David Rosenberg has published a rebuttal to this post from our colleague Vincent Fernando on the matter of the ECRI and its usefulness in predicting the double dip.
ZeroHedge quickly jumped on the text:
ECRI WAS RIGHT ALL ALONG!
We rarely pay attention to blogs (John Mauldin, Barry Ritholtz and Tyler Durden aside) but yesterday yours truly was slammed by one Vincent Fernando (Here’s Why It Was Ridiculous When David Rosenberg Used The ECRI To Predict A Double Dip — nice catchy title).
Well, if the truth be told, if things in the economy are so good and the ECRI was so wrong, why then did Bernanke hint about another major round of QE. No mention in this article, by the way, of how the Fed has now cut its forecast three times in the last four months. The fact that the 10-year Treasury note yield has plunged 150 basis points since April is actually telling you that there is an asset class out there that has responded forcefully to double-dip risks. And, let’s not forget that the Macroeconomic Adviser’s GDP figures show that the economy has contracted in three of the past four months.
It’s always encouraging to find yourself in the company of people you respect. To this end, have a look at the article on page C1 of the WSJ on Bridgewater’s Ray Dalio. To wit:
“One of the nation’s largest hedge funds is emerging as a big winner of 2010, earning its managers and clients billions in profits through a series of bearish bets on the U.S. economy.
Bridgewater Associates Inc. has scored a return of about 38% at its flagship fund, driven in part by a multifaceted wager that the U.S. economy would be in worse shape than many expected and the Federal Reserve would keep interest rates low….”
Then, we see this from Ken Goldstein, the Conference Board’s economist, on page 22 of the FT:
“More than a year after the recession officially ended, the economy is slow and has no forward momentum. The LEI suggests little change in economic conditions through the holidays or the early months of 2011.”
So you see, Vincent, it may not be a “double dip” per se, but stall-speed isn’t really altogether that far away from it either. And guess what? The ECRI actually did nail it!
Fernando is out today. We eagerly await his re-rebuttal!