Don’t Be Fooled, We’ve Been Here Before 

Seeking Alpha 5/05/09


History Repeats Itself: 1929 = 2007

ECRI: No End to Recession in Sight  “According to the U.S. Weekly Leading Index (US WLI) released on 03/06/09 published by Economic Cycle Research Institute (ECRI), the economy is not indicating the end of the recession is near. Lakshman Achuthan of ECRI states:  “The WLI has now slipped to another new cycle low, suggesting that the end of this recession has yet to start taking shape.”  The US WLI has a slight lead over business cycles.  As a leading indicator, the WLI is forecasting economic conditions approximately six months in the future.   Seeking Alpha 3/15/09

Household Debt Vs. GDP  “The problem is us. The problem is not the banks, greedy though they may be, overpaid though they may be. The problem is us… We’ve been living very high on the hog. Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen.”   National Public Radio  2/27/09

How Low Can the Market Go?  “There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000.  During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller’s cyclically adjusted P/E ratio.*  After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X.  We’re still in the middle of the last one.”  The Market Insider  3/2/09

Housing:  Where is the Bottom?  “The continued rapid drop in average home price has shortened my time estimate for reaching the “target equilibrium price” around $120,000 to $125,000.  See cart below.  Piedmonthudson’s Weblog  2-27-08


Corporate Insiders in Buying Frenzy  “A caveat to consider: in September 2007 insiders were enthusiastic buyers. Although not nearly as now. That uptick in buying was, of course, not very profitable since most stocks topped out shortly afterward. The question now is, does today’s frenzy mean that insiders see real value or will we simply see the market fall more and insiders get even more excited about buying?”  Traders Narrative 11/25/08

Korea: 150 Small Shipbuilders Face Bankruptcy  “Shipping companies have reduced new orders and canceled existing ones, as their business slows on the worldwide economic downturn. The domestic shipbuilding industry will likely remain stagnant until the second half of next year,” he noted.  Korean shipbuilders delivered nearly 45 percent of new ships across the globe last year, earning about 45 trillion won ($31 billion). But it is hard to estimate how much small-and medium-sized shipbuilders contributed to the sector because of no available data.”  Korea Times  11/18/08

ECRI: Economy Falling at Fastest Pace in 60 Years  “With WLI growth continuing to plumb new lows, not only is there no recovery on the horizon, but the economy is falling off a cliff at its fastest pace in at least six decades.’ The US WLI has a slight lead over business cycles.  As a leading indicator, the WLI is demonstrating that economic conditions in the future are going to be worse than they are today.”  Seeking Alpha  11/16/08

Unemployment rate reaches highest level in over 14 years Over the past 18 months, 3.3 million workers have been added to the jobless rolls, and there are currently 10.1 million unemployed workers in this country.  The unemployment rate rose from 6.1% in September to 6.5% in October, its highest rate since March 1994. Underemployment, a more comprehensive measure of the extent of labor market weakness, rose to 11.8%, its highest level in over 14 years.  Underemployment’s growth is primarily due to a surge in people working part-time but wanting full-time jobs—up 645,000 from September to October, and by 2.3 million over the past year.”  Economic Policy Institute  11/7/08

TED Spread: A Lagging Stock Market Indicator  “A two-second definition of the TED spread: The TED spread is calculated by subtracting the U.S. T-bill rate from the Eurodollar LIBOR rate. Because LIBOR accounts for the credit risk of lending to banks while the T-bill is viewed as risk-free, an increasing TED spread is an indicator that lenders believe counterparty risk (or the risk of default on loans to other banks) is increasing.  Again, it is an important indicator when the crisis that ails you is very much driven by credit fears.”  Seeking Alpha  11/05/08

Retrenchment in global economic activity deepened in October, as new
business and employment fell at series record rates.
  “The turnaround in the US economy was especially striking in October. Manufacturing output and new orders fell at the fastest rates since mid-1980, while US non-manufacturing activity andnew business posted the third-sharpest losses in theirrespective series histories. The retrenchment of the Eurozoneand UK economies deepened, with both seeing survey recordcontractions of all-industry activity and new orders.”  JPMorgan Global Manufacturing & Services PMI  11/05/08

This Degree of Volatility Has Only Been Seen Twice Before  “It seems like a lifetime ago, but way back in the middle of the day on October 6, I noted how the high level of volatility seen thus far actually tends to lead to a bounce and then even larger moves to the downside.  In the prior instances, only the Crash of 1987 marked a bottom in stock prices.”  Seeking Alpha 10/16/08

Why You Should Care About the Baltic Dry Index  “Because raw materials are used at the beginning of a production cycle, indices related to moving them are seen as an important bellwether of future economic activity in the real economy. And that’s why investors and economists should take care to watch what’s happening, although they also need to be careful how they read it.”  The  1/31/08 

VIDEO China Watch: freight expectations  Sham Gad weighs in to how China’s loss of appetite for commodities is affecting dry bulk shippers and suggests the best way for bargain hunters to take advantage of low prices.

Hindenburg Omen  “The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market – specifically the NYSE – such that the probability that a stock market crash occurs is higher than normal, and the probability of a severe decline is quite high. The rationale behind the indicator is that, under normal conditions, either a substantial number of stocks establish new annual highs or a large number set new lows – but not both.”  Wikipedia

Elliott Wave Theory  “By the early 1940s, Elliott had fully developed his concept that the ebb and flow of human emotions and activities follow a natural progression governed by laws of nature.  He tied the patterns of collective human behavior to the Fibonacci or “golden” ratio, a mathmatical phenonmenon known for millennia by mathematicians, scientists, artists, architects and philosophers as one of Natures ubiquitous laws of form and progress.  The Elliott Wave Theory discovered that “Human beings never change. It has, and has always been, crowd psychology as it waxes and wanes in countable wave patterns that determine markets.”

Leading indicators to thedownside

Leading indicators to the downside

Capital Spectators Leading Indicators: Chasing Unicorns: The Cycle Gods Are Still Playing with Us Mere Mortals  “The fact that our index of leading components are falling even faster strengthens our view that we’re still looking at a rough patch for the wider economy. Yes, our economic metrics are only updated through the end of August and we won’t have all of the numbers for the September reading until early in November. But the more-recent numbers we do have aren’t providing much reason to expect that a turnaround in our broad economic index is imminent. A few examples: initial jobless claims are still running hot, nonfarm payrolls are still shrinking, and various measures related to consumer spending look weak.”

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