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David Rosenberg Slams Business Insider's Vincent Fernando
Who says Canadians lack a sense of humor... And are ever wrong about the ECRI.
From Rosie this morning:
ECRI WAS RIGHT ALL ALONG!
We rarely pay attention to blogs (John Mauldin, Barry Ritholtz and Tyler Durden aside) but yesterday yours truly was slammed by one Vincent Fernando (Here's Why It Was Ridiculous When David Rosenberg Used The ECRI To Predict A Double Dip — nice catchy title).
Well, if the truth be told, if things in the economy are so good and the ECRI was so wrong, why then did Bernanke hint about another major round of QE. No mention in this article, by the way, of how the Fed has now cut its forecast three times in the last four months. The fact that the 10-year Treasury note yield has plunged 150 basis points since April is actually telling you that there is an asset class out there that has responded forcefully to double-dip risks. And, let’s not forget that the Macroeconomic Adviser’s GDP figures show that the economy has contracted in three of the past four months.
It’s always encouraging to find yourself in the company of people you respect. To this end, have a look at the article on page C1 of the WSJ on Bridgewater’s Ray Dalio. To wit:
“One of the nation’s largest hedge funds is emerging as a big winner of 2010, earning its managers and clients billions in profits through a series of bearish bets on the U.S. economy.
Bridgewater Associates Inc. has scored a return of about 38% at its flagship fund, driven in part by a multifaceted wager that the U.S. economy would be in worse shape than many expected and the Federal Reserve would keep interest rates low....”
Then, we see this from Ken Goldstein, the Conference Board’s economist, on page 22 of the FT:
“More than a year after the recession officially ended, the economy is slow and has no forward momentum. The LEI suggests little change in economic conditions through the holidays or the early months of 2011.”
So you see, Vincent, it may not be a “double dip” per se, but stall-speed isn’t really altogether that far away from it either. And guess what? The ECRI actually did nail it!
And as for that other "Leading Index"...
LEADING INDICATORS: DEVIL IN THE DETAILS
On the surface, the Conference Board’s index of leading economic indicators (LEI) report seemed decent enough, registering a 0.3% monthly gain for September, exactly as expected. But the details of the report were to be desired and in fact, suggest sluggish economic growth ahead.
One of the 10 components of the composite index is the level of the Treasury yield curve. Given that short rates have been at virtually zero since the end of 2008, it is really no surprise that the yield curve has consistently made a positive contribution to the index since then. We think it’s much more meaningful in a zero-interest rate environment to look at the LEI excluding the yield curve, which was flat in September after three straight monthly declines.
If we strip out the S&P 500 as well to get a sense of how the “real economy” is doing. On this measure, the LEI fell 0.1%, the fourth consecutive monthly decline. This is actually a rare event when the economy is not in recession: going back to the early 1960s, four consecutive monthly declines in the LEI excluding the yield curve and S&P 500 has happened only 4% of the time (or is a 1-in-25 event).
As aside, when we ran some quick correlations with the LEI, LEI excluding the yield curve, LEI excluding the stock market, and the LEI excluding the yield curve and stock market, the latter had the highest correlation with GDP growth. In other words, the “real economy” components of the LEI historical have the strongest link to GDP growth.
The coincident-to-lagging ratio (a leading indicator of the LEI) fell 0.4% MoM in September and is the weakest since January 2009. Moreover, the ratio is now down three months in a row and we have not seen this happen since we were in recession in 2008-2009.
All in, the details of the report suggest sluggish growth ahead for the U.S. economy. And don’t take our word for it: Conference Board economist Ken Goldstein said in yesterday’s press release that “More than a year after the recession officially ended, the economy is slow and has no forward momentum. The LEI suggests little change in economic conditions through the holidays or the early months of 2011”.
We will have some more to say about the BLS-type data mining (or lack thereof) in the LEI soon enough.
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Who the hell reads BI for the quality of the commentary? They just have nice slideshows on why Apple and facebook are cool. Bitchez!
I still think Vincent Fernando writes here using the "MadHedgeFundTrader" moniker.
Vincent Fernando you've been P*WNED.
BI is a Huffpo economic Mouthpiece rag.
Right on, my brutha!
Who is Sleeping right now, may never really wake up and if, it would be to an empty portfolio! It's just that, who has it coming, well, has it coming!
Oil's depletion aside (which very quietly at the core of reality is responsible for all this) it is useful to note how the failure to recover post Stimulus is essentially lethal. There is no growth and you cannot raise the prices of things no one wants.
This puts a floor under bond prices and a ceiling above inflation. Only necessities will be able to rise, and they are not 100% of consumer expenditures. Those other items that are also portions of consumer expenditures will fall and drag down the overall net inflation measure.
Worst of all . . . this is forever. This is not a cycle. There is no history because this world did not exist in the past. This is perpetual decline of life, lifestyle and society in general and there is nothing that can be done about it. A competitive participant must focus on easing the slope of his own decline, thereby "doing better" than his competitors.
Attempts to "improve" or "increase" will fail and steepen the downslope. Your competitors will all be trying that and worsening themselves. Just watch annual oil production projections from Russia. If they increase above their all time high, life will eventually cycle. But if they are lower than the Soviet years, death for billions is inevitable.
I hope someone hid your razorblades. Dang.
Malthus was wrong, and so is everyone who predicts this will last forever. There will be a new something -- there always has been.
The world's population in 1600 was 545 million people. In 1700 it was 610 million. Gain of about 10% in 100 years.
In 1900 it was 1 billion people. Today, about 7 billion for a gain of 600% in 100 yrs.
The difference? Oil powered food production and transport.
That will go away soon. So will 6 of the 7 billion. You'll be one of them. So will I.
I haven't posted here at ZH for quite a while.
Excellent post.
Glad to see more people are 'getting it' these days.
I think everyone here is well versed on The Crash Course. For those who aren't please go watch it.
Somebody hasn't put together the fact that with the propagation of birth control + increasing demand/inflation means it becomes less affordable to feed children. Instead of "honey, we can't afford that car right now" it'll be "honey, we can afford the pills, not the kid."
Malthus was wrong. One can bleat about geometric expansion all one wants but it's meaningless without considering the sociological effects of technology and economic change on people's decisions.
That punk Vin is a frustrated biologist, a "link posting monkey" for BI.
He had his 5 minutes of glory: like me winning a full night out with 20yo Britney Spears on a adults oriented reality show.
You think you are lucky punk?
The group ABBA wrote " Fernando "
LL Cool J wrote " Mama said Knock you Out !"
And the Winner by TKO...
James Brown!
http://www.youtube.com/watch?v=vsOmvSlPuys
Regards
Vinny likes to draw conclusions based on the status quo, then when he gets called on it he half asses a follow-up that still ignores key components of an issue. Or he takes poorly researched pot shots at prominent contrarian analysts like Rosenberg so that he can do some half-assed backpedalling and pretend he's apologizing. All to generate readership for that 3rd rate site, I would wager.
IMO his words aren't worth the ether they've been printed in. IGNORE.
Regards
I'm Canadian. We have a pretty good sense of humor check out
http://www.youtube.com/watch?v=BhTZ_tgMUdo