Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 17, 2013 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 four sources :

• ECRI, April 26, "Nominal GDP Growth Falls Again"
• ECRI, April 7, “Interview on Jobs & Recession” video
• ECRI, March 8 Interview Summary (provides links to 3 video interviews)
• ECRI, March 5, "Recession in the Yo-Yo Years" (provides a link to a 17-page ECRI report dated March 2013 titled “The U.S. Business Cycle in the Context of the Yo-Yo Years”)

Other past notable 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:

• Bloomberg video, May 9:  "Lakshman Achuthan on Renewed U.S. Recession Call: Video"
• ECRI, May 9:  ”Revoking Recession:  48th Time’s The Charm?”
• Wall Street Journal video, May 9: “Free Market Economies Have Business Cycles”
• ECRI, May 11:  “Rising GDP Doesn’t Rule Out Recession”

Also, subsequent to May 2012:

• Bloomberg video, July 10:  “Recession Here”
• ECRI, September 7:  “Recession Evidence Obscured in Real Time”
• ECRI, September 13: “The 2012 Recession:  Are We There Yet?”
• Bloomberg video, September 13: “Recession Update.”
• CNN video, November 29, “Official Recession Indicators“
• CNN video, November 29, “ECRI Recession Update“
• Yahoo video, November 29, “Ignore GDP and the Fiscal Cliff, U.S. Is Already in Recession“
• Bloomberg video, November 29, “Recession Underway“
• CNBC video, December 7, “Definitional Recession Indicators“
• ECRI, December 7, “The Tell-Tale Chart” including this excerpt:  “Reviewing the indicators used to officially decide U.S. recession dates, it looks like the recession began around July 2012.”

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Below are three long-term charts, from Doug Short’s blog post of May 17 titled “Recession Watch:  ECRI’s Weekly Leading Indicator Declines.”  These charts are on a weekly basis through the May 17 release, indicating data through May 10, 2013.

Here is the ECRI WLI (defined at ECRI’s glossary):

(click on charts to enlarge images)

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This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

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This last chart depicts, on a long-term basis, the WLI, Gr.:

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1665.02 as this post is written

St. Louis Financial Stress Index – May 16, 2013 Update

On March 28, 2011 I wrote a post ("The STLFSI") about the  St. Louis Fed’s Financial Stress Index (STLFSI) which is supposed to measure stress in the financial system.  For reference purposes, the most recent chart is seen below.  This chart was last updated on May 16, incorporating data from December 31,1993 to May 10, 2013, on a weekly basis.  The May 10, 2013 value is -.756 :

(click on chart to enlarge image)

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Here is the STLFSI chart from a 1-year perspective:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 17, 2013:

http://research.stlouisfed.org/fred2/series/STLFSI

_________

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 1650.47 as this post is written

Charts Of Equities’ Performance Since March 9, 2009 And January 1, 1980 – May 16, 2013 Update

In the March 9, 2012 post ("Charts of Equities’ Performance Since March 9, 2009 And January 1, 1980") I highlighted two charts for reference purposes.

Below are those two charts, updated through yesterday’s closing price.

The first is a daily chart of the S&P500 (shown in green), as well as five prominent (AAPL, IBM, WFM, SBUX, CAT) individual stocks, since 2005.  There is a blue vertical line that is very close to the March 6, 2009 low.  As one can see, both the S&P500 performance, as well as many stocks including the five shown, have performed strongly since the March 6, 2009 low:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

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This next chart shows, on a monthly LOG basis, the S&P500 since 1980.  I find this chart notable as it provides an interesting long-term perspective on the S&P500′s performance.  The 20, 50, and 200-month moving averages are shown in blue, red, and green lines, respectively:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1655.99 as this post is written

Postcard From The Stock Market Bubble

This post is the latest I have written concerning the stock market.

For reference, below is a one-year daily chart of the S&P500 through May 15 (with a closing price of 1658.78), indicating both the 50dma and 200dma:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

There are many aspects of the "price action" of the S&P500, as well as many individual stocks, that are notable.  I commented upon this in a variety of past posts, including that of February 19 ("Excessive Positive Sentiment And Froth In The Stock Market.")

As I mentioned in that post:

Many stocks and indices show an increasingly “parabolic” trajectory.

Since that post, one can see from the above chart that the S&P500 has continued its rather remarkable upward trajectory, especially since mid-November.  The "parabolic" price action has intensified.  I believe this "parabolic" trajectory is highly notable when viewed from a long-term historical perspective.

While this strong rally is not in itself necessarily indicative of impending problems, there are a variety of measures that are cause for concern.  Some of those measures were discussed in the aforementioned February 19 post.  Many others also exist, including both those that are "technical" in nature as well as those that could be considered "fundamental" in nature.

Among commonly stated reasons (as seen in the popular media among others) for this strong stock market rally and resulting recent new record high levels in the S&P500 (as well as Dow Jones Industrials) include the oft-stated "accommodative" (or  "easy money") monetary policies as well as the "strong earnings" that are projected to further increase in 2013 & 2014.  The conclusion drawn by such reasoning is that unless there is a substantial change in either monetary policy, or a significant fundamentally-led change in earnings projections - neither of which is seen in prominent forecasts - the stock market's current levels are not only "justified" but the stock market is seen by many as being "attractively" valued on such measures as (forward) PE Ratios.

