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Recession Naysayers Hold Out

Taking a contrarian view can be a grizzly experience.

It is for MKM Partners' economist Michael Darda, who believes all the recent hype in the markets about a recession is overblown. Darda, a frequent business television guest, appeared on CNBC Jan. 2 sporting a new beard. Darda told that he will not shave the beard "until the recession talk ends or housing recovers, whichever comes first."

Darda is a member of a small and increasingly frustrated crew of economists and market strategists who refuse to jump onto the recession bandwagon, despite its increasing popularity.

Since 2008 began, market participants have become ever more pessimistic about prospects for the U.S. economy to pull out of the current housing and financial crisis without contracting. The housing market continues to decline as borrowers face more mortgage-rate resets and as bad loans mount on lenders' and banks' balance sheets.

Michael Darda
Credit: CNBC

The glum sentiment intensified as economic reports last week showed that the woes of housing and mortgage-backed securities are spilling over into the broader economy. The manufacturing sector is declining, and unemployment is rising at a rapid clip. Also, warnings of layoffs swirled at Wall Street firms such as Merrill Lynch (MER) and Citigroup (C), and oil surged to $100 per barrel.

The combination made for a gloomy start to 2008. Stocks fell in the first week of the year, as investors fled to the safe haven of Treasury bonds, and market participants bet that the Federal Reserve would take more action to cut interest rates.

But the gang of optimists say a few negative data points do not a recession make. And they're rather used to swimming against the negativity tide.

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