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Friday, September 30, 2011

ECRI says Jobs To Get Worse Under Recession-Bound U.S. Economy

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, released its latest readings for its proprietary Weekly Leading Index (WLI) today. (More about ECRI)

From
ECRI's Weekly Leading Index Falls: Jobs To Get Worse Under Recession-Bound U.S. Economy
  • ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down – before the Arab Spring and Japanese earthquake – to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes.
  • ...the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”
  • "if you think this is a bad economy, you haven’t seen anything yet."
For a better understanding of ECRI's indicators, read its book, "Beating the Business Cycle."
Book: Beating The Business Cycle
Click book to order
..

Tuesday, September 27, 2011

ECRI Recession Call

The Economic Cycle Research Institute, a New York-based independent forecasting group known as ECRI, called for a recession. (More about ECRI

 Here is what the International Business Times reported this mornng in a summary called "6 Signs We are in a Global Recession."
Stagnation may be an overly positive term. The Economic Cycle Research Institute in mid-September entitled its U.S. cyclical outlook "Economy on Recession Track."
Here's an excerpt from the report: "Today, we must sound the alarm bells loud and clear. ECRI's leading indices of U.S. economic activity have turned down in a textbook sequence. The recessinoary decline in a summary measure of numerous reliable leading indicators, coupled with an ominous drop in a broad measure of current ecnoomic activity representing facts, not forecasts, constitutes a compelling recession signal."
A recession seems baked into the cake already. We were at 1.0% GDP growth before the European PIIGS mess and then we got the double whammy of the dysfunctional congress kicking the deficit issue can down the road. Either of those "black swans" could be enough to kick the economy into a recession on their own but together they probably sealed the deal.

OK, lets assume we are currently in a recession. Is it a big one like the last one or a short, small one? The markets corrected roughly 20% off their highs this year. Is that enough pullback for a small recession?

The next question: Is this a short lived recession that was predicted already by the leading tech stocks already going down from a peak early this year? The market may have bottomed in August and could be on the way up to pull us out of a recession before the numbers even indicate one happened.

How would we know? The only way I know is to keep an eye on ECRI's leading indicators.

Wednesday, September 21, 2011

Fed Twist - US Federal Reserve Twist Statement Explained

Today the US Federal Reserve Open Market Committee (FOMC) met then issued a Press Release explaining what many on TV call the new "Fed Twist Policy." In a nutshell, the FOMC will sell short term US Treasuries to generate funds to buy longer term US Treasuries. They explain it in paragraph three of today's press release.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
The FOMC will also support the housing market:
To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.
The FOMC also voted to keep interest rates between 0 to 1/4 percent and said they anticipate "exceptionally low levels for the federal funds rate at least through mid-2013." The decisions today were not unanimous. Eight members of the FOMC voted for this action and three opposed it.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.
best regards
Kirk Lindstrom
Editor of "Kirk Lindstrom's Investment Letter"
 

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