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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread -- Ignore unavailable to you. Want to Upgrade?

To: marc ultra who wrote (6468)	10/6/2011 8:57:07 PM
From: Investor2	1 Recommendation Read Replies (1) \| Respond to of 10065

You're not the only one in the Bear camp. aaii.com naaim.org schaeffersresearch.com Best wishes, I2

To: marc ultra who wrote (6468)	10/6/2011 11:25:49 PM
From: marc ultra	1 Recommendation Read Replies (2) \| Respond to of 10065

Why I am putting so much weight in the ECRI recession call. While the ECRI seems to have a virtually perfect record in its major economic calls it is not free of critics some even rather vociferous. I have read the criticism from the one or two main critics which are out in the financial blogosphere. It always comes down to the same thing which is that the ECRI was wrong or dishonest or spinning their calls because for whatever reason given, the critic says the recession was already obvious by their analysis way before the ECRI made their call so the ECRI somehow blew it. So it's basically "I said recession before the ECRI so the ECRI is wrong because they didn't call the recession earlier". Let's think what that means functionally to someone like me or others concerned about the possibility of a recession putting us into a bear. The criticism is not only largely irrelevant but in fact I think the criticism just goes along with why their call must be taken very seriously. The ECRI is very conservative making their major economic turning point calls. They rarely make them and I've found no examples of a false positive, that is, they never made a US recession call after which a recession did not happen. As a recent example of how conservative and careful they are, we went through the 2010 slowdown with the ECRI refusing to make a recession call while some were ferociously saying the ECRI's few indicators that are put out publicly like the WLI meant we were in recession. and in fact never went that low without a recession. The ECRI had to write long rebuttals why these people were not interpreting things correctly and they do not see a recession based on the full set of indicators they look at. The ECRI proved correct and there was no recession in 2010. If I am going to go out on a limb and go from bullish to bearish because of an ECRI recession call, then I what I care about as an investor is that in fact that recession will definitely occur because otherwise I've foolishly destroyed my portfolio going from bullish to bearish. What some might consider a false negative I wouldn't care as much about. If they do not give a recession call, and by various opinions or data a recession will have occurred, I will simply miss taking defensive action I might have taken. But I have my own market timing views and in general they probably have some bias to being bullish as I think it's reasonable to be bullish in the long run and only be mostly out of the market when I feel strongly we're heading into a bear. So my radical change of view from bullish to bearish again comes down to a simple series of facts and assumptions. The ECRI has never called a recession that didn't then happen. When they say recession we're talking about a very sharp destructive and deteriorating economic downturn, not some very slow growth which we currently have but something massively worse. Based on history I am willing to assume there is a near 100% chance that if their recession call is correct that we will go into a bear market. Now they are seeing virtually all their indicators falling with each feeding on each other so we are heading for a vicious cycle where weakness in one area causes or exacerbates weakness in other areas which in turn further weakens the the earlier part of the circle and we just spiral down until eventually over time this plays itself out. I also don't think there is an inconsistently where other things I look at have been pointing to strong bull and we are rallying accordingly and the fact I now think we're heading into a bear. My assumption was we will have around 1-2% growth and currently data is consistent with that. The ECRI indicators are forward looking and they are saying we're going to be spiraling down and will be in negative growth with unemployment further rising significantly. It's a matter of time. The ECRI recession time bomb fuse has been lit and while things appear somewhat Ok at the moment, that bomb will soon go off and everything thing now reassuring we can grasp on to today will be in decline.