Review – ECRI

The Economic Cycle Research Institute webpage ECRI.com is the “go to” site for most serious economists and journalists when looking for a read on the US economy. The Weekly Leading Index is available for free and is published every Friday.

The Condensed Version

NBER measures the Business Cycle while ECRI uses leading indicators to anticipate changes in the Business Cycle. ECRI believes that the biggest gap between expectations and reality occur around the turning points between growth and contraction.

The Full Version

Years ago, my father recommended a small book called “Beating the Business Cycle”. I cannot say that I always listened to my father’s advice but this time I was glad that I did.

In straight forward language, the ECRI’s manifesto lays out the case both for why the Business Cycle exists (its death has been oft-reported) and how ECRI has developed a set of leading indicators that allows a 4-6 month peek into the future.

To properly understand how to use the indicator, I would recommend buying the book.

The link will take you to the Kindle Version which you can put on almost any device with the free program.

How does that help you invest?

There are two ways this helps you.

First, the WLI gives you a good quick read on the near term outlook for the US economy. If the indicator is very positive, you can take on riskier assets. If the indicator is negative, don’t be surprised if the Fund King System is putting less risky assets at the top of your rankings.

The second but less frequent use is at turning points. As you will read in the book, the market perception and fundamental reality diverge the most at turning points. By being aware of that one concept, you can improve your investment performance dramatically.