Monday, January 31, 2011

Conference Board CEO Confidence 4Q 2010

On December 27, I wrote a post about the latest Business Roundtable’s CEO Economic Outlook Survey and the Duke/CFO Magazine Global Business Outlook Survey.

Subsequent to that post, the Conference Board released its 4th Quarter CEO Confidence Survey.   The overall measure of CEO Confidence was at 62, up from 50 in the third quarter.

An excerpt from the January 11 Press Release:
“The bounce back in CEO confidence signals that the cloud of pessimism that prevailed in the third quarter has lifted and CEOs are once again optimistic,” says Lynn Franco, Director of The Conference Board Consumer Research Center. “The improvement in both current and future conditions suggests a strong finish to 2010 and continued growth in the first half of 2011.”
As a reference, the January 27 site contained the following chart that shows a long-term chart of The Conference Board CEO Confidence Survey readings, along with those readings plotted against changes in GDP, as noted:


A Special Note concerning our economic situation is found here
SPX at 1276.34 as this post is written

Friday, January 28, 2011

Updates On Economic Indicators January 2011

Here is an update on various indicators that are supposed to predict and/or depict economic activity.  These indicators have been discussed in previous blog posts:

The January Chicago Fed National Activity Index (CFNAI)(pdf) updated as of January 27, 2011:


The Consumer Metrics Institute Contraction Watch:


The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the January 24 Release, titled "Economic index forecasts stronger growth"  :

"The January update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, gaining momentum this year. The index forecasts a growth rate of 3.7% in March and April, up from 2.1% in September. Improved consumer and business confidence and the new tax legislation are expected to help fuel growth. But continued high unemployment, a still-weak housing sector and tight credit conditions will keep growth below 4% this year."


The ECRI WLI (Weekly Leading Index):
As of 1/14/11 the WLI was at 128.9 and the WLI, Gr. was at 4.1%.  A chart of the growth rates of the Weekly Leading and Weekly Coincident Indexes:


The Dow Jones ESI (Economic Sentiment Indicator):

The Indicator as of January 3 was at 46.1, as seen below:

From the January 3 Press Release, "Driven by a wide range of upbeat grassroots economic news, the Dow Jones Economic Sentiment Indicator (ESI) jumped 2.2 points to 46.1 in December, breaking out of its previous range and indicating the economy could be picking up momentum at the start of 2011."


The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting 1-22-09 to 1-22-11:


The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:

As per the January 20 release, the LEI was at 112.4 and the CEI was at 101.9 in December.

An excerpt from the January 20, 2011 Press Release:

“Says Ataman Ozyildirim, economist at The Conference Board:  'While the LEI points to an economic expansion that is gaining further traction, its components still suggest the expansion path may be uneven.  December's gain was led by housing permits, the interest rate spread, initial claims for unemployment insurance and consumer expectations.  The large increases in December and November show that, after a brief pause in the second quarter of 2010, the LEI is resuming the upward trend that began in March 2009.'"

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.

A Special Note concerning our economic situation is found here
SPX at 1299.54 as this post is written

Thursday, January 27, 2011

U.S. Dollar Decline - January 2011 Update

U.S. Dollar weakness is a foremost concern of mine.  As such, I have extensively written about it.  I am very concerned that the actions being taken to “improve” our economic situation will dramatically weaken the Dollar.  Should the Dollar substantially decline from here, as I expect, the negative consequences will far outweigh any benefits.  The negative impact of a substantial Dollar decline can’t be overstated, in my opinion.

The following three charts illustrate various technical analysis aspects of the U.S. Dollar, as depicted by the U.S. Dollar Index.

First, a look at the monthly U.S. Dollar from 1983.  This clearly shows a long-term weakness, with the blue line showing technical support (until 2007):

(charts courtesy of; annotations by the author)

(click on chart image to enlarge)


Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents both a trendline as well as a relatively good visual “best-fit” line.  The gray dotted line is the 200-day M.A. (moving average).  As seen on this chart, the U.S. Dollar looks vulnerable to continuing its downward trend that has been interrupted since early 2008:


Lastly, a chart of the Dollar on a weekly LOG scale.  There are some clearly marked  channels here, with a large, prominent triangle featured.  Triangles are thought of as “continuation” patterns.  In this case, it would be a continuation of the Dollar downtrend since 2002:


I will be providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring...

