We have many rules of thumb for Contrary Indicators. When it comes to magazine covers, we look for a mainstream (not business) outlet joining a trend in progress as it reaches a cathartic moment. Media jumping on a bandwagon can augur a top or bottom just as a major trend reaches a climax.
Yesterday, we noted the repeated housing bottom calling by Barron’s. That was not quite a contrary magazine cover indicator because its a) on a business imprint, not a mainstream media outlet; 2) It is not a call that punctuates the end of run. See Time Magazine’s 2005 Home Sweet Home cover as a perfect example of a mainstream pub that is the exclamation point after a huge run.
Unlike Time, both of the Barron’s housing covers were themselves attempts to be contrarian calls. Rather than hitting that mark, the first one was wildly wrong; we will know if (and how by much) this one is wrong in the not too distant future.
Which leads us to the Economist.
This week’s edition adopts the outlook that “the world economy is better than it was, but there are still big risks out there.” Its a business, not mainstream magazine, plus it is circumspect enough not cheerleading at the top to not qualify.
And there are still big risks out there. Too often since the 2008 financial crisis investors’ hopes for strong and lasting growth have been dashed—whether by bad luck (soaring oil prices), bad policy (too much budget austerity too fast) or the painful realisation that recoveries after asset busts are generally weak and fragile. If tensions with Iran over its nuclear programme spike, for instance, an oil-supply shock could once more cause havoc. Much could yet go wrong.
The timing of this could very well mark a top in economic activity, but by the rules of magazine indicators, I am going to suggest this one fails to qualify.
Can it be…the recovery?
Mar 17th 2012