Recession Odds: Greenspan 50%, Merrill 100%

by: Barry Ritholtz

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 . . .

Greenspan: Recession Odds 'Clearly Rising'
NPR, Morning Edition, December 14, 2007

Merrill Lynch Global Research

Greenspan Says Recession Odds Are `Clearly Rising'
Vivien Lou Chen
Bloomberg, Dec. 14 2007