St. Louis Financial Stress Index – October 31, 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 October 31, incorporating data from December 31,1993 to October 25, 2013, on a weekly basis.  The October 25, 2013 value is -.78:

(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 October 31, 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 1764.71 as this post is written

U.S. Dollar Concerns

One of my ongoing concerns is the future strength, or lack thereof, of the U.S. Dollar.  As I am gravely concerned over the future level of the U.S. Dollar and the implications of such, I have written extensively on the subject of the U.S. Dollar and its vulnerability to substantial decline.

In this post I would like to highlight and summarize various fundamental issues concerning the U.S. Dollar.  (For those interested, every month I have been posting long-term U.S. Dollar charts, including notable technical demarcations.)

For reference purposes, here is a monthly chart of the U.S. Dollar Index, on a LOG scale, since 1983 :

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

The current and ongoing characteristics of our economic situation are "textbook" (pre)conditions to substantially depreciate a currency.  These (pre)conditions include, but are not limited to:

• Very low interest rates
• Truly outsized interventions (including “money printing”);
• Ongoing large budget deficits and deficit spending "as far as the eye can see."
• Substantial federal debt; depending upon specific estimate used, at multiples of GDP when viewed on an accrual basis
• Many exceedingly large asset bubbles - and future implications
• An economic system highly vulnerable to financial instability

As I've discussed in previous posts, perhaps the main reason for the complacent attitude toward future U.S. Dollar levels is that the U.S. has never experienced substantial economic problems brought on by currency weakness.  It appears as if many people will worry about a significantly lower U.S. Dollar if - and when - it occurs.

There are many problems with this approach.  Based on various fundamental and technical analysis factors, I believe that should the Dollar fall substantially from these levels - as I expect - the decline will prove rather intractable - i.e. once it falls, it will stay lower and "reversing the slide" will prove very difficult.

A substantial Dollar decline will have many ill-effects, and will likely be akin to opening a "Pandora's Box" of various economic and financial problems.  This currency weakness will create an entirely new set of severe economic problems and challenges, in addition to other problems that will almost certainly coexist at the same time of the Dollar's decline.

While undoubtedly many people will expect any Dollar decline to be gradual and thus "manageable," such an expectation will unfortunately prove too optimistic.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1763.31 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 August, except for the Case-Shiller National Index, which is through June), from the CalculatedRisk blog post of October 29 titled “Comment on House Prices: Real Prices, Price-to-Rent Ratio, Cities” :

(click on chart to enlarge image)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1771.95 as this post is written

Consumer Confidence Surveys – As Of October 25, 2013

Doug Short had a blog post of October 25 ("Michigan Consumer Sentiment:  Lowest Level Since December 2012") 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)

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There are a few aspects of the above charts that I find highly noteworthy.  Of course, the continuing subdued absolute levels of these two surveys is 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 blog.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1761.91 as this post is written

Current Economic Situation

With regard to our current economic situation,  my thoughts can best be described/summarized by the posts found under the 29 “Building Financial Danger” posts.

My thoughts concerning our ongoing economic situation – with future implications – can be seen on the page titled “A Special Note On Our Economic Situation,” which has been found near the bottom of every blog post since August 15, 2010.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1759.77 as this post is written

Durable Goods New Orders – Long-Term Charts Through September 2013

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 September, last updated on October 25.  This value is 233,411 ($ Millions) :

(click on charts to enlarge images)

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Here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

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 October 25, 2013;

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

_________

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 1756.65 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – October 25, 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 seven sources :

• Bloomberg video, July 30, “U.S. Recession Began in 2012, ECRI’s Achuthan Says“
• ECRI, July 30, “Becoming Japan“
• ECRI, May 31, “What Wealth Effect?“
• 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 October 25 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the October 25 release, indicating data through October 18, 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.:



_________

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 1755.08 as this post is written

St. Louis Financial Stress Index – October 24, 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 October 24, incorporating data from December 31,1993 to October 18, 2013, on a weekly basis.  The October 18, 2013 value is -.686:

(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 October 24, 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 1751.94 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 October 18, 2013:

from page 18:

(click on charts to enlarge images)

CY Bottom-Up EPS vs. Top-Down Mean EPS (Trailing 26-Weeks) 

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from page 19:

Calendar Year Bottom-Up EPS Actuals & Estimates

_____

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 1745.00 as this post is written

S&P500 Earnings Estimates For Years 2013, 2014, And 2015

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 tag)

The following estimates are from Exhibit 12 of “The Director’s Report” of October 22, 2013, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts:

Year 2013 estimate:

$109.28/share

Year 2014 estimate:

