ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

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2014-10-03 Is the Stock Market Cheap? by Doug Short of Doug Short

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1993.23. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2014-09-26 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, down slightly from the previous week's 135.6. The WLI annualized growth indicator (WLIg) is at 2.0, down slightly from the previous week's 2.1. On Wednesday, September 10th, Lakshman Achuthan appeared on Wall Street Journal Live, where he stated that Japan is on track for another recession. He included comments about what that means for Europe and the United States.

2014-09-17 U.S. Household Incomes: A 46-Year Perspective by Doug Short of Advisor Perspectives (dshort.com)

The Census Bureau has now released its annual report household income data for 2013. It is posted on the Census Bureau website. What I'm featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2013.

2014-09-17 Median Household Incomes by Age Bracket: 1967-2013 by Doug Short of Advisor Perspectives (dshort.com)

Earlier today I updated my commentary on household income distribution to include the Census Bureau's release of the 2013 annual data. My focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 46-year history of this data series. The analysis offered some fascinating insights into U.S. household incomes.

2014-09-06 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, little changed from the previous week's 134.8. The WLI annualized growth indicator (WLIg) dropped to 1.8 from the previous week's 2.3. Last Friday, August 29th, ECRI treated the general public to a new commentary on its website focused on the Fed's seeming complacency about inflation becaused of stalled wage growth. ECRI sees a substantially higher inflation risk.

2014-09-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,961.53. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2014-08-23 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.3, unchanged from the previous week. The WLI annualized growth indicator (WLIg) dropped to 2.8 from the previous week's 3.5. On Monday of this week, ECRI broke its silence to the general public with a new commentary on its website focused on housing affordability and home price growth

2014-07-19 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.2, down from the previous week's 136.2. The WLI annualized growth indicator (WLIg) slipped to 4.5 to 4.2.

2014-06-28 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.4, down from the previous week's adjusted 135.3. The WLI annualized growth indicator (WLIg) is unchanged at 4.3 (the previous week adjusted down from 4.4).

2014-06-06 ECRI Recession Watch: Weekly Update by Doug Short of

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, down from the previous week's adjusted 135.3. The WLI annualized growth indicator (WLIg) fell to 4.8 from 5.3. Last Friday (May 30th), ECRI posted a brief overview of post-recession GDP forecasts from the Fed's Open Market Committee and the less optimistic series from the Congressional Budget Office.

2014-06-06 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, down from the previous week's adjusted 135.3. The WLI annualized growth indicator (WLIg) fell to 4.8 from 5.3. Last Friday (May 30th), ECRI posted a brief overview of post-recession GDP forecasts from the Fed's Open Market Committee and the less optimistic series from the Congressional Budget Office.

2014-05-30 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.4, down from the previous week's 135.1. The WLI annualized growth indicator (WLIg) rose to 5.3 from 5.0. That's the highest since June of last year.

2014-05-30 Real Median Household Income Fell 0.42% in April by Doug Short of Advisor Perspectives (dshort.com)

The Sentier Research monthly median household income data series is now available for April. The nominal median household income was down $84 month-over-month and up only $1,420 year-over-year. Adjusted for inflation, it was down $222% MoM and only $409 YoY. The real numbers equate to a -0.42% MoM decline and a 0.78% YoY increase.

2014-05-23 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.1, down from the previous week's 136.3. The WLI annualized growth indicator (WLIg) rose to 5.0 from 4.9. That's the highest since June of last year.

2014-04-25 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, up from last week?s 133.6 (revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.3 from last week?s 3.0. Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.0% at yesterday?s close, although off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.

2014-04-11 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, up from last week's 133.6 (revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.3 from last week's 3.0.

2014-04-04 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.6, unchanged last week (which was revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.0 from last week?s 2.9. Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.9% at yesterday?s close, fractionally off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.

2014-03-28 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.5, up from 133.0 last week (a revision from 132.9). The WLI annualized growth indicator (WLIg) at one decimal place rose to 2.9 from last week's 2.3.

2014-03-21 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.9, down from 133.6 last week (a revision from 133.8). The WLI annualized growth indicator (WLIg) at one decimal place rose to 2.3 from last week's 2.1 (a revision from 2.3).

2014-03-14 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.8, up fractionally from 133.5 last week. The WLI annualized growth indicator (WLIg) at one decimal place rose to 2.3 from last week's 1.8.

2014-03-07 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.5, up from 131.8 last week. The WLI annualized growth indicator (WLIg) at one decimal place rose to 1.8 from last week's 1.7.

2014-02-28 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.8, down from 123.3 last week. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 1.7 from last week's 2.5 .

2014-02-21 The Big Four Economic Indicators: Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

With yesterday's release of the January Consumer Price Index, we can now calculate Real Retail Sales for the underlying sales data released on February 13th. Nominal Retail Sales had fallen 0.4% month-over-month, the second month of contraction, and are up only 0.3% year-over-year. When we adjust for inflation, January sales were down 0.6% MoM. The YoY change was a fractional 0.1% growth. Real sales are down 0.9% from their all-time high in November.

2014-02-20 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, unchanged from last week. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 2.5 from last week's 3.2 (a downward revision from 3.3).

2014-02-14 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, unchanged from last week. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 3.3 from last week’s 4.2. Last weekend, ECRI posted a new publicly available commentary on the company’s website: Failure to Launch. The brief text concludes with this remark: It is now quite clear that the economy is decelerating, not accelerating, with growth in ECRI’s Weekly Coincident Index ... falling rapidly.

2014-02-07 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, down from last week’s downward revision from 133.7. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 4.2 from last week’s 4.3.

2014-02-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1824.35. The ratios in parentheses use the monthly close of 1782.59. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2014-01-31 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.8, unchanged at one decimal place from last week’s downward revision from 133.9. The WLI annualized growth indicator (WLIg) at one decimal place rose to 4.3, up from last week’s 4.2.

2014-01-31 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

The December month-over-month Real Personal Income less Transfer Payments came in at a disappointing -0.21% (-0.2% rounded to one decimal). The year-over-year change is -2.47% (rounded to -2.5%). However, the YoY metric is radically skewed by the December 2012 end-of-year tax-planning strategy whereby income was captured in 2012 to avoided expected tax increases.

2014-01-24 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.9, down from last week’s 134.3. The WLI annualized growth indicator (WLIg) to one decimal place rose to 4.2, up from last week’s 3.5.

2014-01-22 In the Spirit of Martin Luther King: Reflections on Income Inequality by Doug Short of Advisor Perspectives (dshort.com)

Last night my wife and I were looking for something to stream on Netflix, and I remembered that The Butler was available on Red Box (which has a vending machine about a 90-second walk from our residence).

2014-01-17 The Big Four Economic Indicators: Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

With yesterday’s release of December’s CPI, we can now calculate Real Retail Sales for December. Month-over-month real sales came in at -0.07% (-0.1% rounded to one decimal). This indicator is now fractionally off its all-time high set the previous month. Although real December sales were a bit disappointing, this indicator rose 3.57% year-over-year, and it was positive for nine of the 12 months.

2014-01-17 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.5, up from last week’s 133.4 (an upward revision from 133.0). The WLI annualized growth indicator (WLIg) to one decimal place rose to 3.7, up from last week’s 2.5.

2014-01-13 Demographic Trends in the 50-and-Older Work Force by Doug Short of Advisor Perspectives (dshort.com)

In my earlier update on demographic trends in employment, I included a chart illustrating the growth (or shrinkage) in six age cohorts since the turn of the century. In this commentary we’ll zoom in on the age 50 and older Labor Force Participation Rate (LFPR).

2014-01-10 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.0, up from last week’s 133.0. The WLI annualized growth indicator (WLIg) to one decimal place came in at 2.5, up from last week’s 1.9.

2014-01-10 The Big Four Economic Indicators: Today's Strange Nonfarm Payrolls in Context by Doug Short of Advisor Perspectives (dshort.com)

The January Employment Report gives us a look at the December Nonfarm Employment along with extensive revisions back to January 2009. The big stunner today was the meager 74K new jobs in December against expectations of around 196K. This sucker punch from the Establishment Data was accompanied by the equally stunning news that the unemployment rate declined from 7.0-6.7%. The two numbers, of course, are from two completely different surveys - the jobs number from the Establishment Survey of business and government and the unemployment rate from the Household Survey of the general population.

2014-01-06 Market Valuation Overview: Yet More Expensive by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I update during the first days of the month.

2014-01-03 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.9, up from last week’s 131.9. The WLI annualized growth indicator (WLIg) to one decimal place came in at 1.8, unchanged from last week.

2014-01-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1807.78. The ratios in parentheses use the monthly close of 1848.36.

2013-12-30 NYSE Margin Debt Is Fractionally Off Its Real All-Time High by Doug Short of Advisor Perspectives (dshort.com)

The New York Stock Exchange publishes end-of-month data for margin debt on the NYXdata website, where we can also find historical data back to 1959. Let’s examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

2013-12-27 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.9, up from last week’s 130.9. The WLI annualized growth indicator (WLIg) to one decimal place, slipped to 1.9, down from 2.1 last week.

2013-12-13 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.4, down from last week’s 132.7 (adjusted from 132.8). The WLI annualized growth indicator (WLIg) to one decimal place, slipped to 2.8, down from 2.9 last week.

2013-12-06 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.8, up from last week’s 132.3. The WLI annualized growth indicator (WLIg) to one decimal place, rose to 2.9, up from 2.6 last week.

2013-12-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1783.54. The ratios in parentheses use the monthly close of 1805.81. For the earnings, see the table created from Standard & Poor’s latest earnings spreadsheet.

2013-11-22 The Big Four Economic Indicators: Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

The underlying sales data were stronger than expected, and the disinflationary October headline CPI boosted the number higher. in light of the general pessimism over the government shutdown and congressional face-off on debt ceiling, the October numbers are indeed surprising.

2013-11-22 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.2, up from last week’s 131.0 (revised from 131.1). The WLI annualized growth indicator (WLIg) to one decimal place, rose to 2.4, up from 2.2 last week.

2013-11-15 The Big Four Economic Indicators: Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2013-11-08 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.0, down from last week’s 131.4 (revised from 131.5). The WLI annualized growth indicator (WLIg) to one decimal place, rose to 1.8, up from 1.7 last week.

2013-11-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

ere is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1720.03.

2013-11-01 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.5, up from last week’s 131.1. The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 1.7, down from 2.0 last week.

2013-10-25 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.1, up from last week’s 130.3 (revised from 130.4). The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 2.0, down from 2.7 (a downward revision from 2.8).

2013-10-18 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 130.4, down from last week’s 130.3 (revised from 130.4). The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 2.8, down from 3.6 (a downward revision from 3.9).

2013-10-04 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.1, down from last week’s 132.9. The WLI annualized growth indicator (WLIg) to one decimal place, remains unchanged at 4.8% (with last week’s number revised downward from 4.9).

2013-10-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1687.17. The ratios in parentheses use the monthly close of 1681.55. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2013-09-27 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.9, up from last week’s 132.3 (revised down from 132.4). The WLI annualized growth indicator (WLIg) rose to 4.9% from last week’s 4.5%.

2013-09-21 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.4, to one decimal place unchanged from last week’s 132.4 (revised down from 132.3). The WLI annualized growth indicator (WLIg) rose to 4.5% from last week’s 4.3%.

2013-09-13 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.3, an increase from last week’s 131.5. The WLI annualized growth indicator (WLIg) rose to 4.1% from last week’s 3.9%.... At this point the company is still featuring a commentary posted at the end of July, Becoming Japan, which highlights the decline in GDP growth for Japan and seven other major economies, including the US.

2013-09-06 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Last year ECRI switched focus to their version of the Big Four Economic Indicators that I routinely track. But when those failed last summer to "roll over" collectively (as ECRI claimed was happening), the company published a new set of indicators to support their recession call in a commentary entitled The U.S. Business Cycle in the Context of the Yo-Yo Years (PDF format). Subsequently the company took a new approach to its recession call in a publicly available commentary on the ECRI website: What Wealth Effect?.

2013-09-06 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

I’ve now updated this commentary to include today’s release of the August Nonfarm Employment data. As the adjacent thumbnail illustrates, the trend in this indicator has been ever upward, but at a frustratingly slow pace. Today’s announcement of only 169K new jobs was below forecasts. Moreover, the nonfarm jobs number for July was revised downward from 188K to 172K and the June number was revised downward from 162K to 104K for a combined decline of 74K from last month’s report.

2013-09-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1670.09. The ratios in parentheses use the monthly close of 1632.97. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2013-08-30 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, an increase from last week’s 131.0 (revised from 131.1). The WLI annualized growth indicator (WLIg) declined to 4.2% from last week’s 4.5%.

2013-08-24 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.1, a decline from last week’s 131.2. The WLI annualized growth indicator (WLIg) declined to 4.5 from last week’s 4.7%.

2013-08-16 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.2, a decline from last week’s 131.5 (a downward revision from 131.8). The WLI annualized growth indicator (WLIg) declined to 4.7 from last week’s 4.9%.

2013-08-09 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.8, essentially unchanged from last week’s 131.7 (a downward revision from 131.8). At the end of July the company posted a new commentary, Becoming Japan, which highlights the decline in GDP growth for Japan and seven other major economies, including the US. Also this week ECRI’s Lakshman Achuthan defended his company’s recession call on Bloomberg TV.

2013-08-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1668.68. The ratios in parentheses use the monthly close of 1685.73. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2013-07-26 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, up slightly from last week’s 130.2. The WLI annualized growth indicator (WLIg) remains unchanged at 4.5%.

2013-07-19 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.2, up slightly from last week’s 130.1 (revised from 130.2). The WLI annualized growth indicator (WLIg) rose to 4.5% from 4.3% last week (revised from 4.6%).

