I’m writing this on Thursday around 10am and I just received the latest Conference Boards LEI index for October, which increased again, and marks a consistent increase from the March lows after Covid. If you’ve read my stuff for a while, you will know that I give this data point a lot of credibility.
Just as a recap, this data point is the combination of 10 different economic data points that I believe provides a great job of telling the story of current economic strength and current momentum. The ten data points are as follows:
· Average weekly hours, manufacturing
· Average weekly initial claims for unemployment insurance
· Manufacturers’ new orders, consumer goods and materials
· ISM® Index of New Orders
· Manufacturers’ new orders, nondefense capital goods excluding aircraft orders
· Building permits, new private housing units
· Stock prices, 500 common stocks
· Leading Credit Index™
· Interest rate spread, 10-year Treasury bonds, less federal funds
· Average consumer expectations for business conditions
Each data point is given a factor rating. Each data point on its own is important to the overall economy, however when placed along side other important data points you have the ability to get picture not muddied by (one offs) or anomalies, which can encourage you to take premature action.
If we just let the consumer confidence index be our guide, you would be bounced around more than my Irish friend Rick O’Shea…(Say his name a couple of times and you’ll get it). Plus, we as consumers are usually terrible at forecasting things and tend to stay in a depressed state way longer.
So why am I putting so much emphasis on this index? It’s been a long-term predictor of recessions. Not at the fact or after the fact, but on the average since the index started in the 60s, declines happen around 6 months prior. Check out the chart below.
You can see from the circled area we have seen a downturn in the index prior to the start of a recession. That said, due to how a recession is measured (two negative quarters of GDP) by the time a recession has been named, you’re already in one, so paying close attention to this is critical. Now someone will say the recession last year (which I don’t count as official), did not show a downturn (marked in red). Correct, first I’m not sure of any index that can predict a pandemic, and second, we had seen some stalling leading into it. I’m of the mind that if we didn’t get a pandemic and a subsequent MASSIVE amount of stimulus pumped into the economy, we may be looking at one now.
As a financial advisor, I have fielded a number of questions about how much longer this can run before the economy takes a crap, well if the LEI is any indication, it may be a while.
Moving on…tomorrow night (Friday 11/19), Jim Cramer will interview Jensen Huang. If you want to get blown away, check out a replay of this interview. One of the biggest factors in my opinion on why not only the markets and economy, will continue to grow for decade(s) to come, is innovation. Jensen and Nvidia are at the absolute forefront of innovation. He plays a distant cousin in the PR quest behind Musk and Bezos, I think mainly because he doesn’t have a rocket ship, but take it from me, none of their stuff would work without this guy. The younger generation knows Nvidia from their gaming applications, which have truly revolutionized the reality of playing games. Others may have heard of their involvement of driverless cars, but last week they unveiled the next generation of innovation they called Omniverse, and specifically Omniverse Avatars. Now I’m not trying to freak anyone out here, but the day of having an avatar take your order at a restaurant may not be as far away as you think.
I’ve listened to a bunch of Jensen’s interviews over the years, and I’ve been mind-blown more often than not, and I’m sure Friday’s interview will be the same.
HWFFS
Fun
Fun was one of the areas that I put into my “mantra” purely based on my own experiences. When I come back from a vacation, I generally plan the next one. There’s something about having something to look forward to that can help you in the tougher times. I’ve always said that I’m the most productive the day before vacation because I want to make sure everything is done or channeled out before I leave, and I think that’s the way most of us are.
Last weekend I read Dave Crenshaw’s book “The Power of Having Fun” and this book basically makes it ok for all of us to plan and have fun not only on a yearly basis (like a vacation) but monthly, weekly, and even daily. No, I’m not talking about slacking off and turning your back on the things that you don’t want to do and go and have fun, but micro fun. The author talks about creating your “oasis” on a personal level, family level, and work level. He breaks it into a 5-phase process that starts with granting yourself permission to have fun, discovering your fun (everyone’s idea of fun is different), scheduling your fun, protecting, and enjoying your fun.
As with most things I read, I was able to gather a few little things to help me along my journey. I’ve been good at planning the big fun events (yearly vacations etc.), but guilty of not having the shorter fun events. It doesn’t matter whether you’re still in the workforce, retired, or a homemaker. We all get caught in a routine, and it’s easier to forget were here for a good time, not a long time.
Although Fun got on the mantra initially, it did not have the credibility of the other 4 areas. That has definitely changed with the more birthdays I’ve had, but also the books I’ve read. It’s now an equal player.
With that, here’s the buy/sell. Wishing you and yours a very happy and safe Thanksgiving. I’m thankful for all of you.
Yours in fun,
Mick Graham, CPM®, AIF®
Branch Manager Raymond James
Financial Advisor Melbourne, FL
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