Tags: Biderman | recession | Treasury | rates

TrimTabs' Biderman: 60 Percent Chance of Recession Next Year if Fed Stops Buying Treasurys

By Dan Weil   |   Wednesday, 11 Sep 2013 10:53 AM

The economy has a 60 percent chance of falling back into a recession by the end of next year, says Charles Biderman, chairman of TrimTabs Investment Research.

That assumes the Federal Reserve ends its Treasury purchases over the next year and interest rates rise, Biderman tells CNBC. The Fed is currently buying $45 billion of Treasurys and $40 billion of mortgage-backed securities a month.

"Remember, the only strength in the economy now, in a 1 percent growing economy, is anybody who's alive and doesn't have an arrest warrant out can get an auto loan," Biderman asserts.

"You don't need to be making money — you can get an auto loan. It sounds like '06 when buying a house. You just needed to be able to sign your name and you could buy a house."

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GDP expanded 2.5 percent in the second quarter.

Meanwhile, Biderman is bullish on U.S. stocks for the near term, despite their recent correction.

"There continue to be heavy outflows from U.S. ETFs [exchange-traded funds], and that's always been a robust contrary indicator," he explains.

As for interest rates, they'll keep rising if the Fed follows through on its plan to taper quantitative easing, "and that's going to lead to bad things," Biderman says. "If the biggest [Treasurys] buyer is going to stop buying, why should we [the market] buy?"

To be sure, some experts don't think the 10-year Treasury yield will climb much above 3 percent. It stood at 2.94 percent late Tuesday.

A move to the 3 percent would represent "a starting point to put some money to work again," Richard Sega, chief investment officer at Conning, tells The Wall Street Journal.

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