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JimVanMeerten (62.60)

Economy improving

Recs

3

November 19, 2009 – Comments (5)

For those of you who have followed me you know I like to keep things simple and disciplined. My background in accounting and law forces my thinking process to take data, analysis it and then try to decide on a course of action. Before I push the buy button I need to know:
1 - How is the economy doing?

2 - How is the stock market doing?

3 - What stocks have the most consistent price appreciation in the present economic and market environment?

4 - Which individual stocks meet my minimum criteria to add to my portfolio?

There is just too much economic information out there and the more I research the more confused I get. Put two economist in a room and they will issue 5 different opinion papers. To cut through all that confusion I have come to rely on the Conference Board's Leading Economic Index. It's published once a month and consists of a Leading Economic Index (LEI), a Coincident Economic Index (CEI) and a Lagging Economic Index (LAG). Since there are only 21 components on the report I'm not buried in so much data that I get confused.

I'd like to summarize the report to make it simple but have added a link to the complete report so you can make your own conclusions:

 1 -- LEI is up for the 7th straight month -- this month by .3% but residential building permits are still a major weak point.

 2 -- CEI is flat and basically has been since June -- GDP expanding with industrial productivity up and the employment indicators down. Sounds like we are doing more with less and hopefully getting more efficient.

 3-- LAG is still declining with 2 indicators up and 5 down but the rate of decline is slowing slightly with the biggest problems in commercial and industrial loans outstanding.

The roller coaster has reached the bottom and starting to come back up. I'm confident that I'll be seeing positive but not significant price appreciations until the middle cars on the roller coaster climb out of the trough.

I look forward to next month's report due to be released Thursday December 17th at 10:00 AM

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave your comments below or email FinancialTides@gmail.com

 

5 Comments – Post Your Own

#1) On November 19, 2009 at 1:41 PM, ChrisGraley (29.79) wrote:

No offense Jim, but I was expecting a different type of post from the headline. Any reason why you think the econmy is improving other than that index? Because everything I'm seeing points to it being on borrowed time.

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#2) On November 19, 2009 at 2:01 PM, davejh23 (< 20) wrote:

Interesting perspective.  The report was worse than expected, and pointed out several points of caution.  I think most investors reading the report saw a clear picture that the economy will not experience a strong recovery.  I don't think this is why the market is down today...the Dow could very well jump 200 pts tomorrow...I'd guess that it will be up with the dollar down and commodities up.  However, if you're looking at the health of the overall economy, this report is not something to celebrate.

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#3) On November 19, 2009 at 2:45 PM, JimVanMeerten (62.60) wrote:

The economy is like a battleship nor a speed boat.  It takes a long time to change course.  If you look at the lead, coincident and lagging indicators seperately you can see slow steady turning.

I said positive but not significant progress.  Remember that over the last 50 years the rate of return has been 12%.  That's 1% per month.  The one year return on the Valule Line Index of 1700 stocks has been 72%, the S&P 500 one year return has been 32% if that's not progress I'm not sure what is.

 Chart

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#4) On November 19, 2009 at 5:19 PM, davejh23 (< 20) wrote:

Are you talking about the economy, or the stock market?  If you're looking at the stock market as a pure leading indicator, are you suggesting we're going to see a 32% jump in GDP next year?  If, by "slow steady turning", you mean the rate of decent is moderating, I'll agree...I haven't actually seen anything turn up except for the stock market though.

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#5) On November 19, 2009 at 6:20 PM, ChrisGraley (29.79) wrote:

I'm confused as well Jim. I'd like to give you the benefit of the doubt, but I need something tangible from your arguement. I don't need an analogy or a chart or a statistic. I need a reason to be bullish that you are more than welcome to back up with an analogy or a chart or a statistic.

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