Dennis Kneale: An Idiot?

Written By Brian Hicks

Posted July 2, 2009


You’ve got to feel for Dennis Kneale… foot in mouth disease is horrible.

Could it be that bearish views from the likes of Nouriel Roubini are too spot on, too scary for CNBC to report to the naïve believers in Cramer’s, Kneale’s or Kudlow’s abysmal “bottom” theories?

Could be.

If you listen to Kneale, who awkwardly took on bloggers last night, our recession is over. Yep, the same guy that once asked “What’s a VIX?” is telling this to a national audience.


Even a strategist at Barclays Capital, for example, recently said that the economy appears “to be in the sweet spot of a recovery” and that the recession may have ended [in April]”


According to Roubini, “recent data from the U.S. and other advanced economies suggest that the recession may last through the end of the year. Worse, the recovery is likely to be anemic and sub-par. . . The recession is not going to be over today. It’s going to last another 6 to 9 months.”

Unemployment is worsening. Housing woes are far from over. And banking troubles are far from being solved. “I see the risk of a double-dip, W-shaped recession. . . towards the end of next year,” added Roubini.

Even Christina Romer, a senior White House official, is “more optimistic” that the economy is stabilizing. Others believe we’ll stop contracting by Q3 or Q4 2009.

But how?

  • First of all, they fail to see a very important thing Brian Hicks, publisher of Wealth Daily, mentioned last week: “The U.S. economy can’t bottom until banks and financials bottom. . . and banks and financials can’t bottom until housing prices bottom.” And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

  • Second, unemployment is still getting worse. Most economists now believe unemployment will hit 10%. . . with some, according to Hicks, predicting 12% and higher. Couple that with the fact that U.S. consumers are swimming in debt, and what you’re left with is a destructive downturn. That means consumers could still struggle to pay bills and be forced to dip into savings just to get by. And, as Peter Schiff will attest, savings are the “lifeblood of a healthy economy.”

  • Third, the credit card crisis bubble continues to expand. In fact, credit card charge-offs just ballooned to a 20-year high, as Americans battled job and home losses, lost 401k value, and amassed mountainous debt. Revolving credit is about $1 trillion, up about 60% since 2000. The charge-off rate – which measures card loans the banks don’t expect to be repaid – hit 10.62% in May from April’s 9.97%, according to Moody’s. And some expect that rate to surpass 12%.

I could go on, but there’s another blog out there called The Market Ticker, which just published a brilliant piece called To Dennis Kneale: You’re an Idiot that you should check out. Enjoy.

Since Dennis saw fit this evening on CNBC to “go after” bloggers who in turn had gone after him, yet he omitted The Market Ticker, I’ll go ahead and put a full-on dredge out behind my stern and slow to 3kts.

And Dennis, if you would like me on your show, I’ll be happy to appear.  Phone is fine.  And I’m not anonymous, nor do I want to be – CNBC already has has my full bio, my full name, and my CNBC-standard disclosure document back with a digital signature affixed.  You can also “whois” this domain and get my full name and address.  Good enough?  Several employees of NBC Universal are on my forum and a CNBC producer has my direct email address – just ask around and I’m sure you can obtain it, and if you do email me I’ll be happy to call you at your convenience.

OK, now on to the facts – your idiotic and utterly unsupportable “the recession is over” call.

There are two types of recessions, if you happen to know more about economics than you knew about options a year ago, when you were caught asking on the air “what’s the VIX?”

The types of recessions are inventory driven recessions, the most common, and credit driven recessions.

The last material credit driven recession was in the 1930s.  We called it the “The Great Depression.”

Inventory-driven recessions are primarily about excessive industrial capacity for demand.  That is, manufacturers and suppliers of services get too bullish about prospects, build too much capacity and inventory, and wind up engaging in a destructive price war in an attempt to “win”.  This drives down profits and ultimately forces the weaker firms out of business, ergo, recession – GDP and employment decline.  Having cleansed itself of the excess, the economy recovers.   The trigger for these recessions is often (but not always) an external shock such as the oil embargo in the 1970s or the collapse of the Internet fraud-and-circuses games in 2000.

You can read more here.

Great stuff. I think I just found my next favorite blog… well, in addition to mine.

And to those of you that celebrate, have a very happy and healthy July 4th weekend… except you Kneale (kidding).

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