Harmonic recently posted our ADV II and our Investment Advisor Agreement under the Individual section of our site. Please feel free to review the PDF documents and contact us with any questions.
Jan 18th
HIA’s 4th Quarter Letter
Harmonic’s letter to clients for the 4th quarter. A PDF version can be found on our “Individual” client page near the bottom of the page.
January 15th, 2009
Dear Clients and Friends,
The warmth that hung in the air when Harmonic’s previous quarterly letter was penned is a faded memory now, with winter full upon us. Boise’s seen its share of volatile weather: Snow, extreme cold, warm snaps and inversions. We’re proud to note, however, that our pursuit of Harmonic’s two salient goals – to treat our clients with the highest level of repect and professionalism and to generate high caliber proprietary intellectual capital that creates value for our private and institutional clients – has never wavered.
“Following Up”
As we mentioned in last quarter’s letter, we relocated our office in order to accommodate our growing staff and the enormous volume of research we assimilate and create. We doubled our office space and took advantage of very attractive lease rates to position ourselves for further expansion when needed. Our street address remained the same, but we’re a few feet higher: We shifted from suite 320 to suite 440B within the historic Alaska Center in downtown Boise.
Boise’s Rizen Creative, the marketing firm we hired to help us refine our private client marketing effort, developed some great-looking print pieces and an online presence that we think does a great job of highlighting Harmonic’s strengths. We continue to add content of Harmonic’s website and it’s great to have material that reflects our commitment to client service and performance and our excitement about our opportunities.
Eric Lindsay, our intern from Boise State University, finished his stint with us at year-end. He was an enormous help on projects where we required an extra set of hands, and we’ve incorporated several of his time-saving ideas into our regular research process. We wish Eric continued success and look for good things from him in the years to come.
And of course, we released research on investing in gold, our market view, reviews of Boise and Idaho economic statistics, and analysis of the never-ending stream of national economic data. Feel free to contact us or visit HarmonicAdvisors.com to review our research.
High Quality Income
While we noted the development of our High Quality Income solution in our third quarter letter, we’re proud to state that its recent launch represented a unique and outstanding opportunity for investors such as retirees and nonprofits.
Financial advisors have traditionally offered investors desiring a relatively high and stable income stream and low volatility some variety of bond portfolio. In the current low interest rate environment, however, those clients face double jeopardy – a historically low level of interest income and a risk of capital depreciation when interest rates rise. Harmonic reduced this risk by diversifying among bonds of multiple types and maturities, real estate investment trusts, preferred stock and dividend-paying “blue chip” stocks in a single strategy. The High Quality Income strategy offers a yield and risk similar to a high-grade corporate bond but offers capital appreciation potential through its exposure to common stocks.
Not only is HQI a unique and creative solution to the needs of specific investor groups, but it is only the latest example of how Harmonic Investment Advisors fulfills its standard of “integrity, independence and insight.” Our proprietary system of economic and market forecasting and security selection was brought to bear in determining the optimal combination of asset classes and in the choosing of stocks and bonds. We control the software required for this advanced analysis, rather than being dependent on a far-off “home office” or third party. Finally and most obviously, being client-centered, we are able to respond quickly and creatively to needs in our marketplace.
“The Pitch”
As we’ve noted in previous letters, referrals from clients and friends are the lifeblood of our business; your kind words are our only advertisement. Referrals to Harmonic of your friends, acquaintances, coworkers and family members are the highest compliment and are greatly appreciated. Thanks in no small part to those referrals, our ”Assets Under Management” total has continued to expand. As always, we hope you’ll feel free to forward our commentaries, and this letter, to those whom we may be able to assist.
Chris Wyatt, our Wealth Management Officer who joined us late in the third quarter, is ramping up his efforts quickly. Given how critical referrals are to the success of our business, Chris expects to be in touch with our existing clients in that regard. We hope you will welcome his call when he contacts you.
To get you thinking, please note that our target clients fall in the following areas:
- Nonprofits
- Our background in advising and investing for nonprofits offers us a deep understanding of the unique aspects of managing non-profit firms. Further, reinvesting in the community remains an integral part of HIA’s corporate mission and practices.
- Medical professionals
- Those with retirement investments in transition or in need of organization or optimization
- Many of our clients are those that have left a trail of retirement account “breadcrumbs” as they’ve changed jobs. We’ve been able to combine and simplify those portfolios and to coordinate their new self-directed IRA with their existing employer-sponsored retirement plan.
