Friday, August 28, 2015

Consumer Confidence Surveys – As Of August 28, 2015

Doug Short had a blog post of August 28, 2015 (“Michigan Consumer Sentiment: Down Slightly from August Preliminary Reading“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:
(click on charts to enlarge images)
Conference Board Consumer Confidence
University of Michigan Consumer Sentiment
There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the recent sudden upswing, the continued subdued absolute levels of these two surveys was disconcerting.
Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)
While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1983.69 as this post is written

Euro Vs. The U.S. Dollar – August 28, 2015 Update

One of my ongoing concerns is the level and future resiliency of the U.S. Dollar.
For reference, below is a chart that I find notable.  It provides a comparison of the Euro (on the top plot) to the Dollar (found on the bottom plot) on a daily basis, with price labels, over the last five years:
(chart courtesy of StockCharts.com; chart creation by the author)
(click on charts to enlarge images)
euro and U.S. dollar
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1980.99 as this post is written

Thursday, August 27, 2015

Corporate Profits As A Percentage Of GDP

In the last post (“2nd Quarter 2015 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 second 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 August 27, 2015
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1984.25 as this post is written

2nd Quarter 2015 Corporate Profits

Today’s GDP release (Q2, 2nd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 2nd 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 August 27, 2015, with a value of $1823.7 Billion):
after-tax corporate profits
Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:
corporate profits percent change from year ago
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 August 27, 2015; https://research.stlouisfed.org/fred2/series/CP
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1959.03 as this post is written

The S&P500 Vs. The Shanghai Stock Exchange Composite Index – August 27, 2015

For reference purposes, the chart below shows the S&P500 vs. the Shanghai Stock Exchange Composite Index on a daily basis, since 2006, with price labels:
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
S&P500 and Shanghai Stock Exchange Composite Index
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1940.51 as this post is written

Wednesday, August 26, 2015

Durable Goods New Orders – Long-Term Charts Through July 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 July, updated on August 26, 2015. This value is $241,108 ($ 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:
DGORDER 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 August 26, 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 1894.06 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 August 20, 2015 update (reflecting data through August 14) is -.968.
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 August 26, 2015 incorporating data from January 5,1973 to August 21, 2015, on a weekly basis.  The August 21, 2015 value is -.74:
NFCI chart
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 2015:
The ANFCI chart below was last updated on August 26, 2015 incorporating data from January 5,1973 to August 21, 2015, on a weekly basis.  The August 21 value is .24:
ANFCI chart
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 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 1896.78 as this post is written

House Prices Reference Chart

As a reference for long-term house price index trends, below is a chart, updated with the most current data (through June) from the CalculatedRisk blog post of August 25, 2015 titled “Real Prices and Price-to-Rent Ratio in June”:
(click on chart to enlarge image)
house prices
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1867.61 as this post is written

Money Supply Charts Through July 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 August 21, 2015 depicting data through July 2015, with value $13,436.9 Billion:
MZM money supply
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 August 26, 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 August 20, 2015, depicting data through July 2015, with value $12,059.4 Billion:
M2 money supply
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 August 26, 2015:
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1867.61 as this post is written

Three Charts Of Recent S&P500 Price Volatility - August 26, 2015

This post is an update to past posts regarding stock market volatility.
While I track many different measures of volatility, I find the following charts to be both simple and clear in depicting the recent increased volatility in the stock market.
Overall, my analyses indicates that there are many reasons for this volatility, and the volatility is highly significant.
For reference purposes, shown below are three charts with y-axis price labels.
First, a one-year daily depiction of the S&P500 through yesterday’s (August 25, 2015) close, with a 50-day moving average (MA50) depicted by the blue line:
(click on chart to enlarge image)(charts courtesy of StockCharts.com)
S&P500 daily
Second, a four-month daily depiction of the S&P500 through yesterday’s (August 25, 2015) close, with a 50-day moving average (MA50) depicted by the blue line:
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
S&P500 daily four-month
Third, a four-month depiction of the S&P500 in 60 minute intervals through yesterday’s (August 25, 2015) close, with a 50-hour moving average (MA50) depicted by the blue line:
S&P500 60 minutes
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1867.62 as this post is written

Monday, August 24, 2015

Updates Of Economic Indicators August 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 August 2015 Chicago Fed National Activity Index (CFNAI) updated as of August 24, 2015:
CFNAI-MA3
As of August 21, 2015 (incorporating data through August 14, 2015) the WLI was at 131.7 and the WLI, Gr. was at -.4%.
A chart of the WLI,Gr., from Doug Short’s post of August 21, 2015, titled “ECRI Weekly Leading Index: 'Shrinking Trade Pie'“:
ECRI WLI,Gr.
Here is the latest chart, depicting the ADS Index from December 31, 2007 through August 8, 2015:
ADS Index
The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:
As per the August 20, 2015 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Declined Slightly,” (pdf) the LEI was at 123.3 and the CEI was at 112.5 in July.
An excerpt from the August 20 release:
“The U.S. LEI fell slightly in July, after four months of strong gains. Despite a sharp drop in housing permits, the U.S. LEI is still pointing to moderate economic growth through the remainder of the year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Current conditions, measured by the coincident economic index, have been rising moderately but steadily, driven by rising employment and income, and even industrial production has improved in recent months.
Here is a chart of the LEI from Doug Short’s blog post of August 20 titled “Conference Board Leading Economic Index Sees Fractional Decline in July“:
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 1895.16 as this post is written

