Big Picture’s Ritholtz Still Expecting a Hard Landing

Barry Ritholtz had a post Friday morning, “Whither Goldilocks?”, worth reading:

Every good adventure – be it an advertising campaign, religious evangelism, political battle, or even a war – requires a memorable phrase, repeated over and over again, as part of the broader marketing effort.  It can even be something as pedestrian as a catchy jingle or theme song.

Market rallies too need their marketing spin, something to give comfort to its adherents in times of stress.  For the Bulls who have enjoyed the rally off of the summer lows, that mantra has been ‘Soft Landing/Goldilocks Economy’

This despite a plethora of evidence that shows that a soft landing is an exceedingly rare and mythical creature.  Consider the 1994 soft landing – the one true soft landing out of 16 Federal Reserve tightening cycles.  It is the equivalent of performing sucessful neurosurgery with a shovel and mallet.

The question at present is simply this: What will step up to replace Housing as the prime economic driver?

Let’s consider sector specific evidence:

  • Housing, the prime driver of the lion’s share of economic growth over the past 5 years, is contracting rapidly.
  • Sectors related to Real Estate are showing stresses; ……
  • Advertising is the canary in the coal mine…….
  • Transports have been notably mixed…….

The issue isn’t soft landing or not; it is between whether we have a hard landing or a recession – with all that it means for profits, and equity prices……

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