$122.11/share

Year 2015 estimate:

$135.49/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 1743.66 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2013 & 2014 – As Of October 17, 2013

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 tag)

For reference purposes, the most current estimates are reflected below, and are as of October 17, 2013:

Year 2013 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $107.52/share

-From a “top down” perspective, operating earnings of N/A

-From a “top down” perspective, “as reported” earnings of $98.28/share

Year 2014 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $121.46/share

-From a “top down” perspective, operating earnings of $113.76/share

-From a “top down” perspective, “as reported” earnings of $108.29/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 1745.15 as this post is written

Average Hourly Earnings Trends

I have written many blog posts concerning the worrisome trends in income and earnings.

Along these lines, one of the measures showing disconcerting trends is that of hourly earnings.

While the concept of hourly earnings can be defined and measured in a variety of ways, below are a few charts that I believe broadly illustrate problematic trends.

The first chart depicts Average Hourly Earnings Of All Employees: Total Private  (FRED series CES0500000003)(current value = $24.09) :

(click on chart to enlarge image)(chart last updated 10-22-13)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of All Employees:  Total Private [CES0500000003] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 22, 2013:

http://research.stlouisfed.org/fred2/series/CES0500000003

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This next chart depicts this same measure on a “Percentage Change From A Year Ago” basis.  While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 10-22-13)

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There are slightly different measures available from a longer-term perspective.  Pictured below is another measure, the Average Hourly Earnings of Production and Nonsupervisory Employees – Total Private  (FRED series AHETPI)(current value = $20.24)  :

(click on chart to enlarge image)(chart last updated 10-22-13)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private [AHETPI] ; U.S. Department of Labor: Bureau of Labor Statistics;  accessed October 22, 2013:

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

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Pictured below is this AHETPI measure on a “Percentage Change From A Year Ago” basis:

(click on chart to enlarge image)(chart last updated 10-22-13)

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I will continue to actively monitor these trends, especially given the post-2009 dynamics.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1753.08 as this post is written

U-3 And U-6 Unemployment Rate Long-Term Reference Charts As Of October 22, 2013

Shortly after each monthly employment report I have been posting a continual series titled “3 Critical Unemployment Charts.”

Of course, there are many other employment charts that can be displayed as well.

For reference purposes, below are the U-3 and U-6 Unemployment Rate charts from a long-term historical perspective.  Both charts are from the St. Louis Fed site.  The U-3 measure is what is commonly referred to as the official unemployment rate; whereas the U-6 rate is officially (per Bureau of Labor Statistics) defined as:

Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

Of note, many economic observers use the U-6 rate as a (closer) proxy of the actual unemployment rate rather than that depicted by the U-3 measure.

Here is the U-3 chart, currently showing a 7.2% unemployment rate:

(click on charts to enlarge images)(charts updated as of 10-22-13)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Civilian Unemployment Rate [UNRATE] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 22, 2013;

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

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Here is the U-6 chart, currently showing a 13.6% unemployment rate:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons  [U6RATE] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 22, 2013;

http://research.stlouisfed.org/fred2/series/U6RATE

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1751.55 as this post is written

3 Critical Unemployment Charts – October 2013

As I have commented previously, as in the October 6, 2009 post (“A Note About Unemployment Statistics”), 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 (current value = 16.3 weeks) :

(click on charts to enlarge images)(charts updated as of 10-22-13)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Median Duration of Unemployment [UEMPMED] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 22, 2013;

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

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Here is the chart for Unemployed 27 Weeks and Over (current value =  4.146 million) :

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Civilians Unemployed for 27 Weeks and Over [UEMP27OV] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed October 22, 2013;

http://research.stlouisfed.org/fred2/series/UEMP27OV

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Lastly, a chart from the CalculatedRisk.com site, from the October 22 post titled “September Employment Report:  148,000 Jobs, 7.2% Unemployment Rate.”  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.

On April 24, 2012 I wrote a five-part blog post titled “The Unemployment Situation Facing The United States”, which discusses various problematical issues concerning the present and future employment situation.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1756.24 as this post is written

VIX Monthly And Weekly Charts Since Year 2000

For reference purposes, below are two charts of the VIX from year 2000 through Friday's (October 18, 2013) close.

Here is the VIX Monthly chart, depicted on a LOG scale, with price labels as well as the 13- and 34-month moving averages, seen in the cyan and red lines, respectively:

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

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Here is the VIX Weekly chart, depicted on a LOG scale, with price labels as well as the 13- and 34-week moving average, seen in the cyan and red lines, respectively:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1744.66 as this post is written