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 March) from the CalculatedRisk blog post of May 31, 2016 titled “Real Prices and Price-to-Rent Ratio in March”:

(click on chart to enlarge image)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2089.57 as this post is written

Consumer Confidence Surveys – As Of May 31, 2016

Doug Short had a blog post of May 31, 2016 (“Consumer Confidence Declined Further in May“) 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, 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 2091.08 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“1st Quarter 2016 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 first 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)

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 27, 2016

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2093.73 as this post is written

1st Quarter 2016 Corporate Profits

Friday’s GDP release (Q1, 2nd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 1st 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 (without IVA and CCAdj) (last updated May 27, 2016, with a value of $1671.4 Billion):

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Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

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 May 27, 2016; https://research.stlouisfed.org/fred2/series/CP

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2096.80 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 27, 2016 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 May 27, 2016 titled “ECRI Weekly Leading Index:  WLI Up 1.0, YoY at 1.29%.”  These charts are on a weekly basis through the May 27, 2016 release, indicating data through May 20, 2016.

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

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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 2096.95 as this post is written

Durable Goods New Orders – Long-Term Charts Through April 2016

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through April 2016, updated on May 26, 2016. This value is $235,942 ($ Millions):

(click on charts to enlarge images)

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Second, 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 May 26, 2016;

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 2090.10 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 May 19, 2016 update (reflecting data through May 13) is -.985.

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:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on May 25, 2016 incorporating data from January 5,1973 to May 20, 2016, on a weekly basis.  The May 20, 2016 value is -.63:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 25, 2016:

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

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The ANFCI chart below was last updated on May 25, 2016 incorporating data from January 5,1973 to May 20, 2016, on a weekly basis.  The May 20 value is .30:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 25, 2016:

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

_________

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 2091.32 as this post is written

Money Supply Charts Through April 2016

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 May 20, 2016 depicting data through April 2016, with a value of $14,063.9 Billion:

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 24, 2016:

https://research.stlouisfed.org/fred2/series/MZMSL

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 May 19, 2016, depicting data through April 2016, with a value of $12,651.4 Billion:

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 24, 2016:

https://research.stlouisfed.org/fred2/series/M2SL

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2048.04 as this post is written

Broad-Based Indicators Of Economic Activity

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.

The short-term and long-term trends of each continue to be notable.

Doug Short, in his blog post of May 20, 2016, titled “The Philly Fed ADS Index Business Conditions Index Update” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a variety of perspectives.

Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.

The CFNAI MA-3:

(click on charts to enlarge images)

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The ADS Index, 91-Day MA:

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Also shown in the Doug Short’s aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.

_________

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 2052.32 as this post is written

The U.S. Economic Situation – May 23, 2016 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)

“A Special Note On Our Economic Situation”

“Forewarning Pronounced Economic Weakness”

“Thoughts Concerning The Next Financial Crisis”

“Was A Depression Successfully Avoided?”

“Has the Financial System Strengthened Since the Financial Crisis?”

“The Next Crash And Its Significance”

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 May 20, 2016, with a last value of 17500.94):

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2052.32 as this post is written

Updates Of Economic Indicators May 2016

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 May 2016 Chicago Fed National Activity Index (CFNAI) updated as of May 19, 2016: (current reading of .10; current reading of CFNAI-MA3 is -.22):

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The ECRI WLI (Weekly Leading Index):

As of May 13, 2016 (incorporating data through May 6, 2016) the WLI was at 135.0 and the WLI, Gr. was at 5.7%.

A chart of the WLI,Gr., from Doug Short’s post of May 13, 2016, titled “ECRI Weekly Leading Index: WLI Down Slightly, YoY at 1.01%“:

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

Here is the latest chart, depicting the ADS Index from December 31, 2007 through May 14, 2016:

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The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the May 19, 2016 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased,” (pdf) the LEI was at 123.9, the CEI was at 113.6, and the LAG was 121.5 in April.

An excerpt from the May 19 release:

“The U.S. LEI picked up sharply in April, with all components except consumer expectations contributing to the rebound from an essentially flat first quarter,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Despite a slow start in 2016, labor market and financial indicators, and housing permits all point to a moderate growth trend continuing in 2016.”