2013-07-12 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

ECRI posts its proprietary indicators on a one-week delayed basis to the general public, but last year the company switched its focus to a version of the Big Four Economic Indicators I’ve been tracking for the past year. In recent months, however, those indicators have slipped below the fold, replaced by the mixed bag of whatever Indicator du Jour might look recessionary, as in the "Yo-Yo Years" commentary.

2013-07-05 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 130.4, down slightly from last week’s 130.6. The WLI annualized growth indicator (WLIg) fell to 5.3% from 5.8% last week.

2013-07-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1618.77. The ratios in parentheses use the monthly close of 1606.28. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2013-06-21 Regardless of a QE Taper, the US Market Is Due for a Correction by Doug Short of Advisor Perspectives (dshort.com)

The media response to the post-FOMC market behavior has been dramatic. Today we’ve even been treated to some intra-Fed fisticuffs, with St. Louis Fed President James Bullard openly criticizing his colleagues for apparently giving presumably lame-duck Chairman Bernanke license to discuss QE taper timelines in his Wednesday press conference.

2013-06-21 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Ultimately my opinion remains unchanged: The ECRI’s credibility depends on major downward revisions to the key economic indicators -- especially the July annual revisions to GDP -- that will be sufficient to validate their early recession call. Of course, the July revisions will be quite controversial this year, with some major accounting changes and revisions in annual GDP back to 1929. So if we don’t get the downward revisions to support ECRI, they can always question the accounting changes in the revision process.

2013-06-14 ECRI Recession Watch: New Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, up slightly from last week’s 131.0 (revised from 130.9). The WLI annualized growth indicator (WLIg) rose to 6.6% from 6.4% last week (revised from 6.3%).... Two weeks ago the company took a new approach to its recession call in its most recent publicly available commentary on the ECRI website: What Wealth Effect? More...

2013-05-31 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

I’ve now updated this commentary to include April Real Personal Income less Transfer Payments. As I’ve discussed before, the adjacent thumbnail shows the major spike in incomes triggered by pulling early 2013 income forward in November and December (bonuses, dividends, etc.) to manage the tax risks of the Fiscal Cliff. At this point we’ve recovered from the post-strategy dip, so the trend going forward will give a more realistic sense of where this indicator is heading.

2013-05-24 Recession Watch: ECRIs Weekly Leading Indicator Up Slightly by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) is at 130.6, up slightly from last weeks 130.1 (a downward revision from 130.2). The WLI annualized growth indicator (WLIg) dropped to 6.8% from 7.0% last week.

2013-05-17 Recession Watch: ECRI's Weekly Leading Indicator Declines by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-05-10 Recession Watch: ECRI's Weekly Leading Indicator Continues to Show Improvement by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-05-03 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

I’ve now updated this commentary to include April Nonfarm Employment, which included the prior month revision. As the adjacent thumbnail illustrates, this indicator has trended upward in a relatively smooth trajectory over the past 13 months.

2013-05-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,570.70. The ratios in parentheses use the monthly close of 1,597.57. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2013-04-26 Recession Watch: ECRI's Weekly Leading Indicator Rises Again by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-04-19 Recession Watch: ECRI's Weekly Leading Indicator Rises by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-04-12 ECRI's Weekly Leading Indicator Shows a Small Improvement by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is now at 130.1, up from 129.1 last week (revised from 129.2). The WLI annualized growth indicator (WLIg) remains unchanged at 6.2%.

2013-04-05 ECRI's Recession Indicators Decline from the Previous Week by Doug Short of Advisor Perspectives (dshort.com)

Today ECRI has added a new headline on the website, Employment Growth Hits New Low, based on data from today’s jobs report. Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-04-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poor’s "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,550.83. The ratios in parentheses use the monthly close of 1,569.19. For the earnings, see the table below created from Standard & Poor’s latest earnings spreadsheet.

2013-03-29 ECRI Recession Indicator: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) to one decimal place is unchanged from last week. It is now at 129.7, the same as last week’s downward revision from 129.8. The WLI annualized growth indicator (WLIg) has risen fractionally to 6.6%, up from last week’s 6.3%. Those of us who regularly follow ECRI’s publicly available data and commentaries understand that there is no logical connection between ECRI’s proprietary indicators and their "pronounced, pervasive and persistent" recession call of September 2011.

2013-03-22 ECRI’s "Recession" Indicators: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)

The only new ECRI-related news since last Friday’s update is a CBS Moneywatch commentary, Can the stock market rise while the economy stalls? ECRI liked the commentary well enough to reprint it on the company’s website. It basically reiterates Achuthan’s point in the "Yo-Yo Years" essay that it’s possible for the market to rise during a recession, citing three such instances (of the 15 recessions) since the Roaring Twenties.

2013-03-15 ECRI’s Recession Call: Proprietary Indicators Still Not Cooperating by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in today’s update. It is now at 129.9 versus the previous week’s 129.5 (revised upward from 129.3). The WLI annualized growth indicator (WLIg) has eased, now at 6.3, down from last week’s 6.4 (an upward revision from 6.2).

2013-03-15 The Big Four Economic Indicators: Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

With the exception of Real Personal Income Less Transfer Payments (e.g., Social Security, Supplementary Security Income, workers compensation, etc.), the Big Four continue to show expansion. The seemingly bizarre income data is the result of the end-of-year strategy of early bonuses and moving forward of 2013 income to avoid higher taxes. We’ve seen this situation before in the 1990s. The PI anomaly is the reason the average for the Big Four (the gray line above) has shows contraction for the past two months.

2013-03-13 Some Stunning Demographic Trends in Employment by Doug Short of Advisor Perspectives (dshort.com)

I spent much of yesterday reviewing the latest employment report from the Bureau of Labor Statistics (BLS). They have a wealth of employment data, much of which stretches back to 1948. My focus was the Labor Force Participation Rate (LFPR) with some specific attention to gender and age. The LFPR is a simple computation: You take the Civilian Labor Force and divide it by the Civilian Noninstitutional Population. The result is the participation rate expressed as a percent.

2013-03-08 ECRI "Recession" Update: Lakshman Achuthan Stands his Ground by Doug Short of Advisor Perspectives (dshort.com)

The big news this week is the ECRI's Chief Operating Officer and spokesman, Lakshman Achuthan, returned to the media circuit with interviews yesterday on Bloomberg, CNBC and Yahoo's Daily Ticker. In addition, ECRI has published a new commentary available to the general public.

2013-03-05 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,512.31. The ratios in parentheses use the monthly close of 1,514.68. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2013-03-01 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)

ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance.

2013-03-01 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

I've now updated this commentary to include the January Personal Income data, the red line in the chart below. As expected, the January brought the inevitable reversal of the dramatic advance in the November and December data, which was a result of moving income forward to manage the tax risk in anticipation of the Fiscal Cliff. The -4.7% decline in January essentially cancels the 1.4% rise in November and 3% rise in December.

2013-02-22 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)

ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...

2013-02-15 ECRI "Recession" Update: Propietary Indicators Take a Pause by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in today's update. It is now at 129.6 versus the previous week's 130.2.The WLI annualized growth indicator (WLIg) also eased, now at 8.3, down from last week's 8.9. WLIg has been in expansion territory since August 10th of last year, but is is fractionally off its interim high set last week.

2013-02-08 ECRI "Recession" Update: Leading Index Growth Sets Another Interim High by Doug Short of Advisor Perspectives (dshort.com)

First a flashback for those of us who have followed ECRI's media appearances: we know that the company adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...

2013-02-04 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,480.40. The ratios in parentheses use the monthly close of 1,498.11.

2013-02-01 ECRI "Recession" Update: Leading Index Growth Hits Another Interim High by Doug Short of Advisor Perspectives (dshort.com)

ECRI posts its proprietary indicators on one-week delayed basis to the general public, but ECRI's Lakshman Achuthan has switched focus to his company's version of the Big Four Economic Indicators I've been tracking for the past several months. See, for example, this November 29thBloomberg video that ECRI continues to feature on their website. Achuthan pinpoints July as the business cycle peak, thus putting us in at the beginning of the eighth month of a recession.

2013-02-01 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Note from dshort: This commentary has been revised to include the latest Nonfarm Employment data released today.... Nonfarm Employment rose 0.12% in January, following 0.15% and 0.18% gains in December and November, respectively. The Year-over-year increase is 1.52%. Nonfarm employment has been the tortoise of the Big Four, slow and steady. The average MoM change over the past 12 months has been 0.13%, and the range has been 0.07% to 0.20% -- no contractions.

2013-01-25 ECRI "Recession" Update: Leading Index Growth Hits a New Interim High by Doug Short of Advisor Perspectives (dshort.com)

For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article,The Tell-Tale Chart, makes clear their public focus on the Big Four.

2013-01-18 ECRI's Public Indicators Continue to Undermine Their Insistance That We're in a Recession by Doug Short of Advisor Perspectives (dshort.com)

For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article, The Tell-Tale Chart, makes clear their public focus on the Big Four.

2013-01-16 The Big Four Economic Indicators: Real Retail Sales and Industrial Production Both Rise by Doug Short of Advisor Perspectives (dshort.com)

The charts don't all show us the individual behavior of the Big Four leading up to the 2007 recession. To achieve that goal, I've plotted the same data using a "percent off high" technique. In other words, I show successive new highs as zero and the cumulative percent declines of months that aren't new highs. The advantage of this approach is that it helps us visualize declines more clearly and to compare the depth of declines for each indicator and across time (e.g., the short 2001 recession versus the Great Recession). Here is my own four-pack showing the indicators with this technique.

2013-01-11 ECRI's Imaginary Recession: Now in Its Seventh Month by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data. It is now at 128.3 versus the previous week's 126.6 (which is an upward revision from 126.4). Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.1, up from last week's 5.0. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.

2013-01-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,422.29. The ratios in parentheses use the monthly close of 1,426.19.

2012-12-28 ECRI Update: Flunking Recession 101 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data. It is now at 128.3 versus the previous week's 127.2. Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.4, up from last week's 4.6. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.

2012-12-21 ECRI Update: The Recession Call Is Further Undermined by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the latest public data. It is now at 127.2 versus the previous week's 127.4. However, the WLI annualized growth indicator (WLIg) rose, now at 4.6, up from last week's 3.9. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.

2012-12-21 The Big Four Economic Indicators: Real Personal Incomes Improve Significantly By Doug Short by Doug Short of Advisor Perspectives (dshort.com)

The weight of these four in the decision process is sufficient rationale for the St. Louis FRED repository to feature achart four-packof these indicators along with the statement that "the charts plot four main economic indicators tracked by the NBER dating committee." Here are the four as identified in the Federal Reserve Economic Data repository. See the data specifics in the linkedPDF filewith details on the calculation of two of the indicators.

2012-12-14 ECRI Weekly Update: Walking the Recession Plank by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data to its highest level since early August of 2011. It is now at 127.7, up from a downwardly revised 126.7 in the previous week. See the WLI chart. The WLI annualized growth indicator (WLIg) also rose, now at 4.4 from last week's 3.5. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.

2012-12-14 The Big Four Economic Indicators: Industrial Product and Retail Sales Brighten the Picture by Doug Short of Advisor Perspectives (dshort.com)

This morning I've added two more of the Big Four for November: Industrial Production from the Federal Reserve, the purple line in the chart below and Real Retail Sales, the green line.

2012-12-07 ECRI Weekly Update: More Recession Flag Waving by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.8, up from an upwardly revised 126.2 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) also rose, now at 3.5 from last week's 3.4. WLIg has been in expansion territory since August 24th, althout it is off its high at 6.0 on October 12th.

2012-12-05 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1394.52. The ratios in parentheses use the monthly close of 1,416.18. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-11-30 ECRI Weekly Update: Beating the Recession Drum by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.3, up from 125.4 in the previous week. The WLI annualized growth indicator (WLIg) declined to 3.4, down from last week's 3.6. WLIg has been in expansion territory since August 17th, although it is now at a six-week low, with the high at 6.0 on October 12th.

2012-11-26 Median Household Incomes: The "Real" Story by Doug Short of Advisor Perspectives (dshort.com)

The traditional source of household income data is the Census Bureau, which publishes annual household income data each September for the previous year. Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates.

2012-11-23 ECRI Weekly Leading Index: Index Rises, Growth Diminishes by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data (released Wednesday in advance of the Thanksgiving holiday). It is now at 125.7, up from 125.4 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) declined to 3.8, down from last week's 4.3. WLIg has been in expansion territory for thirteen weeks, although it is now at a seven-week low, with the high at 6.0 on October 12th.

2012-11-16 ECRI Weekly Leading Index: The Slippage Continues by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined again in the numbers released today. It is now at 125.4, down from its interim high of 127.6 set five weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 4.4, down from last week's downard revision to 5.0. WLIg has been in expansion territory for twelve weeks, although it is now at a five-week low, with the revised high at 6.0 on October 12th.

2012-11-16 The Big Four Economic Indicators: Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-11-09 ECRI Weekly Leading Index: Off Its Interim High by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined in the numbers released today. It is now at 126.2, down from its interim high of 127.6 set four weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 5.1, down from last week's 5.9. WLIg has now spent eleven consecutive weeks in expansion territory, although it is now at a five-week low.

2012-11-02 ECRI Weekly Leading Index: Still Jogging in Place by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the numbers released today. It is now at 126.6, down from last week's 126.7 (revised from 126.8). Likewise, the WLI growth indicator (WLIg) slipped slightly, now at 5.9, down from last week's 6.0. WLIg has now spent ten consecutive weeks in expansion territory, although it is off its interim high of 6.1. But for the past six weeks the WLI has been jogging in place in a narrow range (126.2 to 126.7).

2012-10-26 ECRI Weekly Leading Index: Running in Place by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally in the numbers released today. It is now at 126.8, up from last week's 126.6 (revised from 126.7). However, the WLI growth indicator (WLIg) slipped slightly in expansion territory, not at 6.0, down from last week's 6.1. WLIg has now spent nine consecutive weeks of in expansion territory. But essentially the WLI has been running in place for the past five weeks.

