Standard & Poors S&P500 Earnings Estimates For 2011 & 2012

As many are aware, Standard & Poors publishes earnings estimates for the S&P500.  (My previous posts concerning their estimates can be found in the under the SPX Earnings Projections tag)

Currently, their estimates for 2011 add to the following:

-From a “bottom up” perspective, operating earnings of $98.06/share
-From a “top down” perspective, operating earnings of $94.89/share
-From a “top down” perspective, “as reported” earnings of $95.69/share

Currently, their estimates for 2012 add to the following:

-From a “bottom up” perspective, operating earnings of $111.79/share
-From a “top down” perspective, operating earnings of $101.21/share
-From a “top down” perspective, “as reported” earnings of $100.97/share
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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.
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1331.10 as this post is written

The Economic Future For Young Americans

On May 2 Gallup had a release titled "In U.S., Optimism About Future for Youth Reaches All-Time Low."

Although the entire release is worth reading, I found the following excerpts to be particularly notable:

Forty-four percent of Americans believe it is likely that today's youth will have a better life than their parents, even fewer than said so amid the 2008-2009 recession, and the lowest on record for a trend dating to 1983.

also:

Gallup uses the same question other survey organizations have asked intermittently over a longer period of time. Selected trends from CBS News, New York Times, and Roper Organization polls reveal that Americans currently express greater pessimism about what the future holds for today's youth than any of these organizations found in surveys from 1983 to 2003. The most positive result occurred in a December 2001 CBS News/New York Timespoll in which 71% said American youth would have a better life than their parents.

also, from the concluding paragraphs:

Confidence in the traditional American dream -- that each generation can work its way up in the world and have a better life than the previous generation -- appears to be slipping away. Americans are less likely to believe this to be true today than at any time on record, including during the worst of the recent economic crisis.

Fewer than 4 in 10 high-income Americans -- who presumably have the greatest access to opportunity and resources to gauge what the markets will do going forward -- believe today's youth will be better off than their parents. This level of pessimism may also reflect the massive destruction of wealth that high-income Americans experienced from the economic meltdown.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1325.69 as this post is written

Americans' Financial Capacity

Recently a NBER Working Paper (#17072) was released titled "Financially Fragile Households:  Evidence and Implications."

There are various notable statistics and findings in the paper.  From the abstract:

This paper examines households’ financial fragility by looking at their capacity to come up with $2,000 in 30 days. Using data from the 2009 TNS Global Economic Crisis survey, we document widespread financial weakness in the United States: Approximately one quarter of Americans report that they would certainly not be able to come up with such funds, and an additional 19% would do so by relying at least in part on pawning or selling possessions or taking payday loans. If we consider the respondents who report being certain or probably not able to cope with an ordinary financial shock of this size, we find that nearly half of Americans are financially fragile.

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My comments:

I find this research, as summarized above, disconcerting.

In fact, it almost seems rather unbelievable, until one considers other recent data (some found in posts labeled "paycheck to paycheck" as well as a variety of others found throughout this blog) that seems to confirm a rather strained "financial capacity" among a substantial percentage of Americans.

Needless to say, $2000 does not "go far" with regard to many common expected and unexpected outlays, especially those concerning medical expenses.

As disconcerting as this paper's findings are, one can only expect this "financial capacity" to further deteriorate if/when economic conditions worsen.
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1320.20 as this post is written

Updates On Economic Indicators May 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 May Chicago Fed National Activity Index (CFNAI)(pdf) updated as of May 23, 2011:



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The Consumer Metrics Institute Contraction Watch:



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The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the March 23 Press Release, titled “Economic index forecasts stronger growth” :

“The March update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, increasing to 3.7% to 3.8% during the summer months. Gains in manufacturing, capital spending and exports are fueling the growth. Consumer spending and employment are expected to continue improving, though at a moderate pace.”

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The ECRI WLI (Weekly Leading Index):

As of 5/13/11 the WLI was at 128.7 and the WLI, Gr. was at 5.3%.  A chart of the growth rates of the Weekly Leading and Weekly Coincident Indexes:



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The Dow Jones ESI (Economic Sentiment Indicator):

The Indicator as of May 2 was at 46.6, as seen below:



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

Here is the latest chart, depicting 5-14-09 to 5-14-11:



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

As per the May 19 release, the LEI was at 114.0 and the CEI was at 102.8 in April.

