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John Lounsbury
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John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
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John B Lounsbury CFP
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Global Economic Intersection
  • A Double Dip Clarion 4 comments
    Jul 15, 2010 2:29 PM | about stocks: DIA, SPY, QQQ
    The following graph from the Consumer Metric Institute shows how their economic activity model is progressing for 2010 compared with 2008 and 2006.



    The CMI calculates by an area under the curve technique that 2010 has a contraction that is twice the size of 2006 and over 1/3 that of 2008.  The 2010 contraction is still advancing (or, more correctly, declining), progressing far longer than in the preceding two years displayed.

    You will not see this on the CMI web site because it is information available by subscription only, but CMI's Rick Davis revealed to Larry Doyle in an interview that CMI predicts GDP for the next two quarters at - 1.5% and -2%.

    If the CMI projection is only partly achieved, it is impossible to see how a significant market downturn will not ensue.  CMI is definitely outside the main stream box which is debating whether GDP for the second quarter will be under +2%, 2-3% or over 3%.  If CMI is correct there will be a major psychic shock.

    Disclosure: Long several S&P 500 stocks. Long and short positions in several NasDaq stocks.
    Themes: recession, GDP, CMI Stocks: DIA, SPY, QQQ
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Comments (4)
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  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Interesting data, John. Those GDP forecasts align quite closely with our own computer models. I've been meaning to learn more about their methodology for some time now.
    15 Jul 2010, 05:32 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Nice summary. CMI was pretty accurate for 2008. No reason to think thier 2010 data will not also be accurate as well.
    15 Jul 2010, 05:38 PM Reply Like
  • robert.b.ferguson
    , contributor
    Comments (10803) | Send Message
     
    Thank you John. This serves to reinforce my own conclusions and continue accumulating cash while my portfolio is in a defensive posture. There will be opportunities to deploy that cash next year.
    15 Jul 2010, 06:42 PM Reply Like
  • Zmartmoney
    , contributor
    Comments (1155) | Send Message
     
    Interesting that we're all standing around, waiting, expecting to see the line turn up again. That, without any assurance that it will do so, in the foreseeable future. I'm not really a pessimist but there are some concerns...
    16 Jul 2010, 01:57 PM Reply Like
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