Last Tuesday morning, several investment fellows met in Lower Manhattan and made rapid-fire presentations to the financial press. Each spoke for about eight minutes, which may be the assumed attention span of those of us writing about investment topics. One that caught our ear was an unassuming money manager from South Carolina named Hugh Moore, partner, along with Steve Till, of Guerite Advisors.

Mr. Moore was notable for his unapologetic pessimism about the economy. While others are mincing about calling for a slowdown here, and headwinds there, Mr. Moore is calling for a recession, starting in 2007. The basis for his outlook is an economic forecasting model that appears to be annoyingly accurate — having correctly predicted all seven recessions since 1960, and not issuing a single false note.

The model characterizes today’s situation as “high risk.” Mr. Moore fancies his role of alerting investors to upcoming problems. That notion is signaled by the name of the firm; “guerite” is the word used to describe a sentry turret in a medieval castle wall. Who knew?

In a follow-up conversation, Mr. Moore described his model as “proprietary” and therefore not available for intense dissection. He says it relies on 12 individual components, including several interest rate factors. The slope of the yield curve and the recent direction of short-term and long-term interest rates are part of the analysis. Mr. Moore’s firm also looks at various stock market indicators such as price/earnings multiples. They use one sentiment indicator, and also incorporate industrial production data.

Though all this quantitative figuring is interesting, it was Mr. Moore’s background in the sub-prime lending market that drew our notice. In his prior career, Mr. Moore ran a company called EquiFirst Corp. in this increasingly alarming segment of the mortgage business. We assume therefore that he has an above-average grasp of just how perilous the credit issues in sub-prime lending might be.

H&R Block recently surprised many investors by taking a sizable charge in relation to loans made by its Options One sub-prime lending unit. The message was that there had been a big jump in delinquencies, which few other market participants have heretofore acknowledged. The concern is that such lending has accelerated at a torrid pace in recent years, driven by an unparalleled increase in home values, and an insatiable appetite for ready cash. If there is a fault line in today’s economy, this is surely its epicenter.

For some, therefore, the H&R Block announcement provided the proverbial canary in the coal mine. Though Mr. Moore’s economic model does not hinge especially on mortgage debt ratios, his view of this market is unquestionably grim, and reinforces his model’s current forecast. Apparently the Guerite model turned negative in May 2005, prompted by various stock market components.

Mr. Moore has compared today’s economic picture with past periods, and concludes that it lines up best with the prevailing conditions in 1968, which ushered in the 1970 recession. Just like 1968, interest rates are rising, thanks to Fed tightening, inflation is on the increase, and we have an inverted yield curve. Stock market valuations are high but benign (price/earnings ratio for the market overall of 17- to 18-times) and stocks have been flat for several months. The economy is recording slow to moderate growth. Curiously, and possibly irrelevant, is that at both times the country has been engaged in an unpopular war.

On the other hand, in 1968 corporate interest rate spreads were widening, while today they are unchanged. More important is that in 1968 there was no significant overinvestment in the housing sector. By any definition that is not the case today. The housing industry today is running at 6.3% of gross domestic product — the highest rate, according to Mr. Moore, since 1955. In 1968, the comparable figure was 4.5%.

Mr. Moore’s view is that the market moves gradually up and down in long, 13- to 18-year cycles that shift stocks from being fundamentally overvalued to undervalued and back again. He thinks the market is early in adjusting downward from the high levels reached in 1999, and that it will be several more years before there is a marked move in either direction.

That’s not to say that the market will be static; there will simply not be a big breakout move in either direction. During the bullish or bearish interim periods, his firm, which has just gotten rolling and which manages only about $10 million, uses index options to create a synthetic cash position or to enhance stock market returns.

This approach can be applied to a variety of portfolios, including diversified stock holdings or ETFs. The firm’s efforts to test the strategy (in theory) have shown it to be so successful that they are soon to file a registration statement for their Absolute Return Fund, projected to be launched in January next year.

When asked whether his model could be wrong, Mr. Moore admits to possibly being overly negative. That is, he is convinced we will see a more significant economic slowdown; an official recession is not a certainty. His concern is that today the housing bubble is widespread, unlike in other periods where it was concentrated and confined to certain regions like California. There is, Mr. Moore concludes, a strong correlation between housing bubbles and recessions.

Does anyone else hear a canary singing?