Is Old Wall Warming Up To Our Late-Cycle Call?

Takeaway: We reiterate our call on deflation and growth slowing.

The Wall Street Journal published an interesting story written by Jon Hilsenrath this morning. Apparently, 58% of WSJ surveyed economists now think it is "likely" that within five years, short-term interest rates will be right back at zero. 


Is Old Wall Warming Up To Our Late-Cycle Call? - WSJ article


Here's the gist of it from Hilsenrath:


"Any number of factors could force the Fed to reverse course and cut rates all over again: a shock to the U.S. economy from abroad, persistently low inflation, some new financial bubble bursting and slamming the economy, or lost momentum in a business cycle which, at 78 months, is already longer than 29 of the 33 expansions the U.S. economy has experienced since 1854..."


Is Old Wall Warming Up To Our Late-Cycle Call? - wsj survey


Nothing new to us here.


In our 73-page Q4 Macro Themes presentation (published in October), we called out the simple fact that the current economic expansion was getting long in the tooth:


Click image to enlarge.

Is Old Wall Warming Up To Our Late-Cycle Call? - macro themes dek cycles  


Hilsenrath continues:


"Among the worries of private economists is that no other central bank in the advanced world that has raised rates since the 2007-09 crisis has been able to sustain them at a higher level."


Economists should be concerned. The latest round of U.S. economic data is "unequivocally bearish." Below is a video of our outspoken CEO Keith McCullough on Fox Business just before Thanksgiving discussing whether the U.S. is headed for recession in 2016.


Indeed, Old Wall economists have been slow on the uptake all year. Evidence? Our #Deflation call (now 18 months old) is a commonplace argument now, following the precipitous crash in commodities.


We continue to think that economists under-appreciate our #GrowthSlowing call (from Q3 2014). Then again, maybe some of them are finally wising up... 


Interestingly, one of the economists surveyed by the Wall Street Journal made the astute observation, as summarized by Hilsenrath, that the "U.S. expansion is now at an advanced stage and consumers have satisfied pent-up demand for cars and other durable goods."


"I call it late-cycle," the economist said. Sound familar? Thanks for coming out. We called out the "Late-Cycle" nature of the U.S. economy back in July. 


Still, what the WSJ surveyed economists seem to miss, even with this seemingly shocking revelation about U.S. growth, is that by raising interest rates the Fed might actually perpetuate an economic slowdown.


Is Old Wall Warming Up To Our Late-Cycle Call? - darius bingo


Our good friend and best-selling author Jim Rickards points out the Fed's nonsensical rationale for raising rates now:


Is Old Wall Warming Up To Our Late-Cycle Call? - rickards

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