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Email Comments From Hussman Regarding Start of Recession and ECRI Track Record

Courtesy of Mish.

I received a nice email from John Hussman regarding my post earlier today Case for US and Global Recession Right Here, Right Now; Recognizing the Limits of Madness; Permabears?

John Writes …

Hello Mish

I enjoyed your latest piece, as always.

In Lakshman’s defense, we’re clients of ECRI, and he did note pretty clearly to ECRI subscribers that the economy was first “moving toward,” then later “squarely in the window of vulnerability” and later “locked on a glide path” to recession.

His current view that the economy has now entered a recession really is the first time in this sequence that ECRI has called a recession actually in progress. I suspect that in the interest of clarity in his interviews, Lakshman may not have brought that subtlety out enough.

For our part, we’ve been in the “oncoming” recession camp since about August of last year, which I think was deferred by the round of central bank easings late last year, but which I also view as part of the same broad signal rather than one failed signal and one probably correct one.

More recently, my own views on the economy deteriorated from strong concerns in  January (Leading Indicators and the Risk of a Blindside Recession) to the specific expectation that a recession would begin in May or June (Dancing at the Edge of a Cliff).

You’re right that saying that we’re in a recession is different than saying one is oncoming, and my view about actually being “in” a recession came last month (Enter, the Blindside Recession).

You also indicated that I turned bullish in 2009. Actually, while our valuation work did indicate that stocks were valued for reasonable 10-year returns in early 2009, I did miss the upturn because I insisted on making our methods robust to Depression-era data (since the market lost two-thirds of its value in the Depression even after becoming “reasonably” valued).

I wasn’t willing to subject shareholders to potentially vicious drawdowns until I was certain that our methods were robust to that period (something I called our “two data sets problem” at the time). Thus, some of your readers can correctly take issue with the comment that I was bullish in 2009.

I think we’re well prepared for future cycles as a result, but 2009 was actually a miss for us. Your reports are always appreciated, Mish. …



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