Owen B

Why So Much Skepticism Regarding the Rally?

Well put article.

The ECRI comes to a similar conclusion -- more frequent recessions -- from their cyclical viewpoint.

www.ritholtz.com/blog/.../

Chart of the Day: Leading Indicator Waves the Caution Flag

Yes, but my point was different. Many blame the global recession on the Lehman failure, etc. ECRI was saying pervasive global recession BEFORE the Lehman failure. That's notable.

The other links point to ECRI's recession call in Jan '08 and Mar '08. I agree that they held off longer than many, but please read their reasoning before dismissing them.


On Dec 09 10:05 PM Swashbuckler wrote:

> The comments of the ECRI director in August of 2008 (BEFORE the Lehman
> debacle) were not exactly visionary nor enlightening. According to
> NBER, at that time, we had already been in a recession for 9 months.
> My 11 year old niece knew we were in a recession.

Chart of the Day: Leading Indicator Waves the Caution Flag

I see. Well, good luck with your approach!


On Dec 09 07:29 PM logicalthought wrote:

> By 2008, we were-- for all practical purposes-- in the recession
> already. Thus, all they did was declare that concurrently, with no
> real lead time. When they could have provided useful lead time--
> say, in early 2007-- they didn't, and, in fact, said multiple times
> that a recession would be avoided.

Chart of the Day: Leading Indicator Waves the Caution Flag

You link to items in 2007. Thank you, I've seen many of them before.

What do you make of the Jan '08, Mar '08 and Aug '08 links that I gave you? Do you want to revise your assertion that, "The ECRI guys completely missed the current recession, claiming we'd be able to avoid it right up until we were in the middle of it."

As for your wallet, it would be better off if you'd heeded their public statements (see left-hand column here: businesscycle.com)

Also, you might want to rethink your statement that ECRI uses econometric models unless you have some evidence to back up your claim. As far as I know they don't. They say they use leading indexes, which cannot be mistaken for an econometric model.

I do, however, agree wholeheartedly with you that economic models are highly suspect!

On Dec 09 05:53 PM logicalthought wrote:

> Unfortunately, as a non-subscriber I can only link to reports that
> provide some excerpts with insight into their thinking. That said,
> perhaps you missed these:
>
> www.businesscycle.com/.../
> www.businesscycle.com/.../
> www.businesscycle.com/.../
> www.businesscycle.com/.../
> www.businesscycle.com/.../
> www.businesscycle.com/.../
> www.businesscycle.com/.../

Chart of the Day: Leading Indicator Waves the Caution Flag

Hi logicalthought,

It seems you missed the ECRI's detailed public statement in Jan. 2008 when then said, "a self-reinforcing downturn has already begun. If allowed to continue, it will amount to the vicious cycle known as a business cycle recession."

You can read the whole piece here: kirklindstrom.blogspot...

Also, don't miss their Mar. 2008 follow up where they comment, "Some will rightly argue that recessions are cathartic and that to try and avert a recession with stimulus would be tantamount to rewarding the bad behavior of those contributing to the housing and credit bubbles. Perhaps, but we must also recognize that recessions bring with them collateral damage affecting millions of innocent bystanders."

You can read that piece here: kirklindstrom.blogspot...

And lest you forget, here's a clip of the ECRI director in August 2008 pointing out the reality of a "pervasive" global downturn BEFORE the Lehman debacle (many like to think it was primarily Lehman that drove the global economy into a tailspin): bloomberg.com/avp/...


On Dec 09 12:39 PM logicalthought wrote:

> The ECRI guys completely missed the current recession, claiming we'd
> be able to avoid it right up until we were in the middle of it. This
> is because all the "economic modeling" in the world was (and is)
> no substitute for common sense, as in "house prices equaled ATM machines,
> and house prices were sliding, so where was the money going to come
> from?" And the inverse of that is also true: Until house prices start
> significantly going up again, where will the money come from? Well,
> ECRI, where will it come from?

Show Me Economic Expansion, Chairman Bernanke

Thank you Steve. I tend to follow the ECRI indexes over the Conference Board's for reasons to numerous to mention. Focusing on the two charts for ECRI's coincident index growth rate, I agree that through Oct. their "monthly" coincident index was not showing positive growth, but their "weekly" coincident index seems close to going positive. What do you make of this? Does this then bode well for the next update of the monthly coincident index?

