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  • 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.
    Jun 26, 2010. 10:50 AM | 27 Likes Like |Link to Comment
  • John Hussman: Recession Warning [View article]
    As I pointed out in my Friday review of the ECRI Weekly Leading Index, it has never dropped to -6.9 without the near-term onset of a recession:

    The WLI data dates from 1967.
    Jun 28, 2010. 11:01 AM | 21 Likes Like |Link to Comment
  • Siegel vs. Standard & Poor's [View article]
    Excellent article. I prefer the valuation method of Yale Professor Robert Shiller over the Siegel's approach. Shiller smooths the P/E calculation by using the earnings average of the previous ten years as the divisor. With this method, the historic P/E10 average is 16.3. The February 2009 close saw a P/E10 of 13.

    Does this make the market cheap? With the Shiller calculation, secular lows around the 1921, 1932, 1949, and 1982 bottoms have been in the single digit range. Here's a link with charts to illustrate:

    Feb 27, 2009. 11:04 PM | 10 Likes Like |Link to Comment
  • Japan, The U.S., Bubbles and Deflation [View article]
    John, I couldn't agree more. Last month Ben Bernanke said the economic outlook is "unusually uncertain". I'd say the degree of uncertainty is unprecedented.

    As for economic theory, the only one I subscribe to is that a well-selected $8 bottle of wine can put a smile on my face as well as a $40 bottle.
    Aug 5, 2010. 12:46 AM | 8 Likes Like |Link to Comment
  • The ECRI Weekly Leading Index: Negative Growth for Seventh Straight Week [View article]
    Hi John -- Yes, I think that's a very plausible explanation for what we're seeing in the WLI. Likewise when I look at the much newer (and narrower) Consumer Metrics Institute's Growth Index, I see a similar pattern of oscillation:
    This coming Friday we get the first read on Q2 GDP from the BEA, which should be interesting. Of course, Q1 GDP was initially put at 3.2%, then dropped to 3.0%, and finally recorded at 2.7%. So I'll take the July 30th number for what it is -- an opening negotiation with reality.
    Jul 24, 2010. 04:52 PM | 6 Likes Like |Link to Comment
  • The ECRI Weekly Leading Index: A Historical Look [View article]
    Interesting analogy. With today's congressional politics, a retest of the 2009 lows might be required.
    Aug 8, 2010. 08:36 PM | 5 Likes Like |Link to Comment
  • The ECRI Weekly Leading Index: A Historical Look [View article]
    Kirk, Yes, I know. Seeking Alpha condensed my original article, which is posted here:
    Note my reference to the Ritholtz article.
    Aug 8, 2010. 10:22 AM | 5 Likes Like |Link to Comment
  • Chart of the Day: Post-Mega Bear Rallies [View article]
    lazzybum -- I've been using 2000 as the secular peak in this series for the past 18 months:
    Jun 27, 2010. 11:41 AM | 5 Likes Like |Link to Comment
  • 2 Measures of Inflation With a Footnote on Gasoline [View article]
    "... gas prices for most people are a minor part of their expenditures."

    That's an erroneous assumption. Consider the suburban household with two wage earners with separate commutes, and then look at this chart of the components of the CPI since 2000:

    Next, have a look at a quintile breakdown of household disposable (after-tax) income:

    The U.S. average price of a gallon of regular has risen 74 cents in 2011. That's about a 45% increase since the end of 2010. For many households, a higher gas price reduces discretionary spending, and for some households, it even means cutting back on grocery expenses.

    For households in the top quintile of income, higher gas prices are irrelevant. For the 2nd and 3rd, a nuisance. But for the 4th and 5th quintiles, the 45% increase in gas prices since the end of last year can definitely impact the quality of life.
    Apr 17, 2011. 08:57 AM | 4 Likes Like |Link to Comment
  • The Q Ratio Indicates a Significantly Overvalued Market [View article]
    Kinabalu -- No it's not timely. However the extrapolations I've been making based on VTI in the months following the last two Z1 releases have matched the subsequent Z1 calculations to within a tenth of a percent. So I've come to feel fairly confident in the ability to estimate a monthly Q for the third quarter of 2010.

    Please understand that I'm making no claims that Q gives us any clue about short-term future performance -- only that it gives us a sense of how the current market is valued via the Q formula in comparison to points in time over the past century or more.
    Sep 20, 2010. 03:14 PM | 4 Likes Like |Link to Comment
  • Value vs. Momentum Chart of the Day [View article]
    "Still, I would have loved to see a third line, showing the results of a simple buy-and-hold strategy. Sometimes the easiest things to do are also the most profitable of all."

    I don't have the raw data for the chart above, so I can't reproduce it with the buy-and-hold third line. But I can give you the approximate returns over the same timeframe.

    Using the S&P Composite as the investment vehicle, $1 invested in 1880 would have the following total return2 (dividends reinvested) at the end of last month:

    * Nominal Return = $15.86
    * Real Return = $7.18 (estimate based on CPI and its predecessor)

    For those unfamiliar with the S&P Composite, you can find some background information here:
    Sep 11, 2010. 09:14 AM | 4 Likes Like |Link to Comment
  • Baltic Dry Index Breaks Down [View instapost]
    Hi John -- My technical analysis contributor, Chris Kimble, has been warning about the Baltic Dry since mid-May. See this post from yesterday:
    Jun 24, 2010. 11:27 PM | 4 Likes Like |Link to Comment
  • ECRI Forecasting Weak GDP Growth? [View article]
    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:
    Jun 22, 2010. 10:21 AM | 4 Likes Like |Link to Comment
  • Bottom of Dow Trading Channel Is Below 5,000 [View article]
    Hi Suna, That's something I've wanted to do, but I've not found a source for the historical Dow earnings. The Dow Jones website has the price data going back to 1986, but not the earnings.

    However, since there's a fair amount of overlap with the S&P Composite, the earnings there might provide a clue. Here's a chart with the P/E using the 10-year average of real earnings through the end of last month:

    Here's a nominal version of the same data:

    As you can see, for the current S&P isn't far from cheap by this metric. I imagine that's equally true of the Dow and if I ever lay hands of the historic Dow earnings, I'll illustrate.
    May 20, 2010. 03:50 PM | 4 Likes Like |Link to Comment
  • The Q Ratio Indicates a Significantly Overvalued Market [View article]
    Yes, the balance sheet does include foreign assets of US companies. Unfortunately, the FRB doesn't give any easy documentation that I'm aware of for these two balance sheet items. If you're up for some heavy reading, here's an article by Stephen Wright, a Q-ratio expert, on some of the details:

    Interest rates definitely have an impact on market behavior, and I think they are indirectly reflected in the Q Ratio. Their relevance is not to the calculation methology. Rather, I would say that periods of very high or low interest rates can be a factor in sustaining Q valuation extremes. This seems like a good topic to explore in a future charting exercise.
    Sep 20, 2010. 05:39 PM | 3 Likes Like |Link to Comment