2012-10-19 ECRI Weekly Leading Index: Index Slips, But Growth Rises by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute declined in the numbers released today. It is now at 126.7, down from last week's 127.6 (revised from 127.7). However, the WLI growth indicator rose further in expansion territory to 6.1, up from last week's 5.7. WLIg has now posted sixteen consecutive weeks of improvement and is at its highest level since May 20, 2011. The divergence between the WLI and its growth derivative is probably attributable to apparent anomaly in the BLS's weekly unemployment data over the past two weeks.

2012-10-16 The Big Four Economic Indicators: Updated Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

The latest updates to the Big Four was today's release of the September Industrial Production, which rose 0.4 percent over the previous month following a 1.4 percent decline the month before. Yesterday the Census Bureau's Retail Sales number was released, and with today's release of the Consumer Price Index we can calculate Real Retail Sales. The latest 0.6% increase gives us a strong three-month upward trend after four months of flat or contracting data. Both indicators beat analysts' expectations.

2012-10-12 ECRI Weekly Leading Indicators: Time to Recant the Recession Call? by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) made a strong advance in the numbers released today. It is now at 127.7, up from last week's 126.2 (revised from 126.3). See the WLI chart below. The WLI growth indicator (WLIg) now marks its eighth week in expansion territory at 5.7, up from last week's 4.6. WLIg has now posted fifteenth consecutive weeks of improvement and is at its highest level since May 27, 2011.

2012-10-09 Median Household Income Growth: Deflating the American Dream by Doug Short of Advisor Perspectives (dshort.com)

What is the single best indicator of the American Dream? Many would point to household income growth. My study of the Census Bureau's data shows a 600.7% growth in median household incomes from 1967 through 2011. The ride has been bumpy, but it equates to a 4.5% annualized growth rate. Sounds impressive, but if you adjust for inflation using the Census Bureau's method, that nominal 600.7% total growth shrinks to 19.0%, a "real" annualized growth rate of 0.4%.

2012-10-05 ECRI Weekly Leading Indicators: Mixed Signals in Latest Data by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally after eight consecutive weeks of growth. It is now at 126.3, down from last week's 126.6 (revised from 126.7). See the WLI chart below. However, the WLI growth indicator (WLIg) now marks its seventh week in expansion territory at 4.7, up from last week's 3.8. WLIg has now posted fourteen consecutive weeks of improvement and is at its highest level since June 3, 2011.

2012-10-04 Median Household Incomes: The Grim Reality by Doug Short of Advisor Perspectives (dshort.com)

Last month I posted a pair of commentaries on median household incomes based on latest annual data released by the Census Bureau. The first looked at the distribution of household incomes by quintile and the top 5 percent. The second examined median household incomes by age bracket. More recently Sentier Research, an organization that focuses on income and demographics, published a fascinating report on median household incomes. The data in their report differs from the Census Bureau's data in three key respects.

2012-10-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,443.42. The ratios in parentheses use the monthly close of 1,440.67. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-09-28 The Big Four Economic Indicators: Updated Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process.

2012-09-28 ECRI Weekly Leading Index Growth at Highest Level Since June 2011 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the eighth consecutive week, now at 126.7, up from last week's 125.3 (revised from 124.7). See the WLI chart below. The WLI growth indicator (WLIg) now marks its sixth week in expansion territory at 3.8 (up from last week's 2.7). It has now posted thirteen consecutive weeks of improvement and is at its highest level since June 10, 2011.

2012-09-21 ECRI Weekly Leading Index Growth at Highest Level Since July 2011 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the seventh consecutive week, now at 125.4, up from last week's 124.7 (revised from 124.9). See the WLI chart below. The WLI growth indicator (WLIg) now marks its fifth week in expansion territory at 2.7 (up from last week's 1.9). It has now posted twelve consecutive weeks of improvement and is at its highest level since July 29, 2011.

2012-09-14 The Big Four Economic Indicators: Updated Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are: Industrial Production, Real Income, Employment and Real Retail Sales.

2012-09-14 ECRI Defends Its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute rose for the 6th consecutive week, now at 124.9 from last week's 124.1. The WLI growth indicator now marks its fourth week in expansion territory at 2.1. It has now posted eleven consecutive weeks of improvement. The big news is yesterday's Bloomberg TV interview, in which Lakshman Achuthan, ECRI's COO, reasserted his company's recession call made a year ago on September 21st and his belief that the recession has already begun.

2012-09-07 The Big Four Economic Indicators: Updated Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-09-07 Economic Data Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fifth consecutive week, now at 123.7 from last week's 123.5 (revised from 123.6). See the WLI chart below. The WLI growth indicator (WLIg) is in its second week in expansion territory at 1.0 (up from last week's 0.5). It has now posted ten consecutive weeks of improvement.

2012-09-04 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,403.45. The ratios in parentheses use the monthly close of 1,406.58. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-08-31 ECRI's Embarrassing Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fourth consecutive week, now at 123.6 from last week's 123.3. See the WLI chart below. The WLI growth indicator (WLIg) has risen into expansion territory at 0.6 after nine consecutive weeks of improvement.

2012-08-24 Economic Data Continues to Refute ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 123.3 from last week's 123.0 (an upward revision from 122.8). See the WLI chart below. The WLI growth indicator (WLIg) is at -0.1, less negative than the -0.4 for last week, which is an upward revision from the previously reported -0.6.

2012-08-17 ECRI Weekly Leading Index Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute rose slightly to 122.8 from last week's 122.5. See the WLI chart below. The WLI growth indicator is at -0.6, less negative than the -1.1 for last week, which is an upward revision from the previously reported -1.3. As of today, the ECRI website continues to feature Lakshman Achuthan's July 10th Bloomberg TV interview, in which he reaffirmed his company's recession call and stated that we're already in a recession.

2012-08-10 ECRI Recession Call: Weekly Leading Index Improves, Growth Index Little Changed by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 122.5 from last week's 122.1 (a tiny revision from the previously reported 122.2). See the WLI chart below. At one decimal place, the WLI growth indicator (WLIg) is unchanged at -1.3 as reported in Friday's public release of the data through August 3. At two decimal places, WLIg is slightly less negative at -1.28 compared to last week's -1.35.

2012-08-03 ECRI Recession Call: Weekly Leading Index Slips But Growth Index Improves by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 122.2 from last week's 122.7 (a tiny revision from the previously reported 122.8). See the WLI chart below. However, the WLI growth indicator (WLIg) improved, now at -1.3 as reported in Friday's public release of the data through July 27, an improvement over the previous week's -1.7, which was an upward revision from -2.3.

2012-08-03 The Big Four Economic Indicators: Updated Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-08-01 The Big Four Economic Indicators: What They're Telling Us About the Economy by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general understanding that there are four big indicators that the committee weighs heavily in their cycle identification process.

2012-08-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,359.78. The ratios in parentheses use the monthly close of 1,379.32. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-07-27 ECRI Recession Call: Weekly Leading Index Improves by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose to 122.8 from last week's 121.8 (a tiny revision from the previously reported 121.9). See the WLI chart below. The WLI growth indicator (WLIg) also improved, now at -1.6 as reported in Friday's public release of the data through July 20, an improvement over the previous week's -2.3.

2012-07-20 ECRI Recession Call: Weekly Leading Index Declines by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.9 from last week's 122.9, a downward revision from 123.2. See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.3 as reported in Friday's public release of the data through July 13, an improvement over the previous week's -2.7 (a downward revision from -2.2).

2012-07-19 The Big Four Economic Indicators: What They're Telling Us about a Recession by Doug Short of Advisor Perspectives (dshort.com)

The ongoing debate about an impending recession in the US grew more conspicuous last week when ECRI's Lakshman Achuthan not only reiterated his company's recession call, but also went so far as to declare that we're already in a recession. There is, however, a general assumption that there are four big indicators that the committee weighs heavily in their cycle identification process. They are Industrial Production, Real Income, Employment, Real Retail Sales.

2012-07-13 ECRI Recession Call: Weekly Leading Index Improves Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 123.2 from last week's 121.9. The WLI growth indicator (WLIg) rose fractionally, now at -2.2 as reported in Friday's public release of the data through July 6, an improvement over the previous week's -2.8 (a slight upward revision from -2.9).

2012-07-06 ECRI Recession Call: Weekly Leading Index Again Improves by Doug Short of Advisor Perspectives (dshort.com)

Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 121.9 from last week's 121.7 (which was a slight upward revision from 121.5). See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.9 as reported in Friday's public release of the data through June 29, an improvement over the previous week's -3.6.

2012-07-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1323.48. The ratios in parentheses use the monthly close of 1,362.16. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-06-29 ECRI Recession Call: Weekly Leading Index Up Fractionally by Doug Short of Advisor Perspectives (dshort.com)

Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.5 from last week's 121.2 (a slight downward revision from 121.3). See the chart below. However, the WLI growth indicator (WLIg) declined fractionally, now at -3.6 as reported in Friday's public release of the data through June 22, down from the previous week's -3.5.

2012-06-22 ECRI Recession Call: Weekly Leading Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.3 from last week's 121.8 (a slight downward revision from 121.9). See the chart below. The WLI growth indicator (WLIg) also declined, now at -3.5 as reported in Friday's public release of the data through June 15, down from the previous week's -3.0.

2012-06-20 WSJ Economists' 10-Year Yield Forecasts: The Growing Spread by Doug Short of Advisor Perspectives (dshort.com)

Earlier this week the Wall Street Journal posted the results of its June Survey of economists. In the past my main interest in these forecasts has been the GDP estimates. But today my attention is fixed on the estimates for 10-year yields. The various Federal Reserve strategies in recent years (ZIRP, QE1, QE2 and Operation Twist) have focused on lowering interest rates, for which the 10-year note yield is an interesting "tell".

2012-06-15 ECRI Recession Call: Weekly Leading Index Up Slightly, But Growth Index Declines by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.9 from last week's 121.3 (a downward revision from 122.3). See the chart below. However, the WLI growth indicator (WLIg) slipped, now at -3.0 as reported in Friday's public release of the data through June 8, down from the previous week's -2.2 (a sizable downward revision from -0.7).

2012-06-08 ECRI Recession Call Update: Weekly Leading Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 121.6 from last week's 122.3 (a downward revision from 122.4). See the chart below. The WLI growth indicator (WLIg) also slipped, now at -2.0 as reported in Friday's public release of the data through June 1, down from the previous week's -0.7 (a downward revision from -0.6). The ECRI numbers are extremely close to the RecessionAlert estimates, posted yesterday, which anticipated 121.9 and -1.9% for the WLI and WLIg metrics.

2012-06-02 ECRI Recession Call Update: Another Weekly Leading Index Decline by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 122.4 from last week's 123.0 (a slight downward revision of 123.1). The WLI growth indicator also slipped, now at -0.6 as reported in Friday's public release of the data through May 25, down from the previous week's 0.1. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.

2012-06-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2012, which is 1,341.27. The ratios in parentheses use the monthly close of 1,310.33. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-05-26 ECRI Recession Call Update: Weekly Leading Index Declines Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 123.1 from a slight downward revision of 124.4 (see the fifth chart below). The WLI growth indicator also slipped, now at 0.1 as reported in Friday's public release of the data through May 18, down from the previous week's 0.4. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.

2012-05-11 ECRI Update: Reaffirming the Recession Call ... Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in todays public release of the data through May 4. This is essentially unchanged from last week. However, the underlying WLI again rose fractionally from an adjusted 124.6 to 125.4 (see the fourth chart below). The big news this week, however, is not the weekly data update but ECRI's latest reaffirmation of its recession call in a Bloomberg interview with ECRIs Lakshman Achuthan earlier this week. Ive embedded a link to the nine-minute video on the Bloomberg website.

2012-05-04 ECRI Weekly Leading Indicator: Third Consecutive Decline by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0 as reported in today's public release of the data through April 27. This is the third consecutive week-over-week decline since January 6th. However, the underlying WLI again rose fractionally from an adjusted 124.0 to 124.7.

2012-05-02 Market Valuation Indicators: Overvaluation Relatively Unchanged by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. The Crestmont Research P/E Ratio, The cyclical P/E ratio using the trailing 10-year earnings as the divisor, The Q Ratio, which is the total price of the market divided by its replacement cost, The relationship of the S&P Composite to a regression trendline.To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression.

2012-04-27 ECRI Weekly Leading Indicator: The Growth Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.6 as reported in today's public release of the data through April 20. This is the second consecutive week-over-week decline since January 6th. However, the underlying WLI rose fractionally from an adjusted 123.8 to 124.1.

2012-04-20 ECRI Weekly Leading Indicator: The Growth Index Slip by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.2 as reported in today's public release of the data through April 13. This is the first week-over-week decline since January 6th, over three months ago. The underlying WLI contracted more dramatically from an adjusted 125.9 to 123.9 (see the fourth chart below). This is the largest decline, in percentage terms, since August 19th of last year.

2012-04-13 ECRI Weekly Leading Indicator: The Growth Index Continues to Improve by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.4 as reported in today's public release of the data through April 6. This is the thirteenth consecutive week of improving data for the Growth Index and the highest reading since August 5th of last year. However, underlying WLI contracted slightly, decreasing from an adjusted 126.3 to 125.7

2012-04-06 ECRI Weekly Leading Indicator Growth Is Now Positive by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.0 as reported in today's public release of the data through March 30. This is the twelfth consecutive week of improving data for the Growth Index and the first postive reading since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.8 to 126.5 (see the fourth chart below).

2012-04-03 Market Valuation Indicators: Overvaluation Increases by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns.

