The 2-Minute Thought: Richard Yamarone Says These Five Indicators Point To Recession

Bloomberg economist Rich Yamarone says that a U.S. recession is coming.  He won’t say when or how -- just that too many things don’t look right.

Speaking to the San Francisco Chartered Financial Analyst (CFA) Society yesterday, Yamarone said we are in “Bizarro World.”  That is a world where 13 countries have negative yields on their 5-year notes.  It is a world where people see low oil and gas prices as a threat rather than potential benefit.  It is a world where the Federal Reserve is trying to raise interest rates even when it expects GDP growth to moderate.

More worrisome than anything to him is that monetary policy has lost its power to create growth.  The most interest rate-sensitive sector in the economy is housing.  And while it certainly has improved since the financial crisis, it hasn’t responded to low rates as much as it should have.  A further worry for Yamarone is that vacancies in regional and strip malls are growing.

Beyond the usual macro indicators, Yamarone likes looking at small pieces of anecdotal evidence.  One thing he does for Bloomberg is put together the “Orange Book,” which highlights direct quotes from hundreds of corporate earnings calls.  The Orange Book can be a wonderful read.  Go through excerpts from dozens of individual earnings calls, and you start to see patterns.  A recent one is that the words “industrial recession” are being used by more than one company.

In addition, there are five indicators Yamarone looks at that suggest economic weakness lies ahead.  All focus on consumers, which have been doing the heavy lifting to keep economic growth positive.  They are:

  • Dining Out
  • Casino Gambling·       
  • Jewelry and Watches
  • Cosmetics and Perfumes
  • Women’s and Girls’ Clothing

All of them, Yamarone says, are declining.