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If You’re a Bull, It’s Time to Start Worrying: Munson


Yesterday's ISM number came in over 50, indicating growth for the first time in four months, but the U.S. economy isn't recovering nearly fast enough for most. The unemployment rate is over 8%, even with some fudging; GDP for the second quarter was 1.3% after two lower revisions; and not even perma-bulls are expecting earnings season to be anything but grim.

Are we in or headed for a recession? "If you're just a man on the street, it sure looks like it," says Lee Munson, author of the book Rigged Money and founder of Portfolio LLC. Technical definitions of what constitute a recession are largely meaningless unless you're an economist.

The frustrating part is that there probably isn't anything the U.S. can do to prevent global infection."If you're a bull, you really have to start being worried," he says.

With European unemployment at all-time highs and Japan being dragged down by China's hard landing, there aren't any robust economies to buy U.S. goods. "I was personally freaked out when I saw Japan's industrial numbers," says Munson. Japan's problems now seem to be getting worse — a grim proposition in light of nearly a quarter century worth of no economic growth.

Too much of the quasi-recovery to date has been based on exports. It's a good thing that housing data is picking up, but Munson notes that building houses is as much consumption as production. If manufacturing is, by its nature, cyclical, then building homes is all but an all-or-none proposition. Housing manufacturing accounts for a lot of jobs, but the out-of-work home buyers won't be in the market for long, even if they can get loans.

Most chilling of all, Munson says, is that bulls, not to mention government officials, need to depend on faith that the rest of the world improves. By tradition, those relying on faith are punished harshly on Wall Street.

He's doing his level best to stay constructive, but the normally decisive Munson can't make it through a full sentence of bullishness without throwing in a hedge. "I would say be more optimistic, but I can't blame you for freaking out right now."