The U.S. Economic Situation – August 24, 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 August 21, 2015, with a last value of 16459.75):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA from 1900
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1942.12 as this post is written

Friday, August 21, 2015

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – August 21, 2015 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.
Below are three long-term charts, from Doug Short’s blog post of August 21, 2015 titled “ECRI Weekly Leading Index:  'Shrinking Trade Pie.’”  These charts are on a weekly basis through the August 21 release, indicating data through August 14, 2015.
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 8-21-15 - ECRI-WLI-YoY -1.9 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 2000.03 as this post is written

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.
FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.
For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of August 6, 2015:
from page 23:
(click on charts to enlarge images)
S&P500 earnings forecasts
from page 24:
S&P500 annual earnings
_____
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 2035.77 as this post is written

Thursday, August 20, 2015

S&P500 EPS Estimates For 2015, 2016 And 2017

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings label)
The following estimates are from Exhibit 12 of “The Director’s Report” (pdf) of August 19, 2015, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78:
Year 2015 estimate:
$118.90/share
Year 2016 estimate:
$132.32/share
Year 2017 estimate:
$146.80/share
_____
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 2079.61 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2015 & 2016 – As Of August 13, 2015

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings label)
For reference purposes, the most current estimates are reflected below, and are as of August 13, 2015:
Year 2015 estimates add to the following:
-From a “bottom up” perspective, operating earnings of $111.88/share
-From a “top down” perspective, operating earnings of N/A
-From a “bottom up” perspective, “as reported” earnings of $100.52
Year 2016 estimates add to the following:
-From a “bottom up” perspective, operating earnings of $131.34/share
-From a “top down” perspective, operating earnings of N/A
-From a “bottom up” perspective, “as reported” earnings of $122.60/share
_____
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 2079.61 as this post is written

Wednesday, August 19, 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 August 13, 2015 update (reflecting data through August 7) is -.989.
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 August 19, 2015 incorporating data from January 5,1973 to August 14, 2015, on a weekly basis.  The August 14, 2015 value is -.77:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 19, 2015:
The ANFCI chart below was last updated on August 19, 2015 incorporating data from January 5,1973 to August 14, 2015, on a weekly basis.  The August 14 value is .26:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 19, 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 2081.07 as this post is written

Tuesday, August 18, 2015

Walmart’s Q2 2016 Results – Comments

I found various notable items in Walmart’s Q2 2016 management call transcript (pdf) dated August 18, 2015.  (as well, there is Walmart’s press release of the Q2 results(pdf))
I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly management call comments; these previous posts are found under the “paycheck to paycheck” label.
Here are various excerpts that I find most notable:
comments from Doug McMillon, President and CEO, page 7:
In the second quarter, Walmart generated more than $120 billion in revenue and delivered earnings per share of $1.08. I’m encouraged by the improvement in our constant currency sales and recognize that our bottom line results should have been better. We had margin pressure from pharmacy reimbursements and higher shrink than we expected during the quarter. These impacts, coupled with higher wage investments, impacted EPS.
comments from Greg Foran, president and CEO of Walmart U.S., page 13:
Second, we’re investing in our associates. This April, we raised the minimum starting wage in our stores to $9.00 per hour, resulting in over 500,000 associates receiving a raise. This new wage structure is expanding our applicant pool. We are also introducing 8,000 new department manager positions, a more focused role that allows the associate to be trained and become more knowledgeable with the areas they support, providing our customers with a better experience in the store. Additionally, we are continuing to focus on career development for all of our associates. Finally, we’ve increased the amount an associate will receive upon being promoted into higher levels of responsibility. These changes gave pay raises to an additional 150,000 associates who are critical to improving the in-store experience.
comments from Greg Foran, president and CEO of Walmart U.S., page 17:
Moving on to the remainder of our financials…gross profit rate declined 41 basis points this quarter. As I said before, this was driven by a handful of key issues. Let’s talk about pharmacy. Reflecting industrywide trends, we are seeing reduced reimbursement rates from Pharmacy Benefit Managers, which is negatively impacting gross margin.
We are also seeing a lower mix of higher-margin cash transactions, reflecting a marketplace shift in which more customers are now benefiting from greater drug insurance coverage. While we are taking a number of actions to lessen the impact, we expect to have pressure on pharmacy for the rest of the fiscal year. Additionally, inventory shrinkage was meaningfully higher than plan for the quarter. We are reviewing the end-to-end inventory management process with a special focus on shrinkage and working to close gaps. Investments are being made in training programs for store and asset protection associates as well as investments in staffing in high shrink areas of the store. But it will take time to see results, so this will impact us versus plan for the rest of the year.

_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2101.39 as this post is written