An excerpt from the May 19 Press Release:

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI has been rising since March 2009, with only a brief one-month interruption in June 2010, and now, in April 2011. The U.S. CEI, a monthly measure of current economic conditions, continued to increase, supported by improving employment figures. Overall, the composite indexes still point to strengthening business conditions in the near term, although the path may be uneven.”

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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 1316.28 as this post is written

When Will The Next Recession Occur?

On May 17, CNBC had an article titled "Goldman's Hatzius: The Next US Recession Is 'Years Away'"
An excerpt:

"There's still a long way to go. The unemployment rate is still 9 percent, we're nowhere close to a really tight labor market that usually predicates a recession, so I think we're still be in a recovery for a few years," Jan Hatzius told CNBC Tuesday,

"The underlying trend is still above-trend growth. That's not going to be true in every indicator, but the best evidence for that is probably the fact that the unemployment been trending down, Hatzius said.

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This view, that a recession is "years away," seems to be widely held among economists and other professional forecasters.  Last week I posted three sets of forecasts, each indicating sustained economic growth for years, as well as other favorable accompanying conditions such as low inflation.  Also of note is that various long-term government projections forecast the same trends.

Very little is seen in these various forecasts that would indicate the possibility of recession, or worse.  In fact, in the Philadelphia Fed Survey Of Professional Forecasters, which I featured in the May 18 post, the following was indicated:

As for “the chance of a contraction in real GDP in any of the next four quarters,” estimates range from 7-12.2% for each of the quarters through Q2 2012.

Will these economic forecasts prove accurate?  While it may be pleasant to think that we will be experiencing economic expansion for years into the future, with little chance of pronounced economic weakness, my analysis continues to indicate that such a scenario will not prove accurate, unfortunately.
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1317.37 as this post is written

New College Graduates And The Job Market

On May 18 The New York Times had a story titled "Many With New College Degree Find the Job Market Humbling."

While I think the entire article is worthwhile reading, two excerpts are particularly notable:

"What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all."

also:

"The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account."

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my comment:

This situation of recent college graduates unable to find (suitable) jobs is very problematical and pernicious on many levels.  The negative impacts of the situation far transcend the college graduates involved.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1333.27 as this post is written

Walmart's Q12012 Results - Comments

I found various notable items in Walmart’s Q1 conference call transcript (pdf) dated May 17, 2011.  I view Walmart’s results as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly results.

Here are various excerpts that I find most notable:

comments from Mike Duke, from page 7:

"Despite improvements in some areas of the economy, core Walmart U.S. customers are still stretched. They remain concerned about rising prices for gas, energy and food, as well as employment issues. Customers trust us to be their ally in fighting rising gas prices and inflation."

comments from Bill Simon, p. 28:

"The paycheck cycle remains pronounced.  During the quarter, we saw continued pressure from ongoing macro economic conditions, as customers continued to trade down to opening price points and some private label products."

comments from Bill Simon, p. 32:

Rising gas prices, high unemployment and increasing inflation continue to be the most important issues facing our customers today.  One in five Walmart moms list gasoline as a top expense behind housing and car payments.  We continue to be prepared to help her with low prices and broad assortment during this time of uncertainty.

Last year during the second quarter, Walmart had the deep rollbacks that drove our unit sales of some items, but did not deliver the intended traffic and basket lift we were looking for.  We will not repeat these programs this year."

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1343.60 as this post is written

Federal Reserve Economic Projections To 2013 And Beyond - As Of April 2011

The following is from the Minutes of The Federal Open Market Committee of April 26-27, 2011, the Summary of Economic Projections.  As stated:

"In conjunction with the April 26-27, 2011, Federal Open Market Committee (FOMC) meeting, the members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in the deliberations of the FOMC, submitted projections for growth of real output, the unemployment rate, and inflation for the years 2011 to 2013 and over the longer run. The projections were based on information available through the end of the meeting and on each participant's assumptions about factors likely to affect economic outcomes, including his or her assessment of appropriate monetary policy."

