No one wants to say it, preferring to call it a slowdown. But I’ll say it:
The United States is in recession now.
Last week, MarineMax – the largest recreational boat dealer in the United States – said earnings would come in at 45 to 65 cents. In January…January, mind you… it said it would earn USD$1.40 to USD$1.50. Last November – only five months ago – it forecast USD$2.05 to USD$2.15.
The reason: Call it fallout from the housing boom. CEO Bill McGill made no effort to hide behind any fig leaves in his conference call: ‘While most of our customers [have] the ability to purchase a boat, they have lost their appetite to pull the trigger when uncertainty enters the equation.’
What uncertainty? ‘Perceived loss in value of their home, the loss in the investment property value, or the perceived or actual trickle-down effect that the housing market may have on their own business or their financial picture.’
Note to sellers of big-ticket items: Batten down the hatches, boys!
Last month, I met with John Williams, the sharp economist behind Shadow Government Statistics. Williams is one of the few economists to call the old hag that is the U.S. economy an old hag.
‘We are in an inflationary recession now,’ he says.
Williams ticks off the data that confirm a recession in progress: Much weaker-than-expected housing starts, retail sales and industrial production.
Also, a weak manufacturing survey, sluggish annual growth in durable goods orders, rising new claims for unemployment insurance, and anemic employment growth.
There is a playbook for dealing with this kind of environment, based on old highlight reels from the 1970s. I can sum it up thusly: Buy tangible things; sell paper.
Markets and Money