Chick to enlarge:

Source: Bianco Research LLC
Charts Of The Week, December 7, 2011

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The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.8 in its latest reading, data through November 25. The latest public data point is more negative than last week’s downwardly revised -7.4 (previously -7.3).

See also the recent Bloomberg interview with Lakshman Achuthan, the Co-founder of ECRI (video).

Their Recession Call remains intact.

Category: Cycles, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “ECRI Sticks With Its Recession Call”

  1. Concerned Neighbour says:

    Europe as a whole may already be in recession, and if not now odds are they will be next year. China is slowing down. U.S. numbers are better, but considering how horrible they’ve been that’s not saying much.

    But equity markets care not, with a massive rally of 150 SPY points in two months. And more exhuberant buying today on the heels of a deal that, shall we say, has a hole or two and faces great challenges to even being ratified. Go figure. May the fantasy land continue.

  2. [...] ECRI is sticking with its recession call, even if it takes a year to play out.  (Big Picture, [...]

  3. ironman says:

    “ECRI Sticks with Its Recession Call”

    So do we, but then, we schedule it too!

  4. Newsboy says:

    Buying equities is purely based on the possibility of hyper-inflationary monetary (debt) creation, although the mechanism of being realized by the masses, through wage inflation and consumption of debt, is still a huge bet…

  5. Singmaster says:

    I trust Achuthan. He may be early but he doesn’t disappoint in the long run.

    I was especially spooked by TBP post yesterday on re-hypothecation.
    http://newsandinsight.thomsonreuters.com/Securities/Insight/2011/12_-_December/MF_Global_and_the_great_Wall_St_re-hypothecation_scandal/

    If I’m reading it correctly, an unwind could result in a calamity greater than 2008. Am I reading it correctly? If anyone has addl insight and perspective, I’d be interested.

  6. louiswi says:

    Seems recession would be an easy call. “even a caveman” could make that call. You see, if you are not in recession then obviously the next event would be recession. Without data showing date, magnitude, duration-the call is meaningless.

  7. DrungoHazewood says:

    Achuthan made an important point about the stock market and the economy. We all know stocks are really bad at signalling recessions and recoveries, because the market is a very good coincident indicator of slowdowns that don’t necessarily lead to recessions or bounces that don’t necessarily lead to recoveries. We can see from the coincident/lagging #s that the economy stopped its free fall and has bounced the last few months. Stocks have followed. The bounce does not necessarily rule out a recession, as they can take many months to manifest themselves. It would be a bad sign indeed if stocks resumed their downtrend, as that would mean the economic bounce is over. The ECRI acceleration/deceleration calls are easier to make money on, because by the time they come out with a recession call, the market has already priced in a lot of damage, and many times is due for a bounce. It is not unusual for the ECRI to make a recession call and have stocks immediately rally. The ECRI determined last year’s bounce was sustainable and this year’s is not.

  8. helleco says:

    Lakshman’s book clearly says they make the recession call based on the WLI (which is the one publically available). If you go by the book, last year he should have made a recession call. He did not and there was no recession. I thought last year there was going to be a recession and I sold my equities and I was a loser. I did not mean to believe him this year. But I am for whatever reason. If he is wrong, I lose a lot of money. If he is right, then he will be a hero. While there are few people out there predicting a recession and have put a percentage chance on it. But Lakshman is ALL IN. I can’t find anyone else put a 100% chance on a recession. So if they are right, they can brag for the next 20 years. If they are wrong, ECRI will cease to exist.

  9. bear_in_mind says:

    I also tend to agree with Achuthan. He’s no Cassandra and isn’t given to waffling based on what their model(s) indicate. Sure, the data and analysis could be wrong, but if it looks like a duck and quacks like a duck…

    And I totally agree with Singmaster about Barry’s post on re-hypothecation last night. We’re being systemically hijacked with suitcases, legalese and brass cojones. It’s enough to makes the Russian mafia blush.

  10. Singmaster,

    see some of..

    “That paper gold, in the form of electronic ones and zeros, typically used by various gold ETFs, or anything really that is a stock certificate owned by the ubiquitous Cede & Co (read about the DTCC here), is in a worst case scenario immediately null and void as it is, as noted, nothing but ones and zeros on some hard disk that can be formatted with a keystroke, has long been known, and has been the reason why the so called gold bugs have always advocated keeping ultimate wealth safeguards away from any form of counterparty risk. Which in our day and age of infinite monetary interconnections, means virtually every financial entity. After all, just ask Gerald Celente what happened to his so-called gold held at MF Global, or as it is better known now: “General Unsecured Claim”, which may or may not receive a pennies on the dollar equitable treatment post liquidation. What, however, was less known is that physical gold in the hands of the very same insolvent financial syndicate of daisy-chained underfunded organizations, where the premature (or overdue) end of one now means the end of all, is also just as unsafe, if not more. Which is why we read with great distress a just broken story by Bloomberg according to which HSBC, that other great gold “depository” after JP Morgan (and the custodian of none other than GLD) is suing MG Global…”
    http://www.zerohedge.com/news/gold-rehypotecation-unwind-begins-hsbc-sues-mf-global-over-disputed-ownership-physical-gold
    ~~~

    Clearing Houses Are The Mechanism Of All Markets
    December 2, 2011, at 4:13 pm
    by Jim Sinclair in the category General Editorial | Print This Post | Email This Post
    My Dear Extended Family,

    We all know bank’s balance sheets are cartoons due to FASB’s capitulation on the fair market value issue, that the euro financial leaders do not deserve the title leader, and that the Fed is the source of liquidity for Euroland in unlimited cheap dollar swaps, but there is more.

    Continue reading Clearing Houses Are The Mechanism Of All Markets…”

    “…Without faith in the clearing house system where is faith that what your account statement says means anything whatsoever?…”
    http://www.jsmineset.com/2011/12/02/clearing-houses-are-the-mechanism-of-all-markets/

    also, re: Jim Sinclair, feel free to read further, on his site, he covers the ‘situation’ in fuller detail..
    ~~

    tho, LSS: yes, there Is a problem..

  11. Quantification of last week’s forward-looking data releases by the TRENDLines Recession Indicator’s heuristic algorithms suggests a 3.2% GDP pace in December will give way to a 0.5% trough in April … en route to a robust 4.2% business cycle crest in 2014Q4.

    TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  12. [...] The ECRI is sticking with its recession call, even if it takes a year to play out. (Big Picture, MarketBeat) [...]

  13. GrenfellHunt says:

    Is there any example in the post-war era of the US economy going into recession without the yield curve inverting first? And if the US yield curve is not forecasting recession, then why does Achuthan think this time is different?

    Achuthan sounds very defensive in the video, and in his previous interviews he’s been very vague as to why exactly he thinks there will be a recession now…except to repeat how strong ECRI’s track record is–which isn’t really the point.

    1. ECRI might be right that we’re heading to recession, but he isn’t making a very good case for his call.
    2. Apparently, the logic is that the rest of the world economy is collapsing, and that the US will be brought down by the contagion.
    3. Achuthan needs to get more pointed questions than most financial journalists are giving him on his call.

  14. GrenfellHunt says:

    Ironman cites Political Calculations blogspot to the effect that the Fed’s Zero Interest Rate Policy rules out use of inverted yield curves as recession forecasting tool. Question: Why? It would be good to see the arguments behind that analysis. Isn’t it difficult for businesses to slip into recession when they can manage short-term crises by borrowing at very low rates?

    Again, ECRI may well be right, but it would be constructive to get some answers to why ECRI thinks that we’re going to get a recession with the yield curve looking as it does.