This guy says we’re toast—and he’s never wrong.

Image: cnbc.com

Lakshman Achuthan must be Barack Obama’s worst nightmare.  Obama, a numbers guy to his core, has got to know that Achuthan’s firm, Economic Cycle Research Institute has called for a double-dip recession—and unlike economists of every stripe, has a perfect 15-year record of calling recessions with no false alarms.

            The firm, founded by Alan Greenspan’s old statistics professor, Geoffrey H. Moore, now deceased, has called the last three recessions correctly and refrained from jumping on the bus when the consensus majority of economists incorrectly called for recessions in periods such as the double-dip call of June 2010.

            Mr. Achuthan, co-founder and COO of the firm, held tight to the firm’s September 23^rd forecast during a segment on CNBC’s November 7 broadcast of Squawk Box.  He attributed the call to a “contagion in the forward-looking indicators.”  This is a reference to the proprietary mix of indices upon which the firm bases its predictions.  The mix is related in part to the institute’s flagship Weekly Leading Index (WLI) used by businesses around the world to get a handle on breaking trends.

            Notably, few U.S. economists are calling for a new recession at the moment, and many of those are citing rising stock market and job numbers to backup their claims, despite the Euro contagion.  None of this seems to bother Mr. Achuthan in the slightest, who categorizes such citations as “now-casting.”

            My own take is that we are not heading for a new recession unless Europe falls off its continental shelf, but the Economic Cycle Research Institute knows more than I do.  And of course now might be a good time to mention that roughly 80 percent of the American public thinks we’re still in a recession.  But the institute holds, firmly, to the notion that things will get worse, and that the American public will definitely feel it.  Notably, again, the institute does not base its forecast on episodic developments such as the Grecian formula for a Euro-breakdown.  It’s all in the indices, whatever the proprietary mix may be. In fact, Achuthan says we may already be in the new downturn and just don’t have the metrics to prove it yet.  He states that the consensus majority of economists usually don’t catch on until we’re six months gone.

            The institute’s analysis of where we are heading is deeply pessimistic in more ways than one.  A summary of the forecast report on the institute’s website states:

It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar.

            Furthermore, the institute holds that we are in a short-cycle period where the “recovery” we had is all we can expect for now.  This, they hold, was a dominant business cycle characteristic from 1799 to 1929.  In short, the period of “Great Moderation” of business cycles, which characterized our business cycles from roughly 1985 to 2007 is over, decidedly so.

            And who would be bumming big time about all this?  President Obama, if he were to give the ECRI report any credence, because almost any analyst out there gives him zero-to-little chance of winning re-election if he faces Romney during a full-blown double dip. So I’ll hope Achuthan is wrong—dead wrong.  But I’d have to think twice before I bet against him.