Monday, September 15, 2014

VIX Weekly And Monthly Charts Since The Year 2000

For reference purposes, below are two charts of the VIX from year 2000 through Friday’s (September 12, 2014) close, which had a closing value of 13.31:
Below is the VIX Weekly chart, depicted on a LOG scale, with the 13- and 34-week moving averages, seen in the cyan and red lines, respectively:
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
VIX Weekly
Here is the VIX Monthly chart, depicted on a LOG scale, with the 13- and 34-month moving average, seen in the cyan and red lines, respectively:
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
VIX Monthly
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 1985.54 as this post is written

Friday, September 12, 2014

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – September 12, 2014 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):
For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.
However, I do think the measures are important and deserve close monitoring and scrutiny.
The movement of the ECRI WLI and WLI, Gr. is particularly notable at this time, as ECRI publicly announced on September 30, 2011 that the U.S. was “tipping into recession,” and ECRI has reiterated the view that the U.S. economy is currently in a recession, seen most recently in these twelve publicly available sources :
Other past notable year 2012 reaffirmations of the September 30, 2011 recession call by ECRI were seen (in chronological order) on March 15 (“Why Our Recession Call Stands”) as well as various interviews and statements the week of May 6, including:
Also, subsequent to May 2012:
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Below are three long-term charts, from Doug Short’s blog post of September 12, 2014 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the September 12 release, indicating data through September 5, 2014.
Here is the ECRI WLI (defined at ECRI’s glossary):
ECRI WLI
This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:
Dshort 9-12-14 - ECRI-WLI-YoY 2.4 percent
This last chart depicts, on a long-term basis, the WLI, Gr.:
ECRI WLI,Gr.
_________
I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1985.66 as this post is written

The September 2014 Wall Street Journal Economic Forecast Survey

The September Wall Street Journal Economic Forecast Survey was published on September 11, 2014.  The headline is “Economists See Overseas Risks as Growth Wild Card.”
I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.
Two excerpts:
More than 90% of the 48 surveyed economists—not all of whom answered every question—said they expect the U.S. economy to improve relative to the first half of 2014. None see the economic outlook deteriorating. The survey was conducted after last Friday's weaker-than-expected August jobs report.
also:
The economists see gross domestic product, the broadest measure of goods and services produced across the economy, advancing at a 3% annual pace this quarter and next. Just three economists expected growth to exceed 3.7% in the third or fourth quarters, and only two see growth falling below 2%.
The economy expanded at a 4.2% pace in the second quarter after contracting 2.1% in the first quarter, according to the Commerce Department.
Forecasters in the Journal survey expect the U.S. economy to grow at a 2.8% annual pace in 2015, down slightly from last month's forecast of 2.9% annual growth.
As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 11.65%; August’s average response was 12.10%.
The current average forecasts among economists polled include the following:
GDP:
full-year 2014:  2.0%
full-year 2015:  2.8%
full-year 2016:  2.8%
Unemployment Rate:
December 2014: 5.9%
December 2015: 5.4%
December 2016: 5.2%
10-Year Treasury Yield:
December 2014: 2.84%
December 2015: 3.58%
December 2016: 4.00%
CPI:
December 2014:  2.1%
December 2015:  2.2%
December 2016:  2.4%
Crude Oil  ($ per bbl):
for 12/31/2014: $94.45
for 12/31/2015: $93.67
(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” label)
_____
I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1985.95 as this post is written

Markets During Periods Of Federal Reserve Intervention – September 12, 2014 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.
For reference purposes, here is an updated chart from Doug Short’s blog post of September 12 (“ECRI Recession Watch:  Weekly Update“) :
(click on image to enlarge chart)
markets during Federal Reserve intervention
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 1980.68 as this post is written