2012-04-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2012, which is 1,389.24. The ratios in parentheses use the monthly close of 1,408.47. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-03-30 ECRI Weekly Leading Indicator Is Poised for Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0, the pivot point between growth and contraction, as reported in today's public release of the data through March 23rd. This is the eleventh consecutive week of improving data for the Growth Index and the highest level since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.4 to 125.9 (see the fourth chart below).

2012-03-23 ECRI Indicators Improve, But Beware the ''Yo-Yo Years'' by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -0.4 in today's public release of the data through March 16th. This is the tenth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.0 to 125.7 (see the fourth chart below).

2012-03-16 ECRI Reaffirms Its Recession Call with New Analysis by Doug Short of Advisor Perspectives (dshort.com)

The WLI growth indicator of the ECRI came in at -1.4 in today's public release of the data through Mar. 9th. This is the 9th consecutive week of improvement data for the Growth Index and the highest level since Aug. 5th of last year. The underlying WLI also improved, increasing from an adjusted 124.6 to 125.1. The big news this week is the ECRI commentary: Why Our Recession Call Stands. The most interesting revelation in the commentary involved a shift to the year-over-year WLI change from ECRI's favored, and rather arcane, method of calculating the WLI growth series from the underlying WLI.

2012-03-09 ECRI's Weekly Leading Index Improves (Slightly) Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -2.6 in today's public release of the data through March 9th. This is the eighth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, increasing from an adjusted 124.1 to 124.3 (see the third chart below). Here again is a recent media appearance by Lakshman Achuthan, the Co-founder of ECRI, defending ECRI's recession call on with CNNMoney.

2012-03-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for February 2012, which is 1,352.49. The ratios in parentheses use the monthly close of 1,365.68. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 15.0 (15.2) ? P/E10 ratio = 21.9 (22.1)

2012-03-02 Market Valuation Indicators: Overvaluation Inreases by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. ? The Crestmont Research P/E Ratio ? The cyclical P/E ratio using the trailing 10-year earnings as the divisor ? The Q Ratio, which is the total price of the market divided by its replacement cost ? The relationship of the S&P Composite to a regression trendline To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression.

2012-03-02 ECRI Continues to Defend its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.0 in today's public release of the data through February 24th. This is the seventh consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, incresing from an adjusted 123.1 to 124.2 (see the third chart below).

2012-02-24 ECRI Defends its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.5 in today's public release of the data through February 10th. This is the sixth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. However, the underlying WLI decreased fractionally from an adjusted 123.4 to 123.2 (see the third chart below). This is the second week of slippage in the underlying index.

2012-02-17 ECRI's Controversial Recession Call: Fifth Consecutive Improvement in the Growth Index by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.7 in today's public release of the data through February 10th. This is the fifth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. The underlying WLI decreased fractionally from an adjusted 123.6 to 123.5

2012-02-16 Profit Margin Squeeze: New Update by Doug Short of Advisor Perspectives (dshort.com)

The accompanying charts offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey through yesterday's release. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data.

2012-02-10 ECRI's Puzzling Recession Call: The Growth Index Contraction Eases Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -4.3 in its latest reading, data through February 3rd. The latest public data point is a reduced contraction from last week's -5.3 (a slight downward revision from the previously reported -5.2). This is the highest level (i.e., least negative) since August 26th of last year. The underlying WLI increased fractionally from an adjusted 123.0 to 123.3.

2012-02-09 Syria, Assad and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)

Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.

2012-02-03 ECRI Recession Call: Growth Index Contraction Eases Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -5.2 in its latest reading, data through January 27. The latest public data point is a reduced contraction from last week's -6.6 (a slight downward revision from -6.5). This is the highest level (i.e., least negative) since late August. The underlying WLI increased fractionally from an adjusted 122.7 to 123.2 (see the third chart below).

2012-02-02 Market Valuation Indicators: Overvaluation Inreases by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. ? The Crestmont Research P/E Ratio, The cyclical P/E ratio using the trailing 10-year earnings as the divisor, The Q Ratio, which is the total price of the market divided by its replacement cost, The relationship of the S&P Composite to a regression trendline. These indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns.

2012-02-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for January 2012, which is 1,300.58. The ratios in parentheses use the monthly close of 1,312.41. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 14.3 (14.1) ? P/E10 ratio = 21.3 (21.5)

2012-01-27 ECRI Recession Call: Growth Index Contraction Eases Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).

2012-01-20 ECRI Recession Call: Growth Index Contraction Eases by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.5 in its latest reading, data through January 13. The latest public data point is a reduced contraction from last week's -8.6, and the underlying WLI rose from an adjusted 121.1 to 123.4 (see the third chart below). The growth index had slipped lower over the past two weeks, but the latest data point is the highest (i.e., least negative) since early September.

2012-01-13 Demographic Headwinds: The Decline of Peak Spenders by Doug Short of Advisor Perspectives (dshort.com)

"S&P 500 to Fall 30-50% in 2012." Dent's grim forecast is primarily based on the demographics of the peak spending years, an age cohort he refers to in the interview as 46-50. Economists and market analysts often think of retiring boomers as the primary drag on the economy with their the transition from the accumulation to the decumulation phase of their life-cycle. But if we understand of the crucial role of consumption for our economic health, a significant decline in the number of peak spenders is a demographic headwind that will challenge us for years to come.

2012-01-13 ECRI Recession Call: Growth Index Contracts Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -8.4 in its latest reading, data through January 6. The latest public data point is a slightly deeper contraction from last week's -8.2, although the underlying WLI rose a point from 120.2 to 121.2 (see the third chart below). The index had been hovering in a narrow range between -7.4 to -7.8 for the previous seven weeks but has slipped lower over the past two weeks.

2012-01-06 ECRI Recession Call: Growth Index Shows Further Contraction by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -8.2 in its latest reading, data through December 30. The latest public data point is a deeper contraction from last week's -7.6. The index had been hovering in a narrow range between -7.4 to -7.8 for the previous seven weeks but has now slipped lower.

2012-01-06 The Great Leading Indicator Smackdown: New Update by Doug Short of Advisor Perspectives (dshort.com)

Periodically I update a series of overlays comparing the ECRI Weekly Leading Index (WLI) and the Conference Board's monthly updates of its index of Leading Economic Indicators (LEI). The most recent LEI update was published on December 22 (data through November), and today we have the latest WLI, based on data through December 30th. As we will see in the charts below, the two indicators continue to exhibit a major divergence.

2012-01-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for December 2011, which is 1243.32. The ratios in parentheses use the monthly close of 1,257.60. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 13.8 (14.0) ? P/E10 ratio = 20.5 (20.7)

2012-01-03 Market Valuation Indicators: Overvaluation Remains High by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the months. ? The Crestmont Research P/E Ratio. ? The cyclical P/E ratio using the trailing 10-year earnings as the divisor. ? The Q Ratio, which is the total price of the market divided by its replacement cost. ? The relationship of the S&P Composite to a regression trendline. To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression.

2011-12-30 ECRI Recession Call: Growth Index Virtually Unchanged for Seven Weeks by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.6 in its latest reading, data through December 23. The latest public data point is virtually unchanged from last week's -7.7. The index has been hovering in a narrow range between -7.4 to -7.8 for the past seven weeks. Those of us who follow this indicator are nervously awaiting a confirmation or reversal of the trend.

2011-12-23 ECRI Recession Call: Growth Index Goes Slightly More Negative by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.7 in its latest reading, data through December 16. The latest public data point is fractionally more negative than last week's -7.5. The index has been hovering in a narrow range between -7.4 to -7.8 for the past six weeks.

2011-12-16 ECRI Recession Call: Growth Index Contraction Moderates Fractionally by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.5 in its latest reading, data through December 9. The latest public data point is fractionally less negative than last week's -7.7, which is a downward revision from -7.6. CRI's recession call is, to say the least, quite controversial in financial circles. The perma-bears are generally supportive of the forecast, while the predominantly bullish mainstream financial view ranges from skeptical to dismissive.

2011-12-09 ECRI Update: Lakshman Achuthan Explains the ECRI Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.6 in its latest reading, data through December 2. The latest public data point is fractionally less negative than last week's -7.8. Yesterday Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television's Surveillance Midday. It was sufficiently representative of the ECRI view that it's also available on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its entirely.

2011-12-09 Market Valuation Indicators: Overvaluation Remains High by Doug Short of Advisor Perspectives (dshort.com)

This interim update was prompted by yesterday's release of the Q3 Fed Flow of Funds data, which triggered a downward revision of the Q Ratio from high to moderate overvaluation.

2011-12-02 ECRI Recession Watch: Growth Index Reverses Trend and Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.8 in its latest reading, data through November 25. The latest public data point is more negative than last week's downwardly revised -7.4 (previously -7.3). Today's update reverses the trend off its interim low of -10.1 on October 14.

2011-12-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for October 2011, which is 1226.41. The ratios in parentheses use the monthly close of 1,246.96. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2011-11-26 ECRI Recession Watch: Decline in Growth Index Continues to Moderate by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index growth indicator of the Economic Cycle Research Institute posted -7.3 in its latest reading, data through November 18. The latest public data point is less negative than last week's upwardly revised -7.8 and continues the trend off its interim low of -10.1 on October 14. Earlier this month I posted the November 7th CNBC interview with Lakshman Achuthan, the Co-founder of ECRI. I'm again including video because ECRI continues to feature it on their website here, which I see as ongoing evidence that they stand behind their recession forecast.

2011-11-18 ECRI Recession Watch: Decline in Growth Index Continues to Moderate by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.9 in its latest reading, data through November 11. The latest public data point is less negative than last week's -8.5 and continues the trend off its interim low of -10.1 on October 14. Last week I posted the November 7th CNBC interview with Lakshman Achuthan, the Co-founder of ECRI. I'm again including video because ECRI continues to feature it on their website, which I see as evidence that they stand behind their recession forecast.

2011-11-11 ECRI Recession Watch: Growth Index Decline Moderates by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index growth indicator of the Economic Cycle Research Institute posted -8.5 in its latest reading. The latest public data point is less negative than last week's -9.4, and trending above its interim low of -10.1 on October 14. ECRI has come under some harsh criticism this past week, starting with a CNBC interview of Lakshman Achuthan, the Co-founder of ECRI. About half-way through the interview, the discussion turns into an uninformative debate in which Achuthan speaks of a "contagion among the forward leading indicators" but dodged requests for specifics.

2011-11-04 ECRI Recession Watch: Growth Index Is Off Its Interim Low by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -9.4 in its latest reading, data through October 28, off its interim low of -10.1 set over the previous two weeks. (Note: last week's original level of -10.0 was revised downward to -10.1.) On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.Institute had announced to its private clients on September 21st.

2011-11-02 Market Valuation Indicators: Increased Overvaluation After the October Rally by Doug Short of Advisor Perspectives (dshort.com)

Below is a summary of the four market valuation indicators I regularly follow. As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns. At present they continue to suggest a cautious long-term outlook and guarded expectations.

2011-10-28 ECRI Recession Watch: Growth Index Virtually Unchanged by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -10.0 in its latest reading, data through October 21, a fractionally change from the previous week's -10.1. On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.

2011-10-24 WSJ Economists' Q3 GDP Forecasts: 2.1 in Q3 and 2.0 in Q4 by Doug Short of Advisor Perspectives (dshort.com)

One of the big economic announcements in the week ahead will be the Advance Estimate for Q3 GDP. The final number for Q2 GDP was 1.3%. Economists in general are optimistic that Q3 will show an improvement in this broad measure of the economy. The consensus for Q3 is 2.2%. But what sort of distribution of opinions do we find among the economists? Is the range of opinions wide or narrow? Let's review the data in the Wall Street Journal's October survey of economists. Fifty of the 56 economists solicited for survey responded.

2011-10-21 ECRI Recession Watch: Growth Index Drops Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now posted 11 consecutive declines since early August. The interim high of 8.0 was set in the week ending on April 15. The latest reading, data through October 14, is -10.1, down from the previous week's -9.7. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000.

2011-10-21 Libya, Ghaddafi and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)

While the US and Europe have remained fixated on the simmering sovereign debt crisis in Euroland, the Arab world has been experiencing waves of demonstrations, protests and civil wars that have seen the fall of three major regimes thus far in 2011, with several others struggling to find equilibrium. The underlying forces behind the Arab Spring are complex and vary from country to country. But a key factor is demographics, as a glance at the population pyramids below suggests.

2011-10-14 ECRI Recession Watch: Growth Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has posted 10 consecutive declines since early August. The interim high of 8.0 was set in the week ending on April 15. The latest reading, data through October 7, is -9.6, down from the previous week's -8.7. On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.

2011-10-13 Boomer Demographics: The Shift Ahead by Doug Short of Advisor Perspectives (dshort.com)

I looked at developments in U.S. demographics from 1980 to the present with a focus on the Boomer bulge. Then I examined current day demographics for several major countries around the globe. I've developed a set of population pyramids for the U.S. that start with 1981 and span7 decades at 10-year intervals using the U.S. Census Bureau data. Let's look at some comparative numbers for these seven snapshots. I've calculated the Elderly Dependency Ratios for each. As this ratio shifts higher, the productive population is increasingly burdened by the cost of entitlement programs.

2011-10-07 ECRI Recession Watch: Growth Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

Last week, September 30th, the Economic Cycle Research Institute (ECRI) publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st. One week later, the Weekly Leading Index (WLI) growth indicator of the ECRI has posted another week-over-week decline, now at -8.1 from the previous week's -7.2 (latest publicly available data as of September 30). The interim high of 8.1 was set in the week ending on April 15.

2011-10-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for September 2011, which is 1173.88. The ratios in parentheses use the monthly close of 1131.42. For the latest earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 13.3 (12.9) ? P/E10 ratio = 19.7 (19.0)

2011-09-30 ECRI Makes a Recession Call by Doug Short of Advisor Perspectives (dshort.com)

Today the ECRI publicly announced that the U.S. is tipping into a recession. Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there's nothing that policy makers can do to head it off. ECRI's recession call isn't based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down before the Arab Spring and Japanese earthquake to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes.

