Wednesday, November 28, 2018

Corporate Profits As A Percentage Of GDP

In the last post (“3rd Quarter 2018 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 third 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)
Corporate Profits As A Percentage Of GDP
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 28, 2018
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2729.03 as this post is written

3rd Quarter 2018 Corporate Profits

Today’s (November 28, 2018) GDP release (Q3 2018,Second Estimate)(pdf) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (Preliminary Estimate) for the 3rd 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 November 28, 2018, with a value of $1975.665 Billion SAAR):
After-Tax Corporate Profits
Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:
Corporate Profits Percent Change From Year Ago
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 November 28, 2018; https://research.stlouisfed.org/fred2/series/CP
_________
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 2729.34 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 November 23, 2018 update (reflecting data through November 16, 2018) 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:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on November 28, 2018 incorporating data from January 8, 1971 through November 23, 2018, on a weekly basis.  The November 23 value is -.81:
NFCI_11-28-18 -.81
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 28, 2018:
The ANFCI chart below was last updated on November 28, 2018 incorporating data from January 8,1971 through November 23, 2018, on a weekly basis.  The November 23 value is -.62:
ANFCI_11-28-18 -.62
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 28, 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 2729.64 as this post is written

Tuesday, November 27, 2018

Consumer Confidence Surveys – As Of November 27, 2018

The Doug Short site had a post of November 27, 2018 (“Consumer Confidence Declined in November“) 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 2676.67 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 September) from the CalculatedRisk blog post of November 27, 2018 titled “Case-Shiller:  National House Price Index increased 5.5% year-over-year in September”:
Case-Shiller indexes
_________
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 2675.07 as this post is written

Monday, November 26, 2018

Updates Of Economic Indicators November 2018

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 November 2018 Chicago Fed National Activity Index (CFNAI) updated as of November 26, 2018:
The CFNAI, with current reading of .24:
CFNAI_11-26-18 .24
source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, November 26, 2018;
The CFNAI-MA3, with current reading of .31:
CFNAIMA3_11-26-18 .31
source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, November 26, 2018;
As of November 21, 2018 (incorporating data through November 16, 2018) the WLI was at 144.9 and the WLI, Gr. was at -3.7%.
A chart of the WLI,Gr., from the Doug Short’s site ECRI update post of November 21, 2018:
ECRI WLI,Gr.
Here is the latest chart, depicting the ADS Index from December 31, 2007 through November 17, 2018:
ADS Index
The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):
As per the November 21, 2018 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in October” (pdf) the LEI was at 112.1, the CEI was at 104.7, and the LAG was 105.5 in October.
An excerpt from the release:
“The US LEI increased slightly in October, and the pace of improvement slowed for the first time since May,” said Ataman Ozyildirim, Director of Economic Research and Global Research Chair at The Conference Board. “The index still points to robust economic growth in early 2019, but the rapid pace of growth may already have peaked. While near term economic growth should remain strong, longer term growth is likely to moderate to about 2.5 percent by mid to late 2019.”
Here is a chart of the LEI from the Doug Short’s site Conference Board Leading Economic Index update of November 21, 2018:
Conference Board LEI
_________
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 2665.71 as this post is written

Money Supply Charts Through October 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 November 21, 2018 depicting data through October 2018, with a value of $15,603.2 Billion:
MZM Money Supply
Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.3%:
MZM Money Supply Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 26, 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 November 15, 2018, depicting data through October 2018, with a value of $14,271.5 Billion:
M2 Money Supply
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.7%:
M2 Money Supply Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 26, 2018:
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2632.56 as this post is written

Wednesday, November 21, 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 November 15, 2018 update (reflecting data through November 9, 2018) is -.998.
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 November 21, 2018 incorporating data from January 8, 1971 through November 16, 2018, on a weekly basis.  The November 16 value is -.82:
NFCI_11-21-18 -.82
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 21, 2018:
The ANFCI chart below was last updated on November 21, 2018 incorporating data from January 8,1971 through November 16, 2018, on a weekly basis.  The November 16 value is -.64:
ANFCI_11-21-18 -.64
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 21, 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 2661.20 as this post is written

Durable Goods New Orders – Long-Term Charts Through October 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 October 2018, updated on November 21, 2018. This value is $248,520 ($ 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 6.7%:
DGORDER 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 November 21, 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 2641.89 as this post is written

The U.S. Economic Situation – November 21, 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 November 16, 2018, with a last value of 25413.22):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA chart since 1900
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2641.89 as this post is written

Tuesday, November 20, 2018

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 November 16, 2018:
from page 21:
(click on charts to enlarge images)
S&P500 earnings estimates 2018 & 2019
from page 22:
S&P500 annual earnings 2008-2019
_____
I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site 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 2690.73 as this post is written

Monday, November 19, 2018

S&P500 EPS Forecasts For Years Through 2018, 2019, And 2020

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 24 of the “S&P500 Earnings Scorecard” (pdf) of November 19, 2018, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share, the Year 2015 value is $117.46, the Year 2016 value is $118.10/share, and the Year 2017 value is $132.00/share:
Year 2018 estimate:
$162.79/share
Year 2019 estimate:
$176.88/share
Year 2020 estimate:
$195.26/share
_____
I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site 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 2716.85 as this post is written