Posts filed under “Cycles”

Attention WSJ OpEd: Correction Needed

Invictus here, requesting a correction from the WSJ.

In an editorial on Saturday, the WSJ made the following demonstrably false claim, using a slightly modified Calculated Risk (Bill McBride) employment graph (emphasis mine):

The nearby chart compares the recovery rate in jobs after each of the last four recessions, and so far this one has been by far the weakest.

Unfortunately for the Journal, Bill’s chart does not represent what they say it represents, and they know it, or at least they should — Bill is a meticulous chart keeper.  Bill’s chart indexes employment to peaks, not troughs, which is to say recessions’ inceptions, not their ends.  Note Bill’s legend:  “Number of Months After Peak Employment”:

A chart that does represent what the Journal claims they’re showing (i.e. “the recovery rate in jobs after each of the last four recessions”)  is immediately below.  I’m using private payrolls only because we all know — and surely the Journal agrees — that the only good government employee is an unemployed government employee.

So let’s use the St. Louis Fed’s USPRIV — private payrolls only. [BR: That also will remove census noise]   And let’s look what has actually transpired “after” — Journal’s word, not mine — “each of the last four recessions”:
(Click through for larger)

Source:  St. Louis Fed Expansion Charts

So, in fact, the previous two jobs recoveries were actually weaker.  (Using total nonfarm payrolls — FRED’s PAYEMS series, which includes those useless government workers — puts this recovery’s current level (100.4186) a smidge behind the ’91 recovery (100.6164) and still ahead of the 2001 recovery.)

I wrote previously — in September 2010 — about this exact issue, asking in that post:

If the economy is in recovery — a new cycle –  for the the past 13 (or so) months — “technical” or not — should we perhaps be looking at the employment situation relative to the trough now, and not to the last peak?

Now, to be crystal clear — if folks want to continue to look at metrics from the December 2007 economic peak, it is their prerogative to do so.  However, it is not their prerogative to claim they are presenting data comparing a metric “after” recessions when they are, in fact, doing nothing of the sort.  Of course, it must be pointed out that using the peaks portrays Obama in the worst possible light, while using the troughs — as I pointed out in September — demonstrates that this recovery is actually stronger than the last two.  But that is clearly not a message the Journal would ever care to convey.

I will not hold my breath waiting on their correction — you know, one in which they actually state that this jobs recovery is better than the previous two.


Employment Indexed to Beginning/End of Recession (April 1st, 2011)

Category: Cycles, Data Analysis, Economy, Employment, Financial Press

What is the Half Life of Your Favorite Technology?

I mentioned this on Bloomberg early this morning, but its worth exploring further: What is the average half life of your favorite technology? We operate under the false assumption of substance and solidity, when in reality, things are deeply in flux. Everything changes, nothing lasts. The various technologies we use are physical manifestations of ideas,…Read More

Category: Cycles, Philosophy, Technology

Secular Bear Markets (inflation adjusted)

Fabulous set of charts looking at inflation adjusted S&P composite during major secular bear markets, via The Chart Store:


Secular Bear Markets


Here is the current crash and snapback:

2007-09 Bear Market


Prior bear markets (WWI, great Depression, 1970s) after the jump

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Category: Cycles, Markets, Technical Analysis

Rebound vs Valuations

Two seemingly contradictory articles are in the WSJ today: • Dow’s Big Rebound Can’t Erase Doubts • A Serving of Doubt on Bank Valuations Perhaps we can help reconcile them. The Dow has recovered from a deeply oversold condition; some of this was the natural elapsing of time, as the panic passed and things moved…Read More

Category: Bailouts, Cycles, Federal Reserve, Investing, Valuation

“Trade the First Day, then Stay Away”

This morning, the WSJ reports on a new trading pattern: First day of the month rally: “Some traders have been adopting a new ritual in recent months—buying early on the first day of the month and selling by the day’s close—taking advantage of a peculiar phenomenon that has seen the Dow Jones Industrial Average rise…Read More

Category: Cycles, Markets, Psychology

Presidential Chart Porn

With the recent passing of what would have been Ronald Reagan’s 100th birthday — and with President Obama having  invoked his name — we have been treated to a steady stream of articles about our 40th president, most of them remembering him in the most glowing terms, particularly as it relates to his economic record. …Read More

Category: Cycles, Data Analysis, Economy, Markets, Politics

Probable Outcomes

Probable Outcomes by Ed Easterling.


Crestmont Research’s Ed Easterling is a fellow traveler — a student of long term secular bull and bear markets.

If you are interested in valuation, sentiment, historical data and sound principles, Easterling is your guy. I have repeatedly referenced his first book, Unexpected Returns: Understanding Secular Stock Market Cycles, over the years as a solid explantory of how markets cycle over decades.

A combination of investment science and art, Probable Outcomes describes the common approach of irrational hope versus a more rational view of the stock market in this book. And, I am a sucker for all of the full-color charts and graphs it contains.


Easterling has done it again. In an investing world obsessed with short-termism, Ed reminds us that the long-term matters, and that investors can prosper – handsomely – by recognizing that valuation and long-term secular trends have an immense impact on our own long-term investment success. Swimming against the current is for heroes and idiots, not for sensible mortals.
-Rob Arnott, Chairman & Founder, Research Affiliates, LLC; Former Editor, Financial Analysts Journal

As a practitioner and a teacher of finance and economics, I am captivated with Easterling’s insights and quantification of the important and critical role of price stability in producing superior investment returns.
-Harvey Rosenblum, Executive Vice President and Director of Research, Federal Reserve Bank of Dallas; Adjunct Professor of Finance, Southern Methodist University

Ed Easterling has hit another home run! Probable Outcomes is a brilliant follow-on to Unexpected Returns and masterfully explains, in an understandable way, the most likely directions for the stock market over the next decade. This essential resource prepares investors to succeed in volatile and challenging times. You will profit from the many valuable insights that are much more effective than hope. 
-John Mauldin, Thoughts from the Frontline

Probable Outcomes makes a strong case that the stock market over the coming decade at best will deliver only average returns to buy-and-hold investors. Once again, as in his splendid earlier book, Unexpected Returns, Ed Easterling tells investors not what they would like to hear, but instead what they need to know.
-Richard Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets, NYU Stern School of Business; coauthor of A History of Interest Rates

Full chapter after the jump.

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Category: Books, Cycles

The Battle of Bull vs Bear

Good Thursday morning. We woke up in the states to see Futures under pressure, but off their worst levels of the morning. Following a day of 1-2% losses in Asia, European bourses gave up less than 1%, losing 50-75bps. US stocks are looking to open lower, as the bears make another attempt at some downward…Read More

Category: Cycles, Markets, Trading

Surprisingly Strong Q4 2010 Revenues

One of the knocks on last year’s earnings was that it was cost cutting was driving profitibility — not organic revenue growth. The recovery could not turn into an expansion, we were told, without solid revenue gains. Earnings may have surpassed Wall Street expectations for seven straight quarters, but sales have trailed forecasts since 2008….Read More

Category: Analysts, Cycles, Data Analysis, Economy

> Lakshman Achuthan discusses ECRI. He is not an economist. But all he hass done for 20 years is study recessions and recoveries. At ECRI, they make economic forecasts based on our leading indexes, none of it is based on the regressions, correlations or econometric models that drive most of the forecasts you hear about….Read More

Category: Cycles, Economy, Think Tank