2011-09-23 ECRI Growth Metric: Revised Data, Still Declining by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted another week-over-week decline, now at -6.7 from last week's -6.1, which is an upward revision from -7.1. In fact, with today's release, the publicly available ECRI data has been revised as far back as January 14th, with increasingly significant revisions from Q2 forward. The formula for the ECRI indicators is not published, but my speculation, based on the timing of the revisions, is that the Q2 Fed Flow of Funds release on September 13th occasioned the updates.

2011-09-16 WSJ Economists' GDP Forecasts: 2.0 in Q3 But Slow Improvement Thereafter by Doug Short of Advisor Perspectives (dshort.com)

Yesterday the WSJ released the results of their September survey of 56 economists, mostly from major financial firms with a handful from academic institutions. The September survey is available in Excel format here. I spent some time studying the results and have made a little snapshot to help us understand what these mainstream professional economists are forecasting for quarterly GDP for the next six quarters through the end of 2012. The chart below includes the responses of each economist. The six forecast series are arranged horizontally from low to high.

2011-09-16 ECRI Growth Metric Goes Yet Further Negative by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update of the publicly available data available (through September 9) now puts the decline at -7.1, down from last week's revised -6.6 (previously -6.2). The interim high of 8.0 was set in the week ending on April 15. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000.

2011-09-14 Retail Sales: The "Real" Consumer And Their Recession-Level Spending by Doug Short of Advisor Perspectives (dshort.com)

The Retail Sales Report released this morning shows that retail sales in August were flat. The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted recessions and the approximate range of two major economic episodes. The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales has taken us (in nominal terms) 2.9% above November 2007 pre-recession peak.

2011-09-13 U.S. Household Incomes: A 43-Year Perspective by Doug Short of Advisor Perspectives (dshort.com)

The Census Bureau has released the household income data for 2010. It is posted on their website. What I'm featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2010. Most people think in nominal terms, so the first chart below illustrates the current dollar values across the 43-year period (in other words, the value of a dollar at the time receivednot adjusted for inflation). The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households.

2011-09-09 ECRI Growth Metric Drops Yet Deeper into Negative Territory by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index growth indicator of the Economic Cycle Research Institute has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update of the publicly available data available (through September 2) now puts the decline at -6.2, down from last week's revised -4.4. The interim high of 8.0 was set in the week ending on April 15. See the CNBC video clip featuring Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI, discussing the risk of a new recession.

2011-09-06 The Great Shift From Manufacturing to Services by Doug Short of Advisor Perspectives (dshort.com)

In honor of Labor Day, which was signed into law as a national holiday in 1894, I spent some time this morning studying a topic I've occasionally mentioned: The shift in the United States from a manufacturing to a services economy. The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. The first chart below is an overlay of the compete series of employment numbers for the two major categories, manufacturing and services. When I say major, I'm referring to the domination of the labor market by these two industries.

2011-09-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for August 2011, which is 1185.31. The ratios in parentheses use the monthly close of 1218.89. For the latest earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2011-09-02 ECRI Growth Metric Drops Deeper into Negative Territory by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) dropped deeper into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update, data through August 26, now puts the decline at -4.3, down from last week's revised -2.1. The interim high of 8.0 was set in the week ending on April 15. See the CNBC video clip featuring Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI, which aired on Wednesday, August 31st, just before the ADP jobs report.

2011-09-01 Recession? No. We're in the Second Great Contraction by Doug Short of Advisor Perspectives (dshort.com)

Here are some charts of troughs to peaks that show why so many people believe the U.S. is still mired in a recession. For those of us who do accept the NBER recession call, the charts support the characterization of our economic condition as The Second Great Contraction. Since the beginning of quarterly GDP data, which has been tracked since 1947, the U.S. has never had an official recession without having achieved new highs in Real GDP and nonfarm employment. Let's hope that continues. But ultimately the debate over recession boundaries is a minor quibble in the ongoing economic reality.

2011-08-26 The ECRI Weekly Leading Index: Growth Metric Slips Further into Negative Territory by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update, data through August 19, now puts the decline at -2.9, down from last week's -0.1. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-08-19 The ECRI Weekly Leading Index: Growth Metric Goes (Fractionally) Negative by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has been oscillating in a narrow range (1.5 to 2.0 in the latest revision) for the past several weeks. However today's update, data through August 12, has touched negative territory with a -0.1 reading. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-08-18 A Long-Term Look at Inflation by Doug Short of Advisor Perspectives (dshort.com)

The August 2011 Consumer Price Index for Urban Consumers (CPI-U) released today puts the July year-over-year inflation rate at 3.63%, which is fractionally below the 3.96% average since the end of World War II. For a comparison of headline inflation with core inflation, which is based on the CPI excluding food and energy, see this new feature. For better understanding of how CPI is measured and how it impacts your household, see my Inside Look at CPI components. For an even closer look at how the components are behaving, see this X-Ray View of the data for the past five months.

2011-08-15 The "Real" Mega-Bears by Doug Short of Advisor Perspectives (dshort.com)

I'm posting my usual update shortly after reading an interesting, if rather disturbing, WSJ article, This Time, Maybe the U.S. Is Japan. It's time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high. The chart below is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior.

2011-08-12 ThECRI Weekly Leading Index: Consistently Indicating Slow Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has been oscillating in a narrow range (from 1.6 to 2.1) for the past seven weeks, with the latest reading at 1.7. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-08-03 Will the "Real" GDP Please Stand Up? by Doug Short of Advisor Perspectives (dshort.com)

How do you get from Nominal GDP to Real GDP? You subtract inflation. The Bureau of Economic Analysis uses its own GDP Deflator for this purpose, which is somewhat different from the BEA's deflator for Personal Consumption Expenditures and quite a bit different from the better-known Bureau of Labor Statistic's inflation gauge, the Consumer Price Index. Now that we have the preliminary read on Q2 GDP and some rather stunning revisions for the past three years, I've updated my trio of charts showing quarterly Real GDP since 1960 with the official and two variant adjustment techniques.

2011-08-02 Crestmont Market Valuation Update by Doug Short of Advisor Perspectives (dshort.com)

The recent article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Ed's method for determining where the market is headed. His analysis is quite compelling. Accordingly I have added the Crestmont data to my monthly market valuation updates. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart I've been sharing on a monthly basis for the past few years.

2011-07-30 Visualizing GDP: The Consumer Is Key... and at the Razor's Edge by Doug Short of Doug Short

Over this time frame, we see that the personal consumption expenditures component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. As the Q2 GDP component analysis clearly illustrates, personal consumption expenditures, at 0.07 of the real GDP 1.29, is at the razor's edge of positive territory.

2011-07-29 The ECRI Weekly Leading Index: Stabilization Continues by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) rose to 2.0 from a downward revision of 1.6 for last week (originally 1.7). The economy seems to be stabilizing after eleven consecutive weeks of decline. The interim high, now adjusted upward to 8.0, was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-28 WSJ Economists' GDP Forecasts: Weak Q2 But a Stronger 2nd Half by Doug Short of Advisor Perspectives (dshort.com)

Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. I've made a little snapshot to help us understand what these mainstream professional eoconomists are forecasting for quarterly GDP for the rest of the year. The markers are arranged from low to high for each quarter so we get a clear idea of the distribution of responses.

2011-07-22 The ECRI Weekly Leading Index: Stabilizing at Slow Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) remained steady at 1.7 the same level as the two previous weeks. The economy seems to be stabilizing after eleven consecutive weeks of decline. The interim high, now adjusted upward to 8.0, was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-21 The Shape of Market Bubbles (with a Footnote on Gold) by Doug Short of Advisor Perspectives (dshort.com)

In my weekly updates of major worlds markets, one of the charts includes an overlay of the amazing bubble in the Shanghai Composite Index. In this commentary we'll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let's take a long view of the index.

2011-07-19 WSJ Economists's Forecasts for the 10-Year Note by Doug Short of Advisor Perspectives (dshort.com)

Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. Now that the July forecast is available, I spent a few minutes this morning reviewing the 2011 and 2012 year-end forecasts for 10-year yields. The chart below illustrates the responses of the 55 economists solicited in the July survey.

2011-07-15 Inflation: A Five-Month X-Ray View by Doug Short of Advisor Perspectives (dshort.com)

Here is a table showing the annualized change over the past five months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2011-07-15 The ECRI Weekly Leading Index: Slow Growth Stabilizing? by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) remained steady at 1.7 ? the same as last week's 1.7, which was a downward revision from 1.9. Is the economy beginning to stabilize after eleven consecutive weeks of decline? The interim high of 7.8 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-08 Taxes, Entitlements and the Federal Debt Crisis by Doug Short of Doug Short

Let's take a closer look at Uncle Sam's balance sheet for last year and the official government projections for 2011 and the decade beyond. With the looming congressional showdown on the debt ceiling, it seems particularly appropriate to understand the broader context. For a quick review of 2010, here is a slide I created for a presentation at the Retirement Income Industry Association (RIIA) conference. 2010 entitlement costs exceeded the entire tax revenue for the year. However, according to the Congressional Budget Office, entitlements only accounted for about 55% of 2010 spending.

2011-07-08 The ECRI Weekly Leading Index: Eleven Consecutive Weeks of Slowing Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 1.8 from last week's 1.9, a downward revision from 2.0. This is the eleventh consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-05 Market Valuation Indicators Continue to Signal Caution by Doug Short of Doug Short

Here are the four market valuation indicators I regularly follow: The Crestmont Research P/E Ratio, The cyclical P/E ratio using the trailing 10-year earnings as the divisor, The Q Ratio, which is the total price of the market divided by its replacement cost and the relationship of the S&P Composite to a regression trendline. To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression. Based on the S&P 500 monthly data, the market is overvalued somewhere in the range of 34% to 48%.

2011-07-01 The ECRI Weekly Leading Index: Ten Consecutive Weeks of Slowing Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 2.0 from last week's 2.9. This is the tenth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-01 Crestmont Market Valuation Update by Doug Short of Doug Short

The recent article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Eds method for determining where the market is headed. His analysis is quite compelling. Accordingly I have added the Crestmont data to my monthly market valuation updates. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart Ive been sharing on a monthly basis for the past few years. The Crestmont P/E of 19.3 is 41% above its average of 13.7. This valuation level is almost identical what we saw in my latest S&P Composite regression to trend update.

2011-06-30 Quantitative Easing Versus the 1940 Fall of France by Doug Short of Doug Short

In real (inflation/deflation-adjusted) terms, when did the US market permanently regain the high reached in 1929? The first chart illustrates two answers to the question. One uses the real price and the other uses the real total return. The remaining charts compare market performance since 2000 with the equivalent elapsed time following the peak in 1929. As the final chart shows, the current real total return over the past eleven plus years has been worse than the performance over the equivalent timeframe during the Great Depression ? at least until the second round of quantitative easing.

2011-06-24 The ECRI Weekly Leading Index: The Ninth Week of Slowing Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 2.9 from last week's 3.6 (a downward revision from 3.7). This is the ninth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-06-17 The ECRI Weekly Leading Index: Eight Weeks of Declining Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 3.7 from last week's 4.1. This is the eighth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-06-15 Inflation: A Five-Month X-Ray View by Doug Short of Doug Short

Here is a table showing the annualized change over the past five months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2011-06-10 The ECRI Weekly Leading Index: A Seventh Week of Declining Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 4.1 from last week's 4.9. This is the seventh consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15.

2011-06-03 Will the "Real" GDP Please Stand Up? by Doug Short of Doug Short

How do you get from Nominal GDP to Real GDP? The Bureau of Economic Analysis (BEA) uses its own GDP Deflator for this purpose. In a recent commentary Rick Davis, the founder of Consumer Metrics Institute, made some interesting observations on the BEA's adjustment technique. His comments prompted me to investigate what Real GDP would look like if we used the PCE Deflator or the Consumer Price Index for the adjustment.

2011-06-03 The ECRI Weekly Leading Index: A Sixth Week of Declining Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 4.9 from last week's 5.0. This is the sixth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-06-01 Crestmont Market Valuation Update by Doug Short of Doug Short

The recent series of articles by guest contributor Ed Easterling triggered a great deal of interest in the Crestmont P/E ratio. Accordingly I have added the Crestmont data to my monthly market valuation posts. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart I've been updating monthly for the past few years. The Crestmont P/E of 20.2 is 47% above its average of 13.7. This valuation level is almost identical what we saw in my latest S&P Composite regression to trend update and somewhat higher than the 40% above mean for the Cyclical P/E10.

2011-05-27 The ECRI Weekly Leading Index: A Fifth Week of Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 5.0 from last week's 5.3. This is the fifth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-05-20 The ECRI Weekly Leading Index: A Fourth Week of Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 5.3 from last week's 6.4. This is the fourth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s.

2011-05-19 Profit Margin Squeeze Continues to Grip the Economy by Doug Short of Doug Short

The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index (data through April). The other is an indicator constructed from two data series in the Philadelphia Feds Business Outlook Survey through todays release. It is the spread between the Philly Feds prices paid (input costs) and received (prices charged) data. A major risk factor for margin squeeze is the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor.

2011-05-13 Inflation: A Four-Month X-Ray View by Doug Short of Doug Short

Here is a table showing the annualized change over the past four months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2011-05-13 Retail Sales: The "Real" Story by Doug Short of Doug Short

I delayed my commentary on the latest Retail Sales Report until today because my focus is on "real" (inflation-adjusted) and population-adjusted retail sales data. Now that we have the April CPI report, let's analyze the numbers. Retail sales rose 0.5% in April. The chart below shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted the approximate range of two major economic episodes. The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact.

