Kasriel Blasts Bullish Economist, Defends LEI

From Investment Intellligencer

Nothern Trust’s Paul Kasriel, whose recession-warning indicator is flashing yellow, devotes an entire eContrarian to poking fun at another economist, Michael Lewis, who scoffed at Kasriel’s advocacy of the LEI as a decent recession-predictor. 

Lewis appears to have taken the same position as most economists: The LEI isn’t a perfect recession predictor, so even though it is suggesting that there will be a recession, there probably won’t be one.  Kasriel argues that this interpretation is bass-ackwards: The LEI is a pretty darn good predictor of recessions, so there probably will be one.  (For good measure, Kasriel throws in his personal Kasriel Recession-Warning Indicator, which, when combined with the LEI, has never given a false signal.)

Who’s right?  Time will tell.  But of the two economists, Kasriel appears to be deriving his thesis from the data, while Lewis appears to be doing it the other way around

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