ECRI Weekly Index Debate

The usefulness of ECRI weekly leading index is widely debated today. The debate was started by Bank of America Merrill Lynch biased report: ECRI: Not the “Holy Grail”.

David Rosenberg of Gluskin Sheff + Associates in todays Breakfast with Dave:

What is fascinating is how the ECRI, which was celebrated by Wall Street research houses a year ago, is being maligned today for acting as an impostor — not the indicator it is advertised to be because it gets re-jigged to fit the cycle.

From our lens, there is nothing wrong in trying to improve the predictive abilities of these leading indicators. Still — it is a comment on how Wall Street researchers are incentivized to be bullish because nobody we know criticized the ECRI as it bounced off the lows (not least of which our debating pal, James Grant). For a truly wonderful critique of the ballyhooed report that was released yesterday basically accusing the ECRI index as fitting the data points to the cycle – not the case, by the way – have a look at ECRI Weekly Indicators Widely Misunderstood that made it to our friend Barry Ritholtz’s blog (“The Big Picture”).

Big Picture post: ECRI Weekly Leading Indicators Widely Misunderstood.

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This entry was posted on Wednesday, June 23rd, 2010 at 2:04 pm and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

5 Responses to “ECRI Weekly Index Debate”

  1. MStigums Says:

    Agree with the sentiment, but, “nobody we know criticized the ECRI as it bounced off the lows,” doesn’t ring true. I recall Mish Shedlock and Paul Krugrman piling on ECRI’s recovery call, saying that ECRI was blind to all the things that were “different this time.” I think ECRI had it right then, as they likely do now.

  2. Belisarius Says:

    But the fact remains that todays sell side research and mainstream media handles this piece of data differently than when it was turning positive.
    It’s definitively not the holy grail, but taken in greater context it has proved to be, let’s say, at least useful.

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