Lakshman Achuthan has someone to take the other side of his recession bet.  Unfortunately for him, it’s no lightweight.  One of the global economy’s best barometer’s of growth is now saying there will be no recession (despite their recent dip in earnings and cautious outlook).  CNBC reports:

“We don’t see a contraction; we don’t see a recession,” FedEx’s Smith said at a meeting in Columbus, Ohio, where General Electric unveiled research on midsized companies.

“It’s steady as you go, slow growth,” Smith said. “Not contraction.”

I still think the whole double dip debate misses the point and takes the focus off of the true cause of this recession.  We have been in a classic balance sheet recession this entire time.  There was no recovery.  There was only massive government stimulus that papered over the weakness in the consumer who has been de-leveraging.  The key from here will be understanding the impact of any potential deficit reduction between now and 2013 (when I believe the BSR could be over) and also keeping an eye on exogenous shocks as they could turn slow growth into negative growth.


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

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.

More Posts - Website

Follow Me:

  • Owen

    If I’m not mistaken, Fedex was discussed during Lakshman’s recession announcement on CNBC last Friday.

  • Steve Hamlin

    “2013 (when I believe the BSR could be over)”

    Cullen – have you written anything about that topic? I’d be very interested to read your thought process.

  • Thomas

    Smith is as good in forecasting as Bernanke:
    His forecast in 2007:

  • Bill

    Thomas, that’s an awesome observation, thanks.

  • Octavio Richetta

    A+! LA is interested in making the right call. In this sense, he has and an advantage vs. Smith.

  • quark

    He must be referecning the German economy.

  • Chet

    The guy is the CEO he’s not going to say things are slowing. What would happen, his stock price would collapse, people would buy less, ship less packages. These guys always put the sunny side up, their future employment demands it. You want a true reading? Ask your local driver how things are.

  • KarmaPolice

    Of course there isn’t going to be a double dip.


    Housing bottomed last quarter and the amount of “shadow” inventory is grossly exaggerated.

  • JRH

    As Lakshman Achuthan has pointed out:

    1) The ECRI was 180 degrees ahead of the consensus in calling the turn this spring.
    2) They are now something like 90 degrees ahead as the consensus is coming to them.
    3) CEO’s and CFO’s are not macro forecasters – in fact, they are the ECRI’s paying clients, and they often tell the ECRI that they are “crazy” because the ECRI’s forecasts will conflict with their companies’ internal forecasts.

  • Wantingtoretire

    Agree Chet & Octavio, I always look to the motive behind the message. And remember attached to every opinion is an asshole, or so I have told…………..

  • Malmo

    “2013 (when I believe the BSR could be over)”

    I’ll take the other side of that bet, especially given the deficit hysteria that is sure to run significant interference well into 2013 and beyond.

  • Kid Dynamite

    FedEx is busy because I keep ordering stuff on and having it shipped to me instead of going to stores!

  • ES

    Yes, me too. With all the free shipping that became popular last 2 years and non sales tax why would I ever want to go to a store again.

  • KB

    Thomas – good point. The history of prediction accuracy implies ECRI view has more weight. The whole FedEx business is not good as leading indicator – it’s a coincidence indicator.

  • arrrgh

    FDX topped at 98 in early july. hit 64 this week (today at 71). down about 35%. somebody doesn’t like their prospects.

  • GreedsGood

    Mr. Smith of Fedex, much like Bernanke and most of the sell-side economists have a prerequisite optimism and a societal “responsibility” to keep their comments positive to avoid causing a self-fulfilling prophecy

    As Soros has said- paraphrasing, “the financial markets have a surefire way of predicting the future, they cause it”

    I don’t necessarily believe that lying or cushioning reality is actually responsible in the long-run, but it does seem to be the M.O. of our leadership (as well as Euro-zone).

    ECRI’s comments seemed to be more about a tell tale pattern which indicates the start of a vicious cycle (business) which cannot be stopped. If this is truly the case, then the “muddle through” until the BSR has receded won’t necessarily continue. It could actually get very ugly again as fear of a pull back breeds saving, austerity and uncertainty.

  • Frenchy
  • Malmo

    I, for one, hope we do get an “officially” declared recession. That will likely be the only chance to get these Beltway morons to do something constructive vis a vis fiscal policy.

  • Mercator

    There is so much cash out there that as soon as a hole widens enough, people move from preservation to risk. I haven’t counted the cycles in the last year, but traders are making a killing on the investors. Dog eat dog market.

  • Malmo

    Risk on does not mean venture capital working in the general economy and thus job creation. Massive speculation? Sure.

  • quark

    If these are true investors you haven’t made a killing on anyone except other traders.

