Money Talk Guest Lakshman Achuthan of ECRI

This weekend Moneytalk host Lynn Jimenez interviewed Lakshman Achuthan. Lakshman Achuthan is the Co-Founder and Chief Operations Officer of the Economic Cycle Research Institute, or ECRI, a New York-based independent forecasting group. He is also the co-author of  the book "Beating the Business Cycle."  

Lakshman and I have been friends for over a decade.  We met after I wrote about how impressive their US Future Inflation Gauge (US FIG) was as a leading indicator for the direction of the Fed Funds rate changes.   

Summary of the key points:

• We are in an economic recovery now but with the economy flying at a lower altitude where the ups and downs will be more noticeable thus
• We should expect more frequent recessions.
• The economy was smoother in the past that was wrongly attributed to "just in time manufacturing," better policy makers like the Fed and better models. 
• Policy driven by models actually makes things worse since they use lagging indicators.
• ECRI's leading indicators can only look ahead 2 to 4 quarters.
• Central banks use old models that "don't work in the real world" and create bigger boom-bust cycles
• Chance of inflation being above what the Fed is targeting is "pretty good" because we have a recovery now and they are strapping a rocket onto the back of the economy and they are stepping on the gas.

Read my latest article  How to Play Expected Inflation From the TIPS Spread

• Look to take more risk now because we should boom before the next bust.
• Don't give up if you are looking for a job as it will get better first.
• "Get it while it is good" and reassess risk in the summer.
• Watch the Future Inflation Gauge (US FIG) to get a handle on inflation.  (I cover this in both my newsletters.)
• Lakshman says the FIG is going up since before QE2 was announced so he thinks the Fed is behind the curve.
• Protect yourself and "Get while the getting is good"

If you sold stocks in early 2008 when I wrote that ECRI said a recession was inevitable, then you could have gotten out of stocks near 1400.  Then if you bought back on April 3, 2009 just after they said a recovery was ahead, you would have gotten back into the market  near the 800s.  Contrast that to Bob Brinker calling us "Recession Casandras" back in 2008 then not having any money  to buy the lows in 2009.  In fact, Brinker was fully invested at the top with a "gift horse buying opportunity" in the mid 1400s! 

==> 0328/8: ECRI Calls it "A Recession of Choice"
==> 5/31/08: Brinker's Cassandra Bashing

Below are some of ECRI's recent predictions that I posted as articles to help ECRI document their great success.

Click to View full size Bob Brinker Buy Levels

KEY ECRI Articles:

• Nov 30, 2010 "ECRI Calls for Revival of US Economic Growth"
• Oct 28, 2010 "The much-feared double-dip recession is not going to happen"
• Oct. 28, 2010 ECRI Warns of High Inflation Nightmare From QE2
• Sept. 24, 2010 ECRI - Premature to Predict New Recession
• July 01, 2010 ECRI Weekly Leading Indicators Widely Misunderstood
• Dec. 04, 2009: ECRI Warns of Lasting High Unemployment Despite Economic Recovery
• July 31, 2009: ECRI Predicts End of Home Price Downturn
• July 21, 2009:  ECRI Predicts The End of the Recession is Imminent
• April 3, 2009: ECRI Says US Business Cycle Recovery Ahead
• March 28, 2008: ECRI Calls it "A Recession of Choice"

Beating the Business Cycle 
By Lakshman Achuthan and Anirvan Banerji

“This easy-to-read book tells you how the respected ECRI calls turning points, and how you can, too.”

—Jane Bryant Quinn, Newsweek columnist

" The Economic Cycle Research Institute can justify a certain smugness now that business cycles are back in fashion."

--Harvard Business Review

“Shows... how far the state of the art in cycle forecasting has advanced, and how investors can profit from it.”

—Jon Markman, award-winning CNBC/MSN financial columnist 

Lynn Jimenez Fan Club  and her Book:

¿Se Habla Dinero? The Everyday Guide to Financial Success (English and Spanish Edition)