- Those who understand that investing is not a speculative short-term game, but is a contest that is won by methodical behavior and disciplined thinking
- We’re not so much interested in the size of a prospective client’s portfolio as their attitude about the investing process and their willingness to engage with us as team members seeking their long-term financial success.
Why Harmonic Is Different
As we noted in our leading paragraph, Harmonic’s two goals are very simple: Treat our clients with respect and professionalism and generate intellectual capital that creates value. We observe, however, that our brokerage firm and bank competitors seem to believe their mandate is client entertainment, rather than to generate performance. It’s our opinion that financial advisors that make investments through mutual funds or third-party investment managers are abdicating their decision-making responsibility. We therefore encourage investors to ask “What am I getting for the money I’m paying my advisor? Is the portion of my wealth being siphoned off worth more than a nice annual dinner or round of golf? Should the investment management business be like other professions from which consumers expect results, rather than just schmoozing?”
There are several reasons that investors should prefer Harmonic’s approach to private client investing over brokers and banks:
- Transparency
- Harmonic’s client holdings and values are available on Schwab’s client website at any time, and at third party sites as of the previous business day’s close. Investments owned within mutual funds and third-party investment managers are usually only known with a one quarter lag.
- Immediacy
- As the managers who control our clients’ investments we visit with clients directly and can answer detailed questions on each holding and how it fits in the overall strategy. Needless to say, there’s no way a bank or broker who’s passed responsibility for the management of client assets to a third party can do this.
- Performance
- Given that the primary focus of Harmonic’s business is to generate intellectual capital and the returns that can be derived from it, we reasonably expect superior performance over time.
- Cost
- Harmonic’s annual fee is only 0.75% of the assets we manage, compared to about 1.25% for the average broker or bank.
Investment Performance
A key factor setting Harmonic apart from its competitors is our dedication to creating proprietary intellectual capital that is the source of outstanding investment returns. It will be no surprise to readers of our Economic Insight and Market Insight research that we have been increasingly conservatively positioned, concerned about the potential for a sharp, sudden break downward. Despite our hard work and after three quarters of outperformance, our Large-cap Core and Smid-cap Core stock strategies slightly underperformed their relevant benchmarks during 4Q09. That said, the full-year performance for those strategies, targeted at institutional and high net worth clients, was outstanding. While we cannot share the exact figures with you in this letter for regulatory reasons we are happy to discuss the performance with you in person.
The majority of our asset allocation-driven private client portfolios beat their benchmarks in 4Q09, as our underweight of US stocks and overweight of their foreign counterparts drove performance. The bond portion of client portfolios took advantage of our exposure to high yield bonds, which performed very well during the quarter. Underperformance was seen in some portfolios, driven by the performance of one security that dramatically underperformed its benchmark. Not coincidentally we began swapping out of that position prior to year-end and will finish that process shortly.
Economic and Market Review and Outlook
The quarter saw spotty and inconclusive signs of growth in the US economy, such as stabilization of segments of the manufacturing sector (albeit at very low levels) and fewer layoffs. The American consumer continues to moderate spending, pay down debt balances, increase savings, and exhibit otherwise rational behavior in an environment where unemployment and foreclosure are an alarmingly real possibility. We are not at all convinced that the US economy will demonstrate robust, self-sustaining growth when the tide of government support ebbs. Consequently our portfolios remained conservatively positioned expecting an equity market pullback to more rational levels.
Personal Notes
On more personal notes, we enjoyed a relatively quiet holiday season with family and friends. Kevin enjoyed a visit from his mom and his two kids that attend University of Colorado, while Kenn took his dogs for a hike in Boise’s snow-covered foothills on a sunny Christmas Day. Chris took advantage of the seasonal slowdown in the market to visit his native Texas with his family.
Harmonic’s excellent investment performance was celebrated at year-end with the same revelry as our first anniversary, November 3rd: We gave each other a quick “high-five” as we turned off the office lights those evenings, knowing that the race begins anew the next day.
Our best to all for a healthy, enjoyable and profitable first quarter.
