Smackdown! Rosenberg vs Epstein

David Rosenberg went nuclear on Barron’s Gene Epstein yesterday for overly optimistic economic forecasts (we previously took Mr. Epstein to task for the same thing: here).

Here’s Rosie:

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“A man who has committed a mistake and doesn’t correct it is committing another mistake.”
– Confucius

Barron’s economic guru, Gene Epstein, titles his column in this week’s edition A Second Dip Still Unlikely.  In his piece, he cites this as evidence:

“The Credit Suisse probability model of recession, discussed here last week, put the six-month probability of recession at zero — and still does.”

Wow.

Go back to January 7, 2008, and in his column, Mr. Epstein boldly said: “So, are we headed for a recession now?  Not so fast.”  What was his reasoning?  Get ready for this:

“Reflecting the December data for private-sector nonfarm payrolls, released Friday, the Credit Suisse six-month model put the chances of an outright recession at 43%.”

This recession model was pegging recession odds at 43% and yet the recession had already begun three months earlier.

If that wasn’t bad enough, Mr. Epstein, on February 4, 2008, dug his heels in even further even though the recession was five-months old:

“Has a recession begun?  Probably not — and a recession probably won’t strike in 2008 … By fourth-quarter 2008, real gross domestic product should be running about 1.5% higher than fourth quarter 2007, a slowdown from the 2.5% of the year just ended.”

Well, instead of GDP being 1.5% higher on a year-on-year basis at the end of 2008, it was in fact 1.9% lower. Then on May 5, 2008, he acknowledged that there was in fact a recession, but titled his piece The 2008 Recession Has Been One of the Tamest on Record. However, didn’t it actually end up going down as the ‘Great Recession’ when all was said and done?

Look, we don’t intend on being cruel here and nobody is perfect — it’s not as if we believed that ‘green shoots’ and a short covering rally were going to elicit an 80% bounce in the S&P 500 from the lows (though we rightfully questioned its longevity).  But to come out and cite the same survey as saying zero odds of recession that only applied a 43% chance in the last go-around when we were already knee-deep in it, would not likely have impressed Confucius.

As an aside, we updated our ECRI logit model and it is suggesting that we have 52% odds of an outright recession, up from 48% last week.   

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