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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Bullish on the Economy


LOU DOBBS: Well my guest tonight is bullish on the economy, bullish on the markets. He's expecting a recovery in the near future, and he says stocks have hit their lows. Lakshman Achuthan, economist and MONEYLINE regular joins us now.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Good evening.

DOBBS: Good evening and bring on the good news.

ACHUTHAN: Well, very specifically ECRI's array of leading indexes have been moving closer and closer to signaling a recovery, a cyclical upturn in the economy.

DOBBS: Now the last time you and I talked, there had been seven weeks of upticks in the weekly indicators. You were looking for ten. Where are we?

ACHUTHAN: We got to nine and then we took a slip, but you know it never goes in a straight line.

DOBBS: Do we start all over again?

ACHUTHAN: No, we don't. Not at all. I think that you're allowed to have a little bit of noise. I think that this is a bonafide cyclical recovery in the leading indexes. We're rather conservative in making our calls. We won't come out and pound the table on a recovery until we see the monthly indicators, which we'll get in about a week or so.

DOBBS: Are you ready to pound?

ACHUTHAN: We're getting close, starting to tap.

DOBBS: OK, well we'll take a tap. Put this in definitive terms for our viewers, many of whom are investors, and obviously very interested in the result here. We have seen a lull in December. Is that it?

ACHUTHAN: My guess is yes, that is it and that would be consistent with an early 2002 trough in the economy. Between now and then, the economy is going to continue to probably slip. Early 2002, somewhere in the first quarter, we'll bottom and begin turning up.

This is a forecast of timing. When will we turn and go the other way? The magnitude, I think, remains a question. The slope of the recovery, how strong will it be, remains a question. There are some significant headwinds that are still out there.

DOBBS: Most significant among those headwinds?

ACHUTHAN: Employment. I think we still have some job losses we're hearing more about them today, that are going to weigh on the consumer's ability to have a cyclical recovery in their consumption. Also, the global cyclical downturn. We had recessions in Germany and Japan, and so our typical markets abroad are very weak.

DOBBS: But in Europe the downturn has not been as bad as some had feared, at least to this juncture. If we look at this market as having hit a low and recovery coming in the end of the first quarter, as you suggest.

ACHUTHAN: Somewhere in there.

DOBBS: When will we have a confirmation that we're back to growth?

ACHUTHAN: Back to growth, when the coincident indicators begin rising. So let's see how those do in February and March. We'll have to wait until about April to get that data.

DOBBS: When you say a coincident indicator?

ACHUTHAN: I mean things like production and employment. When job loss is really slow. I mean, we still have negative job losses. It's not as bad as it was, but it's still negative. It's still the wrong direction.

DOBBS: But of course we can have continued job losses with a growing economy.

ACHUTHAN: We did in 1991. That was the jobless economy, an anemic recovery. So that's why I would caution a little bit on banking on a very vigorous recovery at this point.

DOBBS: OK, well we'll take that tapping. We're going to get you back here to see you pounding.

ACHUTHAN: OK.

DOBBS: Lakshman, thanks. Still ahead, we'll be talking about an asteroid with incredible destructive power that got very close to Earth. The question tonight, however, is why didn't scientists see it sooner?
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