Posts filed under “Cycles”

500 Year CRB Index (Annual)

I love the mere concept of this chart from Jim Bianco — the CRB Index going all the back to the year 1,450:


courtesy of Bianco Research


About now, you may be saying to yourself, “How on earth could anyone find this ancient data — and can it possibly be accurate?”

The answers might surprise you:

The chart uses the following series (plotted monthly):

• 1749 to date: The Wholesale Price Index (now called the Producer Price Index) as calculated by the Bureau of Labor Statistics.

• 1749 to 1861: Statistical Tables of Commodity Prices from: Wholesale Commodity Prices in the
United States, 1700 to 1861, by Arthur Harrison Cole (Harvard University Press, 1938)

• 1749 to 1932: The Warren And Pearson Index of Commodity prices in New York, by George F. Warren and Frank A. Pearson (Wiley, 1933)

• 1782 to 1820: Jeavons Index compiled in 1865

• 1821 to 1929: Sauerback-Statist Index of Commodities in England The following commodity prices (start date): Gold and Silver (1749), Platinum (1938), Copper (1784), Crude Oil (1859), Heating
Oil (1923), Gasoline (1920), Lumber (1890), Wheat (1749), Corn (1749), Soybeans (1914), Cattle
(1749), Hogs (1749) and Pork Bellies (1949).

• 1956/57 to date: The monthly average of CRB BRIDGE futures index as calculated by the Commodity Research Bureau.

• 1450 to 1956: A “Reversed Engineered” CRB using the wholesale/Producer Price Index and 11
commodities as calculated by the Foundation For The Study Of Cycles. (The correlation between
this index and the “real” CRB BRIDGE since 1957 is well over 95%).

Much of this data is available from: The Foundation For The Study Of Cycles.

And yes, it seems to be fairly accurate..

Category: Commodities, Cycles, Technical Analysis

Did US Housing Have a Boom/Bust Cycle?

The NY Fed has a curious research piece out, looking at areas of Upstate New York that were “insulated” from housing price volatility. They note that many parts of the country have not experienced dramatic declines in housing prices, and upstate metropolitan areas of Buffalo, Rochester, and Syracuse even enjoyed price increases during the recession….Read More

Category: Credit, Cycles, Real Estate

Business Booms and Depressions Since 1775

Here is a fascinating piece of investing arcana — from the St. Louis Fed FRASER archives. A history of booms and busts from 1775- 1944. Emphasis is on post war economies.  As described by the paper: A study of the reaction of business activity immediately following previous wars can, in a measure, act as a…Read More

Category: Cycles, Markets

Counter-Cyclical Spending (during recessions)

One of the things I hate about a secular bull market — especially towards its rampaging tail end — is how everyone and everything gets silly. Money and champagne flows, conspicuous consumption is on full display. I recall people — literally — dancing on bars during the late 90s in NYC. To be sure, Fed…Read More

Category: Consumer Spending, Cycles, Psychology, Retail

Happy Anniversary: Top and Bottom!

By one of those oddly serendipitous coincidences, this week marks not one but two major Wall Street anniversaries: Happy Bottoms: The 12 year low was set one year ago this week. On March 6, 2009, the markets made their “Devil” bottom: The S&P500 hit 666.79, down 57.69% from October 11, 2007 high of 1576.09. The…Read More

Category: Cycles, Markets, Technical Analysis

Change in Recent Unemployment Claims Not Unusual

We’ve recently seen some noise about the “mixed” economic data. Looking at initial unemployment claims, this is not an unusual factor at this stage post-recession. >

Category: Cycles, Employment

The St. Louis Fed has made it official, at least through their lens.  The recession ended in June 2009.  As you read here first in January, late last year the St. Louis Fed discontinued the use of  recession shading (thereby signalling its end) in its graphs as of mid-2009. They have now retooled their Tracking the Recession page to…Read More

Category: Cycles, Economy, Employment, Research

How Cyclical Are Market Rallies?

Is this a coincidence or a real cycle? 82-85 days seems to be where the current rally runs out of steam, and needs to gather itself to make anew run higher. Courtesy of The Chart Store I would imagine this is a combination of many factors: Rally strength, preceding sell off, amount of cash flowing…Read More

Category: Cycles, Technical Analysis

NBER Intrigue

Two interesting things happened last November 24. One was pretty well publicized, the other not so much: We got a downward revision of U.S. GDP for the third quarter, from an “advance” 3.5% to 2.8% (it was ultimately determined to be 2.2%) — in any event, it was the first positive print we’d seen in…Read More

Category: Cycles, Data Analysis, Economy, Markets

The recession is over but the depression has just begun

Edward Harrison here. This is an updated version of a post I wrote about two-and-a-half months ago over at Credit Writedowns.  When I wrote it, I had been looking for bullish data points as counterfactuals to my bearish long-term outlook. I found some, but not nearly enough.

Early this year, I wrote a post “We are in depression”, which called the ongoing downturn a depression with a small ‘d.’ I was optimistic that policymakers could engineer a fake recovery predicated on stimulus and asset price reflation – and this was bullish for financial shares if not the broader stock market. But, we are witnessing temporary salves for a deeper structural problem.

So my goal was to find data which disproved my original thesis. But, I came away more convinced that we are in a tenuous cyclical upturn. This post will discuss why we are in a depression, not a recession and what this means about likely future economic and investing paths. I pull together a number of threads from previous posts, so it is pretty long.  I have shortened it in order to pull all of the ideas into one post. So, please read the linked posts for background as I left out a lot of the detail in order to create this narrative.

Let’s start here then with the crux of the issue: debt.

Deep recession rooted in structural issues

Back in my first post at Credit Writedowns in March 2008, I said that the U.S. was already in a recession, the only question being how deep and how long. The issue was and still is overconsumption i.e. levels of consumption supported only by increase in debt levels and not by future earnings. This is the core of our problem – debt.

I see the debt problem as an outgrowth of pro-growth, anti-recession macroeconomic policy which developed as a reaction to the 1970s lost decade trauma in the U.S. and the U.K.. The 70s was a low growth, high inflation ride that generated poor market returns.  The U.K. became the sick man of Europe and labor strife brought the economy to its knees.  For the U.S., we saw the resignation of an American President and the humiliation of the Iran Hostage Crisis.

In essence, after the inflationary outcome that many saw as an outgrowth of the Samuelson-Keynesianism of the 1960s and 1970s, the Reagan-Thatcher era of the 1990s ushered in a more ‘free-market’ orientation in macroeconomic policy. The key issue was government intervention. Policy makers following Samuelson (more so than Keynes himself) have stressed the positive effect of government intervention, pointing to the Great Depression as animus, and the New Deal, and World War II as proof. Other economists (notably Milton Friedman, and later Robert Lucas) have stressed the primacy of markets, pointing to the end of Bretton Woods, the Nixon Shock and stagflation as counterfactuals. They point to the Great Moderation and secular bull market of 1982-2000 as proof. This is a divisive and extremely political issue, in which the two sides have been labeled Freshwater and Saltwater economists (see my post “Freshwater versus saltwater circa 1988”).

Read More

Category: Asset Allocation, Credit, Cycles, Taxes and Policy