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Lakshman Achuthan

lines on the record: 138
first: 2014-11-29
most recent: 2014-11-29
sittings or episodes: 1
sources: podcast

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“Remember That worked wonders. Sure. And so goes the thesis. Now, okay, so you have a cycle. And the cycle doesn't care about the politics that's happening. It's this endogenous cycle in a free market where we're going to have an ebb and flow in our activity. And we had a nasty downturn. And by The spring of 2009, the recession still going on in Davos in April at that time, not in Davos, it was G20 meeting in London. They were talking about depression in April. But the leading indicators had all turned up sharply so that we were forecasting an end to recession by the middle of 2009. And I'm pretty sure the stimulus was still kind of cooking its digging way through. Yeah. So in other words, I'm saying the recession was already in ending.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they all went at this fiscal thing to get it done. I think that they saw some writing on the wall, but even with that kind of consensus, it's just too slow. So the idea that I think in theory Congress might be able to do something, but in practice it's almost impossible to get ahead of the cycle that way.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm like, oh, that's adorable. That's adorable. And remember, you know, Washington is famous for gridlock, but here you had, again, Bush and Pelosi. And Bernanke. Republican.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's cute. But that was back in the day when it was a really big number, and it sank like a stone. Nobody even remembers it. And you see these numbers, they get so large that you don't know what they mean, but it sounds like it could have plugged a hole somewhere in a budget. We had Jim Chan.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Throw a monkey wrench inside of that vicious cycle just for a second. You're not going to get rid of it, but you could maybe stave it off so that you're ready for or a little better prepared instead of what we had here, which was basically a debacle. And it's hard to, I guess it could have been worse.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“These are checks in the mail, right? But they didn't arrive until 2008 towards the summer and the summer, and the recession was already underway. I think in principle, if there's these little tactical moments, you might be able to kind of...”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is that ring a bell? It absolutely does. There was a brief window of opportunity in 2007 where there was literally no inventory on the shelves. It was just a little bit of a weirdness in the inventory cycle. And at that moment some cash in consumers pockets would have spurred a temporary. I'm not saying it would have solved anything long term, but a temporary restocking and staved off. The recession that began in December of 2007. But thanks to the way that DC works, the Bush Pelosi Bernanke fiscal stimulus that they did actually vote through, which was what? Like 150 billion, right?”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think the market left to its own devices is a risk management tool. And here, just to give you the statistics, three out of the last 15 recessions, you saw the market go up even when there was a recession. A couple times you've seen a disconnect. And the one that's very interesting is the Roaring 20s, where it disconnected completely, but it ended badly.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you get a clean output. Yeah, what we do is we don't use models. So a pure cyclical framework won't even use an econometric type model anywhere in its presentation. You're monitoring specific, very, very limited cyclical indicators. And here what's happening is, oh, this component isn't ready, so let me estimate it. And that is a totally, that's a different ballgame. That's what you see every day when someone does an estimate off of a model.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not at all. And so we've been doing a lot of work in a half a century, right? In that time, we've come up with long leading indicators, leading indicators of different sectors of the economy, of employment, of inflation. And this larger array of leading indicators is what we actually use, not anyone leading index. And also what's happened is that the LEI, of course, has been privatized, has been taken out of the public sector. And most people are more comfortable. Most economists are much more comfortable with econometric models and estimations and extrapolations. And a lot of that has actually started to Appear inside the LEI numbers that you're getting. So inside some of those components are extrapolated econometric forecasts, which is really kind of antithetical to the whole idea. Less than optimal.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The thing that people should know is any one of these indicators is highly fallible. Even together, it's not a holy grail”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, you could look at things from the labor market, things from capital investment, things from interest rates, some sensitive commodity prices, some survey data, which wasn't available half a century ago. So these are different types of Short leading indicators. Some come from government, some come from market prices, some come from private surveys. This is, you're diversifying your risk among your indicators here.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“For recession No, no, no, it's not. A short leader is maybe five, six months average lead, and then hidden inside the word average is some variability. So there may have been a case here and there where it had a long lead, but I wouldn't classify it as a long lead, something that led by three or four quarters. It's more likely to be one or two quarters. And it might be a little bit longer lead at the peak and a little shorter lead at the trough. on its own It's a very imperfect indicator. It's not a holy grail. Neither is even the leading index. But one of the things you do when you put leading indicators from different Areas, different sources together into a leading index, you get some confirmation. And so the stock prices are one piece of the puzzle in a set of short leading indicators that were created half a century ago.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. Well, I mean, stocks are key metrics in a free market economy, right? It's all about what these equities are worth in some sense and these market prices. So market prices are an area you can go to to see where you are in the cycle. Sometimes they're coincident, sometimes they're leading. The stock prices are a short leading indicator of the economy. They're a part of the original indicators that more developed back in the late 50s. And as I said, they're a short leading indicator.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You So, the way from our fairly unique perspective, right, not a lot of people talk from a cycle perspective, but from that perspective, we're in this cyclical downturn already, and then you have a huge financial shock. And it makes a bad recession the great recession.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Correct. And the same thing with Lehman. That's eight months after the recession began, for example. That's right. So let's.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“He's actually much closer to the end than the beginning. But everybody immediately their muscle memory brings you to 9-11 in that recession.