ridiculous. We know how you MMTers operate. You hate finance capitalism and you want it all to collapse. You’re letting your biases impact your ability to generate rational thoughts.
Dude chill out. You’re not doing MMR any favors by acting as bad, or worse, than those you’re railing against.
+1
You’ve named four who are on the ‘recession call’. They are dwarfed by army of “slow-growth” or “rebound” crowd.
Thank you but I’ll take these four vs. the army in any battle.
It’s still (necessarily) a minority opinion no matter how prominent the names are.
JJM
Add the MMTers to the list of permabears. Those people are always complaining about the system, calling for economic decline or saying there are bubbles. Frankly, I am relieved to see Cullen reject their mentality. It got tiresome.
LVG
They complain about bubbles because they don’t like bubbles popping in their face.
They don’t understand why if no one likes bubbles they keep blowing bubbles.
My son likes bubbles…he loves the way they pop. Maybe he’s a banker or Central Banker. hmmm Maybe he’s a bull. Naaa…his middle name is Bear(true story). But he’s not a bear or bull. I just hope he gets what he earns in life.
And I wish the same for anyone who invests. They are allowed to get what they earn. Good and bad. You mess with that piece and the system is broken.
If you don’t like the Bears– then invest off of them. If there wrong then how can you lose?
The bears are the most important piece to the cog of investing. They sell to you when you want to buy. And they provide liquidity to the market when it goes to sub 1000. With out their fundamental analysis the market may have gone much lower then 666. At that point all the Bulls had no money left. Thank god for the Bears.
“Market priced it in”. You are joking, no offence intended (which means I intend to give some) ,but the market couldn’t price in the chance that it could find it’s backside.Collectively the margin of error for being wrong is huge.
The problem I see with the chart is that it does not seem to illustrate any “prescience” in the ISM export order number. For the most part the two series seem to be co-incident. And in one case–1998–the ISM number was lagging. So what are we to make of the fact that the ISM number has dropped below 50 while the actual export numbers, while down, are nowhere near their previous recessionary levels? I would propose that it is a stretch to draw any conclusions at all from this chart.
No one is as bad as this stopped clock. You have to watch this video on Roubini calling for crisis just about every single week.
http://www.ritholtz.com/blog/2012/08/roubinis-perfect-storm-a-bloomberg-highlight-reel
He’s F’ing hilarius at this point.
The only person I find more entertaining (both in general and in the on-going suppport of a call) is Hugh Hendry and his bond bubble.
I thought Hendry had been betting on lower interest rates. Did he change his mind?
Possibly? To be fully honest I haven’t follow hugh in the most recent of times- I have a tendency to go back and watch him yell at people between shaking his head while smiling condescendingly in interviews.
Just checked before hitting submit- at least as recently as may 2012 Hendry has said ‘short US treasuries if yeilds sink from their current lows’. My comment was more to how entertaining these two individuals can be and Hugh is one of my favorites if not my all time favorite financial ‘personality’
Here’s a great example of Hugh in all his flowery verbosity that I love so dear-
“Last year was generally very tough for long/short strategies and I commiserate with all concerned. But last year world class funds lost more than 15 per cent in just two months. Today they are celebrated again for making double digit returns in the last quarter even though they still languish below high water marks and their reputation for risk management, at least to those clients who have poured over their copious due diligence statements, has been sorely compromised.”
Hendry said already in 2008: Go long Treasuries but sell T-bonds/Bunds when the yield is at 2.5%.
Or we could be in a interval like 1998 which revealed the same scale of fall without a recessiom and one of the best decades ever for the currency markets. I’m just sayin…
Rosenberg’s analysis is quite good but the guy has put himself in the position of writing and analyzing data daily. His broad themes have been good but macro/ stock predictions not so much.
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