In his latest Global Strategy Weekly, Albert Edwards, a senior member (along with Dylan Grice) of Society Generale's well regarded Global Strategy Team, notes that one of his favorite (and most over-looked) leading indicators is signalling trouble ahead. This gauge, which tracks changes in analyst optimism (yes, they are good for something), has dropped sharply in recent months, suggesting that another U.S. downturn is on the cards.
In addition, those delusiabulls who believe that what happens on Main Street is no longer relevant to Wall Street might want to look at what this indicator is also saying about the outlook for share prices in the period ahead.
I'm not too worried about share prices - they'll only be a symptom. What worries me is the risk of widespread financial collapse, leading to dearth, disease and violence.
Posted by: dearieme | July 27, 2010 at 05:11 PM
Read about the Argentina collapse in 2001. Roving gangs of thugs, food shortages, home invasions. Can't happen here??
see the very interesting story-
silverbearcafe.com
Posted by: Sam | July 27, 2010 at 07:12 PM
dearieme : my sentiments exactly, historically
people organized themselves in time of crisis,
in these modern days crass consumerist has produced
a culture of extreme individualism that is void of
any social responsibility,Hatred is the dominant
emotion.With intelligence comes stupidity and the
more knowledge we accumulate,the more dangerous we
become to ourselves. Civilization has never been
more vulnerable. What a paradox!
Posted by: roger | July 27, 2010 at 07:45 PM
those delusiabulls who believe that what happens on Main Street is no longer relevant to Wall Street might want to look at what this indicator ...
Profitability is increasing with each and every layoff. Corporate America will be fine. Working Americans, not so much. Employed or not the average amurkin will find a way to spend, even moreso if they have extra time on their hands.
Posted by: buzzsaw99 | July 27, 2010 at 07:58 PM
Those charts are very interesting. I was having a look at these 6 months back and it is noticeable the change.
I also trade the market and belive the news always comes out in the chart first. I do follow this guy http://www.forecastfortomorrow.com/ftmembers/ who has been spot on and helping people trading this insane market. Is well worth a look.
Posted by: Erin Crozby | July 27, 2010 at 08:33 PM
I think taking a look at analyst optimism in aggregate is a much more reliable metric than what any individual analyst has to say.
Posted by: Doug L. | July 28, 2010 at 01:39 PM
I checked out forecastfortomorrow.com but didn't learn anything and I am not interested in spending money to become a member. There are a lot of financial sites with information that are free. Besides, I'm not interested in investing in the stock market because I don't trust it.
There are tons of statistics and charts everywhere. I don't trust government numbers because they are deliberately screwed with. They are either meant to make the government look good or to cost the government less money (like the way they figure out a cost of living raise for the elderly and disabled).
All the sites I trust agree there is no recovery.
Posted by: sharonsj | July 29, 2010 at 11:01 AM