My Photo
Note: Jeff does not accept guest blog posts on A Dash of Insight.

For inquiries regarding advertising and republication, contact main@newarc.com

Follow Jeff on Twitter!

Enter your email address:

Delivered by FeedBurner

Certifications

  • Seeking Alpha
    Seeking Alpha Certified
  • AllTopSites
    Alltop, all the top stories
  • iStockAnalyst
Talk Markets
Forexpros Contributor
Disclaimer
Copyright 2005-2014
All Rights Reserved

« Evaluating Recession Forecasts: What Every Investor Must Know | Main | Weighing the Week Ahead: Have big companies lost their earnings mojo? »

January 12, 2012

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451ddb269e20162ff79cada970d

Listed below are links to weblogs that reference Best Recession Forecaster: Robert F. Dieli:

Comments

oldprof

pennypack -- As usual, my blog agenda exceeds my bandwidth!

If I were more worried about a recession, this would rank higher. Meanwhile, two of the installments are close to completion, but will include some outside content.

Pretty soon....

Thanks for noticing!

Jeff

pennypack

Jeff, where are #3 to #5 of your series on recession forecasting? i can't seem to find them...

oldprof

macrotool -- This model has been a subject of discussion among those I have cited. It is based upon data several months old and subject to revision. Even with that, it is not better than the sources I have cited.

Thanks for the suggestion, and I welcome any others. I have held this "competition" open for more than a year. Most nominees have models totally based on back-testing.

Jeff

macrotool

a bit late on the topic but have you looked at the Chauvet recession model. I follow it closely and pretty good track record. IF so, can you tell me what you think of it.

John Butters

Hi,

I noticed the discussion after my last comment. I commented on ECRI's long, short and inflation leading indices here: http://bit.ly/xdCBYA

ECRI may have made minor changes to the components but if you look in the right place you can get a good idea of what is in them. Having pulled them apart, I concluded that they weren't gold dust after all -- which isn't a surprise when you think about it -- and made my own index using the components of the OECD and Conference Board indices that still work (e.g. not M2).

John

No idea. You have defined ECRI black box as an orange and the Diele's Aggregate Spread as an apple so there's no where to go with that comparison. However, with their black box, whatever it is, ECRI has called a recession for the first half of 2012. That's an output from their black box. Diele's Aggregate Spread with their transparent apple, says "recession?" no way, certainly not within the next 9 months. Where does this discussion go if we in fact experience a recession by July 1, 2012? ...and is Dieli's apple red, transparent, or perhaps actually black also. The Aggregate Spread is an apple output. What else do we know about what is inside the apple? Do we know enough to replicate the Aggregate Spread. If we can, does it really matter if we experience a recession by July 1st, 2012. This whole discussion is a little like debating Anthropogenic Global Warming, we just don't need to wait as long to get a real feel for the answer.

John

...also after spending some time with Robert Dieli's Aggregate Spread, I'm not seeing a very consistent relationship between crossing the 200 basis point threshold and recession onset. Please step through each instance from left to right to show just how this works. Thanks. I don't know that ECRI's performance is any better, but we should know soon enough. ECRI maintains we're still looking at recession onset in the first half of 2012.

oldprof

John -- I am well aware of the ECRI contentions and the circumstances of their "non call" or a recession in 2010 and the sudden switch in September of 2011. Since they do not reveal any of their "world indicators" or "long leader indicators" everyone is left to wonder what is inside the black box.

When a group makes the assertion that they are the best at something, you can expect it to be studied carefully. I think that Doug Short provides the most objective data analysis and charts on this topic, and he has featured the WLI for years. Most other people look at it in the same way.

All I am doing is comparing the Dieli record with that held out to be the best.

So to be fair, do you have any other suggestion for a comparison? If Mr. Model is an apple, what apple would you propose for a test?

Jeff

John

Jeff,

Why are you showing the WLI as a recession indicator. ECRI makes it very clear that is very definitely not the purpose of the WLI. You are comparing apples and oranges. Read here: http://www.ritholtz.com/blog/2010/08/weekly-leading-index-still-widely-misunderstood/

John Butters

Thank you for your kind reply. I look forward to learning more in due course.

Best wishes,

John

oldprof

John -- Since a recession is not imminent, this is on my list as important but not urgent. Stuff like the employment preview and assorted news events have interfered.

I have an ongoing series on recession forecasting with two or three more installments. I am also two installments behind on Europe.

To summarize -- it is a very important subject that I want to do effectively. I'll get there.

Meanwhile, I hope you come back to read for other content as well. You can also subscribe to our email updates, or follow me on twitter. You won't miss the article:)

Thanks for your continuing interest.

Jeff

John Butters

Very interested to know how this is calculated -- I have been coming back here since this piece was published to find out! Are you going to give us the details?

oldprof

Eric -- There are two errors. The one you note is what Bob refers to as a "high turn" and the other was in the late 60's where economic weakness occurred, but not with enough magnitude for the NBER to call a recession.

I plan to continue the explanation of how I am using this indicator along with what else to watch. An important question is whether conditions are enough different to alter the probabilities at each level.

More soon.....and thanks for the question.

Jeff

Eric Kennedy

This looks like a good indicator, yet it is worth noting it never got down to 200 for the 1960 recession. Did Bob say why?

oldprof

Fundmyfund -- The 2005 initial signal came from some Katrina-related effects.

It would be easy to take the indicator and add a couple of variables to eliminate this. One of the things I like about Bob's approach is that he stays with the method. He does provide discussion and color in real time. More in the next installment.

Jeff

oldprof

Fundmyfund -- Moving above 200 after a time below indicates that a trough is expected. The NBER uses the trough to indicate the end of a recession.

The indicator is not trying to describe current conditions, but to anticipate peaks and troughs in the cycle.

I hope this helps.

Jeff

Fundmyfund

Also did Robert have any comments about ~2005-2006 which seems to be the one main false positive? THanks

Fundmyfund

Hi Jeff, interesting stuff. I can see clearly the recession calls (i.e. when the line breaks 200 to the downside) but not sure what it tells us when we go back over the 200 reading. Simply that we are not expanding again? Or will expand in 9 months? Thanks

gm

Thanks Mr. Jeff. I wish I can work for smart people like you and Mr. Dieli. Thanks to internet, ordinary folks like me have access to best in the business through mouse click.

Regards.

Proteus

Jeff: Congratulations on having this as a featured story on Business Insider. You've hit the big time :)

It's a well written and persuasive post.

The comments to this entry are closed.