Friday, March 27, 2015

Corporate Profits As A Percentage Of GDP

In the last post (“4th Quarter 2014 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.
There are many ways to view this measure, both on an absolute as well as relative basis.
One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.
As one can see from the long-term chart below (updated through the fourth quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.
(click on chart to enlarge image)
corporate profits as a percentage of GDP
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 27, 2015
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2059.69 as this post is written

4th Quarter 2014 Corporate Profits

Today’s GDP release (Q4, 3rd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 4th Quarter.
Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (last updated March 27, 2015, with a value of $1837.5 Billion):
corporate profits after tax
Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:
Corporate Profits After Tax
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed March 27, 2015;
https://research.stlouisfed.org/fred2/series/CP
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2057.58 as this post is written

Wednesday, March 25, 2015

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 March 19, 2015 update (reflecting data through March 13) is -1.007.
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 March 25, 2015 incorporating data from January 5,1973 to March 20, 2015, on a weekly basis.  The March 20, 2015 value is -.78:
(click on chart to enlarge image)
NFCI 3-25-15
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 25, 2015:
The ANFCI chart below was last updated on March 25, 2015 incorporating data from January 5,1973 to March 20, 2015, on a weekly basis.  The March 20 value is .17:
ANFCI 3-25-15
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 25, 2015:
_________
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 2062.33 as this post is written

Durable Goods New Orders – Long-Term Charts Through February 2015

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.
For reference, below are charts depicting this measure.
First, from the St. Louis Fed site (FRED), a chart through February, updated on March 25, 2015. This value is $231,291 ($ Millions):
(click on charts to enlarge images)
durable goods new orders
Here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:
durable goods new orders percent change from year ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed March 25, 2015;
_________
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 2067.37 as this post is written

Tuesday, March 24, 2015

Money Supply Charts Through February 2015

For reference purposes, below are two sets of charts depicting growth in the money supply.
The first shows the MZM (Money Zero Maturity), defined in FRED as the following:
M2 less small-denomination time deposits plus institutional money funds.
Money Zero Maturity is calculated by the Federal Reserve Bank of St. Louis.
Here is the “MZM Money Stock” (seasonally adjusted) chart, updated on March 20, 2015 depicting data through February 2015, with value $13,094.80 Billion:
MZM money stock
Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis:
MZMSL percent change from year ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 24, 2015:
The second set shows M2, defined in FRED as the following:
M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.
Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on March 19, 2015, depicting data through February 2015, with value $11,820.30 Billion:
M2SL
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis:
M2SL percent change from year ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 24, 2015:
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2096.43 as this post is written

Monday, March 23, 2015

Broad-Based Indicators Of Economic Activity

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.
The short-term and long-term trends of each continue to be notable.
Doug Short, in his blog post of March 20, 2015, titled “The Philly Fed ADS Business Conditions Index” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a variety of perspectives.
Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.
The CFNAI MA-3:
(click on charts to enlarge images)
CFNAI-MA3
The ADS Index, 91-Day MA:
ADS-index-91-day-MA
Also shown in the Doug Short’s aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.
_________
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 2112.77 as this post is written

Updates Of Economic Indicators March 2015

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:
The March 2015 Chicago Fed National Activity Index (CFNAI) updated as of March 23, 2015:
CFNAI-MA3 3-23-15
As of March 20, 2015 (incorporating data through March 13, 2015) the WLI was at 131.1 and the WLI, Gr. was at -3.7%.
A chart of the WLI,Gr., from Doug Short’s post of March 20, 2015, titled “ECRI Recession Watch:  Update“:
ECRI WLI,Gr. since 2000
Here is the latest chart, depicting the ADS Index from December 31, 2007 through March 15, 2015:
ADS Index
As per the March 19, 2015 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased Again,” the LEI was at 121.4 and the CEI was at 111.9 in February.
An excerpt from the March 19 release:
“Widespread gains among the leading indicators continue to point to short-term growth,” said Ataman Ozyildirim, Economist at The Conference Board. “However, easing in the LEI’s six-month change suggests that we may be entering a period of more moderate expansion. With the February increase, the LEI remains in growth territory, but weakness in the industrial sector and business investment is holding economic growth back, despite improvements in labor markets and consumer confidence.”
Here is a chart of the LEI from Doug Short’s blog post of March 20 titled “Conference Board Leading Economic Index Remains in Growth Territory“:
Conference Board LEI
 
_________
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 2112.87 as this post is written

The U.S. Economic Situation – March 23, 2015 Update

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.
There are an array of indications and other “warning signs” – many readily apparent – that current 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)
My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  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.
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 March 20, 2015, with a last value of 18127.65):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA 1900-March 20, 2015
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2112.87 as this post is written