Ahead of the Curve: A Commonsense Guide to Forecasting Business and Market Cycles

Unlike most of the other reviewers, I'm not a trader; I'm a management accountant and Excel geek. "Ahead of the Curve" is one of my favorite professional books because it illustrates how useful it is to plot the rate of change in business and economic data.Ellis named this transformation method ROCET, for Rate Of Change in Economic Tracking, and used it extensively in his book. I named the method just Rate Of Change (ROC) and it's become my favorite way to transform data series for Excel reporting and analysis.I bought the original book in 2007 and then bought the Kindle version several months ago so I could search the book more easily.If you want to identify turning points in your business and economic data, start with the ROC and then smooth your results until the underling pattern becomes clear--as the two charts in the image illustrate.

This book is hard to put down. I like the author's approach in challenging common assumptions and simplifying difficult concepts into bite sized pieces. This book covers concepts that is important to Analysts and CEOs alike. Great read!

Joe Ellis's book was recommended to me by professional investor so I picked up it. I found it very worthwhile. While Ellis's approach to forecasting the business cycle using economic indicators is biased by his strong retail background and I can quibble with a few of his assertions, overall his central thesis that consumer spending drives the US economy and therefore closely monitoring economic indicators associated with consumer income and expenditures is reasonable. He provides some good insights on the correlations between various economic data and has strong opinions as to what is causal, what leads, what lags, and what is just correlation. He also does a very good job of providing context and historical perspective. At one time he had a web-site that kept the data / models up to date, but unfortunately that is no longer the case. The book was published in 2005 and had data through mid 2004 and there were a couple of points that he made that would have provided clues that would have foretold the great recession in 2008. So overall an informative read.

The author's approach toward economic data is very refreshing, in that he works quite hard at finding data that is predictive of stock market declines. Just the chapter on the "recession obsession", and why its bad for you makes the whole book worthwhile. It really put a lot of economic numbers in perspective, and made me realize it was actually possible to use economic numbers to your advantage.I would also add that his writing style is very easy to follow. While it definitely helps if you have some background in economics, it is really not necessary.

In the Preface of the book, Ellis explains the basic theses of the book: the business cycle and its cause and effect relationships, the repeatability of which allows individuals to extract forecasts. Secondly, Ellis highlights some fallacies in common conceptions of the leads and lags in economic cycles. Unlike many economic commentators, he classifies a recession as a lagging indicator as well as employment and capital spending. He designated declines in consumer spending and hourly earnings as leading indicators. Finally, Ellis discredited month by month and quarter by quarter analysis as confusing and out of context. He preferred a year-over-year analysis of an economic cycle, which he called the ROCET--rate of change in economic tracking.Presenting a statistical analysis of business cycles, Ellis clearly identifies independent variables andrelated dependent variables. This approach simplifies the understanding of economics and allowsthe reader to view economics in its basic elements, at the macro and micro level. Like Ellis, I wish that my Intro to Economics had started with this perspective and built the course from there. The next step, applying the method.

Maybe its when I went to school or maybe its that I've spent 42 years trading (about the same amount of time as the author) but what this book offers is a dressed up version of the PCE (personal consumption expenditures) macro-economic model that I was introduced to in college Econ 101 in the 70's. Oh he has nice charts for to support his points and all, but there is nothing terribly new here that hasn't been around for some time, the author just renamed it with some new acronym.Early in the book you get the impression that this is going to lead to something practical. Forget it. This is just a rehash of a nearly 40 year old model. The author talks about what you should do and that the information is free...Now all you have to do is find it (no suggestions as to where) and have a geek write software to perform the various 3 month rolling year of year computations...Oh...and its really not a model you can trade except for certain industries and sectors that might not be affected by...well anything not in the model...Which is just about everything. And the at website he promises has updated information on it? Gone...the domain is up for sale.I'm sending this book back...I already have my notes from college...including a version of the model he has in the book. Spend your money and you time elsewhere.