Among the commentary and detail is this summary table:

Table 1. Economic projections of Federal Reserve Governors and Reserve Bank presidents, April 2011

Percent

Variable	Central tendency1				Range2
	2011	2012	2013	Longer run	2011	2012	2013	Longer run
Change in real GDP	3.1 to 3.3	3.5 to 4.2	3.5 to 4.3	2.5 to 2.8	2.9 to 3.7	2.9 to 4.4	3.0 to 5.0	2.4 to 3.0
January projection	3.4 to 3.9	3.5 to 4.4	3.7 to 4.6	2.5 to 2.8	3.2 to 4.2	3.4 to 4.5	3.0 to 5.0	2.4 to 3.0
Unemployment rate	8.4 to 8.7	7.6 to 7.9	6.8 to 7.2	5.2 to 5.6	8.1 to 8.9	7.1 to 8.4	6.0 to 8.4	5.0 to 6.0
January projection	8.8 to 9.0	7.6 to 8.1	6.8 to 7.2	5.0 to 6.0	8.4 to 9.0	7.2 to 8.4	6.0 to 7.9	5.0 to 6.2
PCE inflation	2.1 to 2.8	1.2 to 2.0	1.4 to 2.0	1.7 to 2.0	2.0 to 3.6	1.0 to 2.8	1.2 to 2.5	1.5 to 2.0
January projection	1.3 to 1.7	1.0 to 1.9	1.2 to 2.0	1.6 to 2.0	1.0 to 2.0	0.7 to 2.2	0.6 to 2.0	1.5 to 2.0
Core PCE inflation3	1.3 to 1.6	1.3 to 1.8	1.4 to 2.0		1.1 to 2.0	1.1 to 2.0	1.2 to 2.0
January projection	1.0 to 1.3	1.0 to 1.5	1.2 to 2.0		0.7 to 1.8	0.6 to 2.0	0.6 to 2.0

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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 1340.68 as this post is written

Philadelphia Fed – 2nd Quarter 2011 Survey Of Professional Forecasters

The Philadelphia Fed Second Quarter 2011 Survey of Professional Forecasters was released on May 13.  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:

GDP:
full-year 2011 : 2.7%
full-year 2012 : 3.0%
full-year 2013 : 2.8%
full-year 2014 : 3.3%

Unemployment Rate: (annual average level)
for 2011: 8.7%
for 2012: 8.1%
for 2013: 7.5%
for 2014: 7.0%

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As for “the chance of a contraction in real GDP in any of the next four quarters,” estimates range from 7-12.2% for each of the quarters through Q2 2012.

As well, there are also a variety of time frames shown (present through the year 2020) 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 1.4-3.5% range.
_____

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 1328.98 as this post is written

The May 2011 Wall Street Journal Economic Forecast Survey

The May Wall Street Journal Economic Forecast Survey was published May 16, 2011.  The headline is "Economists in Survey Discount Inflation."

Most of the article discusses inflation expectations, although raising the debt ceiling and other topics are touched upon as well.

The current average forecasts among economists polled include the following:

GDP:

full-year 2011 : 2.9%
full-year 2012:  3.2%

Unemployment Rate:

December 2011: 8.4%
December 2012: 7.7%

10-Year Treasury Yield:

December 2011: 3.87%
December 2012: 4.47%

CPI:

December 2011:  3.0%
December 2012:  2.3%

Crude Oil  ($ per bbl):

for 6/30/2011: $101.39
for 12/31/2011: $97.78

(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.
_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1329.47 as this post is written

The Increasing Percentage Of "Underwater Mortgages"

On May 9 Zillow.com released a Press Release titled "First Quarter Home Value Declines Match Worst of Housing Recession; Bottom Unlikely to Appear Before 2012" with the subtitle "Home Values Show Sharpest Quarterly Decline Since 2008; Negative Equity Rises to 28.4% According to Q1 2011 Zillow® Real Estate Market Reports"

(Other stories regarding this Press Release were found at a May 9 Bloomberg story, "U.S. 'Underwater' Homeowners Increase to 28 Percent, Zillow Says" and CNBC.com article of May 9 "Homeowners Drowning in Negative Equity")

I think it is important to note how quickly the percentage of "underwater" mortgages is increasing relative to the decreases in home prices.  As well, it is important to note that the 28% figure quoted above is a national average; as seen in the Press Release detail, there are many metropolitan areas with significantly higher figures.  Furthermore, it should also be noted that there are various ways to estimate and measure the percentage of "underwater mortgages," and as such the 28% figure may be understated if another methodology were to be used.

