Wednesday, July 27, 2016

Durable Goods New Orders – Long-Term Charts Through June 2016

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.
For reference, below are two charts depicting this measure.
First, from the St. Louis Fed site (FRED), a chart through June 2016, updated on July 27, 2016. This value is $219,754 ($ Millions):
(click on charts to enlarge images)
Durable Goods New Orders
Second, 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 July 27, 2016;
_________
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 2169.02 as this post is written

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 July 21, 2016 update (reflecting data through July 15) is -1.141.
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 July 27, 2016 incorporating data from January 5,1973 to July 22, 2016, on a weekly basis.  The July 22, 2016 value is -.65:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 27, 2016:
The ANFCI chart below was last updated on July 27, 2016 incorporating data from January 5,1973 to July 22, 2016, on a weekly basis.  The July 22 value is .11:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 27, 2016:
_________
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 2166.94 as this post is written

The Bond Bubble – July 2016 Update

In previous posts I have discussed the Bond Bubble and its many facets, as my analyses indicates that the overall bond market is an exceedingly large asset bubble with immensely large and wide-ranging economic implications.
Since my last post on the Bond Bubble (the June 24, 2014 post titled “The Bond Bubble – June 2014 Update“) I have written various posts about interest rates and associated dynamics.
It should be noted that current rates on 10-Year Treasury Yields, from a (ultra) long-term historical view, remain extremely depressed.  Of note, recent yields have reached all-time lows, as mentioned in the July 6, 2016 post titled "10-Year Treasury Yields - Two Long-Term Charts As Of July 6, 2016."
This can be seen in the following chart of 10-Year Treasury Constant Maturity Yields:
10-Year Treasury Constant Maturity
Data Source: FRED, Board Of Governors Of The Federal Reserve System; accessed July 27, 2016:
Here is another chart of the 10-Year Treasury Yield, from 1980 on a LOG scale, with a long-term trendline.  The current yield is 1.563%:
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
10-Year Treasury Yields
As seen in practically all economic forecasts, the belief that the ultra-low interest rate environment will continue to be sustained is widespread.
There are various highly notable aspects of the Bond Bubble that lack general awareness.  While a comprehensive discussion can't be done in a brief manner, many of my previous posts have discussed certain aspects.
Of particular concern is the financial and economic impact resulting from the "bursting" of the Bond Bubble.  As I mentioned in my post of February 6, 2013 ("The Bond Bubble - February 2013 Update") my expectation at that time - and what I continue to believe - is that after the bursting of the Bond Bubble the rate on the 10-Year Treasury will be far higher than it has been in recent years.  As stated in that post:
While I have not spent considerable effort trying to ascertain the level of this “natural” interest rate, I have little doubt that such a “natural” rate on the 10-Year Treasury would be at least 5%-10% and most likely considerably higher (possibly multiples thereof).  Of course, such rates would have massive implications on a number of fronts.
The prospects of such a large increase in interest rates - which, due to many dynamics of the bursting of this particular bubble - will likely happen in a short period of time.  Overall, this situation is of tremendous concern on many levels, including the impact such rising interest rates will have on other immensely large asset bubbles, including the stock market.
As I stated in the aforementioned February 6, 2013 post;
The perils of this bond bubble and its future “bursting” can hardly be overstated.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2169.18 as this post is written

Monday, July 25, 2016

Money Supply Charts Through June 2016

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 July 22, 2016 depicting data through June 2016, with a value of $14,249.9 Billion:
MZMSL
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 July 25, 2016:
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 July 21, 2016, depicting data through June 2016, with a value of $12,809.3 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 July 25, 2016:
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2175.03 as this post is written

The U.S. Economic Situation – July 25, 2016 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 July 22, 2016, with a last value of 18570.85):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA since 1900
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2175.03 as this post is written

Friday, July 22, 2016

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 July 22, 2016, titled “The Philly Fed ADS Index Business Conditions Index Update” 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
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 2172.42 as this post is written

Thursday, July 21, 2016

Updates Of Economic Indicators July 2016

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 July 2016 Chicago Fed National Activity Index (CFNAI) updated as of July 21, 2016: (current reading of CFNAI is .16; current reading of CFNAI-MA3 is -.12):
CFNAI-MA3
As of July 15, 2016 (incorporating data through July 8, 2016) the WLI was at 137.0 and the WLI, Gr. was at 6.9%.
A chart of the WLI,Gr., from Doug Short’s post of July 15, 2016, titled “ECRI Weekly Leading Index:  WLI Up .3”:
WLI,Gr.
Here is the latest chart, depicting the ADS Index from December 31, 2007 through July 17, 2016:
ADS Index
The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):
As per the July 21, 2016 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased,” (pdf) the LEI was at 123.7, the CEI was at 113.8, and the LAG was 121.9 in June.
An excerpt from the July 21 release:
“The U.S. LEI picked up in June, reversing its May decline,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Improvements in initial claims for unemployment insurance, building permits, and financial indicators were the primary drivers. While the LEI continues to point to moderating economic growth in the U.S. through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and a moderating outlook in labor markets.”
Here is a chart of the LEI from Doug Short’s blog post of July 21 titled “Conference Board Leading Economic Index 'Picked Up in June'“:
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 2171.44 as this post is written

Wednesday, July 20, 2016

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 July 14, 2016 update (reflecting data through July 8) is -1.041.
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 July 20, 2016 incorporating data from January 5,1973 to July 15, 2016, on a weekly basis.  The July 15, 2016 value is -.59:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 20, 2016:
The ANFCI chart below was last updated on July 20, 2016 incorporating data from January 5,1973 to July 15, 2016, on a weekly basis.  The July 15 value is .13:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 20, 2016:
_________
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 2174.51 as this post is written