Eight Reasons There Won't Be a Recession

Let me give you a list of reasons why we won't have a recession. Lots of these ideas came from Ed Hyman at ISI, some are from Jason Trennert at Strategas, and some I figured out myself.

Oh, before I start, my granddaughter Lola Jane, Uncle Dougie Kass' honorary niece, has noticed I have not mentioned her for a few emails. Even at 17 months of age, she is not to be messed with, so Lola Jane, this one is for you. (And it is true that I read Doug's missives to her, but only when she won't sleep.)

1. The four-week moving average of unemployment claims, which come out later today, have been bumping around 350,000. At 400,000, we will probably be at 0% growth, so claims are still showing sluggish economic growth. The monthly Bureau of Labor Statistics jobs report is still showing job growth, and the last recession saw more than 200,000 job losses per month.

2. There is usually massive inventory liquidation going into a recession, and we haven't seen evidence of that yet. It could be that the system is much better in inventory management, but we haven't seen the customary sell-down in inventories.

3. Interest rates are historically low worldwide, and after Ben's testimony yesterday, it is obvious that U.S. rates are going lower. The Fed has been pumping massive amounts of money into the system, as shown by the rapid growth in M2. My bet is the European Central Bank will also capitulate and lower rates before long. The fed funds rate equivalent in the eurozone is 4%, and while I think it needs to be reduced to spur growth, 4% isn't a killer. There is a lot of noise about a stagflation environment developing. The last bout of stagflation in the 1970s saw interest rates/inflation at almost 14% and near double-digit unemployment, so I think the hysteria is a touch premature.

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Vincent Farrell Jr. is a principal of Scotsman Capital Management. Prior to joining Scotsman in April 2005, Farrell was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships. He is a regular guest on CNBC as well as other national print and broadcast media.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.