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The Magazine Cover Indicator Strikes Again!

Here's a (belated) recognition of a contrarian signal: The Magazine Cover indicator

"The Incredible Shrinking Dollar"

Source:  Newsweek

I've been meaning to post this for a week, ever since Aaron Task mentioned it in Columnist Conversation -- but I never got to it.

BTW, is it just me, or does this paragraph (from the cover story) strike anyone else as disingenuous?

"There's been plenty of good news of late about the U.S. economy, so let's start with that: employment is expanding (2.4 million new payroll jobs in the last year); inflation remains low (less than a 2 percent rate in the past quarter); the stock market is higher (up 11 percent on the Dow from its November low), and business investment is impressive (rising at a 14 percent rate in late 2004). Indeed, the recent news has been so good—a major exception being $50-a-barrel oil—that we're hearing again of the "Goldilocks" economy, which grows fast enough to increase jobs and slow enough to muffle inflation. But beyond all the upbeat indicators lurks a potentially frightening problem that unsettles even the wisest and most seasoned economic observers. It's not government budget deficits, a possible housing bubble or even $2-a-gallon gasoline. It's the dollar."

Anyway, kudos to Task for catching this one before the recent dollar rally.

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UPDATE: March 30, 2005 6:04am

The WSJ's Justin Lahart discusses the fallibility of the magazine over indicator here:

Cover Up
http://online.wsj.com/article/0,,SB111205944872991534,00.html

Lahart's a savvy writer whom I know from when h was at TSCM. He's a daily read for me.

Also, note that the magazine cover indicator need not mark a top or bottom; instead, it can point to when a trade gets crowded (i.e., Short the Dollar). A counter trend rally then ensues . . .

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Sources:
Magazine Cover
Aaron Task
Real Money.com, 3/16/2005 9:22 AM EST
http://www.thestreet.com/p/_rms/dps/cc/20050316/columnistconversation1.html#entryId10213433

"The Incredible Shrinking Dollar"
What it means for America's future - and yours
Robert J. Samuelson
Illustration by Viktor Koen
Newsweek, March 21 2005
http://www.msnbc.msn.com/id/7170226/site/newsweek/

Thursday, March 24, 2005 | 05:53 AM | Permalink | Comments (2) | TrackBack (0)
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Comments

Disingenuous? A week ago I sent my trader friends (both of them) side-by-side charts of the nasdaq 1998-2000 and the Aussie SPI 2003-now, with the comment: "Goldilocks economy, Pollyanna market. New paradigm: dot-commidities" The SPI has dropped 130 points in the last 3 days.

Posted by: john brown | Mar 24, 2005 6:28:03 AM