The great bond fund manager, Van Hoisington, is joining the growing list of those calling for recession in 2o12. In a recent interview with Barrons he says 2012 is a year of global recession that the USA will not be immune to it:
“Our expectation is that we are going to enter another recession next year, when we haven’t really fully recovered from the previous one. We think we are in what Niall Ferguson, a Harvard historian, recently termed a slight depression. This isn’t a normal business cycle. So long as there is downward pressure on prices, bond yields will either continue to go down or bottom out around the real rate, assuming that the inflation rate stops at zero. We aren’t there yet, obviously, but are headed in that direction. That’s why we’ve had a bull market and why it will continue until such time as inflationary expectations start to rise.
…No matter where you look, there is a global recession starting. That means our exports and consumption aren’t there. There won’t be any increase in government spending. So we don’t see how in the world you don’t have a recession.”
Most interesting to me is the fact that he recognizes these wouldn’t be two separate events, but rather one long event:
“The important thing to keep in mind is that this isn’t your typical business cycle. You can’t say, “That was a recession, now we had a recovery, and we’re going into another recession.” This is all one development. In terms of real personal income less transfer payments, one of the four coincident indicators the National Bureau of Economic Research uses to determine recessions, has recovered off its recessionary low in ’09, but is still a half-trillion dollars below where it was in ’08. So here we go into a new recession down a half-trillion dollars in real personal income. And industrial production is still off 5% from its peak, and no higher than in ’07. Full-time employment is at the same level as January 2000, while we have had an 18 million-person increase in the labor force and a 28 million-person increase in the population.”
Read the full piece at Barrons.
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