Seeing What Others Ignore
The other day I saw a ridiculous movie trailer about a guy living in the present, who can see the future. The movie was so cliched, I almost laughed out loud… especially when the guy said,
“If you can see the future, you can change the present.”
Its kinda funny in cheesy Hollywood thrillers, but when it comes to real life issues, such as the possibility of another recession, everyone should ask themselves,
“If I knew for certain that we were going to ‘double dip’ back in to the recession of the past couple years, would I act any different?”
A few days ago, I wrote to you about Richard Russell’s prediction of the bottom falling out of the Market, a position supported by almost every major indicator. (if you haven’t read it yet, it is posted right below this one)
And the other day, I came across some more numbers that carry so much weight, many analysts think they are all but “predicting the future.”
You see these numbers came straight from a respected indicator called the Weekly Leading Index, published by the Economic Cycle Research Institute. Basically, this index measures the future of U.S. economic growth, and considers all economic factors… not just the stock Market.
Even though the ECRI is fairly well respected, they don’t get much mainstream attention because their numbers tend to be fairly honest and not “candy coated”.
For example, just over a week ago, their annualized economic growth rate had fallen to -5.7%.
Last week it fell again, all the way to -6.9%.
This is a 56 week low for economic growth.
In the 43 years that this indicator has been in existence, a reading of -3.5% or greater has only twice resulted in a false signal of a downturn, but 7 times resulted in an accurate signal of an impending move to the downside.
Every time the annualized growth rate has hit -10%, a recession has followed 100% of the time.
To make it easier to understand, here are those numbers graphically,
What does all this mean?
Well, Lakshman Achuthan, Managing Director of ECRI summarized,
“After falling for six weeks… the continuing decline in growth rate to a 56-week low underscores the inevitability of the slowdown.”
Although Achuthan is certainly in no rush to go out and say that we are headed to double dip a recession… the numbers don’t lie. These are cold hard facts from those that don’t often admit such negative information.
So I’ll ask you,
“If you knew the economy was poised for a pull back at best, and another recession at worst, would it change the way you act?”
2 Responses to “Seeing What Others Ignore”
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At the risk of upsetting the time/space continuum by being able to change the present based on the future, I would indeed behave differently. That is really no different from those of us today who “think” we can see the future (of the market) and make trades accordingly, today. Also not too different from people who always check their horoscope reading before making a move on their day. So I would think that if we are honest with ourselves you should overwhelmingly hear that “yes, I would act differently.”
Now, do we in fact act differently when we “find out” that the market will do x or y? That depends on what we ourselves “think” the market is going to do, or more importantly, “want” the market to do. We are all very good at finding commentary and agreement to support our own belief, even at the risk of minimizing or ignoring sometimes irrefutable evidence to the contrary.
Of course, how do we validate the claim of the future event? Based on the above phenomenon, we tend to first look for evidence or commentary to support OUR own view if it is counter to the future claim. Or, we blindly accept the future claim as accurate – again because it coincides with our own, and/or because we don’t know HOW to validate the claim.
In either scenario, we are then left with the question of what action “should” we take? Regardless of whether you believe the claim or not, the ultimate decision comes down to this last question. In the end we either act as if we believe the claim, as if we don’t believe the claim, or we do nothing (which is really saying that we don’t believe).
Me? I still check the horoscope!
Your message (blog) appears to tie in with the spx100 deathcross…soon to be the spx deathcross? Just a little glance at the future!