Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: ECRI

Are Equities About To Tip Over?

Please note: This is an article I wrote last Friday for the McAlvany Intelligence Advisor. I’ve republished it here in its entirety:

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Friday’s Jobs Report In Line with Reduced Expectations

Friday’s report from the Bureau of Labor Statistics (BLS) only surprised those with unrealistic expectations about the health of the economy, showing that job growth of just 88,000 new jobs in March not only was far less than establishment economists had predicted, at 200,000, but

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Those Wal-Mart Emails and the US Economy

Much was made of some internal emails from Cameron Eiger, a Wal-Mart VP, expressing his frustration over slow sales at the start of the year. In a February 1st email to company executives, he wrote:

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The Economy is Growing (except for these indicators)

I’ve been expecting this. I have been unalterably bearish on the so-called “recovery” ever since the ECRI restated its position in September last year that another recession started last summer. That call has largely been ignored by the media. But today Bloomberg ran through the

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More confirmation about the new recession

In a strange way this article from Marketwatch is confirming, but also unsettling. I’ve been writing about the recession call by ECRI for months now and now along comes John Hussman saying the same thing to his clients:

Money manager John Hussman, chairman of Hussman Funds, is among those who think it is. “We continue to believe that the U.S. economy joined a global economic downturn during the third quarter of the year,” he wrote to investors recently.

He notes that

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More Evidence the Recession Has Started (Again)

Despite his firm defense of his call that the US economy entered into another recession in July this year, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) continued to be scorned by his critics. Joe Calhoun, writing in his letter to Alhambra Investment Partners’ clients on Sunday, December 9th, said that although Lakshman Achuthan of ECRI “has a flawless record of predicting US recessions…there is one problem with his call: he’s been making it for over a year now…the jury is still out.”

On Tuesday the jury came in: the National Federation of Independent Business issued its Optimism Index and noted that it decreased an astonishing 5.6 points to 87.5, the lowest reading since March of 2010 and the biggest monthly drop going back to 1986. In addition, eight of the measure’s ten components also dropped, confirming that the slowdown is being felt across nearly every facet of the 733 businesses surveyed for the November index.

The drop exceeded the 5.4-point decrease that was reported in October 2008 following the collapse of Lehman Brothers and the 5.2-point decline in September, 2001, following the terrorist attacks on the World Trade Center.

In its press release, the NFIB noted that data from Hurricane Sandy had been removed to avoid skewing the numbers, but the remaining data “makes clear that the election was the primary cause of the decline in [small business] owner optimism.” Said NFIB’s chief economist Bill Dunkelberg, author of the report:

Something bad happened in November—and based on the NFIB survey data, it wasn’t merely Hurricane Sandy. The storm had a  significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence.

Nearly half of owners are now certain that things will be worse next year than they are now. Washington does not have the needs of small business in mind. Between the looming “fiscal cliff,” the promise of higher health-care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism…

When queried about general business conditions – “Do you think that six months from now general business conditions will be better than they are now, about the same, or worse?” – those expecting better business conditions fell by 37 points.

The index reported that small business owners were reducing their plans to make capital investment and build inventories because they expected lower retail sales. Consequently the owners surveyed held out little prospect for increased earnings over that period.

On Friday, December 7th, the Thomson Reuters/University of Michigan consumer sentiment survey reported that consumer confidence also fell significantly in November, reaching a four-month low at 74.5, down from 82.7 the previous month. Economists surveyed by Bloomberg had estimated the index would come in at between 80 and 88. The index also showed consumer expectations for the next six months also touching one-year lows, down to 64.6 from 77.6 in October.

These reports came in on top of the Institute for Supply Management’s Purchasing Managers Index (PMI) which fell in November to its lowest level in over three years.

Economic historians shouldn’t be surprised about the new recession indicated by these reports. The same thing happened in the middle of the Great Depression.

The recovery from the Great Depression had begun and by the spring of 1937 industrial production, profits and wages had reached 1929 levels. But in the summer (coinciding, interestingly, with ECRI’s call that the new US recession started in July 2012) the economy fell off the cliff, with industrial production dropping a heart-stopping 30 percent while durable goods declined even more. Producers pulled in their horns, cutting inventories and capital expenditures, just as are now being reported by the NFIB.

