Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Monday, October 3, 2011

Rosenberg Daily - Welcome to the Fourth Quarter

  • [T] growth rate for the Economic Cycle Research Institute (ECRI) weekly leading economic index fell for the eighth week in a row to -7.2% from -6.74%.  The “spot” index also slumped from 122.16 to 121.9 — the lowest in a year.  Want some context? Okay. This is the same level the ECRI was at in October 1990, March 2001 and January 2008. 
  • [T]he economists at the ECRI are now saying that the U.S. economy is “indeed tipping into a new recession”, adding that “there’s nothing that policymakers can do to head it off”. The ECRI has a pretty good track record so this forecast should not be taken lightly. For if it is right, then based on the historical record this bear market has another 10-20% downside and another 12 months left from a duration standpoint.
  • The S&P 500 has fallen now in each of the past five months (and off 10% for the year). Is that worthy of being called a “pattern”? This is the longest losing streak since March 2008 — and sadly, the bear market had another 12 months to go before it ended.
more bullet points later...
  • [Steve Leuthold says] "the typical stock is down 20% to 25%”, so don’t be fooled by the S&P 500, which has only held within the 1,100-1,200 range because of Utilities and Staples — this is a full-fledged bear market we are in.  The key level on the downside is the 1,102 intra-day low recorded on August 9th.
  • Earnings estimates are still too high and destined to come down... Unless margins manage to widen to yet new all-time highs, expect these estimates to end up getting whacked pretty hard in the months ahead
  • Now with the ECRI officially calling for a recession — actually suggesting that it may have already started — we have to admit that we feel somewhat vindicated, having made this call nearly four months ago to howls of derision....What we saw then and still see now is a full-fledged deleveraging cycle that has gone global. And history teaches us that balance sheet recessions are not the same as plain-vanilla manufacturing inventory cycles. Deleveraging implies debt reduction, asset deflation and rising savings rates.

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