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The Magazine Cover Indicator Strikes Again!

Posted By Barry Ritholtz On March 24, 2005 @ 5:53 am In Markets,Media | Comments Disabled

Here’s a (belated) recognition of a contrarian signal: The Magazine Cover indicator

"The Incredible Shrinking Dollar"

newsweek_dollar [1]

Source:  Newsweek [2]

I’ve been meaning to post this for a week, ever since Aaron Task
mentioned it in Columnist Conversation — but I never got to it.

BTW, is it just me, or does this paragraph (from the cover story) strike anyone else as disingenuous?

"There’s been plenty of good news of
late about the U.S. economy, so let’s start with that: employment is expanding
(2.4 million new payroll jobs in the last year); inflation remains low (less
than a 2 percent rate in the past quarter); the stock market is higher (up 11
percent on the Dow from its November low), and business investment is
impressive (rising at a 14 percent rate in late 2004). Indeed, the recent news
has been so good—a major exception being $50-a-barrel oil—that we’re hearing
again of the "Goldilocks" economy, which grows fast enough to
increase jobs and slow enough to muffle inflation. But beyond all the upbeat
indicators lurks a potentially frightening problem that unsettles even the
wisest and most seasoned economic observers. It’s not government budget
deficits, a possible housing bubble or even $2-a-gallon gasoline. It’s the
dollar."

Anyway, kudos to Task for catching this one before the recent dollar rally.

 

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UPDATE: March 30, 2005 6:04am

The WSJ’s Justin Lahart discusses the fallibility of the magazine over indicator here:

Cover Up [3]
http://online.wsj.com/article/0,,SB111205944872991534,00.html

Lahart’s a savvy writer whom I know from when h was at TSCM. He’s a daily read for me.

Also, note that the magazine cover indicator [4] need not mark a top [5] or bottom [6]; instead, it can point to when a trade gets crowded (i.e., Short the Dollar). A counter trend rally then ensues . . .

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Sources:
Magazine Cover [7]
Aaron Task
Real Money.com, 3/16/2005 9:22 AM EST
http://www.thestreet.com/p/_rms/dps/cc/20050316/columnistconversation1.html#entryId10213433

"The Incredible Shrinking Dollar" [2]
What it means for America’s future – and yours

Robert J. Samuelson

Illustration by Viktor Koen

Newsweek, March 21 2005
http://www.msnbc.msn.com/id/7170226/site/newsweek/


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/03/the-magazine-cover-indicator-strikes-again/

URLs in this post:

[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2005/03/newsweek_dollar.jpg

[2] Newsweek: http://www.msnbc.msn.com/id/7170226/site/newsweek/

[3] Cover Up: http://online.wsj.com/article/0,,SB111205944872991534,00.html

[4] magazine cover indicator: http://bigpicture.typepad.com/comments/2005/03/the_magazine_co.html

[5] top: http://bigpicture.typepad.com/comments/2004/02/forbes_cover_te.html

[6] bottom: http://bigpicture.typepad.com/comments/2005/02/wanted_august_1.html

[7] Magazine Cover: http://www.thestreet.com/p/_rms/dps/cc/20050316/columnistconversation1.html#entryId10213433

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