Non-historians, however, will likely take little comfort in any of these reports. Most will feel like the Great Recession never ended, despite the announcement by the National Bureau of Economic Research (NBER) on September 20, 2010 that its “committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion.”

Perhaps the NBER committee will review the latest report from the 733 small business owners surveyed by the NFIB and alert the media that that expansion has faltered, sending the US economy back into recession once again.

 

 

 

 

 

The ADP Jobs Report for November Just Arrived

The ACP jobs report for November showed 118,000 new jobs were created in the private sector last month. This is hardly good news for the economy but better than I, or Wells Fargo, anticipated. The manufacturing sector is declining, confirming (as I noted yesterday) the recession call by ECRI last year. Wells Fargo thought we might see 80,000.

ACP isn’t the Bureau of Labor Statistics (BLS) which is the big mack-daddy of employment tracking. They use a different methodology than does ACP and sometimes there is a divergence. But over time both outfits’ numbers are very close.

To parse the details:

118,000 new jobs in November, down from 158,000 in October.

19,000 new jobs were created by small businesses in November, down from 50,000 in October.

And, as expected, the manufacturing sector lost 16,000 jobs.

In December a year ago people were excited to see nearly 300,000 jobs created in the private sector. Later it turned out that a lot of them were temp jobs for the holidays. Job creation never touched 300,000 since, muddling around at about 100,000 ever since. This isn’t enough to restore the economy to good health. Or, put another way, there isn’t enough entrepreneurial activity to justify hiring at a level sufficient to absorb new entrants.

And that’s the key understanding from today’s ADP numbers: regulations, uncertainty about the fiscal cliff, the awareness that Obama has little interest in reviving the economy because of his totalitarian ideology and commitment to reducing the US to just another weak socialist state are all combining to keep entrepreneurs – the real job creators – from taking a risk on the future.

I frankly don’t see much to change these numbers from ADP or the BLS going forward. ECRI’s recession call appears accurate: they think it started last July. Nothing here from ADP changes that outlook for the near future.

Latest Manufacturing Report Confirms ECRI’s Recession Call

Cogs and gears

Calling it “unexpected,” Reuters reported that the Purchasing Managers Index (PMI) from the Institute for Supply Management for November fell to its lowest level in over three years. A poll of economists by Reuters showed they didn’t see it coming.

The PMI covers the private sector and quizzes 400 purchasing managers in 18 different manufacturing sectors to get their view of market conditions from their perspective: better than last month, same as last month, or worse, along with any comments they wish to make. Any reading above 50 indicates the sector is growing, and below that it’s contracting.

Bradley Holcomb, the chairman of the survey committee, said:

 The PMI registered 49.5 percent, a decrease of 2.2 percentage points from October’s reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months. This month’s PMI reading reflects the lowest level since July 2009 when the PMI registered 49.2 percent.

The New Orders Index registered 50.3 percent, a decrease of 3.9 percentage points from October, indicating [slowing] in new orders for the third consecutive month…

The Employment Index registered 48.4 percent, a decrease of 3.7 percentage points, which is the index’s lowest reading since  September 2009 when the Employment Index registered 47.8 percent.

Holcomb noted that unsolicited comments from the purchasing managers also reflect the slowdown:

From Food, Beverage & Tobacco Products: “We are in a lull.”

From Plastics & Rubber Products: “Differences between [the] first half of [the] year and [the] remaining half are very dramatic,   growing to a peak in the middle of the year with a gradual decline since.”

From Computer & Electronic Products: “Seeing a slowdown in requests for quotes [RFQ] activity.”

From Electrical Equipment, Appliances & Components: “Seeing a slowdown in demand across [all] markets.”

From Transportation Equipment: “Economy is every sluggish. Production is down and orders have slowed considerably from Q1.”

