Tuesday, August 31, 2021

Consumer Confidence Surveys – As Of August 31, 2021

Advisor Perspectives had a post of August 31, 2021 (“Consumer Confidence Fell in August“) 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 Index

While I don’t believe that confidence surveys should be overemphasized, I find these readings and trends to be notable, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4529.79 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 June) from the CalculatedRisk blog post of August 31, 2021 titled “Case-Shiller : National House Price Index increased 18.6% year-over-year in June“:

U.S. real estate indices

_________

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 4529.34 as this post is written

Friday, August 27, 2021

U.S. Deflation Probability Chart Through August 2021

For reference, below is a chart of the St. Louis Fed Price Pressures Measures – Deflation Probability [FRED STLPPMDEF] through August 2021.

While I do not necessarily agree with the current readings of the measure, I view this as a proxy of U.S. deflation probability.

A description of this measure, as seen in FRED:

This series measures the probability that the personal consumption expenditures price index (PCEPI) inflation rate (12-month changes) over the next 12 months will fall below zero.

The chart, on a monthly basis from January 1990 – August 2021, with a last reading of .00004, last updated on August 27, 2021:

U.S. Deflation Probability

Here is this same U.S. deflation probability measure since 2008:

U.S. Deflation Probability since 2008

source:  Federal Reserve Bank of St. Louis, Deflation Probability [STLPPMDEF], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 27, 2021: https://fred.stlouisfed.org/series/STLPPMDEF

_________

I post various economic 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 4510.84 as this post is written

Thursday, August 26, 2021

Corporate Profits As A Percentage Of GDP

In the last post (“2nd Quarter 2021 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 second quarter), (After Tax) Corporate Profits as a Percentage of GDP is still at levels that can be seen as historically 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 After Tax

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 2021

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4472.41 as this post is written

2nd Quarter 2021 Corporate Profits

Today’s (August 26, 2021) GDP release (Q2 2021, Second Estimate) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (Preliminary Estimate) for the 2nd 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 August 26, 2021, with a value of $2671.246 Billion SAAR):

Corporate Profits After Tax

Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective (value of 69.3%):

Corporate Profits After Tax 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 August 26, 2021; 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 4474.01 as this post is written

Wednesday, August 25, 2021

Durable Goods New Orders – Long-Term Charts Through July 2021

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 July 2021, updated on August 25, 2021. This value is $257,207 ($ 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 17.6%:

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 August 25, 2021; 
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 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 4498.89 as this post is written

Tuesday, August 24, 2021

Money Supply Charts Through July 2021

For reference purposes, below are two sets of charts depicting growth in the money supply.

The first shows the M1, defined in FRED as the following:

Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

Here is the “M1 Money Stock” (seasonally adjusted) chart, updated on August 24, 2021 depicting data through July 2021, with a value of $19,402.0 Billion:

M1 Money Stock

Here is the “M1 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 15.7%:

M1 Money Stock Percent Change From Year Ago

Data Source: Board of Governors of the Federal Reserve System (US), M1 Money Stock [M1SL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 24, 2021: https://fred.stlouisfed.org/series/M1SL

The second set shows M2, defined in FRED as the following:

Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs.

Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on August 24, 2021, depicting data through July 2021, with a value of $20,534.6 Billion:

M2 Money Stock

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 12.1%:

M2 Money Supply Percent Change From Year Ago

Data Source: Board of Governors of the Federal Reserve System (US), M2 Money Stock [M2SL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 24, 2021: https://fred.stlouisfed.org/series/M2SL

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4489.96 as this post is written

Monday, August 23, 2021

Updates Of Economic Indicators August 2021

The following 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 August 2021 Chicago Fed National Activity Index (CFNAI) updated as of August 23, 2021:

The CFNAI, with a current reading of .53:

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, August 23, 2021; 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of .23:

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, August 23, 2021; 
https://fred.stlouisfed.org/series/CFNAIMA3

The ECRI WLI (Weekly Leading Index):

As of August 13, 2021 (incorporating data through August 6, 2021) the WLI was at 152.4 and the WLI, Gr. was at 6.8%.

A chart of the WLI,Gr., from the Advisor Perspectives’ ECRI update post of August 13, 2021:

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

The ADS Index as of August 19, 2021, reflecting data from August 14, 2020 through August 14, 2021:

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

As per the August 19, 2021 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in July” the LEI was at 116.0 in July, the CEI was at 105.6 in July, and the LAG was n/a.

An excerpt from the release:

“The U.S. LEI registered another large gain in July, with all components contributing positively,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The Leading Index’s overall upward trend, which started with the end of the pandemic-induced recession in April 2020, is consistent with strong economic growth in the second half of the year. While the Delta variant and/or rising inflation fears could create headwinds for the US economy in the near term, we expect real GDP growth for 2021 to reach 6.0 percent year-over-year, before easing to a still robust 4.0 percent growth rate for 2022.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index update of August 19, 2021:

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 4480.51 as this post is written

The U.S. Economic Situation – August 23, 2021 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 August 20, 2021, with a last value of 35,120.08):

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

DJIA since 1900 through August 20, 2021

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4441.67 as this post is written

Friday, August 20, 2021

The Real Fed Funds Rate Level And Its Importance

On January 9, 2017 I wrote a post titled “Low Interest Rates And The Formation Of Asset Bubbles.“  As discussed in that post – and for other reasons – the level of the Fed Funds rate – and whether its level is appropriate – has vast importance and far-reaching consequences with regard to many aspects of the economy and financial system.

Along these lines, below is an updated long-term chart indicating the Real Fed Funds Rate [FRED FEDFUNDS – CPIAUCSL] , with a last value of -5.18259 through July 2021. Of particular note is the post-2000 persistently negative Real Fed Funds rate:

Real Fed Funds Rate -5.18259 through July 2021

source: Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rate [FEDFUNDS], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 20, 2021: https://fred.stlouisfed.org/series/FEDFUNDS

source: U.S. Bureau of Labor Statistics, Consumer Price Index: All Items in U.S. City Average, All Urban Consumers [CPIAUCSL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 20, 2021: https://fred.stlouisfed.org/series/CPIAUCSL

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 4405.80 as this post is written

Thursday, August 19, 2021

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI2) is one index that is supposed to measure stress in the financial system. Its reading as of the August 19, 2021 update (reflecting data through August 13, 2021) is -1.0606:

STLFSI2 -1.0606

source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI2], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed August 19, 2021: https://fred.stlouisfed.org/series/STLFSI2

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 August 18, 2021 incorporating data from January 8, 1971 through August 13, 2021, on a weekly basis.  The August 13 value is -.67943:

NFCI -.67943

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 19, 2021:  
http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on August 18, 2021 incorporating data from January 8, 1971 through August 13, 2021, on a weekly basis.  The August 13, 2021 value is -.63110:

ANFCI -.63110

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 19, 2021:  
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 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 4403.70 as this post is written