As I have written of previously, the residential real estate market is highly complex and, in my opinion, widely misunderstood.  The increasing rate of "underwater mortgages" should be of great concern, as it likely will feed the growth of various other problems such as "strategic defaults."

Falling residential real estate prices remain a severe threat to the economy.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1337.77 as this post is written

One Aspect Of Milton Friedman's "Free to Choose" Videos

On February 14 I wrote a post titled "Milton Friedman 'Free to Choose' Videos - The Complete Set".

Of note, this series is from 1980.  As such, many might dismiss the series as irrelevant and outdated.

However, the series (and book of the same title) is highly relevant to today's economic situation.  Virtually all of the same problem areas and critical / unresolved issues discussed in the series are still in existence today.

Given that virtually all of those same problems and issues exist today, one may wonder how much "societal progress" has occurred in the last 30+ years.  This facet is certainly disconcerting...

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1342.08 as this post is written

George W. Bush's "Decision Points" Book - Chapter 9 - Notable Aspects

I think it is important to reflect back upon the events preceding and during The Financial Crisis, and the actions taken during those periods, as they have had, and will have, substantial ramifications for our future economic situation.

I have found comments made by former President George W. Bush to be interesting and notable, although I don't agree with many of his comments or interpretations.  His interpretation of The Financial Crisis and its causes are largely "in line" with what I call the "conventional view" - i.e. that which is most commonly believed among economics and financial professionals.

In my November 29, 2010 post I highlighted some notable quotes from a George W. Bush interview concerning The Financial Crisis.

Recently, I read Chapter 14 of his Decision Points book, titled "Financial Crisis."  While, from an overall viewpoint, nothing in this chapter is necessarily "new" or revelatory in nature, there are nonetheless various notable aspects.  Much of his writings in the chapter echo statements he made during The Financial Crisis, such as those seen in his September 28, 2008 "President's Address to the Nation."

Here are excerpts of some of the material I found most interesting:

On page 440, it starts with his conversation with Ben Bernanke during The Financial Crisis:

"Is this the worst crisis since the Great Depression?" I asked.

"Yes," Ben replied.  "In terms of the financial system, we have not seen anything like this since the 1930s, and it could get worse."

His answer clarified the decision I faced:   Did I want to be the president overseeing an economic calamity that could be worse than the Great Depression?

I was furious the situation had reached this point.  A relatively small group of people - many on Wall Street, some not - had gambled that the housing market would keep booming forever.  It didn't.  In a normal environment, the free market would render its judgment and they could fail.  I would have been happy to let them do so.

But this was not a normal environment.  The market had ceased to function.  And as Ben had explained, the consequences of inaction would be catastrophic.  As unfair as it was to use the American people's money to prevent a collapse for which they weren't responsible, it would be even more unfair to do nothing and leave them to suffer the consequences.

On page 449, he talks about the unforeseen risks proliferating during the housing bubble:

But the exuberance of the moment masked the underlying risk.  Together, the global pool of cash, easy monetary policy, booming housing market, insatiable appetite for mortgage-backed assets, complexity of Wall Street engineering, and leverage of financial institutions created a house of cards.  This precarious structure was fated to collapse as soon as the underlying card - the nonstop growth in housing prices - was pulled out.  That was clear in retrospect.  But very few saw it at the time, including me.

On page 453, he briefly discusses Moral Hazard issues, in the context of the decision regarding Bear Stearns:

My first instinct was not to save Bear.  In a a free market economy, firms that fail should go out of business.  If the government stepped in, we would create a problem known as moral hazard:  Other firms would assume they would be bailed out, too, which would embolden them to take more risks.

And, near the back of the chapter:

One of the questions I'm asked most often is how to avoid another financial crisis.  My first answer is that I'm not sure we're out of the woods on this one yet...."

