Hoisington Quarterly Review and Outlook

I am a few weeks late in posting the "Outside the Box" by John Mauldin featuring the Hoisington Quarterly Review and Outlook.  Van Hoisington and Dr. Lacy Hunt run Hoisington Investment Management and put out an excellent quarterly newsletter.


In this Q4 review the focus is on high debt loads that lead to recession which is precisely what Hoisington is predicting to happen in 2012.


The actualization of a recession in 2012 will be especially difficult for the average American in that we have not really recovered from the previous recession ending in 2009. This obviously is not a typical business cycle; rather, we may be in the midst of what Harvard historian Niall Ferguson titled a “slight depression.” The reason for this analysis is that real personal income less transfer payments, one of the four coincident indicators the NBER uses to determine recessions, has recovered off its recessionary low in 2009, but is still about a half trillion dollars below where it was in 2008. Industrial production is still off 5% from its peak and no higher than in 2005. Full time employment is at the same level as in May 2000, despite a 28 million person increase in population and a 11.4 million rise in the labor force. Real median income stood at $51,800 in 2007, but for the first time ever has declined in this recovery and now stands at an estimated $49,400, a 6.4% drop from the previous peak.  These statistics painfully point out the adjustment process in an overleveraged economy.



Although I share the same concerns outlined in their newsletter I cannot deny the fact that the markets are on an absolute roll right now.  "What the market IS doing is far more important than what you think the market SHOULD be doing".  This is why I am choosing to tread lightly with this rally adding positions that fit within our investment framework but also taking defensive measures as well.