A Special Note concerning our economic situation is found here
SPX at 1296.63 as this post is written

Wednesday, January 26, 2011

Keynes Quote On Currency Debasement

As those familiar with this blog know, I am very concerned about the vulnerability of the U.S. Dollar to a substantial decline.  I have written extensively about this situation.

I think the following quote on the subject of currency debasement is particularly noteworthy.  It is from John Maynard Keynes, from his book Economic Consequences of the Peace, chapter 6:
"Lenin was right.  There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.  The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

A Special Note concerning our economic situation is found here
SPX at 1296.63 as this post is written

The State of the Union Address - Notable Excerpts

I found last night’s State of the Union Address to contain many noteworthy comments.  While I could comment extensively on many parts of the speech, for now I will indicate excerpts that I found most relevant, and may comment upon them at a future point.  I am highlighting these excerpts for many reasons; it should be noted that I do not necessarily agree with all of them.

Here are the excerpts I found most relevant, in the order they occurred in the speech:

"At stake is whether new jobs and industries take root in this country, or somewhere else. It’s whether the hard work and industry of our people is rewarded. It’s whether we sustain the leadership that has made America not just a place on a map, but a light to the world."


"We measure progress by the success of our people. By the jobs they can find and the quality of life those jobs offer."


"The steps we’ve taken over the last two years may have broken the back of this recession – but to win the future, we’ll need to take on challenges that have been decades in the making."


"Sustaining the American Dream has never been about standing pat. It has required each generation to sacrifice, and struggle, and meet the demands of a new age."


"That’s what Americans have done for over two hundred years: reinvented ourselves."


"Meanwhile, when our own engineers graded our nation’s infrastructure, they gave us a “D.”"


"Now, the final step – a critical step – in winning the future is to make sure we aren’t buried under a mountain of debt."


"But now that the worst of the recession is over, we have to confront the fact that our government spends more than it takes in. That is not sustainable.  Every day, families sacrifice to live within their means. They deserve a government that does the same."


"We shouldn’t just give our people a government that’s more affordable. We should give them a government that’s more competent and efficient. We cannot win the future with a government of the past."


"A 21st century government that’s open and competent. A government that lives within its means. An economy that’s driven by new skills and ideas. Our success in this new and changing world will require reform, responsibility, and innovation. It will also require us to approach that world with a new level of engagement in our foreign affairs."


"We may have differences in policy, but we all believe in the rights enshrined in our Constitution. We may have different opinions, but we believe in the same promise that says this is a place where you can make it if you try. We may have different backgrounds, but we believe in the same dream that says this is a country where anything’s possible. No matter who you are. No matter where you come from."


"The idea of America endures. Our destiny remains our choice. And tonight, more than two centuries later, it is because of our people that our future is hopeful, our journey goes forward, and the state of our union is strong."

A Special Note concerning our economic situation is found here
SPX at 1291.18 as this post is written

Monday, January 24, 2011

Trends In Economic Theory

The January 17-January 23 Bloomberg BusinessWeek issue had an article titled "Back to the Economic Future." The article notes "John Maynard Keynes and Fredrich Hayek, who battled over the Depression, are getting a fresh look as the Long Slump lingers on." It discusses the current state of the (macro)economic profession and theoretical trends within the industry. I think the article is worthwhile, as it highlights several important issues. However, I don't agree with some of its points.

I found this comment to be especially noteworthy:

"The newfound interest in the likes of Keynes and Hayek makes sense, too—their ideas were shaped by the Great Depression, which is the last time things were worse than they are now (for the U.S., anyway)."

Ever since the onset of the “Financial Crisis” there have been many prominent people who have indicated that they believe our current economic situation similar to that of The Great Depression. I have written of these comparisons on numerous occasions. As I said in the July 13, 2009 post, “…although our current period of economic weakness does have similarities to that of The Great Depression, there are notable differences as well. To believe that both situations are very similar, and by acting accordingly, imperils our economic situation.”

A Special Note concerning our economic situation is found here

SPX at 1283.35 as this post is written

Sunday, January 23, 2011

misc. note

I recently wrote of "10 'Front and Center' Problem Areas That Pose a Threat to the Economy" on the Seeking Alpha site.  (an additional link on the Global Economic Intersection site can be found here.)

I haven't posted this material to this blog as those familiar with this blog would likely find it repetitive.

However, it is a good synopsis (with links for further reference) of what I feel are the current most prominent "problem areas."

Friday, January 21, 2011

Globalization And Success

The concept of being successful in the global economic environment is a complex one.

