Economic Cycle Research Institute’s (ECRI) Weekly Economic Indicators have been known to move markets. Many people who look at the economy now including economists have a tough time sifting through all the sometimes conflicting crosscurrents. Many of those who have finally come down on the bullish side will cite the ECRI forecast and its splendid record as a key point in reaching their decision. It is really hard to argue with that.
In a way ECRI’s WLI encapsulates all the favorite tools of traditional forecasters in one concise forecast. And why shouldn’t they enjoy the influence they have? Their record of forecasting post war recessions is superlative, and if anyone need any reminding, they were real early in correctly forecasting the economic turnaround we now appear to be having.
Success of course spurs interest. My latest interest started to grow when their indicators started showing some mixed readings a few weeks ago. At the same time I began to see some signs myself that this expansion was having some problems and therefore it was time to start looking for signs of a possible downstroke in the economy.
This past week I thought there would be a good chance both of WLI’s principal indices would drop for a second week in a row. That would be a signal to me to short the market aggressively. Only one of the indexes actually dropped. Though it didn’t happen last week I still feel it could happen fairly soon. Of course whether you want to be short or long it is always helpful to see what important market participants are seeing. So I put getting an ECRI subscription at the top of my “to do” list. Also, as a result of ECRI’s comment that last week’s rise in WLI was due to their commodities index, looking into that went to the top of the “to do” list as well.
The importance of the global commodities index in last week’s performance of the WLI raised a red flag. It’s the word “global” that bothered me. Not only is this index global in nature, but in 2009 China has major influence over all commodity prices. No longer is it the US. China uses three times as much commodities as we do and accounts for all the growth in the world in many commodities. While an international commodities index would have worked well in the US until 2000 it doesn’t anymore. No more than the price of tea in China.
If you wanted to make the case that price increases in China affect US economic activity increases, you would have to at the very least demonstrate that demand in China results in imports from the US. This is the only way you could even begin to justify the use of such an index as a leading index. This would not work though, because US exports to China are so low. They are low because there is no mechanism to translate demand in China into imports from the US . The reason is the mechanism has been deliberately broken by the Chinese government. They have refused to allow a free market in their exchange rate with the US. So what happens in China stays in China . China recently has been growing 8 – 9%, while we have been experiencing negative growth. There is just no cause and effect relation between them and us. So a price index where they have the main influence has no predictive value here. Bottom line, in my opinion ECRI should have shown two down weeks back to back and the stock market should be down a lot further right now.
Regardless of this little problem I still wanted to get access to ECRIs market moving index. Yesterday morning I called ECRI and found out anyone can get the WLI on their website at 10:30am. I knew it was made available at that time but didn’t realize it was free on their website. After digesting that important bit of info I pressed on. I asked about getting a subscription that’s available for the WLI at 9am before the market opened, as I thought there could be a market moving development in the next few weeks. My preconceived notion was it would cost several thousand dollars.. Here is what I learned. If you want to get what is free at 10:30am at 9am instead, before the market opens, the price … $55,000 annually. Needless to say at this point I was speechless. I didn’t ask for a free trial.
Of course paying $55,000 to get information at 9 instead of 10:30 may sound crass, but that’s not all you get. The 9am price is part of the comprehensive entry level subscription. Yes that price is the entry level subscription. There are different levels of subscriptions that include the ability to speak to ECRI personnel on the phone, consulting etc. My reaction, … I was in the right place … I just had the wrong wallet. It seems to me though no matter how you dress it up all you are paying for is the release time. Only institutions can afford that kind of fee and it is not a lot of money for them to pay for market moving information, even if it only moves markets occasionally. For me I think the information is still valuable at 10:30.