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Socially Responsible Investing ideas

Second in the series from our Chief Economist, Mel Miller. http://ow.ly/rrjqG

Burgess COMMENTARY

Peter Burgess

Join this group if you are interested in learning about Socially Responsible Investing ideas 1,680 members Member Steve Schueth Follow Steve Second in the series from our Chief Economist, Mel Miller. http://ow.ly/rrjqG

Steve Schueth President, First Affirmative Financial Network; Producer, The Conference for Sustainable, Responsible, Impact Investing

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Peter Burgess Peter Burgess Founder/CEO at TrueValueMetrics developing Multi Dimension Impact Accounting

I like this statement about the First Affirmative Financial Network:

'First Affirmative understands that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?'

The article about 'Predicting an Expanding Economy' and the indicator Chicago National Activity Index (CFNAI) seems to fly in the face of the first statement, because the underlying idea in the essay is that growth is good. Growth was good when there is was strong correlation between GDP and quality of life, but this disappeared around 50 years ago. What GDP growth does now in the old developed industrial economies is make it much easier for the business community to make profit and for stock prices to increase. In the current economy, GDP growth produces more waste and pollution, but not many more jobs.

Productivity and energy have been the two big determinants of quality of life for most of the past 250 years, but the economic dynamic started to change about 50 years ago with globalization and consumerism. In the past 50 years the demand side of the US economy has been gutted as wages have stagnated, and consumption has exceeded earnings and credit has been used to fill the gap.

Huge changes in economic behavior are needed, especially in North America. Why is it that the US and Canada use more than 16 tons of carbon to support their life-style and the Europeans around 8 tons. Is North America so much less efficient than Europe?

I can go on ... but it would be really good if American ingenuity could be put to work making the economy more efficient and improving the quality of life of everyone in the country.

Peter Burgess - TrueValueMetrics Multi Dimension Impact Accounting Delete Edit Comment 14 minutes left to edit

Predicting an Expanding Economy By Mel Miller

Second in a series of economic updates focused on key economic indicators.

I continue my quest to identify new recession predictors with the goal of improving forecast accuracy. I learned of a relatively new indicator named the Chicago National Activity Index (CFNAI) several years ago and now rely heavily on it as one of my forecast indicators. Constructed by the Federal Reserve Bank of Chicago, this index is released on a monthly basis. Its start date is March of 2001, with the data presented back to March 1967.

The index name is somewhat misleading. It is designed to test the health of the national, not the regional, economy. The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data;

• 1) production and income;

• 2) employment, unemployment, and hours;

• 3) personal consumption and housing; and

• 4) sales, orders, and inventories.

A zero value indicates that the economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth.

Monitoring the index on a monthly basis can be frustrating due to the monthly volatility. A better measure is the three month moving average (CFNAI-MA3) because it is less volatile and based on more complete data.

How to Interpret the Data

A three month moving average below -0.7 indicates the chance of a recession has risen substantially. A result of above 0.2 signals the recession is over. If the indicator rises above 0.7 more than two years into a recovery, it indicates inflationary pressures are accelerating. A reading of 1 or higher is a clear indication that a sustained period of rising inflation is on the near-term horizon.

The latest reading was -0.03 and a rising trend. This index is predicting that the economy will expand at slightly below the long-term average without any inflationary pressure.

The graph also shows the magnitude of the Great Recession and how far back the economy has come from that dark period. From an economic standpoint, an expanding economy with low inflation is about as good as it can get!

NOTE: The CFNAI is not an index available for investment.