Mike Mansfield： "Slow And Methodical March Towards A Double Dip"

http://www.zerohedge.com/article/must-read-look-slow-and-methodical-march-towards-double-dip

A Must Read Look Into The "Slow And Methodical March Towards A Double Dip"
Submitted by Tyler Durden on 09/15/2010 21:40 -0500

Double DipGross Domestic ProductLeading Economic IndicatorsRealityrecoverySell Side Analysts


The following must read presentation by Wolfe Trahan puts every last piece of the economic puzzle together, confirming there is no other outcome but an economic crunch, affectionately known elsewhere in the MSM as a Double Dip. It gives you all you need to know when confronted with the nattering nabobs of neanderthalism, most of whom tend to reside on CNBC. Feel free to do a side by side comparison of this presentation with that put together by Russell Napier earlier, and decide on your own, which one you believe is far more credible. Yet its greatest value-added is the thorough discrediting of the three chief classes of permawrong prognosticators: sell side analysts, company management and economists.

Key summary highlights:

Be Wary Of Sell-Side Forecasts, Economists' Projections And Company Guidance!

Sell Side: A full 70% of S&P 500 stocks currently carry an average rating of "buy" from sell-side analysts. This is higher than at any
other time in the post Sarbanes-Oxley era.

Company Management: Managements’ guidance tends to lag leading indicators by roughly a quarter or two. This leads to misplaced
optimism and pessimism following a peak or trough in leading economic indicators.

Economists: Most economic models were optimized under a period of very different economic circumstances (i.e., 1980s - 2007):

1) Lower Fed policy rates led to more bank lending, private investment and residential construction activity.

2) Increases in consumer’s net worth led to equal or greater increases in consumption (via leverage).

Today’s reality warrants unconventional GDP models: Banks are not lending, private investment remains weak and consumers are
saving more of their income. QE2 is a given in our minds, but will it work?

An environment of decelerating leading indicators requires a different investment approach and is a game changer for all asset
classes. The series that forecasted a sharp recovery in leading indicators a year ago are now flagging a continued deceleration in LEIs.

In 2009, hyper-cyclical sectors such as Financials and Technology performed best as investors tried to get the most bang for their
buck. As leading indicators decelerate, investors should continue to seek out more stable, counter-cyclical sectors such as
Staples, Telecom and Utilities.

Courtesy of Mike Mansfield