Bill Fleckenstein is a private money manager who has always found time over the years to write a regular column for MSN Money and others. Fleckenstein is a card-carrying contrarian, so his commentaries are often of the "yes, but..." variety (during the late 1990s, he was constantly warning that tech stocks were overvalued and due to crash). He has his own subscription-based web site now where he provides running commentary on stocks, the markets, housing--you name it. Fleckenstein posted an email he received from a reader recently, which counters the bullish comments by those forecasters who contend housings woes won't tip the economy into recession. Here's the email, plus a brief comment by Fleckenstein from his "Daily Rap" report:
"Our business is a large hardwood sawmill (sawing oak, maple, cherry, ash, etc., for the furniture (read: HOUSING) industry. We usually enter recession five to six months ahead of the rest of the economy. IT'S HERE! Prices for green and finished lumber are falling at a faster rate than at any time since 1974. We could see it coming for quite a while, but it's not possible to do much more than clean up the balance sheet and get ready to adjust prices paid downward, while still paying enough to keep the loggers alive.
"Timber prices are falling, but never fast enough. I've been predicting 'the big one' for years, and I think 'this time down' will be the worst we've ever seen. No government bailouts in the hardwood industry. It's sink or swim. I anticipate a few years to work through this mess."
(Fleckenstein's comment begins here:) I'm assuming Rap readers have a thorough grasp of the problem. It's just that when I continue to see so much denial -- to whit: a Bloomberg headline today announcing that "Housing Starts In U.S. Rise More Than Estimated, Easing Slowdown Concerns" -- I can't help but yap about it once again. In any case, I expect by sometime in the next three or four months, it will be quite clear that the economy is headed for a serious consumer-led recession.