Thursday, September 11, 2014

Additional Thoughts Concerning The Economic Situation

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.
Current perceived levels of financial danger – both seen in various economic indicators and consensus forecasts, as well as widespread economic commentary – portray (very) low readings for both the near- and longer-terms.  Adding to this widely-perceived level of comfort is the (seemingly) continually-ascending stock market.
While these measures certainly appear to project an aura of safety and continuity, so also did many aspects of past economic periods prior to financial crashes and wide-ranging economic weakness.
What all of these past U.S. economic periods had in common was that, despite subsequent declines of various degrees, economic activity and financial markets at some point rebounded and ascended to new highs.
As such, this financial and economic resiliency has been a long-standing hallmark of the U.S. economy.  However, perhaps the chief question is whether this resiliency will continue unabated, or whether this past resiliency has fostered a degree of complacency from which a substantial degree of financial and economic peril will emerge.
Unfortunately, my analyses continue to indicate the latter assessment.  There are an array of indications and other “warning signs” – many readily apparent – that the current level of economic activity and financial market performance is accompanied by exceedingly perilous dynamics.
I have written extensively about this peril, including in the following:
Building Financial Danger” (ongoing updates)
Cumulatively, the growing level of financial danger will lead to the next crash. Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.
One of the main attributes of our current economic situation is its inordinate complexity.  As such, assuming that future economic outcomes will resemble those of the past is inadvisable.
For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through September 5, 2014, with a last value of 17137.36):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA since 1900
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 1995.69 as this post is written

Wednesday, September 10, 2014

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the September 4, 2014 update (reflecting data through August 29) is -1.32.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on September 10, incorporating data from January 5,1973 to September 5, 2014, on a weekly basis.  The September 5, 2014 value is -.91:
(click on chart to enlarge image)
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 10, 2014:
The ANFCI chart below was last updated on September 10, incorporating data from January 5,1973 to September 5, 2014, on a weekly basis.  The September 5, 2014 value is -.46:
(click on chart to enlarge image)
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 10, 2014:
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1991.52 as this post is written

September 2014 Duke/CFO Magazine Global Business Outlook Survey – Notable Excerpts

On September 9, 2014 the September Duke/CFO Magazine Global Business Outlook Survey (pdf) was released.  It contains a variety of statistics regarding how CFOs view business and economic conditions.
In this CFO Survey, I found the following to be the most notable excerpts:
Chief financial officers in the U.S. say a hike in the minimum wage to $10 to $15 an hour (from the current federal standard of $7.25) would result in immediate layoffs and significantly curtail future hiring at firms that would be affected by these wage hikes.
also:
Nearly half of all companies surveyed indicate they have already or soon will implement labor-saving technology, which will allow them to maintain production with fewer employees. Among these companies, the average reduction in the needed number of employees is approximately 10 percent (median 5 percent).
also:
On a scale of 0-100, CFO optimism about the U.S. economy increased to 63 from 61 last quarter, continuing to rise above the long-run average of 59. Capital spending is expected to grow by more than 7 percent and full-time employment by 2 percent. Earnings should increase by more than 10 percent.
also:
U.S. CFOs indicate governmental policies and increased regulation are their top two concerns in terms of risks to the financial performance of their firms. Other top concerns include the cost of benefits, economic uncertainty, difficulty attracting and retaining qualified employees, and data security.
The CFO survey contains two Optimism Index chart, with the bottom chart showing U.S. Optimism (with regard to the economy) at 63, as seen below:
Duke CFO Survey Optimism
It should be interesting to see how well the CFOs predict business and economic conditions going forward.   I discussed various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.
(past posts on CEO and CFO Surveys can be found under the “CFO and CEO Confidence” label)
_____
I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1989.20 as this post is written

Monday, September 8, 2014

Deflation Probabilities

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”
As stated on the site:
Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2018.
A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.
As for the current weekly reading, the September 4, 2014 update states the following:
The 2013-18 deflation probability—based on the 5-year TIPS issued in April 2013 and the 10-year TIPS issued in July 2008—was 0 percent on September 3, where it has been since early September 2013. The 2014-19 deflation probability is also 0 percent as of September 3.
Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2013 or the five-year period starting in early 2014.
I plan on providing updates to this measure on a regular interval.
_________
I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2007.71 this post is written