The January 17-January 23 2011 Bloomberg BusinessWeek had a short interview of Singapore Prime Minister Lee Hsien Loong.

I found the following excerpt notable, given Singapore's successes in many areas:
On Globalization
Competition is intense, change is continuous, and the fruits of prosperity are unevenly distributed. The only reliable strategy is for countries to upgrade the skills of their people and the capabilities of their economies. This means educating the population, investing in technology and infrastructure to raise productivity, developing new industries to replace declining ones, and constantly adapting to stay relevant. This is what Singapore is striving to do.

A Special Note concerning our economic situation is found here
SPX at 1288.50 as this post is written

Wednesday, January 19, 2011

Financial Situation Facing Illinois

The state of Illinois has received much attention lately for its budgetary shortfalls and recently enacted personal and corporate income tax increases.  A January 13 Wall Street Journal article titled "Illinois Braces for Tax Increases" provides a summary of the current budgetary situation.

I was quite surprised to see state Comptroller Judy Baar Topinka declare on a recent news broadcast that the state's current amount of unpaid bills is $9 billion, as  several well-respected news sources, including the aforementioned Wall Street Journal article, have been quoting a figure of $6 billion.  I find this difference, as well as several other facets of the Illinois financial situation, to be disconcerting.

I believe that there are a variety of factors that up until now have allowed Illinois to avoid facing the enormity of its situation, given the current budget deficits and substantial long-term liabilities.  Perhaps foremost among these factors is that the markets appear to believe that should a state require a "bailout", such a "bailout" would be exercised by the federal government.

Illinois finds itself in a precarious situation; that of increasing taxes during a less-than-strong economy.   I've previously commented upon various complex facets of this situation in posts of February 23, 2010  ("Tax Increases And Our Economic Situation - Follow Up") as well as the "America's Trojan Horse" article.

As I wrote in the August 25 post: "By "sweeping (financial) problems under the rug" instead of truly solving the deficit problems, it almost seems as if states are inherently betting (in a big way) that current economic hardship is transitory, and that better future economic conditions will "save the day."  In effect, there is little need to solve structural budget/financial problems because a strengthening economy will alleviate or eliminate such issues."

For many states, this "better future economic situation" has failed to materialize, and now the markets appear to be increasing their scrutiny of the states' financial conditions.  For a variety of reasons, this situation deserves close monitoring.

A Special Note concerning our economic situation is found here
SPX at 1295.02 as this post is written

Tuesday, January 18, 2011

Larry Kudlow Comment On January 13 Regarding "Too Big To Fail"

On Thursday, Larry Kudlow interviewed Rep. Spencer Bachus on CNBC.

I found one comment Kudlow made, starting at the 6:17 mark,  to be especially notable:

"Many people believe that the top 5,6,8 banks are in fact too big to fail and constitute government sponsored enterprises in effect.  That is an unfair advantage in the credit markets that is sort of like Fannie and Freddie all over know private profit but public taxpayer risk...."

My comment:

As time goes on, the issues of "Too Big To Fail" and "Moral Hazard" are being discussed less and less, which is unfortunate.  There are many aspects of each of these concepts that are profoundly important to our economic system.

I've previously discussed "Too Big To Fail" and "Moral Hazard" in numerous posts...

A Special Note concerning our economic situation is found here
SPX at 1293.24 as this post is written

Monday, January 17, 2011

The January 2011 Wall Street Journal Economic Forecast Survey

The January Wall Street Journal Economic Forecast Survey was published January 14, 2011.  The headline is "Economists Optimistic On Growth."

I found a variety of topics seen in the Q&A (spreadsheet tab) to be interesting, including questions on "Grading Central Bankers" and "QE2".

The current average forecasts among economists polled include the following:

full-year 2010 : 2.8%
full-year 2011 : 3.3%

Unemployment Rate:
for 6/1/2011: 9.3%
for 12/1/2011: 8.8%

10-Year Treasury Yield:
for 6/30/2011: 3.6%
for 12/31/2011: 3.97%

for 6/1/2011: 1.9%
for 12/1/2011: 1.9%

Crude Oil  ($ per bbl):
for 6/30/2011: $88.67
for 12/31/2011: $90.70

(note: I comment upon this survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

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.

A Special Note concerning our economic situation is found here
SPX at 1293.24 as this post is written

Thursday, January 13, 2011

Disturbing Charts (Update 3), Part II

As a continuation of the last post, here are three other charts that I find disturbing in nature.

