ECRI’S LEADING INDEX CLIMBS TO NEW HIGH, RECOVERY “UNSTOPPABLE”
Lakshman Achuthan, managing director of the ECRI says the recovery is going to be v-shaped and much stronger than expected. He calls the recovery “unstoppable”:
(Reuters) – NEW YORK, – As the U.S. economy rebounds from a long-running recession, a weekly leading index of future growth released on Friday showed the annualized growth rate hitting a record high.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 128.3 in the week to Oct. 2 from 127.1 the prior week.
The index’s yearly growth rate rose to new all-time high of 26.1 percent in the latest reading, from a revised 25.0 percent the prior week.
“With WLI (Weekly Leading Index) growth rocketing to a new record high, the economic recovery will prove to be far more resilient in coming months than most believe possible,” said Lakshman Achuthan, ECRI’s managing director.
“The risk of a double dip (recession) is very low,” Achuthan added.
The index was pushed up by stronger housing activity, he
said.
I’ve also attached a video from Tech Ticker this morning:
Part 1:
Part 2:
An “unstoppable, v-shaped recovery? Are you kidding me? Let’s see what happens once the government stimulus is taken away. This is like trying to jumpstart a dead car battery. It works until you take the jumper cables away. I don’t know who this guy is or what his agenda may be, but this economy will not see fundamental, structural improvement until the deleveraging process has run its course. In the meantime, it doesn’t matter how much money the government throws at the problem.
Wein said 1,200 by year end. CNBC said strong dollar and up market earlier today. looks anything is possible. Other countries cannot afford USD to go much lower. US is in the sweet spot, printing, accounting tricks, consume and spend. Then repeat…..
I think we’ve all underestimated the power of Ben’s printing press. Who knows where he can drive prices with that thing….
With what ?
Private investment (included in the LEI)
http://research.stlouisfed.org/fred2/series/FPI?cid=112
Gvmnt savings?
http://research.stlouisfed.org/fred2/series/GGSAVE?cid=112
More Hours worked?
http://research.stlouisfed.org/fred2/series/AWHI?cid=11
Treasury bills,equities are included in the LEI but then rush to the office of comptroller derivatives report.
The one thing that confuses me about the ECRI LI is that it seems to be perfectly correlated with the market. Is it actually a leading indicator of anything?
Steve Hansen in seeking alpha has numerous articles on LI. It was about 1/3 stock performance or more if remembered correctly. It is a self reinforcing loop and how things work in the country I think.
TPC,
Yeah, the ECRI LI consists of 40% market — so it’s not a surprise … and it appears the way the other measurements are made, they really have no hope of offsetting unless they are in free fall. I’ve seen this indicator referred to as the “market indicator of the market indicator” amongst other things.
OTOH, I think you’re right, this “reflation” absurdity can go on MUCH longer than anyone thinks. If some of the same analysis had occurred in 1999 that bears run today, we would have seen many of the same blog posts & rational that the end was near (Prechter did), and yet we had 5 years of phenomenal asset growth that was a real pleasure to cash in on wrt house, we missed the equity market though as my SO scoured EWI and panicked for every last one of those years (and feels very vindicated now, btw). So yeah, they may have been “right” all along, but not profitably. Is the 3rd time a charm? (i.e., another multi-year bubble?) Well, the US Govt is trying, and I think it would be foolish to rule it out.
That would make sense Paul. It was down the last two weeks (with the market) and then all of the sudden it surged to a record high this week. The economic data didn’t get better in the last week, but the market did….This strikes me as a momentum tool and nothing more.
Thanks Bleako. I’ll try to ride the moves up and down, but it’s difficult to overlook the obvious macro hurdles that the economy faces. In the near-term, who knows where we go. It is starting to feel like there are bubbles sprouting up all over the place again.
“This dollar carry trade is really flooding into all asset classes and leading to a simultaneous rally across anything-stocks, high-yield bonds, Treasury prices, gold,” says Mike Larson, an analyst with Weiss Research. “The Fed is essentially pursuing a policy…of asset inflation. They’re doing it by cheapening the currency and by flooding the system with easy money.
chasviv,
So many people like you these days are saying all the bearish things and feeling that you are smarter than others.
If you missed the rally, so be it, no need to be bitter. the fundmental weakness, everyone knows, you have to also take into consideration the Fed’s printing machine. It’s a tricky situation, please don’t pretend you know better than others.
End of day spike is back, new year high today?
Anonymous,
Do not patronize me. It has nothing to do with being bitter about missing the rally,I’ve actually made some money on the long side. In contrast, it has everything to do with a once great country and economy being trashed by a government I no longer trust. And furthermore, it is amazing to me that you would say that I think I am smarter than others because I take a bearish position on the market and the economy. That is comparable to some people recently saying that critics of President Obama are racist when all they are doing is expressing their heartfelt opinions and concerns. And finally, there is nothing tricky about this situation. It is going to take a lot of pain and hurt and sacrifice to dig ourselves out of this mess and this country has no one to blame but itself for the financial hole we are in.
I don’t see where anyone pointed it out, but Mish just had a long post on this:
http://globaleconomicanalysis.blogspot.com/2009/10/can-we-really-trust-leading-economic.html
end of day spike buyers won again, another new high..
