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« June Employment Report Preview | Main | Weighing the Week Ahead: A Summertime Three-Ring Circus »

July 08, 2012


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Michael Pitre

Federal Bank of New York. Equity Premium Drift paper. So they are saying the market is higher because of this? 50% higher.

Apparently some think so.

Michael Pitre

I am not doubting your article and what you are saying Jeff. I just think that in the big scheme of things qe has helped hold up asset prices and inflate them when they are under a lot of pressure. It works best when stocks are way undervalued. Its affects have decline over time.

Michael Pitre

In other words they, the Fed, have been very successful at achieving one of their goals...helping the stock market.

Michael Pitre

Jeff, I could not open the first link. I did read the link on the Super Powers of the Fed. I don't know that we are in disagreement on the Fed. Certainly one of their goals was to help support the stock market with QE...I don't think anyone doubts that. As far as the chart is concerned it seems to make the case to me that easing has helped the stock market over the past few years. Mike.


Mike -- I've written extensively on this subject. Investors should be wary of making spurious correlations based on pretty charts. You would be well-advised to read my page on Fed Policy and Quantitative Easing ( and pay special attention to the post titled The Super Powers of Ben Bernanke:

Michael Pitre

The Fed has no choice but to prop up assets. The minute they stop down we go.

Michael Pitre

Fed prop Job.

Michael Pitre

Jeff, I am not trying to cherry pick here. I agree John Hussman has a perpetual negative outlook. If not for continuous Fed interventions world wide where would we be there now. That alone tells me a lot. I don't know for sure we are already in a recession and I am reading your articles as I think you are a very smart guy. But there are two sides to the coin imo. I personally think we are likely already in a recession but only time will tell. I am not qualified to make that call just an opinion. I do think however some of the experts you site will be wrong. Here is another "perma" bear...Mish.

The Other Extreme "Recession is Not Imminent"

Please consider the other extreme, Recession is Not Imminent by Dwaine van Vuuren.
"Among the bearish voices I most respect is John Hussman, whose work I read regularly. He is thorough and quantitatively rigorous. Whenever I am convinced there will be no recession, I temper my enthusiasm by re-reading his articles to make sure I maintain a balanced view. One day he will be right and I will be wrong, but at least I won't be blindsided.

But the data don't show catastrophe. Looking at the Leading SuperIndex, we are a bit worse off than last summer and the summer before that. We just put in a leading SuperIndex peak on April 13 (10 days after the SP-500 peak) that is lower than the prior two peaks. This slowdown, if not checked in time, may well be the one that pushes us into recession. But even that worst-case scenario is still three to four months away, according to the SuperIndex recession-path projections in our regular weekly report."

I disagree. The global data is an outright catastrophe. Moreover, the jobs reports in the US and the US ISM manufacturing numbers are a catastrophe as well.

I am amused by van Vuuren's statement "at least I won't be blindsided". I suggest he already is. Mish

I will continue to read you every week. Like I said before this is just a personal opinion and I am far from qualified to be sure on this. I do appreciate your time in responding to my comments and wish you the very best. Jeff, I am looking forward to your weekly updates and learning more about this subject. Mike.


Mike -- Hussman did not "nail" anything. He has had a perpetual negative outlook for many years. Whenever there is a recession he is right. His macro commentary has been terrible according to CXO Advisory, as I noted here:

He is a good stock picker and business man.

You are really cherry-picking the old news. Hussman does not have a long-term record of success in recession forecasting. You should spend more time reading the sources I have recommended.

Just a thought....



Mike -- The ECRI has been wrong for nine months. They keep changing the time frame for their forecast. They also keep changing the variables in their model and what they cite as results.

They do not decide when a recession starts. That is done by the NBER. I have written many articles on this theme and I am not going to do it over in the comments. You, and anyone who thinks you are correct, should read this series:

In particular, the piece on how to win a recession forecasting contest will explain the apparent delay in confirming recessions.

At the moment, there is no evidence that we are in a recession. There is some slowing of growth, but not a business cycle peak.

I probably need a full article on this.



Mike -- I (and many others) have frequently written that we are in a period of below trend growth that has been costly and painful for many.

That does not make it a recession, something that has a precise definition.

This is important to keep in mind.



Mike -- Sorry to be slow in responding to your many interesting questions.

On this one, the "rant" takes a time known now to be a recession and goes back to check the GDP forecasts. You could do the same thing on earnings.

This is a misleading comparison, and certainly does not prove that you should take the other side from economists. You should take many years and look for discrepancies to draw such an inference.

It is why I separate recession forecasting from earnings and GDP projections.


Michael Pitre

Here is John Hussman nailing the recession call in November 2007...miles ahead the consensus.

Michael Pitre

ECRI Interview today..Recession is here.

Michael Pitre

"The official unemployment rate is 8.2%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 14.9%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years."

Michael Pitre

If you go against economists you have a greater chance of being right.

Michael Pitre

Jeff. Your insights are quite interesting and valuable. Here is a question for you. Most economists get it wrong and always have. If you go back a good number of months everyone and their brother was calling for a higher level of gdp in the US. Now as time goes on reality is another matter. Each and everyone has had to eat crow regarding their forecasts. Now we see that the world economy has entered stagnation in June. So as time moves on we move closer to recession. I really don't see this ending well.
Thanks for your excellent work!...


Tony -- Thanks for you comment, and I think we should be watching with interest on Wednesday.



KB -- I understand and sympathize with your comment about earnings and the theme.

Put yourself in my chair. I am doing a review/preview article. I try to take last week's news and put it in context that will be helpful in several time frames.

I also try to look ahead.

While I can often suggest what we should be watching, I may not be able to predict specific events.

I strongly agree with your idea about analyzing the "bottoms up" analysis, and I promise to do more.

Thanks for your comment.


tony holland

I look forward to your interpretation of the FOMC minutes
nice article and required weekly reading as always

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