These charts raise a lot of questions.  Many of these questions I have discussed in the blog, as I believe they are very significant in nature.  Additionally, these charts should highlight the “atypical” nature of our economic situation from a long-term historical perspective.

Here is a St. Louis Fed chart depicting the Median Duration of Unemployment (last updated 1-7-11):

(click on charts to enlarge images)


These next two charts are from the Minneapolis Federal Reserve.  These charts really provide a perspective on the length and extent of this downturn.  The first depicts our Unemployment situation (last updated 1-7-11):


This depicts Output (last updated 12-22-10):

I will update these charts on an intermittent basis as they deserve close monitoring.
A Special Note concerning our economic situation is found here
SPX at 1283.76 as this post is written

Disturbing Charts (Update 3), Part I

In the next two posts, I am going to display various charts that I find disturbing.   These charts would be disturbing at any point in the economic cycle; that they depict such a tenuous situation now – 18 months after the official (as per the 9-20-10 NBER announcement) June 2009 end of the recession – is especially notable.

Many more such charts exist, unfortunately.  I regularly discuss many troubling characteristics of our economy in this blog.

As well, I find many aspects of the financial markets to be problematical.  These aspects are frequently discussed.

All of these charts are from The Federal Reserve, and represent the most recently updated data.  I especially find these charts valuable as they depict our current situation in a longer-term historical context.

Charts in this post are from the St. Louis Federal Reserve.  Here are the charts:

(click on charts to enlarge images)

Housing starts (last updated 12-16-10):


The Federal Deficit (last updated 10-18-10):


Federal Net Outlays (last updated 10-18-10):


State & Local Personal Income Tax Receipts  (% Change from Year Ago)(last updated 7-30-10):


Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 1-10-11):


Bank Credit – All Commercial Banks (Percent Change from Year Ago)(last updated 1-10-11):


M1 Money Multiplier (last updated 1-6-11):


Now, onto Part II – unemployment and output…

A Special Note concerning our economic situation is found here
SPX at 1283.76 as this post is written

Wednesday, January 12, 2011

NFIB Small Business Optimism - December 2010

The December NFIB Small Business Optimism was released January 11.  The headline of the Press Release is "NFIB Small Business Optimism Index Remains Weak."

The Press Release contains a variety of statistics.  One excerpt from the Press Release that I found especially notable was:

"Weak sales remains the top problem, stagnating hiring and spending on capital projects.  All of which are sidelining the small business sector from a recovery.  This marks the 36th month of Index readings in the recession level."

In conjunction with this December NFIB Small Business Optimism Survey, the CalculatedRisk blog on January 11 had three charts that depicted various facets (the Index itself; Hiring Plans and Poor Sales) of the Survey, as shown below:

(click on charts to enlarge images)


My previous posts concerning the environment and challenges for small businesses was on October 18 and April 15.
A Special Note concerning our economic situation is found here
SPX at 1274.48 as this post is written

Monday, January 10, 2011

3 Critical Unemployment Charts - January 2011

As I have commented previously, as in the October 6, 2009 post, in my opinion the official methodologies used to measure the various job loss and unemployment statistics do not provide an accurate depiction; they serve to understate the severity of unemployment.

However, even if one chooses to look at the official statistics, the following charts provide an interesting (and disconcerting) long-term perspective of certain aspects of the officially-stated  unemployment situation.

The first two charts are from the St. Louis Fed site.  Here is the Median Duration of Unemployment:

(click on charts to enlarge images)(charts updated as of 1-7-11)


Here is the chart for Unemployed 27 Weeks and Over:


Lastly, a chart from the Minneapolis Federal Reserve site.  This shows the employment situation vs. that of previous recessions (as characterized by severity):

As depicted by these charts, our unemployment problem is severe.  Unfortunately, there do not appear to be any “easy” solutions.

In July 2009 I wrote a series of five blog posts titled “Why Aren’t Companies Hiring?”, which discusses various aspects of the topic, many of which lack recognition.

A Special Note concerning our economic situation is found here
SPX at 1271.50 as this post is written

Friday, January 7, 2011

The S&P500 Vs. The Shanghai Stock Exchange Composite Index - January 2011

On May 3, 2010 I wrote a post concerning the notable divergence that had occurred between the S&P500 and Chinese (Shanghai Composite) stock markets.  Since that May post, the divergence has grown.