Anticipating another merger monday and the beginning of earnings. Another couple of days like this and I am not going to feel so comfortable about being long this market….
It`s true that some optimists are becoming pessimists under a recession but I think that vice versa is also true.With unemployment claims (insurance) over 500.000 every week, unemployment U3:9.8% U6:17%…and so on…and everything that´s is at http://www.usdebtclock.org/ there must be some pessimists and not only those who have missed the rally. The world should be crazy if there weren´t any.
Well, you don´t have to be a pessimist though you can still be sceptic. Still this is about the stock market och that is all about making money. You can just look at Goldman Sachs´ earnings or do you remember the day late last year or
was it (don´t remember) in the beginning of this year when suddenly one day the stock market gain 5-7 percent without any reason.
I think many also just follow the majority on the stock market and there are studies about this as well. This might also make the stock market to go higher. Also short selling hasn´t been this low since 1998(in september 2009). Is this because of the recovery or have banks just pushed the stock market to a greater level so noboby dares to take the risk for short selling anymore? Companies´ earnings are really NOT at a satisfied level neither and probably that´s why insiders are selling. Banks still keeps throwing buy recommendations to the market and somehow analysts keep expectations below the earnings and this make market rise. A rising stock market will also give a psychologic effect on the real economy which I specially have noticed in people who don´t really now anything about the real economy or the stock market. But is it or should the stock market be force to rise?
The real economy is better than it was in the spring time but we still have a long way to go and things can go wrong. The stock market shall and have also gained because of this but they are way ahead of themselves. They have already priced in to much.
I don´t think this Lakshman Achuthan do know so much about the real economy. You could just ask him on which economic theory this recovery is based on? His answer whould probably be the stock market.:)
When the government involves itself in the stock market with trillions the way the US gvmnt has (and gvmnts around the world), doesn’t that inflow of capital allow companies to re-expand operations and re-hire people? If this is done around the world then there can theoretically be a worldwide pick up in r&d/manufacturing, people can be re-hired, products get made, and as people are put back to work consumption rises, and the rate of deleveraging can happen faster than people think. Renewed stock market wealth could also increase the rate of mergers as companies look to take advantage of higher stock prices. It seems to me that’s what’s going on. Can’t all of this happen regardless of dire current economic conditions? Can’t all of this happen faster than everyone thinks? As long as banks have $$$ to loan, people feel comfortable with their finances (i.e. 401K/job) and stocks and corporate wealth are kept inflated by whatever means then it seems the system can be recovered. Has there ever been a coordinated world stimulus the kind we’re seeing? Perhaps predictions about an extended deleveraging period are not as valid because they’re based on examples from the past where isolated attempts to jump start a country’s economy were not effective. We don’t know how effective a coordinated world stimulus can be. It’s never been done before. As long as corporations have wealth for r&d/manufacturing to hire people there will be business activity. If there is business activity then there will be jobs and product demand at the corporate level and eventually at the consumer level. Once those start fire then the deleveraging process can happen and perhaps happen faster than people realize. The issue of flooding the markets and tempting inflation is offset by the risks of disinflation/deflation. Also the issue of spending money the US supposedly doesn’t have perhaps is mitigated by information that is simply not known to the public such as off-ledger wealth the US may have upwards of 100 trillion. In those terms, what’s a few trillion more to save the economy?
http://www.financialsense.com/Market/cpuplava/2009/0930.html
“I have had the sneaky suspicion that the aggressive and unprecedented actions on the part of the Fed have played a significant role in the LEI given a misleading signal as to an economic turnaround it is forecasting, while the economic components would likely paint a different picture. It is important to understand the makeup of the Conference Board’s Leading Economic Index (LEI) and the weights that each component makes up of the LEI. Below is the breakdown of the ten indicators that make up the LEI and their respective weights in the index. As seen below, the three financial indicators make up approximately 50% of the LEI while the seven economic components make up the other 50%, with the M2 money supply alone making up 35.8% of the total LEI. Money makes the world go round, I guess, according to the LEI.”
and now for some anecdotal evidence that the top is at hand…
http://www.bloomberg.com/apps/news?pid=20601110&sid=aZh5HnUipc0k
TPC,
Ol’ ECRI sure knows how to get the natives restless, although the index correlates fairly well with the market, I noticed it turned up in early 2002, as well as Dec 08. It will be interesting to note the public mood when it finally turns. We’re beginning to get some of those ‘undenialble positive economic #s’, ie, retail sales and employment. I noticed Canada’s emp #s went positive for the first time since the recession started.
Van,
I believe it also went positive in late 2001….
Anirvan Banerji from ECRI is over on RealMoney.com telling Doug Kass he is dead wrong:
“Doug, regarding your skepticism about a self-sustaining economic cycle due to ‘nontraditional headwinds,’ ECRI’s objective leading indices, designed to address this specific question, are telling us that this is a nonissue as far ahead as they can see — which is further ahead than the markets. “Current economic conditions” are of course not favorable, but that’s always true when you’re just coming off the bottom of the business cycle.”
Here’s an article by ECRI researcher Banerji saying that following their public calls would get you 8% OVER S&P over past nine years. I have to tell you that sounds pretty good:
http://www.thestreet.com/story/10608336/1/solid-indicators-are-investors-best-friend.html?cm_ven=GOOGLEN