Sincerely,
Harmonic Investment Advisors
As noted in today’s Economic Insight, consumer-level inflation isn’t a problem. One reason why: About 40% of the “core” CPI weight is in the “Housing” component, of which about 75% is rent or mortgage payments. The charts below, courtesy of Haver Analytics and Gluskin Sheff, highlight the extraordinary number of vacant rental units — 4.6 million — and the 11% apartment vacancy rate. The latest spike in these measures, by the way, are probably thanks to taxpayer-funded “first-time homebuyer” programs and the like.
| RELEASE | PERIOD | ACTUAL | EXPECTED (consensus) | LAST | HIA COMMENT |
| (leading, coincident, or lagging indicator) | |||||
| Trade Balance (lagging) | November | -$36.4B | -$35.0B | -$32.9B | The trade gap ballooned on higher petroleum imports. Positively, though, the uptrend in exports continued. |
| Advance Retail Sales (leading) | December | -0.3% | 0.4% | 1.3% | Sales unexpectedly fell, somewhat offsetting November’s spike. |
| Industrial Production (coincident) | December | 0.6% | 0.6% | 0.8% | Manufacturing, which accounts for about 12% of the US economy, paused in its rebound in December, with the manufacturing component of the IP index declining 0.1%. In the latest month, utilities output rose 5.9% due to unseasonably cold weather. |
| Capacity Utilization (coincident) | December | 72.0% | 71.9% | 71.3% | CapU moved upward for the sixth consecutive month but remains near record lows. |
| Consumer Price Index (lagging) | December (YoY) | 2.7% | 2.8% | 1.8% | The figure continued on its uptrend, driven mostly by higher energy prices, especially gasoline. |
| Consumer Price Index ex- food & energy (lagging) | December (YoY) | 1.8% | 1.8% | 1.7% | The index for shelter (which comprises about 40% of the total index weight) is essentially flat year-over-year, but most other categories are now showing slight gains. |
TRADE BALANCE
The more-negative trade deficit will provide a numerical drag to 4Q09 GDP growth. A surge in the price of petroleum imports accounted for most of the decline; the trade-weighted US Dollar strengthening 4.4% during the month was a headwind to US exporters, but the US$ is still well below its recent high in March. The key takeaway here is a slow resurgence in the strength of the US export sector. Also, the an increase in exports and imports is welcome after a recession that saw a sharp slowdown in world trade.
RETAIL SALES
Excluding autos, gasoline and building materials retail sales broke a four month string of increases. The largest categories of retailers showed significant declines, including motor vehicle & parts dealers (-0.8%), food & beverage stores (-0.8%), general merchandise (-0.8%), and restaurants (-0.6%). Electronics stores (-2.6%) were particularly hard-hit, a telling sign in a holiday season where consumer electronics were the gift of choice. The biggest gainers during December were gasoline stations (+1.0%, no surprise given higher gas prices alluded to elsewhere in this report) and sporting goods, hobby, book & music stores (+1.6%). Interestingly, sales at non-store(ie, online) retailers rose +1.4% from November and +10.3% year-over-year.
INDUSTRIAL PRODUCTION
The apparent stabilization in the manufacturing sector, while its unclear that it’s created jobs, is a tick in the positive column for the US economy. The Industrial Production figures rose moderately, while November’s reading was revised downward from +1.1% to +0.6%. December’s gain was largely due to an 5.9% increase in output of the nation’s utilities; the key manufacturing segment posted a -0.1% decline after a +0.9% jump last month.
CAPACITY UTILIZATION
Factory capacity utilization remains extremely low and is especially weak in the manufacturing sector, which had a utilization rate of only 68.6% in December. A look at the utilization for the different stages of production shows clearly where the weakness lies:
- Crude stage = 86.1%, 0.5% below the long-term average
- Primary / semi-finished stage = 68.9%, 13.1% below the long-term average
- Finished stage = 70.2%, 7.5% below the long-term average
However, the trend for each stage of production has been positive since bottoming in mid-2009.
While a high degree of spare capacity means inflation is unlikely in the near-term, it also suggests that companies’ profit margins have not sustained the degree of pressure they have seen in prior recessions, so corporate earnings are better than in prior recoveries.