2011-05-13 The ECRI Weekly Leading Index: A Third Week of Fractional Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 6.4 from last week's 6.6. This is the third week of fractional decline from the 11-month interim high of 7.7 for the week ending on April 15.

2011-05-06 The ECRI Weekly Leading Index: A Second Week of Fractional Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 6.7 from last week's 7.5. This is the second week of fractional decline from the 11-month interim high of 7.7 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-05-06 The Philly Fed ADS Business Conditions Index by Doug Short of Doug Short

The Philly Fed Aruoba-Diebold-Scotti Business Conditions Index is not very well known. But as this commentary demonstrates, it has had an amazing correlation with the better known Chicago Fed National Activity Index (CFNAI). Check out the parallel regressions in the two Fed indicators with a regression through GDP over the same time frame.

2011-05-02 Is the Stock Market Cheap? by Doug Short of Doug Short

Here's the latest update of my preferred market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2011, which is 1,363.61. The ratios in parentheses use the March monthly close of 1331.51. For the latest earnings, see the adjacent table from Standard & Poor's.

2011-04-29 The ECRI Weekly Leading Index: Down Fractionally by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined fractionally to 7.5 from last week's eleven-month high of 7.7. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-04-23 The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) increased to 7.7 from by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) increased to 7.7 from a slight downward revision (6.8 to 6.7) for the previous week. This is this highest level since May 14, 2010.

2011-04-20 Understanding Your Capital by Doug Short of Doug Short

For many years financial planners embraced the image of a three-legged stool to explain sources of retirement income: Social Security, Pensions, Personal Savings. Of course, as we all know, for most people the stool now has only two legs, making it a rather wobbly support. Over the past few decades, private pensions have essentially disappeared. They may still be available for government and some union employees, but pensions in the world of private business are generally available only to a shrinking number of older workers who were grandfathered into a now closed system.

2011-04-19 Inflation, the Education Bubble, and the Odds of a Disastrous Retirement by Doug Short of Doug Short

Mish Shedlock featured an article with a title that summarizes a huge financial problem: The Education Bubble; Student Loan Debt Passes Credit Card Debt, Expected to Hit $1 Trillion. Mish's article especially resonates with my own research on the astonishing inflation in college tuition and fees, an imminent disaster that's been in the making for decades. This chart shows the relative growth of education costs as compared to the consumer price index. College tuition and fees is a mere 1.5% of the overall CPI. But for households that pay these expenses with student loans, the burden is high.

2011-04-15 The ECRI Weekly Leading Index Continues to Hold Steady by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) has held relatively steady over the past eight weeks. The Growth Index is now at 6.7 based on data through April 8. The average of the past eight weeks is 6.6 with a range of 6.2 to 7.1 (unchanged from last week). The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom.

2011-04-13 Price and Earnings Growth Across Market History by Doug Short of Doug Short

Last week guest contributor Chris Turner's article on S&P 500 Trailing Earnings offered a fascinating perspective on the relationship between price and earnings in the S&P 500 since the late 1980s. His research prompted me to create a series of charts documenting the relative growth of price and earnings from various starting points in market history to the present. The chart below is an overlay of the real (inflation-adjusted) S&P Composite price and earnings since 1871. I've also plotted a 10-year moving average of earnings for those who share my interest in the cyclical P/E ratio.

2011-04-08 The ECRI Weekly Leading Index: Growth Is Holding Steady by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) has held relatively steady over the past seven weeks. The Growth Index is now at 6.7 based on data through April 1. The average of the past seven weeks is 6.6 with a range of 6.2 to 7.1.

2011-04-07 S&P 500 Trailing Earnings and What They Suggest Going Forward by Doug Short of Doug Short

When questioned the other day about the relationship between trailing earnings and the S&P 500, I was inspired to create the chart below to study the problem. It is based on Standard & Poor's Senior Index Analyst Howard Silverblatt's S&P earnings estimates spreadsheet. It shows the one-year trailing earnings for S&P 500 in blue with a linear regression to highlight the trend. The five-year average of trailing earnings in is shown in red. The Standard & Poor's one-year trailing estimates through 2012 are highlighted in yellow. The quarterly closes of the index itself are depicted in green.

2011-04-04 The ECRI Weekly Leading Index: Holding Steady by Doug Short of Doug Short

The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turn negative 17 times when no recession followed, but 14 of those declines were only slightly negative and most of them reversed after relatively brief periods. Three other three negatives were deeper declines.

2011-04-04 Three Market Valuation Indicators Continue to Signal Caution by Doug Short of Doug Short

Here is a combined perspective on the three market valuation indicators I routinely follow and most recently updated on Friday: The relationship of the S&P Composite to a regression trendline. The cyclical P/E ratio using the trailing 10 year earnings as the divisor. The Q Ratio, the total price of the market divided by its replacement cost. This post is essentially an overview and summary by way of chart overlays of the three. To facilitate comparisons, I've adjusted the Q Ratio and P/E10 to their arithmetic mean, which I represent as zero.

2011-04-04 Taxes, Entitlements, and Our Monstrous Budget Crisis by Doug Short of Doug Short

From time to time I've shared my historical perspective on Debt, Taxes and Politics. Let's now look at what's happening this week. Congress continues to squabble over trivial budget cuts for the 2011 fiscal year, for which the Congressional Budget Office projects a staggering deficit of $1.48 trillion. Meanwhile the word is out that tomorrow Republicans will unveil a plan to cut $4 trillion from the budget, primarily from Medicare and Medicaid, over the next decade. Against these political maneuverings, a partial government shutdown looms if congress can't pass a budget by Friday.

2011-04-01 Is the Stock Market Cheap? by Doug Short of Doug Short

A standard way to investigate market valuation is to study the historic Price-to-Earnings (P/E) ratio using reported earnings for the trailing twelve months (TTM). Proponents of this approach ignore forward estimates because they are often based on wishful thinking, erroneous assumptions, and analyst bias.

2011-04-01 Market Valuation: The Message from the Q Ratio by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.

2011-03-27 The ECRI Weekly Leading Index: Slight Moderation in Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues its rise. The Growth Index is now at 6.5 based on data through March 18. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

2011-03-25 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short

A major risk factor for margin squeeze is the increase in commodity prices over the past several months. The latest turmoil in the North Africa and the Middle East has now put oil prices in the spotlight. At present, in light of the unemployment rate and the ongoing demographic shift, the rise in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.

2011-03-18 What Inflation Means to You: Inside the Consumer Price Index by Doug Short of Doug Short

The Fed justified the current round of quantitative easing "to promote a stronger pace of economic recovery" The Fed is trying to increase inflation, operating at the macro level. But what does an increase in inflation mean at the micro level, specifically to your household? Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers.

2011-03-18 The ECRI Weekly Leading Index Continues Its Climb by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-11 The ECRI Weekly Leading Growth Index Up Slightly by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-10 The Q Ratio: Updated with Latest Federal Reserve Data by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the US, which is released quarterly. The first chart shows Q Ratio from 1900 to the present. I've extrapolated the ratio since the latest Fed data based on a combination of the price of VTI, the Vanguard Total Market ETF, and an extrapolation of the Z.1 data itself.

2011-03-09 Household Income Growth Versus Two Major Expenses by Doug Short of Doug Short

In a previous post I illustrated the growth of household incomes since 1967 based on Census Bureau data. Let's trim the timeline and compare the growth of two major household expenses ? medical costs and college tuition and fees.

2011-03-07 U.S. Household Incomes: A 42-Year Perspective by Doug Short of Doug Short

In preparation for a presentation at the Retirement Income Industry Association later this month, I've been researching household incomes in the United States. My data source is the Census Bureau, which has a quintile breakdown of data from 1967 through 2009. The pie chart here shows that the top fifth of households in 2009 took home 50% of the nation's income. The middle fifth received 15% and bottom fifth 3%. The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households

2011-03-04 The ECRI Weekly Leading Index Moves Higher Into Positive Territory by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-01 The Q Ratio Moves Yet Further Into Nosebleed Territory by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.

2011-02-25 The ECRI Weekly Leading Index Moves Higher Into Positive Territory by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues its rise ? now at 6.1. The current number is based on data through February 18.

2011-02-22 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short

At present, in light of the unemployment rate and the ongoing demographic shift, the surge in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.

2011-02-18 The ECRI Weekly Leading Index: Moving Higher Into Positive Territory by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 4.9. The current number is based on data through February 11.

2011-02-17 Inflation: A Look Inside the Latest CPI Releases by Doug Short of Doug Short

Core CPI is still substantially below the Fed's inflation target of 2%, but both headline and Core CPI have begun to rise in recent months. If we extrapolate the latest rise over the next year, Core CPI would hit the Fed's target rate by the end of summer. Of course, monthly CPI numbers are too volatile to place any confidence is extrapolations of this sort.

2011-02-11 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 4.5. The current number is based on data through February 4. The adjusted sequence for the last five weeks has been a steady range: 3.6, 4.1, 3.5, 3.6, 4.5.

2011-02-04 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 3.7. The current number is based on data through January 28. The adjusted sequence for the last four weeks has been a steady range: 3.6, 4.1, 3.5, 3.7.

2011-02-04 Death by Treasuries by Doug Short of Doug Short

Are Treasuries rolling over? Check out the astonishing rise in yields over the past week. In some respects the Fed's quantitative easing has been quite effective ? for example in punishing the risk-adverse savers who've invested in Treasuries.

2011-02-02 Three Market Valuation Indicators Continue to Signal Caution by Doug Short of Doug Short

As I've frequently pointed out, these indicators (relationship of the S&P Composite to a regression trendline, The cyclical P/E ratio, and the Q ration) aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns. At present they suggest a cautious outlook and guarded expectations.

2011-02-01 Is the Stock Market Cheap? by Doug Short of Doug Short

Here's the latest update of my preferred market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for January 2011, which is 1282.62. The ratios in parentheses use the January monthly close of 1286.12 (which this month gives a similar ratio to one decimal place as the monthly average).

2011-02-01 The Q Ratio Moves Yet Further Into Nosebleed Territory by Doug Short of Doug Short

The average (arithmetic mean) Q ratio is about 0.71. In the chart below I've adjusted the Q Ratio to an arithmetic mean of 1 (i.e., divided the ratio data points by the average). This gives a more intuitive sense to the numbers. For example, the all-time Q Ratio high at the peak of the Tech Bubble was 1.82 ? which suggests that the market price was 158% above the historic average of replacement cost. The all-time lows in 1921, 1932 and 1982 were around 0.30, which is about 57% below replacement cost. That's quite a range.

2011-01-28 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement, although the latest 3.5 is slightly below the previous week's 4.1. The current number is based on data through January 21.

2011-01-25 Economic Forecast Failures: The 10-Year Yield by Doug Short of Doug Short

Earlier today I analyzed the Wall Street Journal survey of economist forecasts for Q4 GDP. How accurate are economists' forecasts in general? It varies, of course, but sometimes they miss by a long shot. Consider, for example, the forecasts for 10-year Treasury yields in the October 2010 WSJ survey.

2011-01-21 The ECRI Weekly Leading Index Continues to Improve by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement. The latest weekly number is based on data through January 14.

2011-01-19 Market Valuation Since the 1990s by Doug Short of Doug Short

Many analysts dismiss the apparent market overvaluation implied by charts such as these. Eventually we will find out if the 1990s shift in valuations was a permanent change or a reversion to historic valuations lies ahead.

2011-01-07 The ECRI Weekly Leading Index Continues to Improve by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement. The latest weekly number is based on data through December 31.

2011-01-04 The Q Ratio Moves Further Into Nosebleed Territory by Doug Short of Doug Short

The mean-adjusted charts above indicate that the market remains significantly overvalued by historical standards ? by about 62% in the arithmetic-adjusted version and 75% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2011-01-04 Three Market Valuation Indicators All Signal Caution by Doug Short of Doug Short

Let's check out the latest overlays of the three valuation indicators I routinely follow: The relationship of the S&P Composite to a regression trendline; The cyclical P/E ratio using the trailing 10-year earnings as the divisor; and The Q Ratio.

2011-01-03 Is the Stock Market Cheap? by Doug Short of Doug Short

Here's the latest update of my preferred market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for December 2010, which is 1241.53. The ratios in parentheses use the December monthly close of 1257.64 (which this month gives the same ratio to one decimal place as the monthly average).

2010-12-28 Consumer Confidence Index: Down Slightly But Well Below the Historical Trend by Doug Short of Doug Short

Let's take a step back and put the Director of the Consumer Research Center's rather rosy interpretation of consumer confidence in a larger perspective. The chart below is intended to help evaluate the historical context for this index as a leading indicator of the economy. Toward this end I have included recessions and GDP. The linear regression through the index data shows the long-term trend of this very volatile indicator. Today's 52.5 reading is significantly below the 85.3 of the current regression level (38.5% below, to be precise).

2010-12-28 Gasoline Prices: The Holiday Present We Didn't Want by Doug Short of Doug Short

On our brief Christmas afternoon drive home from a family gathering in Clayton NC, we spotted a Wal-Mart service station sign for $3.01.9 regular gas. The post-Thanksgiving holiday season is not one I normally associate with high gas prices. As the chart below shows, the general pattern is for gasoline prices to peak in the summer and decline after Labor Day. This year has run counter to the pattern by a significant degree.

2010-12-23 Politics and GDP: Which Party Is Best for the Economy? by Doug Short of Doug Short

Here is a snapshot of the average GDP by political party in control of the White House and Congress. Of course, GDP lags any policy changes that impact its components, so the table must be viewed in the historical context of the chart below. Draw your own conclusions.

2010-12-23 The ECRI Weekly Leading Index Turned Positive ? The First Time Since May by Doug Short of Doug Short

The question, had been whether the latest WLI decline that began the the Q4 of 2009 was a leading indicator of a recession or a false negative. The published index has never dropped to the current level without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director is now on record stating that we've avoided a double dip. The revised GDP for Q3, coming in at 2.6, confirms the ECRI stance.