The chart below illustrate this divergence; it shows the S&P500 vs. the Shanghai Composite on a daily basis, LOG scale, since 2006:

(click on chart to enlarge image)(chart courtesy of

It is notable that the Shanghai Composite led the SPX (S&P500) significantly in late ’08 – early ’09, yet it has been stagnant- to-declining lately.

I continue to find this divergence between the S&P500 and  Shanghai Composite to be notable and disconcerting, on an "all things considered" basis.

A Special Note concerning our economic situation is found here
SPX at 1276.63 as this post is written

Thursday, January 6, 2011

Food Stamps As Of December 2010

This post is an update to previous posts concerning food stamps.  The program is officially called “Supplemental Nutrition Assistance Program,” or SNAP.  As stated on the SNAP website, “As of Oct. 1, 2008, Supplemental Nutrition Assistance Program (SNAP) is the new name for the federal Food Stamp Program.”

The data was last updated December 2, 2010, reflecting September 2010 levels.

Here is a table showing various monthly statistics with regard to National Level participation and costs going back to FY2007.  As seen in this table, the number of people participating as of September 2010 is 42,911,042, up 16.23% from year-ago (September 2009) levels.  As a reference point, the figure as of June 2009 (the official end of the recession as defined by the NBER) was 34,882,031.  Longer-term annual data is also available.

As I wrote in the April 12 post, “Of course, what is particularly disconcerting is not only the extent of participation in these programs, but the fact that this is yet another notable statistic that is getting worse well after the purported end of the recession.”

A Special Note concerning our economic situation is found here
SPX at 1276.56 as this post is written

Tuesday, January 4, 2011

The "Safety Net" - A Few Comments

On December 14, The Wall Street Journal had a story titled "Fewer Homes 'Underwater' as Foreclosures Increase."

In the article, I found a quote by Matt Dobler as especially notable:  "It just kind of leaves you wondering what the safety net is for my generation, because it's obviously not our home."

Although I typically don't mention the term "safety net," I do believe the concept deserves contemplation, especially given our current economic situation.

There are various definitions of "safety net";  perhaps the most straightforward is "anything that provides security against adversity or misfortune."

Is the "safety net" growing or shrinking?  Is it getting higher or lower?  What can one do to insure against financial adversity?  To what extent should/can the government create a "safety net"?

The concept is particularly relevant now, as it seems as if an increasing number of people are experiencing hardship and adverse economic volatility.

Measuring, as well as predicting, trends in people's changing economic fortunes is difficult.  One effort that has been made is the creation of the "Economic Security Index" that I discussed in the August 6 post.

Recent research related to this "Economic Security Index" is seen in a December report titled "Standing On Shaky Ground" (pdf), subtitled "Americans' Experiences With Economic Insecurity."  An excerpt from page 3:

"As suggested by the title of this report, many Americans are—and see themselves to be—standing on shaky ground. The recent economic downturn represented an especially powerful quake, emanating from two distinctive epicenters: declining employment and disrupted financial markets. Yet Americans faced jarring economic shocks even before the downturn, and continue to do so today. The SERPI and related evidence suggest that economic insecurity has become the rule, not the exception, for many Americans—even in good times."

I'll likely comment further on the topics of the "safety net" and "economic security" in future posts...

A Special Note concerning our economic situation is found here
SPX at 1271.89 as this post is written

Monday, January 3, 2011

MacroMarkets December 2010 Home Price Expectations Survey

On December 22 MacroMarkets released its December Home Price Expectations Survey results.

Here is the Press Release (pdf); the accompanying chart is seen below:

(click on chart image to enlarge)

As one can see from the above chart, the expectation is that not only has the residential real estate market (nearly) hit a “bottom” as far as pricing; but that steady yet mild appreciation will occur through 2015.

The survey detail is interesting.  Of the 110 survey respondents, only 7 foresee a cumulative price decrease through 2015; and of those 7, only one, Gary Shilling, sees a double-digit percentage cumulative price drop.  He remains the most “bearish” of the survey participants with a forecast of a 19.68% cumulative price decline through 2015.

The Median Cumulative Home Price Appreciation for years 2010-2015 is seen as -1.0%, -.4%, 1.94%, 4.6% , 7.86%, and 11.69% respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of forecasts (seen in Gary Shilling’s above-referenced forecast)  will prove too optimistic in hindsight.  Although a 19.68% decline is substantial, from a longer-term historical perspective such a decline is rather tame in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While at this time many people have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post.

A Special Note concerning our economic situation is found here
SPX at 1257.64 as this post is written