This report may have surprised the economists polled by Reuters but it certainly didn’t surprise Lakshman Achuthan, chief economist at the Economic Cycle Research Institute (ECRI), who called for another recession back in September, 2011. Following the prediction, The New York Times noted that ECRI not only correctly called the beginning and the end of the last recession, “it has gotten all of its

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The Fed’s Big Plan: Deceive and Print

Federal Reserve – Press Release, 9/13/2012

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.

The Federal Reserve: The Biggest Scam In History

The Federal Reserve: The Biggest Scam In History (Photo credit: CityGypsy11)

So, another $40 billion of new money pouring into the economy, right? That’s how the Fed operates: it doesn’t borrow the money to buy those mortgage-backed securities that banks are holding (and would love to get rid of and dump onto the Fed). It’s going to “create” that new money and use it to buy them.

That’s the classical definition of inflation. It’s also a classic indicator of panic on the part of the Fed. I mean, what else could they do? The only tools they have are deception and printing.

Here’s the deception part, from the Fed’s official press release (I’ve italicized the relevant parts):

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent monthsGrowth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed levelInflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Let’s look at these highlighted parts of the Fed announcement:

Economic recovery has continued to expand at a moderate pace in recent months.

What recovery? ECRI called for a recession a year ago, iterated its position back in June, and just reiterated it again last week. John Huntsman and Mish Shedlock both concur: we’re already in a recession.

Growth in employment has been slow.

Slow? How about non-existent? It’s growing so slowly that more people are leaving the workforce than are being hired. How about that for “slow?”

The unemployment rate remains elevated.

It’s actually much worse than officially reported (more reliable estimates put the rate at 15 percent, some even higher). The unemployment rate went down because of those people ending their job search efforts!

Growth in business fixed investment appears to have slowed.

Well, what would you expect? Would you invest in this economy now? Why? The Fed is awfully slow in coming to this obvious conclusion.

The housing sector has shown some further signs of improvement, albeit from a depressed level.

Housing starts are running about 750,000 a year, down from 1.2 million in 2007. That’s about 60 percent of normal. Some improvement!

The prices of some key commodities have increased recently.

Oh, really? Have you looked at the price of gold and silver lately? The are setting new highs as I’m writing this!

Deceive and print: how about that as a strategy to get the economy moving again?

The Sinking Economy May Sink Obama

Washington Times: Obama’s Economic Crisis

“He is deliberately misrepresenting this. Here’s a person with a terrible record on government spending and a terrible record on jobs and a person who broke his word on taxes. He has no credibility.”

English: "Former Presidents George H. W. ...

“Former Presidents George H. W. Bush and Bill Clinton film a public service announcement encouraging the American people to make cash donations to the tsunami relief effort through www.usafreedomcorps.gov in the White House Library Wednesday, Jan. 5, 2005.” (Photo credit: Wikipedia)

Who said that? Bill Clinton! Who was he saying it about? George H. W. Bush! When did he say it? 1992!

Fooled ya, didn’t I? 20 years have passed and little has changed except the players.

The GDP numbers on Friday showing the economy continuing to slow and headed into the recession predicted months ago by ECRI (Economic Cycle Research Institute), isn’t good news for Obama. The last quarter of last year showed growth (conveniently revised upward in Friday’s report) was 4.1 percent (on an annualized basis), while the second quarter was just 1.5 percent. Not only is the economy slowing, it is slowing at an accelerating pace.

But the White House claimed that Friday’s numbers indicate that “the economy continues to move in the right direction.” Spokesman (read: apologist) for the White House Jay Carney said:

We’re still in a position where we are pulling ourselves out of the very deep hole caused by the Great Recession, and there is still—of course—a great deal of anxiety in the country about the economy.

The establishment’s mouthpiece, The Wall Street Journal, even had to admit that things are looking dour for Obama:

Mr. Obama is running for re-election as a tribune of the middle-class against “millionaires and billionaires,” but his Presidency has been the worst for the middle class and the poor in decades

In return for blowing out the federal balance sheet, Americans got more debt but not more growth. And Mr. Obama says he wants $100 billion in more stimulus now?

Added to the record of the last four years, the 1.5% second quarter should solidify in the public mind that President Obama has failed on the economy.