2010-12-17 The ECRI Weekly Leading Index: A Hair's Breadth from Turning Positive by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 28th consecutive week, coming in at -0.1. However, the rate of contraction has been lessening for the past 20 weeks. The latest weekly number, based on data through December 10, is a tiny fraction below the positive range. How tiny? The -0.1 is rounded from -0.052.

2010-12-16 Inflation: A Look Inside the Latest CPI Release by Doug Short of Doug Short

Headline CPI has remained essentially flat for the past six months. Core CPI has generally trended downward over the past year, but the latest annualized rate saw a fractional rise from 0.61% to 0.77%, which is still substantially below the Fed's core inflation target of 2%. Was there a driver for this change? A quick glance at the chart suggests that Housing made the difference. Housing makes up 42% of the Headline CPI, and it moved from a negative annualized rate of -0.24% to 0.01%.

2010-12-14 The Fed's QE2 Intervention: A Disaster in the Works? by Doug Short of Doug Short

QE2 is a gambit. At face value, we must assume that speeding the recovery and increasing core inflation to the target rate are the true motives. The Fed says as much, and the concern of the sole dissenter, Thomas Hoenig about long-term inflation risks, reinforces this view. On the other hand, blog commentators have speculated on a range of ulterior prime motives ? ranging from bank bailouts to funding Uncle Sam with interest-free loans, etc.

2010-12-11 The ECRI Weekly Leading Index: Still Negative But Continuing to Improve by Doug Short of Doug Short

On Friday, December 10 the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 27th consecutive week, coming in at -1.5. However, the rate of contraction has been lessening for the past 19 weeks. The latest weekly number is based on data through December 3.

2010-12-10 The Q Ratio Is Moving Into Nosebleed Territory by Doug Short of Doug Short

The mean-adjusted charts above indicate that the market remains significantly overvalued by historical standards ? by about 59% in the arithmetic-adjusted version and 72% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-12-07 Inflation and Market Valuation by Doug Short of Doug Short

Here is a rather different look at the pattern of cyclical P/E10 ratios that form the basis of my monthly valuation update Is the Stock Market Cheap? Instead of the usual chronological sequence of ratios, the scatter diagram I made plots the monthly ratios according to the annualized inflation rate on the horizontal axis. I've set vertical gridlines at 4% intervals and marked the average (arithmetic mean) P/E10 for each 4% vertical band.

2010-12-06 What Inflation Means to You: Inside the Consumer Price Index by Doug Short of Doug Short

The universal response is to moan over price increases and take delight when prices are cheaper. But in reality, households vary dramatically in the impact that inflation has upon them. The one thing we can be certain about is this: An increase in inflation will have a painful effect on lower income households, those on fixed incomes, and any household whose discretionary spending is more dream than reality.

2010-12-03 The ECRI Weekly Leading Index: Still Negative But Improving by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 26th consecutive week, coming in at -2.4. However, the rate of contraction has been lessening for the past 18 weeks.

2010-12-01 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

Our mean-adjusted charts indicate that the market remains significantly overvalued by historical standards ? by about 49% in the arithmetic-adjusted version and 62% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-12-01 Is the Stock Market Cheap? by Doug Short of Doug Short

In times of critical importance, the conventional P/E ratio often lags the index to the point of being useless as a value indicator. "Why the lag?" you may wonder. "How can the P/E be at a record high after the price has fallen so far?" The explanation is simple. Earnings fell faster than price.

2010-11-19 The ECRI Weekly Leading Index: Negative Growth But Improving by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 24th consecutive week, coming in at -4.5. The rate of contraction has been lessening for the past 16 weeks. The latest weekly number is based on data through November 12. On October 29, economist Lackshman Achuthan, the managing director of the Economic Cycle Research Institute, gave assurances on CNBC that ''we're not going to go into a new recession anytime soon.''

2010-11-17 QE2 and Mortgage Rates: Measuring the Fed's Strategy by Doug Short of Doug Short

How will we know if the new round of quantitative easing is a success? An early sign will be that a variety of rates will fall ? at least until the economy reaches liftoff, which probably means sustained real GDP north of 3.3% (the long-term GDP average). I'm already tracking Treasury yields on a regular basis (Treasury Yield Snapshot). Spreads are widening, which should be pleasing to the Fed, but the rising yields at the short end are probably not the Fed's intention.

2010-11-12 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 23rd consecutive week, coming in at -5.7, an improvement from last week's -6.5. The rate of contraction has been lessening over the two months. The latest weekly number is based on data through November 5.

2010-11-05 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index of the Economic Cycle Research Institute registered negative growth for the 22nd consecutive week, coming in at -6.5, unchanged from last week. The rate of contraction has been lessening over the past eight weeks. While the published index has never dropped to the current level without the onset of a recession, the ECRI managing director is now on record stating that we've avoided a double dip. Doug Short presents charts of the index, gross domestic product and the federal funds rate since 1965.

2010-11-02 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market, calculated as the total price of the market divided by the replacement cost of all its companies. Doug Short presents charts of the Q Ratio since 1900. The mean-adjusted charts indicate that the market remains significantly overvalued by historical standards - by about 48 percent in the arithmetic-adjusted version and 60 percent in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-11-01 Is the Stock Market Cheap? by Doug Short of Doug Short

After dropping to 13.4 in March 2009, the S&P 500 price-to-earnings ratio using trailing earnings averaged over 10 years has rebounded to 21.4. The historic average is 16.35, suggesting that the stock market is expensive. Secular declines have ranged in length from over 19 years to as few as three. The current decline is now in its 10th year. Doug Short provides charts of the P/E10 ratio since 1871.

2010-10-29 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 21st consecutive week, coming in at -6.5, a fractional improvement over last week's -6.9. The rate of contraction has been lessening over the past eight weeks. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1965.

2010-10-22 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's Weekly Leading Index registered negative growth for the 20th consecutive week, coming in at -6.8, a fractional improvement over last week's -7.0. While the rate of contraction has been lessening over the past seven weeks, the magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, gross domestic product and the federal funds rate since 1967.

2010-10-15 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 19th consecutive week, coming in at -6.9, a fractional improvement over last week's -7.0. While the rate of contraction has been lessening over the past six weeks, the magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data going back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate going back to 1967.

2010-10-12 Small Business Sentiment, Cautious Consumers and the Stealth Recession by Doug Short of Doug Short

The National Federation of Independent Businesses small business optimism index rose fractionally this month, from 88.8 to 89.0. Doug Short presents a chart comparing the small business optimism index with the Consumer Metrics Institute's weighted composite index going back to 2005. The chart suggests that the government's stimulus measures had a temporary impact on consumer discretionary spending, but little or no impact on small business sentiment. The recession may officially be over, but the small business optimism index is still in recession territory.

2010-10-08 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 18th consecutive week, coming in at -7.0, an improvement over last week's -7.8. While the rate of contraction has been lessening over the past five weeks, the magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate going back to 1967.

2010-10-01 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 17th consecutive week, coming in at -7.8, an improvement over last week's -8.7. The latest weekly number is based on data through September 24. The magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-10-01 Is the Stock Market Cheap? by Doug Short of Doug Short

Doug Short presents charts of the S&P 500 P/E and P/E10 ratios since 1870. The Financial Crisis of 2008 triggered an accelerated decline toward value territory, with the P/E10 ratio dropping to the upper fourth quintile of historic values in March 2009. The price rebound since the 2009 low pushed the ratio back into the first quintile, and it is now positioned just below the lower boundary around 20. By this historic measure, the market is expensive.

2010-10-01 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market, calculated by dividing the total price of the market by the replacement cost of all its companies. The current Q ratio suggests that the market remains significantly overvalued by historical standards - by about 41 percent in the arithmetic-adjusted version and 52 percent in the geometric-adjusted version. Periods of over- and under-valuation, however, can last for many years at a time. Doug Short presents charts of the Q ratio since 1900.

2010-09-24 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Economic Cycle Research Institute's weekly leading index registered negative growth for the 16th consecutive week, coming in at -8.7, an improvement over last week's -9.3, which is a downward revision from -9.2. The magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-09-21 Three Market Valuation Indicators by Doug Short of Doug Short

Doug Short presents historical overlay charts of three different valuation indicators: the real S&P composite regression to trend, the real P/E 10 adjusted to its arithmetic mean, and the Q ratio adjusted to its arithmetic mean. Based on the latest S&P 500 monthly data, the index is overvalued by 41 percent, 34 percent or 28 percent, depending on which of the three metrics you choose.

2010-09-20 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The charts indicate that the market remains significantly overvalued by historical standards - by about 41 percent in the arithmetic-adjusted version and 52 percent in the geometric-adjusted version. Periods of over- and under-valuation, however, can last for many years at a time.

2010-09-17 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 15th consecutive week, coming in at -9.2, a slight improvement over last week's -10.1. The index had been hovering around -10 for the previous five weeks. The magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-09-10 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the weekly leading index of the Economic Cycle Research Institute registered negative growth for the 14th consecutive week, coming in at -10.1, a fractional improvement over last week's -10.2, which was a downward revision from -10.1. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-09-03 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the weekly leading index of the Economic Cycle Research Institute registered negative growth for the 13th consecutive week, coming in at -10.1, a fractional decline from last week's -9.9. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the weekly leading index, GDP and the federal funds rate since 1967.

2010-09-01 Is the Stock Market Cheap? by Doug Short of Doug Short

Doug Short provides charts of the S&P 500 since 1870, adjusted for both inflation and 10-year trailing earnings. The financial crisis of 2008 triggered an accelerated decline in the PE/10 toward value territory, with the ratio dropping to the upper fourth quintile in March 2009. The price rebound since the 2009 low pushed the ratio back into the first quintile, and it is now positioned just below the lower boundary around 20. By this historic measure, the market is expensive.

2010-09-01 The Q Ratio and Market Valuation by Doug Short of Doug Short

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The charts indicate that the market remains significantly overvalued by historical standards - by about 33 percent in the arithmetic-adjusted version and 44 percent in the geometric-adjusted version. Periods of over- and under-valuation, of course, can last for many years at a time.

2010-08-27 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the weekly leading index of the Economic Cycle Research Institute registered negative growth for the 12th consecutive week, coming in at -9.9, a fractional improvement from last week's -10.1. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short provides charts of the weekly leading index, gross domestic product and the federal funds rate going back to 1967.

2010-08-23 We're Underperforming the Great Depression by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute and the federal funds rate going back to 1967. The index registered negative growth for the 11th consecutive week on Friday, coming in at -10.0, a fractional improvement from last week's -10.2. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data. The index has never dropped to the current level without the onset of a recession.

2010-08-20 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute and the federal funds rate going back to 1967. The index registered negative growth for the eleventh consecutive week on Friday, coming in at -10.0, a fractional improvement from last week's -10.2. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data. The index has never dropped to the current level without the onset of a recession.

2010-08-16 Treasury Yields in Perspective by Doug Short of Doug Short

Doug Short presents charts of inflation, 10-year Treasury bond yields and the federal funds rate since 1962. Last week the Fed said it will reinvest payments on mortgage assets it holds into Treasury bonds. Not surprisingly, yields fell, with the 10-Year Treasury index, for example, closing the week down 4.6 percent from its level the hour before the Fed announcement. As the charts illustrate, Treasury bond yields have occasionally led the market. How the Treasury bond market plays out over the next few months will be of critical importance to equity markets and the economy as a whole.

2010-08-13 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute, gross domestic product and the federal funds rate. The index registered negative growth for the ninth consecutive week on Friday, coming in at -9.8, a fractional improvement from last week's -10.3. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession.

2010-08-10 What if There Hadn't Been a Tech Bubble? by Doug Short of Doug Short

Doug Short presents charts of the correlation of the cyclical P/E10 ratio and inflation from 1881 to the present, including one chart that removes the effects of the tech bubble. The charts suggest that the overvaluation of today's market traces its roots much further back - perhaps to the early 1990s.

2010-08-06 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts comparing the Economic Cycle Research Institute's weekly leading index, gross domestic product and the federal funds rate. On Friday the index registered negative growth for the eighth consecutive week, coming in at -10.3, a fractional improvement from last week's -10.7. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. The index has never dropped to the current level without the onset of a recession.

2010-08-05 Valuing the S&P 500: As-Reported Earnings Estimates by Doug Short of Doug Short

Doug Short provides a monthly market valuation update based on the cyclical P/E ratio using the 10-year average of as-reported earnings, and includes a table showing the earnings for most recent quarters and the estimates for the rest of the year. Based on Wednesday's close of 1120.46, the P/E ratio based on the trailing 12-month earnings for Q2 is the difference between a P/E of 16.8 (latest earnings) versus 17.6 (July 21 earnings).

2010-08-02 Is the Stock Market Cheap? by Doug Short of Doug Short

Doug Short provides charts of the S&P 500 P/E10 ratio since 1870. The historical average of the S&P 500 P/E10 ratio is 16.35. By this historic measure, at 21.7, the market is expensive.

2010-08-02 The Q Ratio and Market Valuation by Doug Short of Doug Short

Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The Q Ratio is the total price of the market divided by the replacement cost of all its companies, and is a popular method of estimating the fair value of the stock market. The charts indicate that the market remains significantly overvalued by historical standards - by about 39 percent in the arithmetic-adjusted version and 51 percent in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-07-30 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts of gross domestic product, the Economic Cycle Research Instititute's weekly leading index and the federal funds rate since 1965. On Friday the WLI registered negative growth for the seventh consecutive week, coming in at -10.7. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s.

