Is Dennis Kneale's Great Recession Really Over?

During all the coverage of CNBC attacking Zero Hedge, a much smaller blogger from AnnuityIQ reached out to me because he was literally shoved out of the ring. Rather than ignore him because he is not one of the top indie bloggers, I thought it would be nice for him to finish the point he was making when CNBC cut him off.

Damien Hoffman: Ray, please share your story about how you ended up on the other side of a Dennis Kneale spasm on CNBC. Can you explain your role and the role of the other bloggers whom Dennis attacked?

Ray: We received a comment from Dennis’s producer to appear on his show, but they contacted us the same day the show was going to air. This was a problem because I was out of town and had no way of getting to a NBC studio. So, we agreed to do the show by phone.

I knew I was not truly going to get a shot at explaining my position because phone interviews "do not make exciting TV” as the CNBC producer put it. I have to admit, I did call out Dennis right away regarding his call that the recession was over. But I believe his war with bloggers was more of a ratings ploy than anything else.

Regardless, I was surely not going to back down from my point of view and was more than willing to go on his show knowing they would censor or hang up on me. My mistake was I fed into his irrelevant questions right away. I should have gone right into why he was wrong.

I do stand by my original statement about Dennis that he has very little clue about the markets or the economy. However, that does not seem to stop him from opening his mouth. My role in blogging is to use my 16 years in financial services experience to offer unbiased opinions on the markets and news items we are spoon fed by the mainstream media. I believe I add a unique aspect to commentary by looking beyond the headline numbers. But many bloggers add something to the internet because there are lots of experienced people who want to share information. I believe that blogs are becoming an important part of financial news and I presume that Dennis is threatened by that in some way.

Damien: On your blog you lay out the evidence against Kneale’s career-call that "The great recession is over." Can you please present your case here, going point by point against Dennis’s assertions?

Ray: Ah, where to begin with Dennis’s myth ... point by point might take too long. I would first like to point out his original assertion that "the great recession is over" was based on some volatile data that has all, except the ISM, turned negative on him. However, that has not seemed to stop his repeated assertion. Since then he has cherry picked new data points which are irrelevant to the discussion. Dennis is also confused about the fact that a positive market is not indicative of an economic recovery.

To get to the point, unemployment is a major problem and will hinder economic growth for some time to come. Because of the employment problems we are seeing consumer credit contract at an increasing rate which is not good news for GDP which is 70% dependent on consumer spending. Until we see unemployment improve, I think it is fruitless to call an end to this recession. We need, at the very least, flat job losses versus huge 250K a month losses.

I think housing will continue to be a problem as we move forward as more foreclosures are due to hit the market every month. Then there is commercial real estate which may be the biggest problem of all in the near-term. The mild improvement we see in housing is solely based on fictitious demand generated by the tax credit, lower prices from foreclosures, and Fed induced hyper-low mortgage rates brought on by quantitative easing. Without this artificial stimulus there would not be much demand for housing and prices would continue to fall -- which I believe they need to continue to do.

Just because the equity markets are up does not mean we are in the clear. In fact, I believe we are in a bear market rally. It took this credit bubble years to evolve and it will take longer than a few months to shake out completely. I suspect the biggest problem we have is the consumer. The consumer credit contraction entered its fifth straight month of decline and will likely continue into the future. Banks are still not lending which will further hamper any recovery -- especially since consumers cannot use their homes as a piggy bank the way they did over the last decade. While this deleveraging is painful, it is necessary for a full recovery and maybe, just maybe, Washington will do more to encourage manufacturing versus relying solely on consumer spending to drive GDP growth.

Finally, everyone claims this time is no different than other recessions. I could not disagree more. This time is definitely different than most recessions we have had. Even experts say that we haven’t seen anything like this since the 1930’s -- and the 1930’s was a depression, not a recession. Until someone can show me that those other recessions lost the same amount of firms the size of Lehman, Bear Sterns, Washington Mutual, Merrill Lynch, Freddie, Fannie, etc., then their assertion is preposterous. No other time in history except the 1930’s have we lost so many banks or seen unemployment climb as high as it has as fast as it has. This time is very different.

I have always predicted a W recovery from this recession. When we do have growth it will not feel like a recovery because it will be much lower growth than we might expect -- maybe something to the tune of 0-1.5%. The 3Q09 GDP number will more than likely be somewhat good, but with GM and Chrysler back in business along with cyclical restocking I do not think it will last. To think we can have a jobless, earning-less, income-less, spending-less economic recovery is just plain crazy. I do think we are closer to the end versus the beginning of this recession we are in, but we are not out of it yet.

Damien: Why do you think CNBC uses airtime to make ad hominem attacks against bloggers? 

Ray: I fully believe the media players, in general, have their own agendas. They dislike blogs who go against them. For example, a blogger will look deeper into the unemployment numbers and figure out that job growth is more or less a result of government spending which is counterproductive to the economy. CNBC will spin the numbers to sound good when only the headline number is good but the fundamentals are just not there.

CNBC has had falling ratings and I think some sites are filling in the gap. This threatens them. I admit that some blogs are just hateful towards some people and I disagree with that. That is part of the problem. Many bloggers attack Dennis or other hosts personally, but that was never my intent. I wanted to dispel his ideas because they were not accurate. That is where bloggers generally go wrong, it is easy to attack someone, but it is more difficult to discredit their comments. 

Damien: Do you think CNBC is winning new loyal watchers with this tactic? More importantly, do you think these new viewers will purchase goods and services from companies that advertise on CNBC? 

Ray: I do not think they will attract new viewers other than bloggers. I am not sure about buying goods or services from their advertisers. I have never been swayed by TV advertising, so I am not a good person to ask. Frankly, the 8:00PM slot is so competitive on the networks that Dennis gets a very small viewership overall. I also believe that Dennis offers a double standard by calling bloggers names, but chastises us for calling him names. I am sure he will attract some people with his own form of hate speech. However, viewers will eventually either see through it or get sick of it. If I was a betting man, I would wager that the show will not last more than a year or so.

Damien: If I can’t get valuable financial media on CNBC, where do you recommend I go?

Ray: You can get some good information from CNBC. I like the market data they offer. But the commentary is something else altogether. I read a variety of sources including Bloomberg, the Wall Street Journal, IBD, various other industry journals, INPoints.blogspot.com and ZeroHedge. There is never one good source of information. You need to broaden your reading material as you will see differences in some of the same stories you read between different organizations. The more you know, the better investor you will be. I encourage people to go beyond what I say, what you say, or what anyone says, and make up their own mind. But you can only do that through reading different sources of information.

Damien: Do you have plans to separate your annuity site from your blog and blog more often? 

Ray: I have thought about separating the blog from the website, but they really go hand-in-hand. I need to redesign everything to make it more user-friendly. But right now I think it will remain as is. I stopped blogging after I got sick last year, but am back in action and post several times a day now. We have come a long way and have built a solid readership along with becoming a contributor to SeekingAlpha.com. We have also made several new friends within the industry and are grateful for our confrontation with Dennis as it helped me way more than it could have ever hurt me.

Damien: Ray, thanks for sharing the rest of your thoughts that we were unable to hear on CNBC. I wish you the best with your site and hope you stay well.

Ray: Thanks for the opportunity, Damien.