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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: blitzfund who wrote (54484)	9/1/2001 4:36:38 PM
From: William H Huebl	Read Replies (1) \| Respond to of 94695

Summary of link follows: moneycentral.msn.com The forecast calls for more pain The Economic Cycle Research Institute takes the guesswork out of determining which ways the economic winds are blowing. What's the forecast? Achuthan, managing director of the Economic Cycle Research Institute (ECRI) in New York, has spent most of his adult life, and possibly several past lives, figuring out which data from the worlds of industry, markets and society do a decent job of auguring short-, medium- and long-term trends in the U.S. and global economy. Doppler radar actually provides a pretty good metaphor for what Achuthan's team does. ECRI receives data from government, academic and market sources and sorts them into piles that are then turned into three key indexes: A "long-leading" index that provides a 12-month view. The data include long-term interest rates, housing permits (because they indicate intent) and corporate profits. The data include stock prices, new orders for manufactured goods, initial claims for unemployment insurance, overtime hours and commodity prices. A "coincident" index that provides a current view. The data might include current production, employment, sales and earnings. 'Where's the recovery?' Right now, Achuthan says the big question on clients' lips is: "Where's the recovery?" By late January, his long-leading indicators failed to recover even after the Fed began to ease interest rates. The leading employment index had fallen to a 19-year low growth rate, and both his leading manufacturing index and services index had made cyclical moves down. (On Friday, stock traders got excited about data showing strong home sales, but below the surface of the report were signs that home prices were softening -- a negative.) Achuthan notes that the average postwar recession has lasted 10 months and the worst (1974 and 1981) lasted 16 months. ECRI's long-leading indicators first turned down at the end of September 2000; its short leaders turned down in January; and its coincident indicators are marginally negative now. As a result, he says the current improvements may mark the bottom of ECRI's long-leading indicators gauge, but do not meet the bar required to declare that they forecast a real upturn in the economy. (Optimists may correctly note that the consumer has continued to spend right through several recessions, albeit at a slower rate.) For example, a cash-rich, low-cost leader like Dell Computer (DELL, news, msgs) could wipe out a cash-poor, high-cost producer like Compaq Computer (CPQ, news, msgs). A typical endgame following these periods, says Achuthan, is widespread consolidation as stronger companies buy rivals at low prices, particularly in basic industries such as chemicals and heavy manufacturing. In the past two 16-month global recessions, the same false premature signal was given but the market did ultimately get the timing right each time. The index can ultimately go to +20% and higher as the recovery progresses. I will keep an eye on the ECRI indicators and visit again with Achuthan from time to time as the data and interpretations proceed over the next few months.