_________

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 2040.04 as this post is written

Walmart’s Q1 2017 Results – Comments

I found various notable items in Walmart’s Q1 2017 management call transcript (pdf) dated May 19, 2016.  (as well, there is Walmart’s press release of the Q1 results(pdf) and related presentation materials)

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 3:

We delivered comp sales of 1 percent in Walmart U.S. due to continuing traffic increases, which improved 1.5 percent this quarter. This was our 7th consecutive quarter of positive comp sales, and our 6th consecutive quarter of positive comp traffic.

comments from Brett Biggs, EVP & CFO, page 9:

Gross margin improved 44 basis points in the quarter. We delivered improved margin rates in Food, Consumables and Health & Wellness as our continued focus on reducing costs both in how we operate the business and in procuring merchandise provided benefits. In addition, transportation costs benefited from lower fuel prices, we had some improvements in shrink, and we also lapped last year’s incremental expenses related to the west coast port congestion.

comments from Brett Biggs, EVP & CFO, page 10:

Finally, as we communicated in October, price investment is always an important part of our growth plan. We began the initial phase of additional price investment late in the first quarter, lowering prices on key items in select geographies. As always, we’re committed to providing quality merchandise at a great value, using data and analytics to better serve our customers.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2047.63 as this post is written

Zillow Q2 2016 Home Price Expectations Survey – Summary & Comments

On May 18, 2016, the Zillow Q2 2016 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

Two excerpts from the Press Release:

Overall, the economists surveyed predicted home price appreciation would be up 4 percent year-over-year at the end of 2016, higher than predictions of 3.7 percent indicated in the previous survey. However, if Sanders or Trump is elected, the economists would lower their expectations both for home values and the overall performance of the U.S. economy.

also:

"Longer-term expectations for U.S. home values continue to trend slowly downward, and are at the lowest levels they've been since the market recovery began four years ago," said Pulsenomics founder Terry Loebs. "After adjusting for expected inflation, the expert panel's forecast for national home value appreciation averages 1.7 percent annually through 2020." Although this would mark a significant pull-back from the 3.6 percent inflation-adjusted average annual rate experienced since the start of the recovery in 2012, Loebs said that housing market stakeholders should keep the fading optimism in perspective. "During most of the decade that preceded the onset of the real estate bubble more than fifteen years ago–a relatively normal period for the U.S. housing market–nominal home values didn't even keep up with inflation."

-

Various Q2 2016 Zillow Home Price Expectations Survey charts are available, including that seen below:

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q2 2016 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only one (of the displayed responses) forecasts a cumulative price decrease through 2020.  That forecast is from Mark Hanson, who foresees a 14.77% cumulative price decrease through 2020.

The Median Cumulative Home Price Appreciation for years 2016-2020 is seen as 4.00%, 7.64%, 11.14%, 14.31%, and 17.97%, respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Mark Hanson’s above-referenced forecast) will prove too optimistic in hindsight.  From a longer-term historical perspective, such a decline is very mild 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 many people continue to 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, from these price levels 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 titled “What’s Ahead For The Housing Market – A Look At The Charts.”

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2047.63 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 May 13, 2016:

from page 22:

(click on charts to enlarge images)

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from page 23:

_____

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 2048.33 as this post is written

S&P500 2016, 2017 & 2018 EPS Estimates

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 20 of the “S&P500 Earnings Scorecard” (pdf) of May 18, 2016, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share and the Year 2015 value is $117.46:

Year 2016 estimate:

$118.46/share

Year 2017 estimate:

$135.49/share

Year 2018 estimate:

$148.81/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 2050.46 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2016 & 2017 – As Of May 12, 2016

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 May 12, 2016:

Year 2016 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $114.74/share

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

-From a “bottom up” perspective, “as reported” earnings of $105.78/share

Year 2017 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $133.98/share

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

-From a “bottom up” perspective, “as reported” earnings of $124.95/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 2051.92 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 May 12, 2016 update (reflecting data through May 6) is -.919.

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:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on May 18, 2016 incorporating data from January 5,1973 to May 13, 2016, on a weekly basis.  The May 13, 2016 value is -.64:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 18, 2016:

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

–

The ANFCI chart below was last updated on May 18, 2016 incorporating data from January 5,1973 to May 13, 2016, on a weekly basis.  The May 13 value is .36:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 18, 2016:

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

_________

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 2050.58 as this post is written