  • JD

    How was Smith’s forecast wrong in the link you provided? FedEx dividends have increased steadily since 2007:

    Sounds like his prediction for Fed Ex was spot on. I think he knows his own company.

  • Vince

    Is Smith on Obama’s campaign team? We are thirteen months away from the 2012 election. Obama can care less about the common folk suffering so what can he do? Fudge all the important economic numbers to get the market higher and then three months later revise everything. By that time nobody will care. Investing is a dirty game but the only game in town. If you believe an of these number you might as well believe in the tooth fairy as Sam Zell once said to a reporter on CNBC.

  • Ted

    I was a big fan of Amazon too until I came across this recent article:,0,7937001,full.story
    As a native Pennsylvanian it did not sit well. Understand the demands of that type of business, but at the same time I’d gladly pay a few extra bucks for them to not treat their workers like crap.

  • Andrew P

    Everything will be fine, until the Eurozone implodes and takes the entire world financial system with it. When it finally goes, it will go very fast – probably within a few hours. Too fast for EZ politicians to agree on any fix.

    I am actually surprised that the EZ hasn’t had any serious bank runs yet. People over there are awfully complacent.

  • Conventional Wisdumb

    Being a contrarian is such a lonely place to be especially when it comes to the US economy. You get called a pessimist, a doomer, betting against America, etc.

    But when you destroy people’s life savings with your pathetic forecasts you are still held up as a paragon of virtue because “no one else saw it either”. As long as you are a member of the consensus herd, your performance is irrelevant.

  • Andrea Malagoli

    Personally, I think this debate about another recession or not is somewhat irrelevant. First, the first recession only ended for company CEOs and nobody else. Second, a slow growth environment will suffice to cause poor returns on equities for some time to come. There is an apparent paradox going on right now. All of a sudden we praise companies with a large cash balance sheet. When I was going through my MBA many (unspecified) years ago we were been told that too much cash was bad. How times change. Seriously, one needs to worry that all this cash is not being reinvested in business innovation, which is bound to hurt at some point.

  • Ray

    June 20, 2007: “FedEx expects earnings to be $1.45 to $1.60 per diluted share in the first quarter of fiscal 2008 and $7.00 to $7.40 per diluted share for the full year”.

    Actual FY: $3.65

  • Blissex

    «Obama can care less about the common folk suffering so what can he do? Fudge all the important economic numbers to get the market higher and then three months later revise everything.»

    The problem is only about the richest 50% of registered electors actually vote, and registered electors are the richest subset of those with the right to vote, and those with the right to vote do not include immigrants, legal or illegal, who are usually poor. Even worse, the 5% who make campaign donations are the richest of the 50% who vote.

    Therefore there is very little political gain to worry about jobs.

    The 50% of registered electors who vote have well paid, mostly safe jobs (even if some of them sometimes lose them and then turn left…), are real estate landlords or have significant stock retirement accounts, and really worry about getting low-tax or tax-free capital gains on their property.

    America being America nobody gives a damn about the unproductive, lazy jobless losers beneath them, unless those exploitative parasites try to STEAL THEIR PROPERTY with taxes.

    My usual Grover Norquist quote:
    «The 1930s rhetoric was bash business — only a handful of bankers thought that meant them. Now if you say we’re going to smash the big corporations, 60-plus percent of voters say “That’s my retirement you’re messing with. I don’t appreciate that”. And the Democrats have spent 50 years explaining that Republicans will pollute the earth and kill baby seals to get market caps higher. And in 2002, voters said, “We’re sorry about the seals and everything but we really got to get the stock market up.»

    American politics is the politics of the “F*ck YOU! I am fully vested” class.

    «the EZ hasn’t had any serious bank runs yet.»

    Amusingly Great Britain had a serious bank run 2-3 years ago, at the height of the crisis, and most people seem to have forgotten. That’s how bad things are.

  • Blissex

    «the first recession only ended for company CEOs and nobody else.»

    My impression is that the 1980s recession has not ended yet, except at times for property owners, and then only because of endless margin-debt financed asset price bubbles engineered by the Republicans, with the complicity of the Democrats, because there is no other game in town.

    If one looks at graphs of after-inflation GDP (mostly flat) and debt (climbing fast) over the past several decades it is damn obvious that GDP growth has been pretty small, and entirely due to most “families” funding the consumption part of GDP from debt. Without that GDP growth would have been probably zero or even negative after inflation, never mind GDP-per-head, which would have been negative or significantly negative. And there are well known graphs from Brookings that show that per-head median income of male workers has shrunk by over 30% in 30 years anyhow.