With the exception of Messrs. Roubini and Roach, the vast majority of Wall Street economists are still whistling Dixie. Another exception, previously noted here, is Northern Trust's Paul Kasriel. Kasriel hasn't gone so far as to forecast a recession, but he is at least willing to conclude that, when our boat's instruments say we're heading for the rocks, that's probably where we're headed.
In the March 22 eContrarian, Kasriel observes that the LEI is en route to its first quarterly-average year-over-year decline of this expansion. Barring a miraculous turnaround in March, the quarterly average LEI will produce a "signal" that has preceded every recession since 1960 (and yielded only one "false positive.") Kasriel notes that Wall Street loves to diss the LEI--but suggests that this is because it outperforms almost every proprietary economic model on the Street.
Kasriel's bearishness, moreover, doesn't stop with LEI. He also invokes the Kasriel Recession-Warning Indicator: the combination of an inverted yield curve and a year over year contraction in the real money supply. The KRWI has missed only one recession since 1960 and has given no false signals. So far in the first quarter, the KRWI is performing about in line with the LEI.
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