We have many rules of thumb for Contrary Indicators. When it comes to magazine covers, we look for a mainstream (not business) outlet joining a trend in progress as it reaches a cathartic moment. Media jumping on a bandwagon can augur a top or bottom just as a major trend reaches a climax.

Yesterday, we noted the repeated housing bottom calling by Barron’s. That was not quite a contrary magazine cover indicator because its a) on a business imprint, not a mainstream media outlet; 2) It is not a call that punctuates the end of run. See Time Magazine’s 2005 Home Sweet Home cover as a perfect example of a mainstream pub that is the exclamation point after a huge run.

Unlike Time, both of the Barron’s housing covers were themselves attempts to be contrarian calls. Rather than hitting that mark, the first one was wildly wrong; we will know if (and how by much) this one is wrong in the not too distant future.

Which leads us to the Economist.

This week’s edition adopts the outlook that “the world economy is better than it was, but there are still big risks out there.” Its a business, not mainstream magazine, plus it is circumspect enough not cheerleading at the top to not qualify.

And there are still big risks out there. Too often since the 2008 financial crisis investors’ hopes for strong and lasting growth have been dashed—whether by bad luck (soaring oil prices), bad policy (too much budget austerity too fast) or the painful realisation that recoveries after asset busts are generally weak and fragile. If tensions with Iran over its nuclear programme spike, for instance, an oil-supply shock could once more cause havoc. Much could yet go wrong.

The timing of this could very well mark a top in economic activity, but by the rules of magazine indicators, I am going to suggest this one fails to qualify.

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Less gloom, but no boom

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Source:
Can it be…the recovery?
Economist
Mar 17th 2012
http://www.economist.com/node/21550278

Category: Contrary Indicators, 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.

15 Responses to “Uh-Oh: Economist Cover “Can it be…the recovery?””

  1. Greg0658 says:

    uh oh Jongo @ Danger Island
    http://www.youtube.com/watch?v=p-ywc503A_Y
    1 banana 2 banana 3 banana four

    is that a real ink on paper cover or a webby trial balloon?
    how many reverse reverse reverse psychologies are we in now? lost count.

    ps – more profile on rightguy w/+freckles

  2. Pantmaker says:

    @ Greg- Ha!! I thought the same thing when I saw the headline…

    The “Uh oh Chongo Bear Market” has begun! how appropriate.

    http://en.wikipedia.org/wiki/List_of_stock_market_crashes

  3. NMR says:

    I’ve been reading the economist for over 50 years and I can tell you the last four have not been amongst their most distinguished. They got the UK completely wrong; they joined the lemming chorus over the imminent demise of the Euro and exit of Greece, Portugal, Spain and maybe Italy; they overhyped our deficit problems complete with bond vigilantes running amok ; and took seriously the Ryan budget and other Republican head games. To mention just a few. In this case they seem to have figured out the US is probably on the edge of a breakout (I know you’re still a sceptic Bazzer). Consider this. Americans don’t buy 14 million autos in recession or even semi recession conditions.

  4. Orange14 says:

    To add to NMR’s post, those of us who follow Calculated Risk’s blog can see a variety of indicators that point to a recovery. The central question is how vigorous it will be in the months to come.

  5. drewburn says:

    Tops are diferent from bottoms on sentiment. And, uh, even a stopped clock is right twice a day……… I suspect the magazine cover is more of a top indicator, but only occasionally a bottom indicator. It’s like Helene @ Street.com: VIX is good at bottoms, not tops. Every indicator has it’s strength…….and weakness.

  6. constantnormal says:

    Probably not a contrarian indicator … published too soon for that. If this cover had rolled out in October, I think it would be A Different Story.

    We’re having a “recovery” but it is likely to be one of the smallest and shortest recoveries on record. Not enough demand from too few remaining middle class for it to be anything else. Add in the boomers transitioning from big-spenders at the top of their careers to penny-pinching retirees with insufficient savings, and the demand half of the equation is likely to be weak for a generation to come.

    Come 2013, with whatever whacked-out political sensibilities are steering our national economic bus, the Fed will be out of rope (I think that this week’s fall of the Treasuries is the first crack in their firmament) and the bus will be out of road. No plan, no clue, no courage.

    But the newly re-elected will be safe and secure for yet another term in office, so they could care less. This next election cycle is likely to be one of long-term pols paying off supporters and lining up those cushy jobs as lobbyists, for when they exit the bus.

  7. carleric says:

    If therer was just less governmental meddling with data and economic indicators I could be convinced but for now just color me skeptical

  8. crunched says:

    Not sure if that’s a contrary indicator, but I bet this is:

    http://www.forbes.com/sites/ericsavitz/2012/03/18/apple-sets-monday-a-m-call-on-cash-position-dividend-coming/

    So basically, with APPL stock massively, massively overextended, let’s say you buy APPL for the ‘new’ dividend’ right away. Let’s say the new dividend is 2%. That’s $11 a year on one share. If you buy 1000 shares you will make $11,000 in one year.