No Chance of a 'V' Recovery

Yes, in March they said recession a done deal (at the time there was a big debate about recession because GDP was still coming in positive): kirklindstrom.blogspot...

But a few months earlier in January they were waving a BIG yellow flag for anyone that was listening, pointing out an unusual inventory situation/opportunity that was lost on everyone, especially policy makers: kirklindstrom.blogspot...


On Oct 04 09:33 AM JCC wrote:

> Agreed - Furthermore ECRI predicted the current mess a little late
> in March 2008, which was plenty of time to get out and preserver
> your capital.
>
> ECRI has done pretty well in the economic prediction business.
>

No Chance of a 'V' Recovery

You wrote, "ECRI has been wrong before and they were in 2007 about the strength of our economy"

But I've heard ECRI state that GDP growth reached a 4-year high in mid-2007. Is that not true?


On Oct 02 04:16 PM enigmaman wrote:

> Your points of fact are well taken but
>
> 1-ECRI has been wrong before and they were in 2007 about the strength
> of our economy
> 2-We have more houses then qualified buyers and 6 million more foreclosures
> on the horizon, builders are selling at looses just to stay in business,
> so housing is now our ball and chain and not the cavalry
> 3-India and East Asia are doing fine so far, whom will they sell
> their wares to to maintain their GDP, it wont be USA ,then who?<br/>4-
> Like all headlines, they show we are breaking records all over the
> place, but what lies underneath those numbers, todays stats were
> sobering because they indicate economy still needs to be in ICU and
> also needs pacemaker to keep its heart beating
> 5- Foreign demand for what?
>
> I want a V shape recovery, I really do, everyone prospers from a
> good economy, there is no reason to want it to falter because it
> takes all down with it. Then again there is no reason to believe
> everything will come up roses because we want it to, to expect a
> V shaped recovery after all that this economy and its people have
> been through in such a short time and facing a government that insists
> on adding debt upon debt without worry about an 18% tax revenue shortfall
> is insane, OK wishful thinking. The devil is in the details and the
> details are what we are not getting, but they are there is you search
> for them and when you find them they are worse then you expected,
> like today workers are losing hours worked at an unrepresented pace,
> worse then anticipated. Give you an idea about unemployment, at 9.8%,
> the Pres said his stimulus would add 3million jobs in the next two
> year, Ha, but lets say it did, the unemployment numbers would not
> change because the underemployed represent 3 million jobs, so before
> we can add one new job employers have to bring current employtees
> back up to 40 hrs work week. So the uphill battle is steeper then
> the Admin is letting on, peel the onion and make sure you hold your
> nose and shield your eyes otherwise it will make you cry

Leading Economic Indicator Isn't Indicating the Real Recovery

The LEI is a bastardized version of it's original self. Geoffrey Moore (ECRI Founder) helped develop the original LEI in 1960, but since 1979 he left it to the mainstream economist to manage (see how that worked out) and he went forth with the WLI and other leading indexes at Columbia University and ECRI.

As a result the LEI and WLI often diverge, and the LEI is usually a step behind (same thing happened with 2001 recession).

www.bloomberg.com/apps...

BTW, is your chart of ECRI's weekly coincident is showing some upturn, or not?

Looks Like a 'V' to Me

In your post about how ECRI must be wrong, you missed (?) reports that don't hold up with your conclusions.

kirklindstrom.blogspot...


On Sep 17 07:21 AM logicalthought wrote:

> Gee, and what was ECRI saying about the future in, say, July of 2007?
> Well, let's go to the videotape:
> www.businesscycle.com/.../
>
> How about February of '08? Although the full report isn't available
> to non-subscribers, this little summary makes its conclusions pretty
> clear:
> www.businesscycle.com/.../
>
> Seeing as they completely missed the mess we're currently in, what
> makes you think they can accurately forecast its end?

What if It Is a 'V' Recovery?

This blog post (see link below) chronicles links to more complete ECRI public statements from Jan. 2008 - Mar. 2008 regarding recession:

kirklindstrom.blogspot...

