With the Dow and the U.S. dollar both surging, today a legend in the business sent King World News a powerful piece where famed Bloomberg economist Richard Yamarone just issued a dire warning.
October 22 (King World News) – From Art Cashin’s note: “A Friend Looks At An Esoteric Indicator – In Wednesday’s Bloomberg Brief, my good friend and Bloomberg economist, Richard Yamarone, pulled up some data on a rather unusual indicator. Here’s how he introduced the topic:
One of the lesser known, but historically accurate, economic barometers is currently signaling a moderation. The quarterly average of the Conference Board’s Coincident-Lagging ratio has been slumping since 2012 and currently resides at the same level as in 2009, which was the lowest since early 1975.
In addition to the highly respected index of leading economic indicators, the Conference Board publishes composite gauges of coincidental and lagging indicators. Coincident indicators include nonfarm payrolls, industrial production, manufacturing and trade sales, and personal incomes less transfers. They are designed to mimic the business cycle.
So-called “lagging indicators,” which take a few months to identify changes in economic activity, are also published in the Conference Board’s monthly report. There are seven indicators in the lagging composite including, among others, average duration of employment, labor cost per unit of output in manufacturing, CPI for services, and commercial and industrial loans.
It is often thought that lagging indicators are useless in the analysis of economic activity. This is not accurate, since they play a substantial role in confirming or refuting signals coming from the leading and coincident indicators.
Currently the quarterly average of the ratio of the Conference Board’s Coincidental-Lagging index is trending to multiyear lows. The deceleration is sharp and steadfast, implying some degree of economic moderation. This series is better at predicting turning points (vector) rather than the pace (magnitude) of growth in economic output. During the third quarter the ratio was 95.1 — the same level as in the first and second quarters of 2009, which were the lowest since the first quarter of 1975 (94.5).
Rich goes on to cite the record of the indicator, including an occasional miss or two. As I recall, this indicator is followed by another multi-decade trading veteran, my friend Dennis Gartman.
Overnight And Overseas – ECB stays on hold as expected. Markets wait on Draghi press conference. Shanghai rose while Hong Kong and Tokyo slipped a bit. Emerging markets looked mixed and India was closed.
European markets are mixed and little changed as they await details from Draghi. U.S. futures slightly better as crude bounces off the lows. Euro weakens versus the dollar. Yields are up a smidge. Gold looks unchanged.
Consensus – Resistance remains in the S&P 2037/2041 area. Keep your eye on crude, which may be a key factor. Biotechs will be monitored also. Stick with the drill – stay wary, alert and very, very nimble.” ***ALSO JUST RELEASED: Richard Russell – Global Scenarios Too Wild To Consider And The Golden Key CLICK HERE.
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