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1341.33 as this post is written

3 Critical Unemployment Charts - May 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 5-6-11)



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Here is the chart for Unemployed 27 Weeks and Over:



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Lastly, a chart from the CalculatedRisk.com site, from the May 6 post titled "Employment Summary, Part Time Workers and Unemployed over 26 Weeks." This shows the employment situation vs. that of previous recessions, as shown:



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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.
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1340.20 as this post is written

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

Starting on May 3, 2010 I have written posts concerning the notable divergence that has occurred between the S&P500 and Chinese (Shanghai Composite) stock markets.  Since that May post, the divergence has grown.

The chart below illustrates 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 StockCharts.com)



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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.
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1335.10 as this post is written

Food Stamps As Of April 2011

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 April 29, 2011, reflecting February 2011 levels.

Here is a table showing various monthly statistics with regard to National Level participation and costs going back to FY2008. As seen in this table, the number of people participating as of February 2011 is 44,199,391, up 11.64% from year-ago (February 2010) 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, 2010 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.”
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1347.32 as this post is written

The Wildly Sanguine Views Of The U.S. Dollar Drop

Lately there have been a variety of opinions and articles stating that the decline of the U.S. Dollar is either not something to be (unduly) concerned about, or even that such a falling U.S. Dollar will be beneficial.

The logic behind these opinions is various.  One, that is particularly notable, is that the U.S. Dollar has had large declines previous in its history; these declines have occurred with negligible adverse economic consequences.  Based upon these previous Dollar declines, it follows that any large decline now will also be free of accompanying economic damage.

This theory, that previous large Dollar declines have not had severe economic ramifications, is largely true; however, I believe, based upon a variety of factors that these previous episodes are not representative of our current economic situation.

One of the reasons I believe that this U.S. currency decline is not being taken as seriously as it should is that the U.S., unlike other countries, has never experienced a severe decline in its currency that brought on severe adverse economic consequences.

While of course such accompanying adverse economic consequences is contingent upon many factors, including the extent of the currency's decline,  on an "all things considered" basis I believe there are many reasons to be very concerned about further substantial U.S. Dollar weakness.

Of particular concern is U.S. policy toward the U.S. Dollar, as stated by Treasury Secretary Geithner and Ben Bernanke.  The "official policy" is one supportive of a "strong Dollar."  However, policy actions seem to contradict the "strong Dollar" statements.

During his April 27 Press Conference, Ben Bernanke made comments about the U.S. Dollar.  I found his reasoning rather myopic in nature, and his conclusions incorrect.  Perhaps most disconcerting was his answer to the question about the potentially problematical impacts of a weak Dollar:

"...I don't think I really want to address a hypothetical which I really don't anticipate."

While a severe drop in the U.S. Dollar can hopefully somehow be avoided, I fear that this probability is low.  As such, I have written extensively about the vulnerability of the U.S. Dollar to a substantial decline and the adverse economic consequences that would accompany such.

We, as a nation, are already seeing the negative manifestations of a weak Dollar, many of which are causing complex problems.  Further adverse impacts from a weak currency are bound to be just as insidious, if not more so.

I think Keynes, from his book Economic Consequences of the Peace, perhaps best spoke of the ill-effects of currency debasement:

"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."

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1356.62 as this post is written

The U.S. Dollar Index is at 72.78 as this post is written

U.S. Dollar Decline - May 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 StockCharts.com; annotations by the author)

(click on chart image to enlarge)

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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:

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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:

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I will be providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring…
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1332.87 as this post is written

"10 Problem Areas" Update

On January 10 I wrote, on the Seeking Alpha site, an article titled "10 'Front and Center' Problem Areas That Pose a Threat to the Economy."

I would like to briefly update my thoughts on these "Problem Areas" as I continue to believe they are very important.

Three factors of the ten seem to be improving, and mildly at that.  These three factors are state finances, unemployment and Ben Bernanke's demeanor.  All of the others have continued to visibly worsen.

With regard to unemployment, although from an "all things considered" standpoint the situation seems to have perhaps slightly improved, there are still severe problems, as seen both in various unemployment statistics as well as anecdotally.   In this latter category, one sees wildly skewed ratios of job applicants to open positions at job fairs and the like.  Along these lines, it was reported last Thursday that McDonald's had over 1 million job applicants for the 62,000 jobs it recently took applications for.

With regard to Ben Bernanke's public demeanor improving,  while this is notable, I certainly wouldn't assign it as much importance as the other nine factors.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1366.54 as this post is written