Eighty Percent Chance Of Screwed

The Zero Hedge crew flags David Rosenberg's latest advice that the numbers show an 80% chance of a double-dip recession.

Last week, we pointed out that the ECRI Leading Index dipped to negative for the first time in over a year, which on a historical basis tends to predict a recession with surprising regularity. Today, David Rosenberg takes this data and expands on his views of the probability of a double dip. An interesting observation: when the ECRI drops to -10 (from the current -3.5, and plunging at the fastest rate in history), the economy has gone into a recession 100% of the time, based on 42 years of data. At the current rate of collapse, this means in two months we should know with certainty if the double dip has now arrived.

From this morning's < ahref="http://www.zerohedge.com/sites/default/files/Breakfast_with_Dave_061410.pdf"Breakfast with Dave:

The smoothed ECRI leading economic index fell in the opening week in June for the fifth week in a row and now down in nine of the past ten. The index, went from +0.3% to -3.5%, the weakest it has been in a year. After predicting the V-shaped recovery we got briefly in the inventory-led GDP data when the index soared off the bottom in late 2008, at -3.5%, we can safely say that this barometer is now signalling an 80% chance of a double-dip recession. It is one thing to slip to or fractionally below the zero line, but a -3.5% reading has only sent off two head-fakes in the past, while accurately foreshadowing seven recessions — with a three month lag. Keep your eye on the -10 threshold, for at that level, the economy has gone into recession … only 100% of the time (42 years of data).

In other words, if the ECRI Leading Index drops any more from -3.5%, we're in massive trouble.  If it hits -10%, we screwed within months.  Personally, I think we will be in a double-dip recession before the end of the year, the question is simply going to be how bad it will be and how long it will last.  if the deficit hawks get control, it could be a full-blown depression.  We'll see.