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Down the drain?
Old 06-23-2004, 04:09 PM   #1
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Down the drain?

Check this out, its an indicator I brought up a while back

http://www.businesscycle.com/

Look down the page for the weekly leading indicator. Its supposed to give an idea where the economy is headed about 8 months from now. At this time we're headed to zero; below zero is considered recessionary.

The indicator appears to have been fairly predictive in the past.

Buckle up...
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Re: Down the drain?
Old 06-24-2004, 12:11 AM   #2
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Re: Down the drain?

there record is pretty stellar,i try to pay attention when i remember.if the prediction is fairly true than perhaps both global and local bonds will fair ok.My thinking is perhaps the $ falls further ,foreign bonds may be the beneficiary
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Re: Down the drain?
Old 06-24-2004, 09:33 AM   #3
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Re: Down the drain?

Quote:
...headed to zero...
Hmm. A few more months to reach zero, then 8 months for the down turn to start. This fits in well with a typical post election year cycle. If it goes below zero in a few months, the sell in May and go away strategy may be useful next year.
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Re: Down the drain?
Old 06-29-2004, 06:43 PM   #4
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Re: Down the drain?

Michael,

you wrote:
"If it goes below zero in a few months, the sell in May and go away strategy may be useful next year. "

Maybe dumb question.. Could you please elaborate?

Thanks
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Re: Down the drain?
Old 06-29-2004, 10:30 PM   #5
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Re: Down the drain?

An old Wall Street saying based upon the typical seasonal pattern of past stock market returns. In most non election years, the market gains the most in the first few months, loses ground June to September, and then picks back up October until next May. Some people play this pattern by only holding stocks 6 months per year. They sell in May, and go away on vacation for the summer. In the fall, they come back from the Hamptons, and play the stock market again.
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Re: Down the drain?
Old 06-30-2004, 07:18 PM   #6
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Re: Down the drain?

Thanks Michael,

That's what I thought you meant. Kinda defies the Buffet "buy good stocks and hold forever" philosophy.
Please advise if this approach fits this cyclical investing strategy: I would invest X amount of money in the VG Total Stock Market Index Fund on Oct. 1 and then sell/transfer to a VG Stable Value Index Fund in May. In October, I would repeat. Yes? Thanks in advance!

Slipp
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Re: Down the drain?
Old 06-30-2004, 08:40 PM   #7
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Re: Down the drain?

Hey Slipp,

Market timing is a loser's game. Read Bernstein's
"4 Pillars of Investing" before you go off half-cocked
on some cockamamie scheme.

Cheers,

Charlie
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Re: Down the drain?
Old 07-01-2004, 09:37 AM   #8
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Re: Down the drain?

Yeah, there are all kinds of "systems" that work great back tested.

I've tried several. They stop working immediately after I do so.

My favorite was a particular fund that had NEVER had a losing quarter in its history. Had two in a row right after I bought it, and a losing year as well.

I really hate making history.

I guess the point is, no historic pattern is safe. Mysterious, the future is.
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Re: Down the drain?
Old 07-01-2004, 10:26 AM   #9
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Re: Down the drain?

Oh Yeah

I bought my big Vanguard REIT index position in 98 after reading Bernstein on correlation and promptly got hosed - hung on - and felt better in 2000-02 when it zigged while the market zagged - uh er have I got it backwards? Anywise did what Bernstein said it would based on correlation. Still basically a Boglehead - but ordered Four Pillars last night - Barnes and Noble summer sale - get it for free as a birthday present. Will what all the fuss is about.
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Re: Down the drain?
Old 07-01-2004, 12:32 PM   #10
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Re: Down the drain?

Quote:
I would invest X amount of money in the VG Total Stock Market Index Fund on Oct. 1 and then sell/transfer to a VG Stable Value Index Fund in May.
Late October, almost Novermber, except in election years when the favorable season runs from July to December. The strategy has many variations that slightly change the buy/sell dates according to such indicators as the MACD. It did not work in every past year, just most.

This is just one of many strategies that are floating around, and this is just one tool out of the many to consider. Be aware that most people are not good at market timing. Most people who try it lose money. Do a lot of study, and be very conservative if you decide to implement any such strategy. They can potentially be very hazardous to your wealth.
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Re: Down the drain?
Old 07-01-2004, 12:55 PM   #11
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Re: Down the drain?

