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Friday, October 12, 2012

More economic stuff

Whether we go into a recession or not is an important question.  In order for my theory that we are making a major top and a new bear market is starting to be correct, we will need to have a recession.  If the data starts to indicate renewed economic growth, stocks should go higher and I will have egg on my face.  If I am wrong, I want to know that as soon as possible.  Here are a few more items with some pointing toward recession.

The first chart is Cap Ex.  In CEOs lowering expectations I showed how CEO expectations for future Cap Ex spending went way down.  Check out this chart of the latest data.


The other two times this data dropped like this we did go into a recession.  This is a limited data series unfortunately.  We don't know if we have gotten any drops like this in the past where we did not go into recession.  This is a warning sign at least.

Lets take a look at the import/export data.


Both imports and exports have turned down.  We can see that past history shows that can mean the start of a recession.  It is too early to tell if this will continue or not.  I would say this chart is a warning of a possible recession, but not a clear sign we are in one. 

FedEx recently put together a slide showing the exports of their biggest markets.


All the export growth rates have contracted a lot.  Germany, UK, Taiwan and Hong Kong have already gone negative.  Japan is not far behind.  How long will the other countries stay positive?  This looks pretty seriously negative for the global economy.

Here is another look at imports and exports.


We can see there was a big difference in the data between the last two recessions.  During the great recession everything fell off a cliff suddenly.  That of course was the panic caused by the financial crisis.  The current trajectory looks much more like the data going into the 2001 recession.  We are getting pretty close to where we were at the onset of that recession.

Lastly we have the four week moving average of initial jobless claims.

This data has stabilized over the last few months.  It has not clearly turned up like it did in the prior two recessions.  Notice back in 2000 it turned up way before the onset of the actual recession.  During the last recession, it turned up right at the start.  Because there has been much less hiring then in past recoveries, I expect this will be the last data to turn up this time.  The turn might not happen until after the recession has already started.  This is one of the few bright spots in the economic data.  We will see if it holds up.

The more I look at the data, the more items I see indicating we are probably in or very close to a recession.  Will there be a turn up in the 4th quarter this time?


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.