Chart of the Day: Post-Mega Bear Rallies [View article]
Hi John -- As the creator of some of these chart (which I've been updating since the fall of 2008), let me assure you that I don't intend them as forecasts. Rather my key motive has been to educate people that secular bear markets can last a very long time. Not every dip is a good buying opportunity.
Hi Chris, Good point. Readers should note, however, that the ECRI report you reference is dated April 30th. The WLI growth number was 13.8 at that time. The number reported on Friday (for June 11th) was -5.7.
I shared some charts here to give a historical context for the WLI, GDP and recessions: seekingalpha.com/artic...
Hi John, Good stuff! Here's another perspective -- more from the standpoint of WLI and recessions rather than GDP per se: seekingalpha.com/artic...
See also this chart, which gives a close-up of the timeline into the recession that began (officially) in December 2007: dshort.com/charts/econ...
WLI went negative 14 weeks before the onset of the recession. WLI was at -3.1 on November 30, 2007 and -4.1 a week later. The latest WLI, as you know, is -5.7.
It will be interesting to watch the various indicators over the rest of the summer.
ECRI Registers Yet Another Week of Negative Growth [View article]
Charlie, Here's a snapshot of the historic Conference Board CCI: dshort.com/charts/econ... The current level leaves much to be desired. Recessions have begun at much higher levels, although usually on falling confidence.
Note, however, the level of confidence going into the only double-dip recession since the Great Depression: 1981-1982. That recession began at a confidence level of 83.5 after peaking at 86.9 two months prior.
ECRI Registers Yet Another Week of Negative Growth [View article]
Actually the Consumer Metrics Institute uses a radically different approach to tracking consumer sentiment -- no phone calls or questionnaires. Rather it mines databases that track consumer interest on discretionary purchases. See the this FAQ from their website: www.consumerindexes.co...
ECRI Registers Yet Another Week of Negative Growth [View article]
Charlie -- My study of the past 5 years suggests that the WLI and the Consumer Metrics Institute's 91-day Growth Index show some strong correlation to the economy (GDP) and appear to be leading indicators.
The Michigan Consumer Sentiment Index looks far less useful as an indicator of anything. Here's a chart to illustrate: dshort.com/charts/econ...
Note that both the WLI and 91-day Growth Index have fairly reliably led GDP. The Michigan Index -- shown here as a quarterly percent change to align with the other measures -- seems a bit random.
The reason for the 5-year timeframe is that's the Consumer Metrics Institute's Growth Index dates from then. So far it looks very promising as a valid indicator of consumer sentiment.
ECRI Registers Yet Another Week of Negative Growth [View article]
Good comments. I had looked around for an explanation of how the Growth column is calculated in their spreadsheet. I even ran a test in Excel using every value in the raw index a as a divisor to the latest Friday data point and found no match.
I also agree that the amplitude of the peak in October of 2009 could increase the chance of a false negative.
Still, in 42 years, the only false negative decline greater than the current -5.7 was triggered by that 1987 crash. I was a 40-year old investor when the crash occurred and have a vivid memory of the months that followed. There appears to have been some genuite spillover effect to the general economy since GDP dropped from 7.0 to 2.1 in Q5.
I'm also intrigued by the seeming corroboration of the Consumer Metrics Institute's Growth Index: dshort.com/charts/Cons... This index is only five years old, but it has also taken a tumble into negative territory. Eventually, we'll see find out if these indicators were right.
The Consumer Metrics Institute's Growth Index [View article]
It's easier to evaluate the merit of indicators with long track records. The Consumer Growth Index is one I plan to keep an eye on. For now it looks quite promising.
John, Thanks for the link to your "Bull or Bear? Let History Be the Guide" article -- excellent! Every few months I update this series, which looks at cyclical real returns in the S&P Composite, including dividends (I see it's now about time for a new update): dshort.com/charts/SP-r... See especially the 10- and 20-year cycles for comparison with your chart.
I'd love to do the same with the Dow, but I've never found a source for Dow dividends. The Dow website has the daily closes since the founding of the index in 1896 -- but no dividend history.
Conference Board Consumer Confidence Index: Evaluating Historical Performance [View article]
John Hussman: Recession Warning [View article]
dshort.com/articles/EC...
The WLI data dates from 1967.
Chart of the Day: Post-Mega Bear Rallies [View article]
Chart of the Day: Post-Mega Bear Rallies [View article]
Baltic Dry Index Breaks Down [View instapost]
dshort.com/articles/Ki...
World Markets Update [View article]
ECRI Forecasting Weak GDP Growth? [View article]
seekingalpha.com/artic...
A version with slightly more recent charts is here:
dshort.com/articles/Co...
ECRI Forecasting Weak GDP Growth? [View article]
I shared some charts here to give a historical context for the WLI, GDP and recessions:
seekingalpha.com/artic...
ECRI Forecasting Weak GDP Growth? [View article]
seekingalpha.com/artic...
See also this chart, which gives a close-up of the timeline into the recession that began (officially) in December 2007:
dshort.com/charts/econ...
WLI went negative 14 weeks before the onset of the recession. WLI was at -3.1 on November 30, 2007 and -4.1 a week later. The latest WLI, as you know, is -5.7.
It will be interesting to watch the various indicators over the rest of the summer.
ECRI Registers Yet Another Week of Negative Growth [View article]
dshort.com/charts/econ...
The current level leaves much to be desired. Recessions have begun at much higher levels, although usually on falling confidence.
Note, however, the level of confidence going into the only double-dip recession since the Great Depression: 1981-1982. That recession began at a confidence level of 83.5 after peaking at 86.9 two months prior.
ECRI Registers Yet Another Week of Negative Growth [View article]
Actually the entire FAQ is worth a look: www.consumerindexes.co...
Hope that helps clarify why the numbers are different from Indexs that use monthly questionnaires.
ECRI Registers Yet Another Week of Negative Growth [View article]
The Michigan Consumer Sentiment Index looks far less useful as an indicator of anything. Here's a chart to illustrate:
dshort.com/charts/econ...
Note that both the WLI and 91-day Growth Index have fairly reliably led GDP. The Michigan Index -- shown here as a quarterly percent change to align with the other measures -- seems a bit random.
The reason for the 5-year timeframe is that's the Consumer Metrics Institute's Growth Index dates from then. So far it looks very promising as a valid indicator of consumer sentiment.
ECRI Registers Yet Another Week of Negative Growth [View article]
I also agree that the amplitude of the peak in October of 2009 could increase the chance of a false negative.
Still, in 42 years, the only false negative decline greater than the current -5.7 was triggered by that 1987 crash. I was a 40-year old investor when the crash occurred and have a vivid memory of the months that followed. There appears to have been some genuite spillover effect to the general economy since GDP dropped from 7.0 to 2.1 in Q5.
I'm also intrigued by the seeming corroboration of the Consumer Metrics Institute's Growth Index: dshort.com/charts/Cons...
This index is only five years old, but it has also taken a tumble into negative territory. Eventually, we'll see find out if these indicators were right.
The Consumer Metrics Institute's Growth Index [View article]
S&P: Regression to Trend [View article]
dshort.com/charts/SP-r...
See especially the 10- and 20-year cycles for comparison with your chart.
I'd love to do the same with the Dow, but I've never found a source for Dow dividends. The Dow website has the daily closes since the founding of the index in 1896 -- but no dividend history.