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“At stake, we just even in some ways it's bigger, right? Right, in some ways, and but definitely the 9 11 of its day and boom, economy cruises right through it. And people tend to associate recessions with the nearby shock. 9-11 is a great example. That occurred half a year after the recession was underway.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“More vulnerable. It's like you have your compromised immune system, and if there's a shock, boom, you're in trouble. On the other hand, if you're in an upswing and you have a shock, for example, Pearl Harbor. We had a big upswing going on in the indicators, and it's pretty massive shock.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because the recession, our research shows, and this is, I'm looking over a lot of time, almost a century in some cases, and many different economies around the world. And what we find is the free market has this endogenous Cyclicality to it where it wants to accelerate and decelerates. Now that's Going on. That's the nature of a free market at its very essence. Now, shocks are always happening. If a shock occurs when there's a cycle downturn, The vulnerability is there. When we have the leading indicators or the indicators of the cycle turning down, we like to describe it as a window of vulnerability. Opening and at that time, if there's a shock, very easy for it to be recessionary.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Trump that caused them to tip over. Great point. And I think it's really the reason we exist. And I want to contrast it a bit with more mainstream economics. But first, let me answer your question directly. A key finding of generations of work. I'm talking decades of work. We're the third generation now, is that recession is not simply caused Buy an external shock, you know, like an oil shock or the Fed did something or whatever.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you'll have these economies, especially in the post-World War II period Western Europe, Japan, where they get very high trend growth because they're rebuilding and all of these things. And so they'll still have cycles in growth, but it'll be around a higher trend. What we're seeing now, which is quite interesting from the cyclical... Vantage point from that cyclical framework is that the developed economies, their trend growth is so low that the cycle, which is endogenous, it's part of how a free market works. Each downturn you have an easier chance to go negative.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“As you've seen formally planned economies like India or China loosen up and become more free market oriented, you're seeing those cycles present themselves in a more traditional way, as we've seen in the developed world.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You get this my save. You got it When you get this vicious, the vicious cycle. Now, that can also turn virtuous, and at times that you don't expect, like in 2009, where it kind of runs its course to the downside. Fever breaks. And the fever breaks. You have some pent-up demand. And you can actually see it, the vicious cycle turn virtuous where an unexpected kind of sales leads to catches production short. Then you have to gear up and hire and incomes. Sudden things start working. Suddenly you have a virtuous cycle. So the business cycle in a free market, this is in every free market.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, it can't just be something hitting one spot of the economy. It's going to spread across and kind of infect. So cycles, you can have a vicious cycle, which is a recession. It snowballs, you know, because if, let's say production goes down, employment goes down, income goes down, you can't buy that much, sales go down, and that kicks production down.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Definition. Describe what that is. Well, this is going back two generations. Zekary is the third generation of this research going back to Wesley Mitchell, who helped define what a recession is. It's a pronounced pervasive and persistent Decline in output, employment, income, and sales.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It actually shrinking. So you might have the overall economy expand 3%, and then it'll slow to 2% or 1% and hopefully reaccelerate. And sometimes it does. Sometimes it doesn't. In the recessions, it goes negative.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Recession is really at the heart of how a market economy works, where it alternates between upswings and downswings and growth. And some of those downswings turn into recessions. You actually contract.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“When he retires from the National Bureau, where he was director, he starts forecasting and he creates a research firm called the Center for International Business Cycle Research, which originally was at Rutgers and it moved very quickly over to Columbia Business School, where Mitchell and Burns had also taught. And that's where it was housed from the early 80s through the mid-90s. And I began working with Dr. Moore in 1990 right there.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Shiskin at the Commerce Department to invent the idea, the statistics for a composite index, they put the leading indicators in the composite index together, those two ideas. And there's your original index of leading economic indicators, which they then gave to the Commerce Department.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“He started to do work when Moore was working under him on leading indicators of revivals, because remember there were a lot of depressions back then. Sure. And Moore after World War II took up that work again and refined it to leading indicators of revival and recession. That's your first set of leading indicators. He worked with a man named Julius.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Officially Yeah, the shaded areas on your charts. When did they start and end? Dr. Moore picked them all until 78. That's unbelievable. And a lot of them, right? That's crazy. So Mitchell figured out what was a business cycle.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was it? No, no, it was Dr. Moore. He used to say he'd quip that he would have lunch with himself or have a meeting with himself over lunch and decide the dates. So”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Became Fed chairman under Nixon in the Nixon administration. Now, but earlier, Wesley Mitchell, in the early part of the last century, in the 20s helped form the National Bureau of Economic Research. And this is where...”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, right. The Wall Street Journal called him the father of leading indicators. And to put it in perspective, Dr. Moore was the protege of Wesley Mitchell and Arthur Burns, earlier business cycle researchers. Wesley Mitchell”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Bill Clinton won that presidential election with It's the Economy Stupid. Right, of course. Even though the recovery was starting.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That we study recessions and recoveries. Okay. So that's what I've done. For all of my professional career, I started in the 1990 with the 1990, the old 1990-91 recession, a fairly mild, fairly shallow recession. Yeah. People were a little freaked out back then. Remember, Japan was going to take over the world and all that. Right. And they bought 30.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“More or less close. There you go. There you go. Well, thanks a lot for having me on. I'm looking forward to the conversation.”
2014-11-29 · Masters in Business · Masters in Business: COO of ECRI Lakshman Achuthan (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source