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Macro Overview

As we noted Monday, the soothing soothsayers have latched onto the few decent econo-data points amongst all the awful economic news as proof the economy is fine.

We've also heard the claim that the sudden increase in market volatility and global market turmoil were not signalling anything significant. These are a bit "head-in-the-sand" for my tastes.

A review the of the Macro data suggests recession odds remain a much higher possibility than many realize. (And no, I do not mean a "33% chance").

My pal Nouriel notes the good and bad news:

Good Economic news:

•  The February manufacturing ISM surprised on the upside going back to a 52.3 level that is the critical contraction level of “50”;

• Existing home sales were up 3% in the last month;

• January personal incomes went up 1% while personal spending went up 0.5%;

• Mortgage applications were up 3% in the last week.

• The Conference Board's January index of consumer confidence unexpectedly rose to a level of 112.5.

The Not-so-Good Economic news:

• The Q4 GDP growth estimate was revised from 3.5% to 2.2%

• Based on the Q4 growth revision all of the four components of investment fell in Q4: residential investment, business investment in software and equipment, non-residential investment in structures, inventories investment

• Inventory to sales ratios remain high – in spite of the Q4 inventory adjustment – so that further cutbacks of production to reduce inventories will be necessary in Q1 and Q2.

• Durable goods orders were sharply down in January including, most importantly, capital goods orders and shipments, good proxies for current and future investment. At current rates, real investment in software and equipment could be down 10% in Q1 alone. The sharp and unexpected fall in durable goods orders was a crucial trigger for the US stock market sell-off on Tuesday.

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There's a full parade of horribles to check out, at RGE; these are the first four  negatives of 15 or so -- check out the rest for more details . . .

>

Source:
Hard Landing Recession Ahead
Nouriel Roubini
RGE | Mar 02, 2007
http://www.rgemonitor.com/blog/roubini/181123

Thursday, March 08, 2007 | 04:54 AM | Permalink | Comments (20) | TrackBack (0)
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Comments

not sure why anyone would foloow the opinion of a permabear. too inflexible for me. always too negative.if you listened to some, you would be in gold igots and live in a cave. Not sure why some people just have such a negative bent. maybe they desire the good old days of buying stocks for 6 and 7 times earnings and interest rates at 14 and 15 percent. not sure really. maybe a little bit of schadenfruedism going on there. they re right every so often, and then they become "gurus". but no one brings up the fact that they have been bearish for years on end. other than last weeks hic up, this market is the best in 7 years. Its been on a tear. if the perma bears followed through with their convictions, i can only conclude that they have been residing in the house of pain for the last two years. this market may be going higher if this rate cut talk gets some legs. things really aren 't all that bad except for those hedgies reaching for yield that bought those tranches of of sub prime paper. other than that, things will work themselves out and your US economy will continue humming along. Recessions come and go and in looking backover 35 years of investing, they are merely speed bumps on the long road of lifetime investing. I read recently with interest of a Pimco manager selling his house and moving into an apartment obviously fearing the worse to come. What is the point of living if you don't live? Let s see what happens....but will we go into a mutli decade post 1929 type of depression? I am betting not.

Posted by: mark | Mar 8, 2007 7:37:54 AM