My analyses, however, continues to indicate a starkly different conclusion.  I continue to view this stock market as not only an asset bubble, but also one that is exceedingly large.  While I concede that this view is very unique and not necessarily an "obvious" conclusion,  like many bubbles it will be evident in hindsight.

As well, my analyses indicate that the "popping" of this equity bubble will have a profound and lasting negative impact on the economy.  While many people believe that bursting equity bubbles don't represent a substantial threat to the larger economy, I continue to believe that their analyses and conclusions are not pertinent to our present situation.

Cumulatively, this parabolic stock market and its various "mania" characteristics are yet another "danger signal" in the overall financial system.  As I have written, my overall analysis continues to indicate a building level of financial danger, very large by historical standards.  My analyses indicate that such danger and its resolution will have highly notable future consequences, including that of a stock market crash that is outsized by historical standards.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1658.78 as this post is written

Uncertainty And Its Impact On The Economy

One subject that is a major issue - and one that many believe is "holding back the economy" - is that of "uncertainty."  This is a substantial concern to businesses, both large and small, as seen in recent business surveys including the NFIB Small Business Optimism Survey as well as the Deloitte "CFO Signals" Survey.

While this "uncertainty" seems to comprised of many factors, those prominent include government spending and budget issues; regulations; government requirements; and foreign and monetary policy.  Needless to say, the topics are wide-ranging and (potentially) complex.

While I don't believe, as many do, that this "uncertainty" is the key issue that is constraining economic growth, I nonetheless believe it is a critical issue, especially to businesses.

An April 29 op-ed in the Wall Street Journal, "Uncertainty Is the Enemy of Recovery," by Bill McNabb, focuses on the topic.

A couple of notable excerpts include:

Quite simply, if firms can't see a clear road to economic recovery ahead, they're not going to hire and they're not going to spend. It's what economists call a "deadweight loss"—loss caused by inefficiency.

also:

Three economists, Stanford University's Nicholas Bloom and Scott Baker and the University of Chicago's Steven Davis, have done invaluable work measuring the level of policy uncertainty over the past few decades. Their research (available at policyuncertainty.com) shows that, on average, U.S. economic policy uncertainty has been 50% higher in the past two years than it has been since 1985.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1648.03 as this post is written

The May 2013 Wall Street Journal Economic Forecast Survey

The May Wall Street Journal Economic Forecast Survey was published on May 13, 2013.  The headline is “Economic Road Clearing, but the Going is Slow.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the Q&A found in the spreadsheet.

Notable excerpts from the article include:

The 52 forecasters, not all of whom answered every question, are unusually unified in their assessment, with few seeing growth significantly faster or slower than the consensus estimate. Asked about economic threats, they cited a familiar litany of concerns—a renewed crisis in Europe, a sharper-than-expected slowdown in China, gridlock in Washington—but even most pessimists saw little threat of a severe downturn. Overall, the economists put the risk of a new recession at just 15%, down from 24% in December.

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The current average forecasts among economists polled include the following:

GDP:

full-year 2013:  2.4%

full-year 2014:  2.8%

full-year 2015:  3.0%

Unemployment Rate:

December 2013: 7.3%

December 2014: 6.7%

December 2015: 6.2%

10-Year Treasury Yield:

December 2013: 2.23%

December 2014: 2.86%

December 2015: 3.48%

CPI:

December 2013:  1.8%

December 2014:  2.2%

December 2015:  2.4%

Crude Oil  ($ per bbl):

for 12/31/2013: $95.39

for 12/31/2014: $97.19

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” label)

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1630.49 as this post is written

Philadelphia Fed – 2nd Quarter 2013 Survey Of Professional Forecasters

The Philadelphia Fed Second Quarter 2013 Survey of Professional Forecasters was released on April 10.  This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.

The survey shows, among many measures, the following expectations:

Real GDP: (annual average level)

full-year 2013 : 2.0%

full-year 2014 : 2.8%

full-year 2015:  3.0%

full-year 2016:  2.9%

Unemployment Rate: (annual average level)

for 2013: 7.6%

for 2014: 7.1%

for 2015: 6.6%

for 2015: 6.1%

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As for “the chance of a contraction in real GDP” in any of the next few quarters, estimates are 14.6%, 14.3%, 13.1%, 13.4%, and 12.5% for each of the quarters from Q2 2013 through Q2 2014, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2022) with the expected inflation of each.  Inflation is measured in Headline and Core CPI and Headline and Core PCE.  Over all time frames expectations are shown to be in the 1.4%-2.3% range.

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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 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 1633.70 as this post is written

Markets During Periods Of Federal Reserve Intervention – May 9, 2013 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 May 9 ("Treasury Yield Snapshot…") :

(click on chart to enlarge image)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1629.20 as this post is written