MORE FOR THE DOOMERS TO THINK ABOUT: NEW YORK, Oct 2 (Reuters) - An index of future U.S. economic growth slipped in the latest week, but its yearly growth rate climbed to a new record high, indicating a smooth recovery in the near-term, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index slipped to 127.1 in the week to Sept. 25 from an upwardly revised 127.9 the prior week, which was originally reported as 127.8. Last week's figure marked a 60-week high. The index's yearly growth rate rose to new all-time high of 25.1 percent in the latest reading from 24.3 percent the prior week "With WLI growth rising to yet another record high, the economic recovery is highly unlikely to falter in the next few months," said ECRI Managing Director Lakshman Achuthan. Achuthan recently told Reuters that unease over rising unemployment, debt-laden consumers, and fears of a dip in economic growth are typical of recessionary times, and do not necessarily signal roadblocks to recovery. Last week, Achuthan said current data shows that economic recovery is "far from fragile." http://www.reuters.com/article/marketsNews/idUSNYS00546420091002
I'm waiting until 2010 myself before forming any opinions, but if you think the U.S are going to get away cleanly just like that with the amount of debt they have think again.
This is a very simple equation. The moment the Fed starts pulling away the printing press (if ever) is the moment when this party comes to a screeching halt. Any article, commentator, "expert", ET poster, or television show thinking this is a healthy economy is one clueless yambag in my opinion. Free printing press = new stock highs. Until it ends, no reason to think otherwise.
First, the ECRI is a "black box". For all I know, its just a tweak of the Conference Boards Leading Economic Indicators (also know as the MIS-leading economic indicators). Second, like the LEI, I've never found the ECRI to be useful in trading Eurodolars or Treasuries. Third, like the LEI, I suspect the ECRI suffers from what statisticians call excessive curve fitting. That is, the index is changed from time to time so that it would work based on what happened in the past. For this reason, it always lags behind the cycle. What worked in predicting an a turn in the economy 10 years ago, won't be helpful in predicting a turn today. While auto production schedules were a great indicator of future economic activity in the 50s, and home starts were a great predictor in the last decade, it will be something completely different in this cycle. Fourth, both indices suffer from 'reflexivity'. Stocks go up causing the index to go up, causing stocks to go up, causing money supply to go up, causing the index to go up ...
Just because some algorithms are driving everything possible higher does not denote growth. AIG is up some 60-70% in the last two months too, does that mean the company's healthy?