After careful review, it seems ECRI was not surprised by the recession as some have tried to suggest.


On Sep 07 09:16 AM fotokemist wrote:

> Thanks to all for an enlightening post and discussion. I am new to
> this game and continue to be amazed at the quality of information
> and discussion available on the web.
>
> If memory serves, Steve posted something in February or March from
> ECRI predicting improving business conditions by summer (pardon my
> laziness for not digging this up.) My point is that somewhere there
> is an ECRI report from six months ago for each month.
>
> Could one of you folks much more experienced than me do an assessment
> of how they have been doing recently?
>
> I am among the group that is concerned that the level of government
> interference compared to earlier events may have had an adverse effect
> on their models. Given my poor understanding of cause and effect
> in the current environment, any knowledge of their models, etc.,
> I would find some current "calibration data" very helpful.
>
> Steve, thanks again for all your effort.

Here Come the Economic Clowns

Either ECRI is totally full of it, or people are going to be caught flat-footed:

www.reuters.com/articl...

Here Come the Economic Clowns

Hi Steve,

I'm with you but I don't get what you mean here,

"one final point, i am seeing no economic indicator -except leading ones such as new orders - which shows this great recession is ending. and this data is subjective, not objective."

This doesn't seem to jibe with your regular posting of ECRI leading indexes? I also have been led to understand that their indexes are "objective."

OB

On Aug 09 07:28 AM Steven Hansen wrote:

> markfl
> i always read John Lounsbury and you will find my comment already
> there.
>
> you are correct about trucking being a coincident indicator. the
> problem is that there is no quantitative pulse point (data set).
> if you look at my history, logistics is one of the areas i consult.
>
>
> however, sea and rail transport do provide timely real time data
> to analyze. and both of these remain with the recessionary levels.
>
>
> one final point, i am seeing no economic indicator -except leading
> ones such as new orders - which shows this great recession is ending.
> and this data is subjective, not objective.
>
> when i see quantitative data rising, i MIGHT think things are getting
> better. the problem with quantitative data in the next few months
> is that it is stimulus driven. i am not a fan of stimulus, and all
> it does is make big W's economically.

Beating on the Federal Reserve

ECRI posted new stuff about their home price upturn call on their website: businesscycle.com

A summary.

"With U.S. home values far below their boom-time highs, most observers are resigned to an indefinite downdraft in home prices. It is this uncertainty about the ultimate bottom in home prices that has converted so many mortgage-related derivatives into toxic assets. Yet, at long last, the end of the home price downturn is in sight.

One key reason for the turnaround in the outlook is housing affordability, which is hovering around all-time highs. The current combination of drastically reduced home prices and very low mortgage rates has hardly ever been seen in living memory…

Most importantly, the U.S. Leading Home Price Index (USLHPI), designed to predict cyclical turns in real home prices, has now been rising for five months… But a three P’s analysis (see chart below) of the level of the USLHPI reveals an even more promising picture… the recent upturn in the USLHPI is almost as pronounced as the median in comparable past cycles… it is almost as pervasive; and … it is just as persistent. The implication is clear: this is a genuine cyclical upturn in the level of the USLHPI. Such an upturn in the USLHPI amounts to a forecast of a cyclical upturn in the level of home prices this year…"

ECRI vs. Roubini, Round Two

John,

I read ECRI's book, Beating the Business Cycle, and I think you misunderstand how to read the WLI.

You say, "ECRI’s WLI peaked on Oct 5, 2007, four days before SPX’s peak close of 1565 on Oct 9. WLI’s AGR turned negative on Aug 31, 2007, shortly after the financial crisis became obvious to everyone that month, and peaked earlier first on May 18 and twice more at the same level, the last being on June 8."

Their work is not technical analysis, where you can pick out multiple peaks this way. In order for you to claim there was an Oct. 05, 2007 peak, you'd also have to say there's a August 24, 2007 trough. But the WLI edged up less than two points between those dates, after falling almost five points since June 8, 2007. My understanding is that because there was no pronounced upswing, the slight uptick is noise, and not a new cyclical upturn. All this is to say that the peak in the WLI occurred on June 8, 2007, which happens to be six months before the recession began.

OB