Wednesday, October 31, 2018

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 October 25, 2018 update (reflecting data through October 19, 2018) is -1.125.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on October 31, 2018 incorporating data from January 8, 1971 through October 26, 2018, on a weekly basis.  The October 26 value is -.84:
NFCI_10-31-18 -.84
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 31, 2018:
The ANFCI chart below was last updated on October 31, 2018 incorporating data from January 8,1971 through October 26, 2018, on a weekly basis.  The October 26 value is -.70:
ANFCI_10-31-18 -.70
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 31, 2018:
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2717.60 as this post is written

Employment Cost Index (ECI) – Third Quarter 2018

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.
One prominent measure is the Employment Cost Index (ECI).
Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:
The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.
On October 31, 2018, the ECI for the third quarter was released.  Here are two excerpts from the BLS release titled “Employment Cost Index – September 2018“:
Compensation costs for civilian workers increased 0.8 percent, seasonally adjusted, for the 3-month period ending in September 2018, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.9 percent and benefit costs (which make up the remaining 30 percent of compensation) increased 0.4 percent from June 2018. (See tables A, 1, 2, and 3.)
also:
Compensation costs for civilian workers increased 2.8 percent for the 12-month period ending in September 2018 compared with a compensation costs increase of 2.5 percent in September 2017. Wages and salaries increased 2.9 percent for the 12-month period ending in September 2018 and increased 2.5 percent for the 12-month period ending in September 2017. Benefit costs increased 2.6 percent for the 12-month period ending in September 2018. In September 2017, the increase was 2.4 percent. (See tables A, 4, 8, and 12.)
Below are three charts, updated on October 31, 2018 that depict various aspects of the ECI, which is seasonally adjusted (SA):
The first depicts the ECI, with a value of 134.3:
ECIALLCIV_10-31-18 134.3
source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 31, 2018:
The second chart depicts the ECI on a “Percent Change from Year Ago” basis, with a value of 2.8%:
ECIALLCIV_10-31-18 134.3 2.8 Percent Change From Year Ago
The third chart depicts the ECI on a “Percent Change” (from last quarter) basis, with a value of .8%:
ECIALLCIV_10-31-18 134.3 .8 Percent Change
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2719.26 as this post is written

Tuesday, October 30, 2018

Consumer Confidence Surveys – As Of October 30, 2018

The Doug Short site had a post of October 30, 2018 (“Consumer Confidence Up Again in October“) that displays the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:
(click on charts to enlarge images)
Conference Board Consumer Confidence
University of Michigan Consumer Sentiment
There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, 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 notable, 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 2682.63 as this post is written

Four Charts Of Recent S&P500 Price Volatility – October 30, 2018

This post is an update to past posts regarding stock market volatility.
While I track many different measures of volatility, I find the following charts to be both simple and clear in depicting the recent volatility in the stock market.
Overall, my analyses indicates that there are many reasons for this volatility, and the volatility is highly significant.
First, a one-year daily depiction of the S&P500 through Monday’s (October 29, 2018) close, with a 50-day moving average (MA50) depicted by the blue line:
(click on chart to enlarge image)(charts courtesy of StockCharts.com)
S&P500 1-year daily chart
Second, a three-month daily depiction of the S&P500 through Monday’s (October 29, 2018) close, with a 50-day moving average (MA50) depicted by the blue line:
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
S&P500 3-month daily chart
Third, a three-month depiction of the S&P500 in 60-minute intervals through Monday’s (October 29, 2018) close, with a 50-hour moving average (MA50) depicted by the blue line:
S&P500 chart 3-month 60 minute intervals
Fourth, a one-month depiction of the S&P500 in 10-minute intervals through Monday’s (October 29, 2018) close, with a 50-period moving average (MA50) depicted by the blue line:
S&P500 chart 1-month 10 minute intervals
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2641.25 as this post is written

