Economist Cover: The Great American Slowdown

Wednesday, April 16, 2008 | 10:30 AM

One of the things that people get wrong all the time is the contra meanings of magazine covers. This is a subject we have discussed for quite some time around here.

The assumption is that if something shows up on a mag cover, whatever the subject is must therefore be all over, hence, its time to go the other way. This is a fundamental misunderstanding of what the cover indicator is all about.

The short version is that when a long running trend, well represented by consensus opinion and stock prices, finally bubbles up to the front of a major magazine cover, THATS WHEN its very very late in the cycle. Hence, it is a contrary indicator.

A recent classic cover was the Time Magazine on Housing back in the summer of 2005. The timing was near perfect, as Housing peaked in August  '05.  However, when something is relatively new, such as the US economic slowdown (see Economist cover below), it is not a true contrary indicator.

Let's compare these two examples:

Housing Boom
- Lasted almost 10 years
- Home prices increased 2 and 3 standard deviations from historical means
- Homebuilder stocks ran 500% to all time highs

US Economic Slowdown
- (Un)Offically going on for less than 6 months; GDP still positive
- S&P 500 and Dow Industrials made all time highs six months ago
- Equities still within 10-15% of highs
- No consensus for a recession

When we compare these two quantitatively, the differences are pretty obvious as to which one is the true contrary indicator . . .

>

Economist_slow_down




>

Previously:
The Magazine Cover Indicator
Big Picture Overview

uh-oh: Time Magazine on Housing    http://bigpicture.typepad.com/comments/2005/06/uhoh_time_magaz.html

Source:
The great American slowdown
Apr 10th 2008
The Economist print edition
http://www.economist.com/opinion/displaystory.cfm?story_id=11016333

Wednesday, April 16, 2008 | 10:30 AM | Permalink | Comments (36) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c52a953ef00e551d660b18833

Listed below are links to weblogs that reference Economist Cover: The Great American Slowdown:

Comments

According to Hussman's excellent piece this week, he feels we are in the 3rd inning of the mortgage crisis. I recommend reading that. Reggie Middleton's blog is hammering Lehman and Morgan Stanley. I have to agree with them and Barry, that we are not near the end of this cycle.

Watch oil today too...bullish inventory just out...could see 115 and above.

Posted by: Steve Barry | Apr 16, 2008 10:43:16 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner