Hussman: US Likely Entered into a Recession in Mid-2012
Leading indicators, which point to where the economy is headed, paint a different reality.
Shilling: New Recession Has Already Begun
After a rocky spring, we’ve had two consecutive months of gains in the Standard & Poor’s 500 index.
And some pros are looking for a strong fall and are hoping the Federal Reserve rides to the rescue with more “quantitative easing” at its September meeting.
But just when you thought it was safe to get back into the market, here comes Gary Shilling to throw ice water on your hopes and dreams.
Shilling, a perennial contrarian, said that when economists sift through all the data, they will say the next U.S. recession began in the second quarter of 2012.
Earlier this year, Shilling predicted a global recession would occur in 2012; now, it’s well under way in Europe and he said it already has hit our shores. Read Gold’s column about Shilling’s prediction of a global recession in MoneyShow.com.
“I think the U.S. is in recession,” he told me in a phone interview last week.
But here’s the good news, if you can call it that: He expects this to be a brief, mild, cyclical recession, not the kind we had in 2008-2009.
“I think the recession started in the second quarter and will run about a year,” he said. He predicts a decline in GDP of 3.5% from peak to trough “because I’m not looking for a financial crisis.”
Now It is confirmed by Intel: The last time Intel posted two, or even one, consecutive declines in Y/Y revenue, the recession was found to have already been in place for nearly a year, starting in December 2007.
For those who missed it earlier, Intel reported results that were just slightly better than expected, and yet the stock tumbled over 3% after hours. The reason is because despite a weak quarter which had been pre-guided down by the sellside community every so effectively, the semiconductor manufacturer saw even more weakness in Q4. Those who wish to read the details can do so here. For everyone else who is more of a visual learning bent, we present the following chart which shows the year-over-year change in Intel revenue, which shows that for the first time in 12 quarters, INTC reported a decline in annual revenue. Furthermore, there is virtually no question that Q4 will also see a revenue decline: the only question is whether it will be greater than Q3′s 5.5% Y/Y drop.
Why is this notable? Because the last time Intel posted two, or even one, consecutive declines in Y/Y revenue, the recession was found to have already been in place for nearly a year, starting in December 2007.
Intel is held by many as the canarie in the coalmine of the ever so critical tech sector, which is also a proxy for high-margin electronics products, and from there marginal demand in the economy as a whole. One can hope that the central planners have this latest recessionary confirmation under control (and with China sternly refusing to join the easing party the conclusion so far is they absolutely do not), or else the market will find itself at such a disconnect between the synthetic, correlation driven and implied value from the ES and SPY relative to cash flow intrinsics that not even QE?+1 will be able to save the policy vehicle that is the market, let alone the economy.