2010-07-29 Debt, Taxes and Politics by Doug Short of Doug Short

Doug Short provides charts of gross federal debt as a percentage of GDP, with estimates to 2015. As the charts illustrate, there is logic to the ratio increases within the historical context of two World Wars and the Great Depression. Likewise, the steadily decreasing ratio over the next 35 years enabled the tax cuts in 1964. With the 2001 and 2003 tax cuts expiring this year, will the gross federal debt be a factor in determining the direction of future tax rates? Who knows? This is, after all, a congressional election year.

2010-07-23 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides charts comparing the Economic Cycle Research Institute's Weekly Leading Index to GDP and the federal funds rate. On Friday the index registered negative growth for the seventh consecutive week, coming in at -10.5. This number is based on data through July 16th. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to the current level without the onset of a recession.

2010-07-16 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides a chart showing the correlation between the Economic Cycle Research Institute's weekly leading index growth index, gross domestic product and recessions. The index has just registered negative growth for the sixth consecutive week, coming in at -9.8. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967.

2010-07-15 A Short History of Stock Dividends by Doug Short of Doug Short

Doug Short provides charts of the inflation-adjusted price of the S&P composite and dividend yields, as well as real price growth and dividend growth since 1971. As the charts illustrate, risk has returned with a vengeance. Aging Boomers may finally recognize the value of dividend income, especially as their paycheck days draw nearer to a close. Perhaps dividends will someday reemerge as a mainstay of investing. The one certainty is this: It won't happen overnight.

2010-07-13 Total Return or Total Disappointment? by Doug Short of Doug Short

Doug Short provides charts of the S&P Composite since 1929 adjusted for real price and real total return. As the charts show, for the past 21 months, the secular bear market that began in 2000 has substantially underperformed the equivalent timeframe during the Great Depression.

2010-07-12 Annualized Total Return Roller Coaster by Doug Short of Doug Short

Doug Short provides charts of the annualized rate of return of the S&P 500 over 10-, 20- and 30-year intervals. Imagine that 10 years ago you invested $10,000 in the S&P 500. How much would it be worth today, adjusted for inflation with dividends reinvested? Brace yourself: Your investment would have shrunk to $6,956, an annualized return of -3.57 percent. That's a loss of 30.4 percent. As many households have discovered, investing in equities carries risk. Households approaching retirement should understand this risk and make rational decisions about fixed income alternatives.

2010-07-09 The ECRI Weekly Leading Index by Doug Short of Doug Short

The Economic Cycle Research Institute's weekly leading index growth metric has had a respectable (but by no means perfect) record for forecasting recessions. Doug Short provides a chart showing the correlation between the WLI, gross domestic product and recessions. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to the current level without the onset of a recession.

2010-07-02 Is the Stock Market Cheap? by Doug Short of Doug Short

This commentary looks at various metrics of market valuation. The TTM P/E ratio is shown to ?often lag the index to the point of being useless.? The more reliable P/E 10 (the Shiller P/E) is 20.6 and in the first quintile of historical valuations, indicating the market is expensive. The Shadow Stats inflation-adjusted P/E 10 shows the market is fairly priced, but this is an unreliable indicator.

2010-07-02 The Q Ratio and Market Valuation by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. The mean-adjusted data indicate that the market remains significantly overvalued by historical standards - by about 37 percent in the arithmetic-adjusted version and 48 percent in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-07-02 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the fourth consecutive week, coming in at -7.7. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967. The ECRI Weekly Leading Indicator has never dropped to this level without the onset of a recession.

2010-07-01 Regression to Trend by Doug Short of Doug Short

Looking at various metrics describing today's economy, Doug Short poses the question, 'Are you bearish or bullish about the market?' Short looks at the bearish view, the bullish alternative, and various methods for calculating consumer prices. He ultimately concludes that the ideal method is 'somewhere between the revised BLS method and the historic method preserved by John Williams of Shadow Government Statistics' and comes down on the bearish side.

2010-06-30 Financial Life Cycle Planning by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? Let's take a look.

2010-06-25 Market Volatility Update by Doug Short of Doug Short

The Chicago Board Options Exchange Volatility Index (VIX), which shows the market's expectation of 30-day volatility, has been rising to the 'above 30' warning level. It briefly crossed above 30 intraday but closed a shade lower at 29.74. Doug Short provides a chart series showing the VIX and S&P 500 over two timeframes.

2010-06-25 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides charts of gross domestic product and the Economic Cycle Research Institute's weekly leading index since 1965. The WLI just registered negative growth for the third consecutive week, coming in at -6.9. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to -6.9 without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped to -6.8.

2010-06-21 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides charts comparing gross domestic product, the Economic Research Institute's weekly leading index and the federal funds rate since 1965, with recessionary periods marked off. A significant decline in the weekly leading index has been a leading indicator for six of the seven recessions since 1965. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. Unfortunately, the federal funds rate is already at zero. Can the Fed still take steps to avoid a double-dip?

2010-06-18 Sixteen Dow Recoveries: Update by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? The Dow closed yesterday (June 17th) 59.4% above the March 2009 low after reaching an interim closing high up 71.1% on April 26th. Compared to the other 15 rallies at the equivalent point, the current rally is in 7th place. The volatile recovery after the Crash of 1929 leads the pack by a wide margin. Second and third place date from yet earlier periods, as does the fifth place.

2010-06-17 Consumer Metrics Institute's Growth Index by Doug Short of Doug Short

Doug Short provides charts comparing the Consumer Metrics Institute's growth index with gross domestic product and the S&P 500 since 2005. Thus far the growth index has been an effective leading indicator of GDP. As such, a double-dip recession appears to be a distinct possibility amidst the end of the various government stimulus efforts, the potential contagion of the financial stress in Europe, the ongoing environmental catastrophe in the Gulf of Mexico and another round of consumer belt-tightening.

2010-06-16 Debt-to-GDP, Federal Tax Brackets and Politics by Doug Short of Doug Short

Doug Short provides charts of gross U.S. federal debt as a percentage of GDP since 1900, with key historical events and presidential administrations highlighted. As the charts illustrate, the recent financial crisis and steep market decline triggered a dramatic acceleration in the ratio. With the 2001 and 2003 tax cuts expiring this year, will the gross federal debt be a factor in determining the future direction of the country's tax rates? Who knows? This is, after all, a congressional election year.

2010-06-14 Flag Day and Leading Indicators by Doug Short of Doug Short

Doug Short provides overlay charts of the S&P 500 and the Economic Cycle Research Institute's Weekly Leading Index. The Weekly Leading Index recently hit a 44-week low and descended into negative territory. This would seem to indicate dramatic slowing of the U.S. economy in the months ahead. Short also provides a chart of the 91-day 'Trailing Quarter' Daily Growth Index with an overlay of GDP. If this indicator has credibility, then a prospect of a double-dip recession, something that's happened only once since the Great Depression, cannot be easily dismissed.

2010-06-11 The Q Ratio and Market Valuation by Doug Short of Doug Short

Doug Short provides charts comparing the Q ratio of the S&P 500 and market valuations from 1900 through Q1 2010, updated to include new flow of funds data from the Federal Reserve. The mean-adjusted charts indicate that the market remains significantly overvalued by historical standards - by about 37 percent in the arithmetic-adjusted version and 48 percent in the geometric-adjusted version. Periods of over- and under-valuation, of course, can last for many years at a time.

2010-06-09 The Market and Recessions by Doug Short of Doug Short

A new article in The Atlantic asks the question "Are We Slipping Back into a Recession?" The article cites five reasons why the recovery is in trouble and five reasons why it's on track (with one reason used on both sides of the debate). For a long-term historical context on recessions in the U.S., Doug Short republishes an article originally posted on July 9, 2009, shortly after the end of the latest recession (according to the unofficial consensus). The article includes inflation-adjusted and nominal charts of U.S. stock market prices since 1871, with recessionary periods highlighted.

2010-06-08 The Shape of Market Bubbles by Doug Short of Doug Short

Doug Short provides an overlay chart of four major bubbles across market history to see the variety of shapes a bubble can take. The overlay includes the 2007 Shanghai Composite bubble, the 2000 Nasdaq technology bubble, the 1929 Dow bubble and the 1989 Nikkei bubble. As the chart illustrates, bubbles usually go unrecognized by the majority of market participants until their late stages. The left side of the bubble is usually more gradual than the collapse, although the incredible rise of the Shanghai market is a notable exception.

2010-06-07 Three Market Valuation Indicators by Doug Short of Doug Short

Doug Short provides two charts of the Q Ratio and P/E10 ratio of the S&P 500 Composite Index in order to facilitate comparisons: one adjusted to the arithmetic mean of the two ratios, and the other to their geometric mean. Based on the monthly averages of daily closes in the S&P 500 for the month of May (1125.06), the index is overvalued by 26 percent, 33 percent or 39 percent, depending on which of the three metrics you choose.

2010-06-04 Variations on the Q Ratio by Doug Short of Doug Short

The Q ratio, developed by Nobel Laureate James Tobin, is a popular method for estimating the fair value of the stock market. It consists of the total price of the market divided by the replacement cost of all its companies. Doug Short provides charts of the Q ratio since 1900. The mean-adjusted charts indicate that the market remains significantly overvalued by historical standards - by about 39 percent in the arithmetic-adjusted version and 50 percent in the geometric-adjusted version. Periods of over- and under-valuation, however, can last for many years at a time.

2010-06-01 Secular Bull and Bear Markets by Doug Short of Doug Short

Doug Short examines an inflation-adjusted chart of the S&P Composite. An obvious feature of the chart is a pattern of long-term alternations between upward and downward trends, or secular bull and bear markets. Secular bull years total 80 versus 52 for the bears, a 60:40 ratio. The latest monthly average of daily closes is 33 percent above trend after having fallen only 6 percent below trend in March of last year. Previous bottoms were considerably further below trend. Will the March 2009 bottom be different?

2010-05-27 World Markets: Revised Update by Doug Short of Doug Short

Doug Short provides provides a an overlay chart of world markets since March 9, 2009. The chart, he writes, illustrates the synchronous behavior of international stock indices. The question going forward is whether the correction to date is a long-term low or an interim low with more downside to come. Short also provides a chart of the Shanghai Composite Index since 2000, which includes a classic market bubble.

2010-05-24 Market Musings: Manic-Depressive Mondays by Doug Short of Doug Short

On Friday CNBC ran a piece observing that Mondays have strongly outperformed the other days of the week in 2010. Doug Short provides two pairs of tables that allow us to compare the behavior of weekdays during two nasty bear markets and the rallies that followed. Monday has indeed behaved strangely over the past decade. The key factor is whether we're in a bull or a bear market. Now that CNBC has publicized the 'buy on Friday, sell on Monday concept,' however, Short wouldn't put much 'stock' in this strategy going forward.

2010-05-21 Sixteen Dow Recoveries: Update by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? Doug Short overlays the first 500 days of sixteen recoveries in the Dow Jones Industrial Average since its creation in 1896 in a new chart, as well as a chart based on Dow daily closes with the sixteen rallies highlighted. The question is whether the rally of the past 14 months is the early stages of a secular bull market, or whether the future will resemble something closer to the early 1900s, the late 1960s-1970s, or something in between.

2010-05-18 Learning from the S&P 500 Monthly Moving Averages by Doug Short of Doug Short

Doug Short analyzes monthly closes of the S&P 500 since 1950 to back-test several monthly moving average strategies versus buy and hold. The results suggest that in secular bull and bear markets, passive management is a successful strategy on the way up, but is a losing proposition on the way down. The reverse is true for active management with simple moving averages. It's unlikely to outperform buy and hold on the way up, but outperformance on the way down is a virtual guarantee. Unfortunately it's impossible to pin-point those secular tops and bottoms and change strategy on a dime.

2010-05-13 Japan's Post-Bubble Rallies by Doug Short of Doug Short

Doug Short provides an updated chart that gives a close-up view of cyclical rallies and their durations during Japan's secular bear market, now in its 20th year, as well as a table that documents advances, declines and elapsed time for each cycle.

2010-05-05 Market Valuation and the Consumer Price Index by Doug Short of Doug Short

In response to a reader question, Doug Short posts a chart displaying real values of the S&P 500 using the 'Alternative CPI' from economist John Williams. The alternative inflation measure, which employs the original methodology used by the Bureau of Labor Statistics before 1982, produces market valuations that are much flatter over time than the official BLS inflation statistics, and lend yet another point of conflict in the perennial debate between the bulls and the bears and the inflationists and deflationists.

2010-05-03 Regression to Trend by Doug Short of Doug Short

About the only certainty in the stock market is that, over the long haul, overperformance turns into underperformance and vice versa. Is there a pattern to this movement? Doug Short applies some simple regression analysis to this question. A regression trend line drawn through the S&P Composite stretching back to 1871 clarifies the secular pattern of variance from the trend ? those multi-year periods when the market trades above and below trend. That regression slope represents an annualized growth rate of 1.7 percent.

2010-04-22 Sixteen Dow Recoveries - Another Look by Doug Short of Doug Short

This post features a return of Doug Short's analysis of how the Dow?s recovery compares to prior major recoveries, altered to adjust for reader feedback. Short has included an inflation-adjusted overlay chart, removed the 1932 rally (an outlier that scrunches up other rallies), and extended the timeline so we can see what followed. The recovery since March 2009 is the second in the first decade of the 21st century, and it started from a lower low. As the charts show, history has witnessed several other examples of multiple recoveries in relatively close succession with lower starting points.

2010-04-19 Sixteen Dow Recoveries by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? Doug Short created an overlay of the first 500 days of 16 recoveries in the Dow Jones Industrial Average since its creation in 1896 to help answer that very question. Compared to the other 15 rallies at the equivalent point, the current rally is in fourth place. The volatile recovery after the Crash of 1929 leads the pack by a wide margin. Where do we go from here? Some of the historic 500-day rallies went on to substantially higher gains. On the other hand, several of the earliest rallies soon faltered.


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