Talk about mixed emotions. Watching the economy crater under Obama’s watch reminds me of the fellow watching his mother-in-law drive off the cliff in his brand new Cadillac.

ECRI Stays with Recession Call

Stacks of money

When Lakshman Achuthan, co-founder of Economic Cycle Research Institute (ECRI) appeared on CNBC to defend his prediction last September of an “imminent” recession, challenges came from many observers, including Tom Keene and Ken Prewitt of Bloomberg and Jon Stewart of The Bonddad Blog. Each pointed to an array of economic indicators that appeared to make Achuthan’s prediction appear almost silly: jobs data improving, auto sales increasing, homebuilders stock prices bouncing, consumer sentiment positive, and others.

Achuthan remained adamant about his prediction, made late September 2011, that not only would the economy shortly enter a new recession but

It’s going to get a lot worse. The vicious cycle is starting where lower sales, lower production, lower employment and lower income [leads] back to lower sales…

You haven’t seen anything yet.

He repeated his prediction in the face of new data apparently pointing in the opposite direction: “Since our recession call five months ago the definitive hard data [we] used to determine official recession dates have gotten worse, not better, despite the consensus view things have

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Is the Economy Slowly Gaining Momentum?

SP 8033, a GE Dash 8-39B, leading an EMD SD40T...

Zachary Karabellwriting at The Daily Beast on Thursday, claimed that the latest numbers on the US’s economy were showing some modest improvement. After reviewing comments from the Federal Reserve in their final statement of the year (the economy is “expanding moderately”), the Institute for Supply Management (index above 50 for several months, indicating growth), the Gross Domestic Product numbers (growing at about 2 percent on an annual basis), unemployment (dropping slightly), and consumer sentiment (up a little), Karabell concluded “The real dirty little secret of the American economy is that we are doing OK.” Some other numbers that came in after his article was published seemed to confirm that the economy is showing a faint blush of rose. The National Retail Federation said it expects Christmas holiday sales to rise to $469 billion this year, up about 4 percent from their October forecast, but still down from the 5.2 percent gain a year ago. The latest from the Association of American Railroads shows weekly traffic gains of nearly 4 percent year over year. The Business Outlook Survey from the Philadelphia Federal Reserve Bank showed that “all the broad indicators remained positive and suggest a modest expansion of activity…[and] the broadest indicator of future activity reflected a trend of increased optimism about growth over the next six months.” That report noted further that hiring expectations in that region are beginning to improve as well, along with indicators for

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How Bad Will This “New” Recession Get?

A homeless man in Paris

The prediction by the Economic Cycle Research Institute (ECRI) that the United States is headed into another recession was greeted by a rise in the stock market from 1,074 on the Standard and Poor’s 500 Index on Tuesday, October 4, to 1,238 on Friday, October 21, a gain of 15 percent in just 13 days.

This sudden rise happened in the face of ECRI’s spokesman Laksman Achuthan’s emphatic forecast that “it’s going to get a lot worse…you haven’t seen anything yet.” Furthermore, Achuthan said that

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ECRI Announces New Recession Has Started

Dollar

Image by Images_of_Money via Flickr

Last Friday Laksman Achuthan, co-founder of Economic Cycle Research Institute (ECRI), announced that not only has the economy entered a new recession, but that “it’s going to get a lot worse. The vicious cycle is starting where lower sales, lower production, lower employment and lower income [leads] back to lower sales…you haven’t seen anything yet.” Despite some evidence that the economy is growing in places, it’s not enough to overcome the significant array of indicators that Achuthan has used successfully for years to predict the economy. According to The Economist, ECRI has never issued a “false alarm,” and this time should be no different.

On his website, Achuthan stated:

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Double Dip Evidence Piling Up

Double Dipped Cones

Image by John Bollwitt via Flickr

When John Hussman, in his Weekly Market Comment, noted that the Economic Cycle Research Institute’s (ECRI) Index “has slumped to the lowest level in 44 weeks and has now gone to a negative reading,” he was confirming other recent signals that the economy was giving off, notably here and here, that the possibility of a double dip recession continues to increase.

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2021 Bob Adelmann