    Now let’s take into account Apple is slowly getting its margins pushed lower from increased competition, and they’re clearly reaching a maturing point with all their products. What more can you add to the ipad? They’ve already pushed things too far with the launch of ipad 3 and most are complaining the screen is either worse or barely different from ipad 2. Many, many are complaining of yellow screen, etc.

    In other words, let’s say Apple stocks takes a major breather and drops to it’s 50 day moving average one hundred dollars below. You will be down $100,000 right away.

    I think apple stock is on the verge of peaking. People are putting their hope in an Apple TV. That’s so ridiculous. Will people wait in a line to buy a TV? How often do people need a new television anyway? Not nearly as often as they replace their phones, etc. And the only thing people care about when they’re getting a flatscreen is picture quality. Not extra, annoying gadgets. Internet TV already failed. Somehow I don’t think Apple will just suddenly jump into the TV arena and start pumping out better sets than others who have been in the field for decades.

  9. Barnnie says:

    Heh, heh….. I used to read “The Economist” but gave up years ago on their $5 oil “world bet”…….. s’prise!! never came to pass…..

  10. Pantmaker says:

    American’s don’t buy 14 million autos in a recession? The recession we just “left” kicked off with auto sales solidly at 16 million. The first 6 months of the actual recession had sales above 14 million. This looks like a dead cat bounce to me. The days of cash out refi deals and home equity lines of credit ATM cards are gone (hopefully for good). This little bump is just filling in the desperate holes that developed over the last 4 years..and now they are gonna drive them until the doors fall off. For a lot of the folks that are retiring, this may be the last car they ever buy. I’ll bet 12 million is the new normal.

  11. Expat says:

    Gosh, golly, gee-whiz! If I knew that all it took to keep the economy from imploding was 10 trillion in new printing, I would have done this ages ago! And now that we’re recovering, let’s boost it by printing another ten trillion. What could possibly go wrong?

  12. mathman says:

    While on the other side of the world (via cryptogon):

    http://www.latimes.com/news/nationworld/world/la-fg-china-caves-20120318,0,2352472.story
    In China, millions make themselves at home in caves

  13. LauraS says:

    I think that the economic magazines just reproduce what they hear from the world outside. There is not enough critical thinking about what is really happening in the society and markets. If there is a crisis, they just spread the word and make things worse. If there is a market optimism, they support this optimism by writing in favour of investing.

    I stopped reading them in 2008 when the economic crisis started. Instead of bringing a serious analysis they started to focus the unrelevant data. This lead to confusion about the bailouts of the big banks.

    There are some typical examples of the behavior of the journalists:
    When Stiglitz came with the Privatizing Profits, Socializing Losses and with the critique of the US government, the mainstream media just followed him. When the Vancouver housing bubble became the second biggest in the world, canadian media started to write about it.

    I rather read interesting blogs like this one and they are for free with people who are not objective, but offer an interesting opinion on the current state of things.

  14. mathman says:

    Here’s a sign that the housing problem is being corrected for our recovery:

    http://www.alternet.org/story/154582/kiss_the_mcmansion_goodbye%3A_is_the_american_home_shrinking?akid=8429.206600.VFWvsr&rd=1&t=6
    Very Tiny Houses may be the new American homeowner porn.

    Weeee, (from the article):

    “How much smaller are homes getting? According to NRDC’s Kaid Benfield, the average American home exploded from 983 square feet in the 1950s up to 2,300 square feet early in the 2000s, even as the size of families declined over the decades.

    But by 2010, according to data from both Trulia.com and the National Association of Home Builders (NAHB), the median size of a new US home had headed back down toward 2,100 square feet. And that was just single-family homes; the calculations didn’t take into account the increasing popularity of condos, which would have brought the number down even further.

    Some experts think this long-term trend toward smaller houses is likely to hold steady even if the economy improves. “I don’t expect [home size] to come back up,” says Gopal Ahluwalia, a VP at NAHB. He notes that nine out of 10 NAHB members surveyed said they were planning to build smaller, lower-priced homes in the future. “We don’t need big homes; family size has been declining for the past 35 years.” That fact may not have stopped us from going big in the past, but it may matter more in these frugal and eco-conscious times.”

    Most people (in the U.S.) own so much crap that, to live in a much smaller home will require tossing a lot of their accumulated clutter or renting the ever popular storage unit to house the junk.

  15. romerjt says:

    Disturbing observations about the recovery – sub-prime car loans for 6 & 7 yrs! — “six- and seven-year loans are becoming increasingly popular. Indeed, of those who took out an auto loan in 2008 43% were of six- or seven-year durations, up from 32% in 2004, according to J.D. Power and Associates.”

    And a billboard from a credit union (no less) linking a home equity loan with a vacation. Same as it ever was?