CONSUMER PRICE INDEX
The year-over-year increase in the CPI remains driven by substantial increases in the price of energy. Perhaps unsurprisingly, the 0.3% year-over-year increase in the shelter component of the Index was the smallest annual increase since 1953; the food component of the Index showed the first full-year decrease since 1961. The month-over-month change in CPI was caused by broad-based price increases. A 2.5% increase in the price of used vehicles was the month’s largest; most other categories saw modest growth. While the trend for both “headline” and core CPI has been higher in recent months, consumer level inflation has yet to become a concern, with the “core” rate remaining at a historically moderate level.
Jan 14th
“Who’s Buying Stocks?”
From research firm Trim Tabs, via blog ZeroHedge:
The most positive economic development in 2009 was the stock market rally. Since the middle of March, the market cap of all U.S. stocks has soared more than $6 trillion. The “wealth effect” of rising stock prices has soothed the nerves and boosted the net worth of the half of Americans who own stock.
We cannot identify the source of the new money that pushed stock prices up so far so fast. For the most part, the money did not come from the traditional players that provided money in the past:
- Companies. Corporate America has been a huge net seller. The float of shares has ballooned $133 billion since the start of April.
- Retail investor funds. Retail investors have hardly bought any U.S. equities. Bond funds, yes. U.S equity funds, no. U.S. equity funds and ETFs have received just $17 billion since the start of April. Over that same time frame bond mutual funds and ETFs received $351 billion.
- Retail investor direct. We doubt retail investors were big direct purchases of equities. Market volatility in this decade has been the highest since the 1930s, and we no evidence retail investors were piling into individual stocks. Also, retail investor sentiment has been mostly neutral since the rally began.
- Foreign investors. Foreign investors have provided some buying power, purchasing $109 billion in U.S. stocks from April through October. But we suspect foreign purchases slowed in November and December because the U.S. dollar was weakening.
- Hedge funds. We have no way to track in real time what hedge funds do, and they may well have shifted some assets into U.S. equities. But we doubt their buying power was enormous because they posted an outflow of $12 billion from April through November.
- Pension funds. All the anecdotal evidence we have indicates that pension funds have not been making a huge asset allocation shift and have not moved more than about $100 billion from bonds and cash into U.S. equities since the rally began.
If the money to boost stock prices did not come from the traditional players, it had to have come from somewhere else.
Since we don’t know where the buying power is coming from , we don’t know what to watch for a signal that the market is about to “adjust” downward to what we consider to be its fundamentally based fair value.
Jan 12th
“Bear Index”
In the markets as in life, there are bears and there are BEARS. No word on the other species typically associated with financial markets…
|
RELEASE |
PERIOD |
ACTUAL |
EXPECTED (consensus) |
LAST |
HIA COMMENT |
|
(leading, coincident, or lagging indicator) |
|||||
| ISM Manufacturing Index (leading) |
December |
55.9 |
54.8 |
53.6 |
Manufacturing sector continued to expand last month, and accelerated from November. |
| Construction Spending (leading) |
November (MoM) |
-0.60% |
-0.50% |
0.00% |
Construction spending resumed its earlier downward trend. A reversal in private residential spending from last month’s spike was the primary culprit. |
| Factory Orders (leading) |
November |
1.1% |
0.4% |
0.6% |
Orders for nondurable goods rose +1.8%, led by petroleum and coal products, while orders for durable goods rose 0.2%. |
| ISM Non-manufactur-ing Composite (leading) |
December |
50.1 |
50.4 |
48.7 |
The ISM’s non-manufacturing index showed a reversal from November, with the Index rising but the important new orders component growing at a slower rate than previous months. |
| Unemploy-ment Rate (lagging) |
December |
10.00% |
10.00% |
10.00% |
Unemployment rate held steady. According to the Household Survey the number of unemployed Americans was 15.3 million in December; this number has risen by 7.6 million since the official beginning of the recession in December 2007. |
| Nonfarm Payrolls (lagging) |
December |
-85K |
0 |
-11K |
The seasonally adjusted data show a drop of -81K jobs in goods-producing businesses, versus a loss of only -4000 in service-providing businesses. Average hourly earnings fell -$0.03 while the average workweek remained a very short 33.2 hours. |
| Consumer Credit (lagging) |
November |
($17.50 billion) |
($5.00 billion) |
($3.50 billion) |
Consumer credit plummeted in November. October’s figure was revised $0.7B lower, to -$4.2B. |
ISM MANUFACTURING INDEX
Growth appeared in 9 of 16 industries surveyed. Importantly, new orders accelerated sharply and the order backlog was flat. The employment index rose a full point, suggesting that manufacturers may have reached their maximum productive capacity given existing resources and have begun to hire. Inventories remain very lean.
