The Zen of Economic Recessions

In the weekend Barron’s, Portfolio manager Larry Haverty has some zen comments on the recession that isn’t a recession:

This is the market that just won’t quit. Or is it?

Haverty: It is like a mystery play. In Act I
of the play, it is very clear the U.S. consumer is in what I would call
a 21st-century recession, and that’s a recession without the negative
economic statistics that you would normally get in a ’60s or ’70s style

How then do you know there is a recession?

We have weak end demand virtually everywhere — in
restaurants, autos, durables and at the low end of the consumer area,
with pricing pressure on everything from oil to milk. We are not
getting a classic recession, probably due to the fact that inventory
management has been so much better than it was 30 years ago, largely
due to computers. There aren’t the massive cancellations of orders that
existed in the classic recessions in the ’60s and ’70s. I can’t tell
you the last time I have seen a retailer with seriously excessive
inventory. The message from this part of the play is that while the
consumer is weak, it has basically put the Fed on hold for the last
year and for the foreseeable future, because if the Fed raises interest
rates it is going to make the sectors that are weak much weaker, and
that is not going to accomplish anything.


  1. The Fed is getting the planned slowing of the growth rate pretty much on schedule. Some parts of the economy are affected more than others.
    Meanwhile, the rest of the interview shows that Haverty sees a continuing shift of assets from bonds to stocks and that he is having no problem finding attractive equitites.
    If he wants to call it a 21st century recession, that’s OK. It is better than the old kind!

  2. Hell yeah! it’s easy to be a pundit when you can define your own terms!
    What a nut. “Pricing pressure” on oil? As in pressure to go higher? Due to all the increased demand from this 21st century “recession”?

  3. There is something familiarly poignant about being absolutely right yet out of the money due to poor timing.
    These things never come together in precisely the same way, there’s always the modern twist.