Composite that with the frequent pattern that the last 2 years of a four year presidential term are usually very good for stocks while the first two stink.

The reason is obvious: all the economic programs are geared up to "hit" before the election.
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Re: Down the drain?
Old 07-30-2004, 10:03 AM   #12
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Re: Down the drain?

The ECRI growth rate indicator continues its downward trend and has broken zero. By this measure (allegedly predictive of real economic growth by 8 months), we'll see an economic downturn around...hmmm...november, which will continue downward for at least 5 months into a recessionary position.

Couple that with the article below. If this indicator is as accurate as it has been historically it might be possible that the fed will have to stop raising rates and may have to cut them to restimulate economic growth, and we may be seeing yet another period of stagnancy or decline in equities.

I've been counting on interest rate increases making cd's and bonds look more attractive, but I'm feeling less certain of that at this point. And I still dont like stock valuations one bit.

I may decide to split my taxable portfolio three ways: max ibond purchases, and split the rest between 5 year cd's and 20 year tips and get used to the idea of making 1% on my money. Or stuff the whole thing into long term california munis and hope inflation stays tame for the next 10 years.


U.S. Economy Slows Dramatically in Spring

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON - The U.S. economy grew at an annual rate of just 3 percent in the spring, a dramatic slowdown from the rapid pace of the past year, as consumer spending fell to the weakest rate since the slowdown of 2001, the government reported Friday.

The Commerce Department (news - web sites) said that the gross domestic product, the country's total output of goods and services, slowed sharply in the April-June quarter from a 4.5 percent growth rate in the first three months of the year.

The size of the slowdown caught economists by surprise. Many had been looking for GDP (news - web sites) growth to come in around 3.8 percent in the second quarter. Even that would have been a sharp deceleration for an economy that had been growing at a 5.4 percent annual rate through the year ending in March.

It raised the issue of whether the economy, which Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) said last week had encountered a "soft patch" in June, could be in danger of seeing growth falter even more in coming quarters.

In one piece of good news, inflation pressures eased with a key GDP inflation gauge that excludes energy and food rising at an annual rate of just 1.8 percent in the second quarter, down from a 2.1 percent increase in the first quarter.

President Bush (news - web sites) is counting on strong economic growth to generate sizable gains in employment in coming months to give voters a good feeling about the economy as they go to the polls on Nov. 2.

However, Democratic challenger John Kerry (news - web sites) contends that Bush is pursuing a failed economic policy that has produced the worst jobs record of any president since Herbert Hoover and is subjecting Americans to a "middle class squeeze" of falling wages and rising costs for health care and education.

The 3 percent GDP growth rate in the second quarter was the slowest growth since the economy was expanding at a lackluster 1.9 percent rate in the first quarter of 2003.

Over the next four quarters, the economy tuned in a sizzling performance with GDP growth rates of 4.1 percent in the second quarter of 2003 and 7.4 percent in the third quarter, a pace that was the fastest in 20 years, and 4.2 percent in the fourth quarter and 4.5 percent in the first quarter of this year.

The slowdown in the second quarter stemmed from a sharp slowing in consumer spending which rose at an annual rate of just 1 percent, the smallest increase since a similar 1 percent rise in the second quarter of 2001, when the economy was slumping.

All of the GDP figures from 2001 through 2003 were revised with Friday's release as part of an annual revision to the numbers to reflect new sources data.

Those revisions changed the annual GDP rates only slightly but did alter significantly the quarterly GDP changes. There are no longer three consecutive declining quarters of GDP in 2001 during the period that the National Bureau of Economic Research has formally ruled that the country was in a recession. Instead, the GDP demonstrated a sawtooth pattern of a decline followed by a quarter of growth.

The weak growth in consumer spending reflected a big drop in auto sales and other durable goods which fell at an annual rate of 2.5 percent in the second quarter.

Offsetting the weakness in consumer spending, business investment and residential housing continued to race ahead during the quarter.

But consumer spending is critical, given that it accounts for two-thirds of total economic activity. Many economists believe the slowdown in consumer demand will be temporary. They point to strong job growth in recent months and rising consumer confidence. They believe that will provide support for a rebound in consumer spending in the months ahead.

