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Daily Archives: August 8, 2010

Business cycle indicator says double-dip is likely

ECRI WLI index says there is a fair chance that double-dip is coming.  Here is an analysis I borrowed from dshort.com.

(click to enlarge; graph courtesy of dshort.com)

According to dshort:

A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

Three of the false negatives were deeper declines. The Crash of 1987 took the Index negative for 68 weeks with a trough of -6.8. The Financial Crisis of 1998, which included the collapse of Long Term Capital Management, took the Index negative for 23 weeks with a trough of -4.5.  The third significant false negative came near the bottom of the bear market of 2000-2002, about nine months after the brief recession of 2001. At the time, the WLI seemed to be signaling a double-dip recession, but the economy and market accelerated in tandem in the spring of 2003, and a recession was avoided.

The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to the current level without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped to -6.8.

David Rubenstein Interview on Charlie Rose

A very intriguing interview of David Rubenstein, co-founder of private equity firm The Carlyle Group.

He talks about current economic challenges, the performance of Obama Administration, and US’ strategy to deal with a fast rising China.

Rubenstein’s firm is the most active PE firm in China. Something most interesting to note is Rubenstein is also the owner and collector of Magna Carta, probably the most important historical piece documenting the development of Western property rights.

(click on the image above to view the video; Source: Charlie Rose)

Testing religious freedom

America, the land of free speech and free religion, is facing some rather testy issue on whether to allow Muslims to build their mosques. In Copenhagen where I'm living now, there is a quite large Muslim population, and I find mosques are not few and far between.  In contrast, in the US, where I lived for nine years and traveled intensively, probably I only saw one mosque, personally, near Hartford, CT.  

Read the report from NYT.