Recession Odds: Greenspan 50%, Merrill 100%

In an interview Friday morning with NPR, former Fed Chairman Alan Greenspan said that the odds of a recession are "clearly rising" and are now about 50%.

(click link above for NPR radio broadcast)

Earlier on Thursday, CNBC reported that Greenspan raised his view of chances of a U.S. recession to 50%, from 30%:

"Greenspan said it's too soon to say whether a recession is coming, "but the odds are clearly rising."

"We're getting close to stall speed" in economic growth, he said. "And we are far more vulnerable at levels where growth is so slow than we would be otherwise. Indeed ... somebody who has an immune system which is not working very well is subject to all sorts of diseases, and the economy at this level of growth is subject to all sorts of potential shocks."

~~~

The former Fed chair is downright chipper compared with some of the data crunchers over at Merrill Lynch: They look at the simple formula involving the Yield Curve and Corporate Spreads. This correctly forecast the 2001 and 1990-91 recessions.

Based on Merrill's read of these two elements -- and I don't know precisely what they do to generate this chart based on those factors -- they have a much more distraught view of the economy than the Maestro:

100% Chance of Showers

Chart courtesy of Merrill Lynch, Gartman Letter

If any one can tell me how this chart gets assembled and massaged, it would be greatly appreciated . . .

Sources:
Greenspan: Recession Odds 'Clearly Rising'
NPR, Morning Edition, December 14, 2007
http://www.npr.org/templates/story/story.php?storyId=17210282

Merrill Lynch Global Research

Greenspan Says Recession Odds Are `Clearly Rising'
Vivien Lou Chen
Bloomberg, Dec. 14 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGyhKOCi4xdU&

Comments

[NutritionFacts:]

Barry, re Chart 3. What was the timeliness of that 'correct' prediction of a recession that eventuated in 2001? It looks to me like the first signal was given in late 98/early 99. The recession came in 2001 (aided and abetted (perhaps) by our great friend Osama). So, what should one do? Sell it all now pending the recession that'll happen along in 2009? Yes, that's great, just great. For an economist, useful perhaps. For a trader? I'm not convinced.

2007 Dec 16 11:57 AM

[gordon:]

We are already in a recession, especially here in California. Read this andy you can see all the indexes , housing, banks, brokers, retail, transports, all are in bear markets. The Dow (DIA) is being heldup artificially by the Plunge Team, buying the DIA, they can easily manipulate 30 stocks, just watch the end-of-day spikes in the DIA, Paulson is funneling excess tax receipts to the primary dealers, banks borrowing cheap lately have not loaned all those billions of Treasury bailout funds, they also, have been instructed to buy stocks with the money. Not to say a trader can't make money, but unless the transports, after this recent deatcat bounce>
financialsense.com/Mar... can't get back in an uptrend, this PPT manipulation of the Dow(DIA) is doomed to fall hard.

2007 Dec 16 12:44 PM

[NutritionFacts:]

"The Dow (DIA) is being heldup artificially by the Plunge Team".

Yes, of course it is. Now (and yes, I know, I know, this is going to make me look silly), where is your evidence?

2007 Dec 16 12:53 PM

[Reinko:]

Just take a look at 2006 and 2007:

In 2006 home owners withdrew 650 billion on housing value and this year the last known figure is 500 billion US$.

This money is mostly used for consumption so it is 'pumped' into the economy.

Therefore this is some kind of artificial economical growth, when you withdraw the 650 and 500 billion from the gross domestic product you see that without it, the economical growth is negative for 22 months on a row.

I live in the Netherlands, in the previous decade the Dutch took out 4% of their house value and 'pumped' it in the economy. They did this for 2 years and it took us 4 years to recover.

2007 Dec 17 01:42 PM