5. Wrong Focus - Vintage Data (1)
Almost all economic data is revised 3 and 12
months later
> Inflation > Savings Rates
> Unemployment > Industrial Output
> GDP > Trade, etc
This makes for greater historical accuracy, but
does not help inform decision makers in real
time
6. Wrong Focus - Vintage Data (2)
> Making decisions based on incomplete data
or, even worse, data that will tell a completely
different story upon revision, is a recipe for
disaster
> Variant Perception focuses on economic data
and prices that are not revised (ISM survey,
yield curve, initial unemployment claims, etc)
7. Wrong Focus - Lagging Indicators
> Inflation typically reaches its peak in the
middle of a recession and troughs when an
expansion is strongest
> Unemployment is always at its lowest point
when a recessions starts
8. Consensus Economists Do a Bad
Job at Forecasting Recessions
โQuite simply, the record of failure to predict
recessions is virtually unblemished. Only 2 of
the 60 recessions that occurred around the
world during the 1990s were predicted a year
in advanceโ
Prakash Loungani, Assistant to the Director
External Relations Department, IMF
9. 1990 Recession:
Large Industrial Downturn
Alan Greenspan:
"In the very near term there's little evidence that I can
see to suggest the economy is tilting over [into
recession]." July, 1990
"...those who argue that we are already in a recession I
think are reasonably certain to be wrong." August, 1990
"... the economy has not yet slipped into recession."
October, 1990
10. 2001 Recession: Dotcom Bust (1)
The Economist, January 2005:
โIn a survey in March 2001 95% of American
economists said there would not be a recession.โ
The recession started the month of the survey,
March 2001, and industrial production had
already been contracting for five months.
11. 2001 Recession: Dotcom Bust (2)
Alan Greenspan, May 2001:
โMoreover, with all our concerns about the next
several quarters, there is still, in my judgment,
ample evidence that we are experiencing only a
pause in the investment in a broad set of
innovations that has elevated the underlying
growth rate in productivity to a level
significantly above that of the two decades
preceding 1995.โ
12. 2008 Recession:
Subprime Bust, Banking Crisis
Ben Bernanke, October 2008:
โThe risk that the economy has entered a
substantial downturn appears to have
diminished over the past month or so.โ
The 2008 recession started in December 2007
19. Contact Us to Learn More
Variant Perception has also developed Leading
Economic Indicators for the following measures
> Business Cycle Financing > Durable Consumption
> Real Money Growth > Shipping
> Market Volatility > Construction
> Manufacturing > Key Commodities
> Car Sales
And many more...
