Kass: Get Real and Drop the Rosy Forecasts
This blog post originally appeared on RealMoney Silver on Nov. 19 at 8:07 a.m. EST.
With the exception of a few holdouts -- such as Ben Stein, Sir Larry Kudlow and FT Advisors' Brian Wesbury -- there is finally recognition by most economic observers and market participants that if the economy isn't currently in a recession, it is likely entering one shortly.
I believe there is little doubt that the body of (growing) economic evidence will force the few remaining economic permabulls to tweak their spreadsheets, allowing for reality by year-end. (Well, maybe not Ben Stein!)
Meanwhile, those opaque financial institutions around the world, under the pressure of FASB157 and their investors, are finally 'fessing up to how badly they played the credit cycle and how their shortage of common sense contributed to a gluttonous investing behavior in which they believed their own nonsense in packaging and selling dubious securitizations and "ate their own cooking."Since I have been gone, the last few weeks have signaled a weakening domestic U.S. economy:
- Retail sales have soured -- even category killer Starbucks (SBUX) experienced negative comps.
- Industrial production has turned down.
- Credit conditions have worsened -- the triple-A portion of the four-month-old ABX Index has dropped by over 20%, to about 72.0, in the last three weeks; the double-A portion has declined over 40%, to about 40.0.
- Housing activity continued its death spiral.
- Signs of corporate profit margin contraction are plentiful, most recently by FedEx (FDX) late last week.
- Investment firms' subprime writedowns have quickened, and money market funds have made their own confessions.
- And, reflecting the changing economic reality, the equity market is souring while the bond market is sparkling.
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