Monday, October 29, 2018

Another Recession Probability Indicator – Updated Through Q2 2018

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of October 4, 2018, titled “Recession Probability Models – October 2018.”
While I don’t agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.
Another probability of recession is provided by James Hamilton, and it is titled “GDP-Based Recession Indicator Index.”  A description of this index, as seen in FRED:
This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.
If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.
Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled “Recession probabilities” as well as on the “The Econbrowser Recession Indicator Index” page.
Below is a chart depicting the most recent value of 1.10%, for the second quarter of 2018, last updated on October 26, 2018 (after the October 26, 2018 Gross Domestic Product Q3 2018 Advance Estimate (pdf)):
GDP-Based Recession Indicator Index [JHGDPBRINDX]
source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on October 29, 2018:
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2658.69 as this post is written

Sunday, October 28, 2018

Velocity Of Money – Charts Updated Through October 26, 2018

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.
All charts reflect quarterly data through the 3rd quarter of 2018, and were last updated as of October 26, 2018.
Velocity of MZM Money Stock, current value = 1.326:
MZMV_10-26-18 1.326
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 28, 2018:
Velocity of M1 Money Stock, current value = 5.586:
M1V_10-26-18 5.586
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 28, 2018:
Velocity of M2 Money Stock, current value = 1.455:
M2V_10-26-18 1.455
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2658.69 as this post is written

Friday, October 26, 2018

Real GDP Chart Since 1947 With Trendline – 3rd Quarter 2018

For reference purposes, below is a chart from the Doug Short site post of October 26, 2018 titled “Q3 GDP Advance Estimate: Real GDP at 3.5%” reflecting Real GDP, with a trendline, as depicted.  This chart incorporates the Gross Domestic Product Q3 2018 Advance Estimate (pdf) of October 26, 2018:
Real GDP chart since 1947
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2667.92 as this post is written

Thursday, October 25, 2018

Durable Goods New Orders – Long-Term Charts Through September 2018

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 September 2018, updated on October 25, 2018. This value is $262,098 ($ Millions):
(click on charts to enlarge images)
Durable Goods New Orders
Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis, with a last value of 7.9%:
Durable Goods New Orders Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed October 25, 2018;
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2695.92 as this post is written

Wednesday, October 24, 2018

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 October 18, 2018 update (reflecting data through October 12, 2018) is -1.108.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on October 24, 2018 incorporating data from January 8, 1971 through October 19, 2018, on a weekly basis.  The October 19 value is -.87:
NFCI_10-24-18 -.87
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 24, 2018:
The ANFCI chart below was last updated on October 24, 2018 incorporating data from January 8,1971 through October 19, 2018, on a weekly basis.  The October 19 value is -.74:
ANFCI_10-24-18 -.74
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 24, 2018:
_________
I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2656.10 as this post is written

Money Supply Charts Through September 2018

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 October 19, 2018 depicting data through September 2018, with a value of $15,605.8 Billion:
MZMSL_10-19-18 15605.8
Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.3%:
MZMSL_10-19-18 15605.8 3.3 Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 24, 2018:
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 October 18, 2018, depicting data through September 2018, with a value of $14,241.6 Billion:
M2SL_10-18-18 14241.6
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.9%:
M2SL_10-18-18 14241.6 3.9 Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 24, 2018:
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2740.69 as this post is written

Tuesday, October 23, 2018

The S&P500 Vs. The Shanghai Stock Exchange Composite Index – October 23, 2018

For reference purposes, the chart below shows the S&P500 vs. the Shanghai Stock Exchange Composite Index on a daily basis, since 2006, with price labels:
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
S&P500 v SSEC
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2755.88 as this post is written

The U.S. Economic Situation – October 23, 2018 Update

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.
There are an array of indications and other “warning signs” – many readily apparent – that current economic activity and financial market performance is accompanied by exceedingly perilous dynamics.
I have written extensively about this peril, including in the following:
Building Financial Danger” (ongoing updates)
My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.
For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through October 19, 2018, with a last value of 25444.34):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA since 1900
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2755.88 as this post is written