CONSTRUCTION SPENDING
Residential spending fell alongside nonresidential and government spending. Notably, October’s earlier estimate of no change was revised downward to a -0.5% drop.
FACTORY ORDERS
Growth in new orders was firmer for nondurable goods than durable ones in November. New order growth was strongest in industrial machinery, ships & boats, computers and iron & steel mills. Orders were weakest in nondefense aircraft and parts and defense communication equipment. The durable goods side of this series tends to be fairly volatile since it includes high value transportation items such as aircraft and ships.
ISM NON-MANUFACTURING INDEX
The Index scratched its way back above 50, indicating a very slight expansion of the critical service sector. Continued expansion of the new orders component, albeit at the lowest level in 4 months, is encouraging; growth was seen in the agriculture, information, retail, healthcare, professional & technical, and public administration industries. However, the Index’s employment component showed a slower rate of contraction but remains at a dismal level.
EMPLOYMENT SITUATION
The most closely-watched economic release of the week (and the month) was today’s Employment Situation. It’s somewhat confusing because it contains data from two surveys, the Household and the Establishment, that are conducted differently and therefore provide different estimates. Also, each Survey shows both Seasonally Adjusted and Not Seasonally Adjusted data, so getting a read on what’s actually happening is challenging. The “headline” numbers are the Unemployment Rate from the Household Survey and the Nonfarm Payrolls figure from the Establishment Survey, both of which are seasonally adjusted. For a broader discussion of the Employment Situation data, see our Economic Insight research entitled “Fun With Numbers” released 5 September 09.
Household Survey
Adjusted for seasonal variations, the Household Survey data showed that the number of unemployed persons fell by -73K during December, continuing November’s decline. According to this Survey the number of unemployed Americans has risen by 7.6 million since the beginning of the recession. Companies have clearly shifted some work to from full-timers to part-timers; full-time workers have declined by -6.6 million over the past year while part-time workers have increased by 1.1 million. Multiple job-holders remained basically flat at about 5% of the total employed. The average duration of unemployment continued its rise, hitting 29.1 weeks – almost 7 months – with an alarming 39.8% of unemployed Americans remaining unemployed 27 weeks or longer. The broadest measure of unemployment, which includes “marginally attached” and “discouraged” workers, resumed its rise, to 17.3% from 17.2% in November.
According to the Household Survey the unemployment rate for manufacturing jobs was 11.9%; for construction, 22.7%; agriculture, 19.7%; healthcare and education, 5.6%; and government, 3.6%.
Establishment Survey
The seasonally adjusted Establishment Survey data showed a drop of -81K jobs in goods-producing businesses versus a loss of only -4000 jobs in service-providing businesses; notably, this report appears at odds with the ISM data cited above. The Survey showed declines in many major private industry groups. However, Professional and Business Services grew by 50K, driven largely by a 46K increase in temporary help services, and Education and Healthcare rose 35K, with gains in most sub-industries. Interestingly, financial sector hiring also grew by 4000 jobs on the back of small gains in most sub-industries. Real estate, however, lost another -6100 jobs during the month. Government employment totals fell by -21K, with declines in every state and Federal category outside of non-Postal Service Federal jobs.
The “birth/death” model used by the Bureau of Labor Statistics to estimate jobs created or lost by opening or closing firms “created” 59K jobs in October.
Average hourly earnings were $18.82 in December, down -$0.03 from November but up $0.42 from a year ago. While increases from November varied by industry, year-over-year gains were broad-based, with declines in only a handful of industries.
The average work-week remained very short on a historical basis, unchanged from November at 33.2 hours. The longest work-weeks were recorded in Mining & Logging (43.5 hours), Petroleum & Coal Products (43.2 hours) and Primary Metals manufacturing (43.1 hours). The shortest hours were, unsurprisingly, in Leisure & Hospitality (24.8 hours), Retail (29.9 hours) and Education & Healthcare (32.3 hours).
Analysis
The Establishment Survey has a “large company” bias, which is why the “birth/death model” is used. Given the importance of small businesses in our economy, we believe (and the historical record would suggest) that these businesses are the “canary in the coalmine” of domestic economic activity, since they have less cash on the balance sheet, less access to credit, and less exposure to overseas markets than large companies. Consequently, we prefer to emphasize the Household Survey in our analyses.
