Someone who shares this quest for expertise is Gary D. Smith. He writes an excellent daily diary on theStreet.com's professional site, StreetInsight (subscription required), a service that we find quite valuable.
Like Doug Kass, Gary manages to post daily thoughts about the market while managing his own fund. He also writes a public investment blog, Between the Hedges (featured in our blogroll) that is one of the top resources for those actively trading the market. Gary's approach is top-down, looking for growth at a reasonable price. His daily moves reflect technical considerations as well as breaking news. His lively interchanges with Doug Kass help thoughtful readers to focus on crucial issues.
Gary reported on Saturday that the Economic Cycle Research Institute's weekly leading economic indicators were flat, but the ten-week moving average was at a high for the cycle. We are big fans of the ECRI because their methods have avoided "false positive" recession predictions in the past.
The current report is consistent with the most recent public interviews of Lakshman Achuthan on CNBC (March 15, 2007, subscription required). Achuthan pointed out that inflation indicators like the PPI were coincident indicators, without leading power. Their leading indicators showed a slight downtrend, without any forecast increase in inflation for the next three quarters. On the same interview Michael Darda of MKM partners observed that recession forecasts were overblown. His research showed that a recession had not followed a Fed tightening cycle in 45 years when the tightening stopped at low interest rate levels, like the current 5.25%.
This assessment is, not surprisingly, consistent with the statement from the Fed, relying on their staff of hundreds of PhD economists.
We find this evidence more persuasive than the arguments of those claiming to see problems in housing and subprime mortgages. Since everyone knows about this issue, the only question is which analytical method is better at forecasting the impact.
Since few investors or traders have the individual competence to make their own forecasts, finding the real experts is crucial.