Main Street

Many orthodox economic reports have been weakening and the Economic Cycle Research Institute (ECRI) publishes a Weekly Leading Indicator Index (WLI). This has nicely filled in the huge gap between announcements by the NBER.

The following chart shows a remarkable plunge to -10.7. Remarkable because anything below -10 says "Recession".



Baltic Index (BDI) broke down in early June. The plunge since has been severe and faster than the one in June 2008. We took that one as warning on the financial markets as well as upon business activity.


At such times, the BDI has been a reliable indicator on weakening international trade. While the equivalent in Europe to the ECRI is not yet being worried about, the Baltic links America's ECRI to the rest of the world.

Our case that the economy would decline virtually with the stock market seems to be working out. This means that financial history is still within a fairly typical post-bubble contraction that could run for a number of business cycles. Possibly each contraction would be severe and each expansion would be modest.

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