As with the November report, today’s release could be influenced more than usual by seasonal adjustment factors. Unemployment was accelerating during the 4Q08, which may have generated unusually high adjustments depending on the methodology the BLS uses.
Today’s release is unfortunately not the confirmation of improving employment for which we’d hoped. We cited several encouraging items in last month’s release; however, those points either reversed or were flat in December:
- A seasonally-adjusted month-over-month loss of -589K jobs according to the Household Survey. Unadjusted for seasonal factors the drop was -1,179K.
- The broadest measure of under- and unemployment resumed its increase.
- The length of the average work-week remained unchanged at a near-record low.
- Average hourly earnings fell.
Additionally, the number of Americans considered “not in the labor force” rose by about 840K; the labor force participation rate dropped from 64.9% to 64.6%. The extremely long average period of unemployment is also of great concern and likely explains why so many seem to “drop out,” and also why the reported unemployment rate did not rise.
Harmonic continues to believe that employment is the linchpin of the economic cycle. When unemployment moderates so that consumers feel more secure, they’re likely to feel more comfortable spending in addition to saving. While some data, such as consumer spending, have shown recent “green shoots” we worry that without the support of income through private job creation debt levels will remain unsustainably high, delaying an organic and robust economic recovery.
Consumer Credit
Consumer credit outstanding plunged again in November; non-revolving credit, such as auto loans, fell -2.9% (a reversal of last month’s 2.4% increase) and revolving credit like credit cards continued its precipitous decline, dropping -18.5%. The decline reflects both consumer pay-downs and tightened credit standards.
Jan 07th
HIA lowers clients trading costs.
Boise, Idaho, January 7, 2010— In an ongoing effort to make investing more accessible and affordable, Harmonic Investment Advisors announces a reduction in trading fees for clients, regardless of household portfolio size or trading frequency.
Beginning January 19th, Harmonic’s Private Clients will pay just $8.95 per trade for stocks and exchange traded funds if they are registered for e-confirms and e-statements. Previously, investors that held less than $1 million in household assets paid $19.95 per trade. This 55% reduction in trading commissions continues Harmonic’s commitment to their clients to achieve optimal performance at a reduced cost relative to their peers. Current clients will continue to pay just 0.75% per year for advisory services.
Jan 05th
“Jobs, Past and Future”
I recently ran across two interesting visual analyses of the employment situation. The first is an analysis similar to the one I distribute monthly discussing Boise’s local employment situation. Slate.com used data from the Bureau of Labor Statistics to create an interactive map of the employment stats for each county in the nation. As the viewer scrolls forward she can see how the shift in year-over-year employment is distributed across the country.
Interactive link: http://www.slate.com/id/2216238
The second, from NPR.org, is a graphical treatment of a forecast, also from the BLS, of the jobs expected to be created in the next several years. The user can mouse-over each dot to see the number of jobs forecasted to be created in each industry and segment.
Interactive link: http://www.npr.org/templates/story/story.php?storyId=121875404
Jan 22th
Weekly Economic Insight: 18 January-22 January
Author: Chris
Comments: 0
Two leading indicators of the housing market diverged in December, with permits rising sharply but starts declining. Starts of structures with 5 or more units rose 15% month-over-month. The divergence between the two indicators highlights the volatility of the housing market in winter, and the lack of follow-through from permit to actual construction. The report suggests, though, stabilization if not recovery in the housing market.
The Leading Economic Indicators continued their positive trajectory for the ninth consecutive month. The most heavily weighted component, money supply (specifically M2), has exploded as the government has flooded the economy with fiscal and monetary stimulus. Unfortunately, little of that liquidity is being transmitted into the real economy, as bank lending is contracting – total loans and leases at US commercial banks fell by 7.2%, from $7,263B to $6,738B, from last December to this. It is, of course, actual lending to businesses and consumers that fuels the economy, not simply the existence of the funds on bank balance sheets. Other LEI components, like the “interest rate spread”, are suspect in their usefulness because this recession, stemming from a banking crisis and fueled by massive consumer deleveraging that has required that short term interest rates be held abnormally low, is quite different than other post-WW2 downturn. Long story short, we think the LEI is giving a false signal of the strength of economic recovery.