Whole Earth Forecaster Home
Economics (forecast reliability not guaranteed)
Despite government and private economists' optimism, the economy is still in recession and it looks like 1992 will come before the
economy shows any real strength. Way back in the February 1990 issue of WEF I forecasted that the economy was peaking and that it would bottom
in 1992. That looks now to be an excellent forecast.
- Whole Earth Forecaster newsletter, October 1991.
Gross Domestic Product 
Below are compared the U.S. Gross Domestic Product (quarterly growth, annual % rate) and yearly Berg Timer.
BT was able to forecast all ten recessions since 1947. Look for economic slowdown/recession in 2007 and 2009-10.
Commodities, Goldman Sachs Commodity Index
Below are compared the weekly Goldman Sachs Commodity Index and monthly Berg Timer since 1999 and forecast through 2002.
I wouldn't want to be on the wrong side of monthly BT when trading a broad commodity index.
The Goldman Sachs Commodity Index is a composite of 26 commodities from all commodity sectors: six energy products, eight metals and twelve agricultural products (4 grains/5 softs/3 meats). Possible means of implementation include the purchase of GSCI-related instruments, such as the GSCI futures contract traded on the Chicago Mercantile Exchange (CME) or over-the-counter derivatives, or the direct purchase of the underlying futures contracts. For more information on the GSCI see: http://www.gs.com/gsci/
Forecast: Look for a bottom in the GSC the 2nd week in June 2002 with a rally lasting into the second week of July. Then down through the 3rd week of August, up through the 3rd week of September, down through the last week of October, then up through year-end.
Heating Oil
Below are compared daily Heating Oil and the 3day-sum of the 3-day sum of daily BT.
All Heating Oil traders should be aware of this correlation. This is a simple, direct relationship. The best trades are those where BT makes a big turn lasting for several market days like 4/21/03 above. You can do more research to develop your own stops and entry/exit rules. There are two possible explanations for this correlation: (1) The weather affects weather derivative trading which then affects this market and/or (2) it's simply mass psychology being affected by atmospheric and weather conditions.
If BT bottoms or peaks over the weekend it looks like it's best to enter or exit the trade on the prior Friday's close.
Durable Goods Orders
Below are Manufacturers' Durable Goods Orders and the 2-yr Berg Timer (lagged one year) since 1961.
This positive correlation is about the same with most macro-economic indices compared to BT. BT correctly forecasted the major lows of 1958, 1966, 1970, 1975, 1977, 1984, 1988 and 2001.
Forecast: Orders should peak in 2003 then fall and bottom in 2005.
Interest Rates
Below are compared Real Interest Rates and the 2-yr Berg Timer since 1965.
A 'real interest rate' is defined as interest rate minus inflation. The above real interest rate was calculated by subtracting the Consumer Price Index from the 3-Month T-Bill rate. BT correctly forecasted the major low in rates in the early 1970's, the large bubble in rates during the late 1970's and many other smaller highs and lows.
The real interest rate represents the real cost of money and is a good indicator of the business cycle.
Forecast: Real rates should bottom in 2004 and rise through 2005.
"Perhaps the strongest observation to be made is that real rate peaks and troughs appear to have an established relationship with business cycle peaks and troughs. Every postwar business cycle peak follows a peak in the real rate series and a real rate trough occurs either with or shortly after a business cycle trough. This observation is consistent across the eighteen series we constructed."
Michael Dotsey and Brian Scholl. The Behavior of the Real Rate of Interest over the Business Cycle. Federal Reserve Bank of Richmond Working Paper No. 00-9. August 2000.
Production Hours
Below are Work-Week Hours of Production and yearly Berg Timer since 1983.
Work-Week Hours is a basic macro-economic index reflecting the state of the economy, a useful tool for management.
Forecast: Production hours should remain relatively low with an upward bias through late 2004. They should then peak in 2005.
Mortgage Applications
Below are compared total weekly mortgage fees from applications and weekly Berg Timer in 1995.
The data is from a broker at a mortgage brokerage business in Miami (data unavailable Apr-June). The broker sent me the data after noticing a correlation between weekly BT and the amount of fees they took in each week.
This is further evidence that housing sales are affected by weather and/or human excitability.
Data source: Mortgage broker wishes not to divulge his name.
