ECRI Weekly Leading Index indicator rises moderately but still suggests a sluggish outlook

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose moderately (+0.55% vs. -0.22% last week) but the six-month smoothed growth rate fell modestly (from -0.7 to -0.9), modestly below the flat line, suggesting that the economy will be somewhat lackluster and rather sluggish in the months ahead, neither booming nor busting.

According to ECRI, "With WLI growth slightly negative, and remaining in a narrow band for the past two months, U.S. economic growth is set to slow through the New Year."

A WLI growth rate of zero (0.0) would indicate an economy that is likely to run at a steady growth rate, neither accelerating nor decelerating. A WLI fluctuating in a range from +1.5% to -1.5% would seem to forecast a relatively stable "Goldilocks" economy.

The current reading for the smoothed growth rate is still too close to zero to discern with any great confidence whether the economy is really trending downwards or upwards. We may need another month or even two before the trend becomes clear.

If I were looking at this one indicator alone, I would say that the Fed is succeeding at its goal of moderating the economy to a sustainable growth rate.

I will offer the caveat that the Weekly Leading Index and its smoothed growth rate do not tell us how strong the economy will be six or nine months from now, but do tell us whether whether weakness or strength is more likely a few months from now. It works best to tell us whether a "gathering storm" might be lurking just around the corner, but presently indicates relatively "clear weather" for the next few months, even if the interval is occasionally punctuated with financial market "gyrations."

-- Jack Krupansky

Euro again rises into uncharted territory

The Fed rate cut on Wednesday gave the euro a boost further into uncharted territory, with the December euro futures contract rising to $1.4507 on Friday from $1.4396 a week ago, a gain of 1.11 cents.

Where the euro goes from here is up in the air since we no longer have a solid consensus on what the Fed will do with interest rates, where the overall U.S. economy is headed, or how deep-pocketed the speculators are who have been pushing up the euro.

As far as where speculators think the euro may be headed, euro futures out at March 2009 were only at $1.4504 on Friday, so there isn't exactly a lot of "slam dunk" enthusiasm for betting on an aggressive ongoing upwards trend, so far.

The good news about the decline of the dollar is that it puts downwards pressure on imports and upwards pressure on exports which combine to put upwards pressure on GDP. It also puts upwards pressure on the revenue and earnings of multinational companies.

-- Jack Krupansky

Money market fund yields still high despite Fed rate cuts

One unfortunate side effect of Fed rate cuts is to push money market fund yields down. The good news is that money market fund yields have not yet declined to match even the September Fed rate cut. According to iMoneyNet, as of Tuesday (before the latest Fed rate cut) the average 7-day yield was 4.42% as compared to a yield of 4.69% (0.27% decline) the week before the half-point Fed rate cut on September 18, 2007. The Fidelity Money Market Fund 7-day yield as of Friday (after the latest Fed rate cut) was 4.91% as opposed to 5.13% (0.22% decline.)

There are two main reasons that money market fund rates haven't declined as fast as the Fed rate cuts: 1) existing investments in the fund portfolios continue to maintain their existing yields until they mature, and 2) new commercial paper yields have a higher credit spread due to anxiety about commercial paper in general.

I would continue to expect money market fund rates to drift downwards in the coming weeks and months, but I had expected that they would have been even lower by now. Further, there is no reliable way to forecast how the market for short-term commercial, and associated credit spreads, will evolve in the coming weeks and months.

Note: You can still get a 5.40% APY 6-month CD from Countrywide Bank. Sure, you have the taint of the Countrywide subprime mortage scandal, but the money is FDIC-insured up to $100,000 or $250,000 in an IRA.

I continue to stick with the Fidelity Money Market Fund (SPRXX) for my main "rainy day" cash since it is a solid combination of convenience, security, and decent yield. My "core" Fidelity account uses the Fidelity Municipal Money Market Fund (FTEXX) which had a 7-day tax-equivalent yield of 4.28% (for the 28% federal income tax bracket.)

-- Jack Krupansky

Finally checked my free annual credit report

I finally got around to checking my credit report using the free annual credit report that each of us is entitled to according to FTC regulations. I went to AnnualCreditReport.com and entered some information to enable my credit reports to be located. The FTC web site makes it easy to start the process, but each of the three main credit report vendors has their own quirky interface for how to verify your identity and then each has their own format for the actual report. Even so, that was the easy part of the process. The real work is carefully reading all of these cryptic notations and trying to determine if all of the information really is in order. The bottom line is that I am in reasonably good shape although there are lots of little oddities that I would like to clean up if it is not too much trouble.

I went through personal bankruptcy back in 2005 and that is all there in the reports. The good news is that the reports show it as being discharged and for the most part has proper remarks on my various credit cards indicating that they were part of my bankruptcy filing.

It was odd that my Diners Club card was not listed at all on two of the reports and the third report says that it was written off as a bad debt and without any mention of my bankruptcy.

A New York State tax lien which I "satisfied" over a year ago is still listed but is not marked as being paid yet on all three reports. I should try to get that fixed.

There were a couple of phantom credit card accounts which seem to be cases where a new card had been issued to replace an existing card. In one case one of those accounts is listed as being in good standing while the other was negative and subject to the bankruptcy filing.

A phantom credit line for a closed bank account was in good standing. There is no way for me to access it since the bank account is gone, so it is simply floating out there. It does not appear to be causing any harm.

There are also a couple of old accounts that I thought had been closed years ago but still show as open and in good standing. I could try to get them closed, but they may actually help make my credit look better.

One annoyance is that since so many banks had been involved in mergers and acquisitions I ended up with lots of Bank of America and Chase accounts. Trying to sort them out and figure out the original bank that I knew when I used the card is a pain.

I do not have any plans to try to fix the oddities in the very near term, but eventually I may try to fix some of them just to see what the process is like. I am simply content that there are no major unexpected problems.

-- Jack Krupansky

ECRI Weekly Leading Index indicator falls modestly and suggests a sluggish outlook

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) fell modestly (-.17% vs. -0.30% last week) and the six-month smoothed growth rate fell modestly (from -0.5 to -0.7), modestly below the flat line, suggesting that the economy will be somewhat lackluster and rather sluggish in the months ahead, neither booming nor busting.

According to ECRI, "With WLI growth somewhat subdued and hovering in a narrow band for the last two months, U.S. economic growth is set to slow in the coming months."

A WLI growth rate of zero (0.0) would indicate an economy that is likely to run at a steady growth rate, neither accelerating nor decelerating. A WLI fluctuating in a range from +1.5% to -1.5% would seem to forecast a relatively stable "Goldilocks" economy.

The current reading for the smoothed growth rate is still too close to zero to discern with any great confidence whether the economy is really trending downwards or upwards. We may need another month or even two before the trend becomes clear.

If I were looking at this one indicator alone, I would say that the Fed is succeeding at its goal of moderating the economy to a sustainable growth rate.

I will offer the caveat that the Weekly Leading Index and its smoothed growth rate do not tell us how strong the economy will be six or nine months from now, but do tell us whether whether weakness or strength is more likely a few months from now. It works best to tell us whether a "gathering storm" might be lurking just around the corner, but presently indicates relatively "clear weather" for the next few months, even if the interval is occasionally punctuated with financial market "gyrations."

-- Jack Krupansky