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Where Is Economy at in the Economic Cycle?


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#1 Sentient Being

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Posted 28 December 2006 - 09:46 AM

I'm wondering where others feel the US is in terms of the economic cycle.

If you were to place the economy into categories of:
  • Early expansion
  • Middle Expansion
  • Late expansion
  • Early Contraction
  • Late contraction?
Which category would you place us in and why?


And I'll take a stab at it here myself.
  • Consumer Confidence numbers are still pretty good and not plunging.
  • Interest rates have risen but don't seem terribly high, even though they have paused. I feel there is plenty of room for higher rates if the fed must cut inflation down the road
  • GDP continues to rise.
To me this means we are NOT noticeably in the contraction state yet. But this expansion has been going on now for several years and is aging. So we must be beyond the "early expansion" phase. Are we "Mid" expansion or "late" expansion, maybe a bit of both? If we are in a period where we might say we have modest inflation, Flat to negative yield curve, That might be late Expansion. But with GDP rising that hints at middle expansion. Have rates peaked yet for real? Consumer confidence doesn't appear to be into a declining phase. I'm seeing signs I would have to say the economy is somewhere in the middle to late expansion phase and we haven't really seen the contraction phase yet. Some may argue that it has begun and will show up in the numbers soon, in 2007. But I don't think all that evidence is in yet.

I'm not very good at this, as I've never tried to gain expertise on the basic numbers that make up the economy. Anyone else want to take a shot at placing the US economy into it's proper position in the economic cycle?
In the end we retain from our studies only that which we practically apply.

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#2 Cirrus

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Posted 28 December 2006 - 10:28 AM

Commodity prices the past month or two are hinting that we are likely in the late expansion phase. The yield curve is signaling this as well. The assumption is the Fed and FCBs mainaining their current policy. JMHO.

#3 pdx5

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Posted 28 December 2006 - 01:07 PM

I would place it in the late expansion category. For example the housing boom is cooling off. It was caused by Fed lowering the interest rates to 40+ year record lows. The housing boom added a lot of fuel to the economy since 2002. Already over hundred thousand jobs have been eliminated related to housing. Ofcourse the Fed can revive the housing by lowering interest rates by 100 basis points or more. However I can't see that happening any time soon, in time to save housing.
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#4 briarberry

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Posted 28 December 2006 - 02:08 PM

we're too late for the bull bus but still a bit early for the bear bus :D


‘The American Trucking Associations’ advanced seasonally adjusted for-hire Truck Tonnage Index plunged 3.6 percent in November after falling 1.9 percent in October.

Trucking serves as a barometer of the U.S. economy because it represents nearly 70 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

The American Trucking Associations is the largest national trade association for the trucking industry.

http://www.truckline...834A84E2401.htm


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#5 spielchekr

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Posted 28 December 2006 - 02:22 PM

Wouldn't one expect the oft touted YOY growth in online Christmas shopping to increase trucking utilization? What happened there?

#6 briarberry

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Posted 28 December 2006 - 02:37 PM

someone suggested that it might be due to the cut-backs in the timber industry, HBs not buying so much wood ?

#7 briarberry

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Posted 28 December 2006 - 02:48 PM

another bad sign (for sale sign :) )...


Land's slippery slope: prices of residential lots fall more than those of homes

Saturday, December 23, 2006 - By June Fletcher, The Wall Street Journal


Although lot prices aren't tracked nationally by government agencies or trade groups, for-sale-by-owner Web site Owners.com says that overall, the median price for a typical 1.13-acre lot on the site was $99,500 in October, down 9.6 percent from a year ago. Meanwhile, the median U.S. home price in October was $221,000, down 3.5 percent during the same period -- a record year-over-year decline, according to the National Association of Realtors.


http://www.post-gaze...7/748280-30.stm

Edited by briarberry, 28 December 2006 - 02:49 PM.


#8 Sentient Being

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Posted 28 December 2006 - 03:50 PM

I've decided to take a bit of a new approach here, for me. I'm looking at Sam Stovells work that compiled the sectors and industries and how they tended to do in each phase of the economic cycle.

What I want to do is start watching industries and sectors by stocks and ETF's for those items that should do well in the coming cycle.

In my mind, I think we are very possibly somewhere in the late expansion phase. So we are looking forward to seeing the early contraction phase's arival.
  • Early Contraction....some of the better performing sectors/industries (as compared to the S&P 500) which is how he ranked them are:
  • Aerospace
  • Entertainment
  • Retail
  • Beverages
  • Foods
  • Drugs
  • Household products
  • Retail Food
  • Tobacco
  • Utilities Electric companies
  • Utilities Natural Gas
  • Electronic Instruments
So I'm going to be setting up a folder with ETF's and some stocks in those general areas looking to take possibly some longer term positons at reasonable entries that may present themselves. Possible join some very long term trends, or look for trend change to the upside. My thinking is to get myself into a few positions that might be likely to outperform based on past history and positioning in the economic cycle.

In the end we retain from our studies only that which we practically apply.

~ Johann Wolfgang Von Goethe ~

#9 traderpaul

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Posted 29 December 2006 - 10:58 AM

I've decided to take a bit of a new approach here, for me. I'm looking at Sam Stovells work that compiled the sectors and industries and how they tended to do in each phase of the economic cycle.

What I want to do is start watching industries and sectors by stocks and ETF's for those items that should do well in the coming cycle.

In my mind, I think we are very possibly somewhere in the late expansion phase. So we are looking forward to seeing the early contraction phase's arival.

  • Early Contraction....some of the better performing sectors/industries (as compared to the S&P 500) which is how he ranked them are:
  • Aerospace
  • Entertainment
  • Retail
  • Beverages
  • Foods
  • Drugs
  • Household products
  • Retail Food
  • Tobacco
  • Utilities Electric companies
  • Utilities Natural Gas
  • Electronic Instruments
So I'm going to be setting up a folder with ETF's and some stocks in those general areas looking to take possibly some longer term positons at reasonable entries that may present themselves. Possible join some very long term trends, or look for trend change to the upside. My thinking is to get myself into a few positions that might be likely to outperform based on past history and positioning in the economic cycle.

Wrong approach....Market leads the ecnomy by 6 to 9 months.....By the time you read recession in the newspaper it is to late to sell.....
"Inflation is taking place now. Prices may not appear to be rising because they are making packaging smaller. "— Rickoshay

#10 PorkLoin

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Posted 29 December 2006 - 11:11 AM

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Here's an ol' buddy of Cirrus's. For a resource/commodity background and the exploration and small cap companies, tiny producers, etc., involved, I keep an eye on this index. Agreed that we may well be late in the game for "expansion" in terms of years.

Month-by-month we had a nice correction from May to October and since then things have been back on track. How high the train will go is a valid question.

With the long term in mind, I don't think the Fed or other central banks will opt for deflation over inflation, and I'm going to continue giving the nod to liquidity, and to markets where big growth is evident. The banks are not all-powerful, and deflation/recession/big phase change in the economy certainly isn't impossible, but I'd rather be late than early in getting off the train.

Happy New Year to all, and Sentient Being -- YEAH - BEVERAGES!


Doug