The Federal Reserve began raising interest rates on June 30 and Greenspan indicated that further rate hikes will likely come at a gradual pace as long as inflation does not threaten to get out of hand. Couple that with this:
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Re: Down the drain?
Old 07-30-2004, 10:49 AM   #13
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Re: Down the drain?

TH, can't you wait until after the market close to make your doom and gloom pronouncements? The Dow dropped 40 points as soon as news of your post got out.

(Cause and effect, once again )
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Re: Down the drain?
Old 07-30-2004, 11:23 AM   #14
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Re: Down the drain?

Quote:
. . .In one piece of good news, inflation pressures eased with a key GDP inflation gauge that excludes energy and food rising at an annual rate of just 1.8 percent in the second quarter, down from a 2.1 percent increase in the first quarter. . .
Yeah. . . this makes sense because none of us need energy or food.

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Re: Down the drain?
Old 07-30-2004, 11:59 AM   #15
 
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Re: Down the drain?

Quote from AP article:
"In one piece of good news, inflation pressures eased with a key GDP inflation gauge that excludes energy and food rising at an annual rate of just 1.8 percent in the second quarter, down from a 2.1 percent increase in the first quarter."

There are some economic perspectives that link equity value specifically the market's P/E to energy trends. One example (Curbing My Enthusiasm and The Crude Story)
http://www.cm1.prusec.com/yardweb.ns...eekly?readform
It is interesting to follow the trends here in U.S as well as overseas especially emerging markets as economic and political moves continue to impact each other (ie. Russia's Yukos)..
Personally, I have some stakes in emerging markets and a mutual fund that have energy as one of its top holdings. The allocations were not a play on energy at the time just my take on diversifying.

So I'm on the sideline for now but researching and evaluating commodity/energy/natural resources. Given the political and economic relationship, I'll let the cash generates its 2.5% until after the election or something could happen between now and then to change my mind.

And yep, oil reaches record high above $43 as the market takes a dive an hour before closing.
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Re: Down the drain?
Old 07-30-2004, 02:29 PM   #16
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Re: Down the drain?

Dive, Baby, Dive!

I need some help with my DCA.
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Re: Down the drain?
Old 07-30-2004, 05:17 PM   #17
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Re: Down the drain?

Be careful watch you wish for....
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Re: Down the drain?
Old 07-30-2004, 07:43 PM   #18
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Re: Down the drain?

Quote:

Yeah. . . this makes sense because none of us need energy or food.

I've come to the conclusion that government specified rates of inflation are somewhere between horsepuckey and outright bullshit. Just looking at things from real estate/rents to cars to food to utility bills - - you know, the stuff that composes 80% of what we spend money on is in the 6-8% range...conservatively.

Further, the IRS says incomes have declined over the past two years. Is *that* functioned into inflation in some manner?

I just read some scuttlebutt about the jobs report as well. In deep BEER#1 paraphrasing, if the guys that do the jobs report get a positive thumbs up from the guys doing the "how is the economy doing' department, they ADD JOBS THAT MUST HAVE BEEN CREATED BECAUSE THE ECONOMY IS DOING WELL. There is no basis for this jobs addition, they simply do it on the assumption that in a strong economy, small businesses are adding jobs that they cant measure.

Isnt that a nice self fulfilling set of prophecies? We remove critical elements from our inflation numbers, declare the economy is doing well and inflation is tame, then say jobs are way up.

A lot easier than my old job was...

By the way, my port is up .80% for the day...I think I'll increase my doom and gloom projections.
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Re: Down the drain?
Old 11-20-2005, 10:05 PM   #19
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Re: Down the drain?

I love reading dated posts that I participated in.* Gotta love investment wisdom .... just 16 months later.* Lesson... Nobody has a clue*

Slipp
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Re: Down the drain?
Old 11-21-2005, 12:02 AM   #20
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Re: Down the drain?

Quote:
Originally Posted by slipp1229
I love reading dated posts that I participated in.* Gotta love investment wisdom .... just 16 months later.* Lesson... Nobody has a clue*

Slipp
This conclusion, while possibly correct, is unjustified by this thread.

Ha
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