Total Household Net Worth As Of 3Q 2012 – Two Long-Term Charts

In the last post ("Total Household Net Worth As A Percent Of GDP 3Q 2012") I displayed a long-term chart depicting Total Household Net Worth as a percentage of GDP.

For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1949:Q4 to 2012:Q3).  The last value (as of December 6, 2012) is $64.76884 Trillion:

(click on each chart to enlarge image)

-

Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1415.68 as this post is written

Total Household Net Worth As A Percent Of GDP 3Q 2012

The following chart is from the CalculatedRisk blog post of December 6, 2012 titled “Fed’s Q3 Flow of Funds:  Household Mortgage Debt down $1.15 Trillion from Peak.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from The Federal Reserve Flow of Funds 3Q 2012 report:

(click on chart to enlarge image)

As seen in the above-referenced CalculatedRisk blog post:

According to the Fed, household net worth increased in Q3 compared to Q2 2011. Net worth peaked at $67.3 trillion in Q3 2007, and then net worth fell to $51.2 trillion in Q1 2009 (a loss of $16.1 trillion). Household net worth was at $64.8 trillion in Q3 2012 (up $13.6 trillion from the trough, but still down $2.5 trillion from the peak).

The Fed estimated that the value of household real estate increased $301 billion to $17.2 trillion in Q3 2012. The value of household real estate is still $5.5 trillion below the peak.

My comments:

As I have written in previous posts on this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

As seen on the chart, the Total Household Net Worth is making an upturn, but is significantly below the prior 2007 peak.

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1417.80 as this post is written

St. Louis Financial Stress Index – December 6, 2012 Update

On March 28, 2011 I wrote a post ("The STLFSI") about the  STLFSI (St. Louis Fed’s Financial Stress Index) 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 December 6, incorporating data from December 31,1993 to November 30, 2012 on a weekly basis.  The December 6, 2012 value is -.268 :

(click on chart to enlarge image)

_________

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 1413.19 as this post is written

Recession Probability Models

There are a variety of economic models that are supposed to predict the probabilities of recession.

While I don't agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

Please note that each of these models is updated regularly, and the results of these - as well as other recession models - can fluctuate significantly.

The first is the "Yield Curve as a Leading Indicator" from the New York Federal Reserve.  I wrote a blog post concerning this measure on March 1, 2010, titled "The Yield Curve as a Leading Indicator."

Currently (last updated December 5, using data through November) this "Yield Curve" model shows a 6.42% probability of a recession in the United States twelve months ahead.  It showed a 5.74% probability through October.

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., "An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

This model, last updated on November 30, currently shows a 2.94% probability using data through September.

Here is the FRED chart (last updated December 3) :

-

The two models featured above can be compared against measures seen in recent blog posts.  For instance, the November 2012 Wall Street Journal Economic Forecast Survey (summarized in the November 13 blog post) showed that economists surveyed averaged a 21% probability of a U.S. recession within the next 12 months.

Of course, there is a (very) limited number of prominent parties, such as ECRI (most recently featured in the November 30 ECRI post) that believe the U.S. is already experiencing a recession.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1410.05 as this post is written

December 4 Gallup Poll Results On Economic Confidence – Notable Excerpts

On December 4, Gallup released the poll results titled “U.S. Economic Confidence in November Best in Four Years.”  The subtitle is “Average index score of -13 for the month.”

Two of the most notable excerpts:

Americans' economic confidence was better in November than in any month since Gallup began tracking confidence daily in January 2008. The -13 Economic Confidence Index score surpasses the previous bests of -17 from October and May of this year.

also:

In November, 17% of Americans rated current conditions as "excellent" or "good" and 38% rated them as "poor." That net score of -21 indicates Americans remain more negative than positive about the economy, but on a relative basis, it is the best current conditions rating since March 2008 (-20).

The -5 economic outlook score, based on 45% saying the economy is getting better and 50% saying it is getting worse, is the best Gallup has measured since it began daily tracking in 2008. The prior best was last month's -10.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1415.08 as this post is written

Building Financial Danger – December 5, 2012 Update

On October 17, 2011 I wrote a post titled “Danger Signs In The Stock Market, Financial System And Economy.”  This post is a brief 19th update to that post.

My overall analysis indicates a continuing elevated and growing level of danger which contains  many worldwide and U.S.-specific “stresses” of a very complex nature. I have written numerous posts in this blog of some of what I consider both ongoing and recent “negative developments.”  These developments, as well as other highly problematic conditions, have presented a highly perilous economic environment that endangers the overall financial system.

My analysis continues to indicate that there are many reasons for tremendous concern, as seen in almost innumerable fundamental economic, financial-market, and proprietary measures.

Two recent disconcerting signs are the weakness exhibited by broad-based economic indicators, and from a global standpoint the implications stemming from the  continual decline in the Shanghai Stock Exchange Composite Index, now at a level less than 2000, compared to its 2007 high above 6000.

Also of ongoing immense importance is the existence of various immensely large asset bubbles, a subject of which I have extensively written.  While all of these asset bubbles are wildly pernicious and will have profound adverse future implications, hazards presented by the bond market bubble are especially notable.

Predicting the specific timing and extent of a stock market crash is always difficult, and the immense complexity of today’s economic situation makes such a prediction even more challenging. With that being said, my analyses indicate that the danger inherent in the financial system has reached a level at which a stock market crash – that would also involve (as seen in 2008) various other markets as well – continues to be at a level at which a near-term crash is of tremendous concern.

(note: the “next crash” has outsized significance and implications, as discussed in the post of January 6, "The Next Crash And Its Significance")

As reference, below is a one-year daily chart of the S&P500, indicating both the 50dma and 200dma as well as price labels.  The current price is 1407.05 :

(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 1407.05 as this post is written

3rd Quarter Corporate Profits

Last Thursday's GDP release (Q3, 2nd Estimate) was accompanied by the BLS Corporate Profits report (preliminary) 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 (last updated 11/29/12, with a value of $1752.2 Billion) :

-

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

-

Other depictions of 3rd Quarter Corporate Profits can be seen in the New York Times Economix blog post of November 29 titled "Record Corporate Profits."

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1412.16 as this post is written

U.S. Dollar Decline – December 3, 2012 Update

U.S. Dollar weakness is a foremost concern of mine.  As such, I have extensively written about it.  I am very concerned that the actions being taken to “improve” our economic situation will dramatically weaken the Dollar.  Should the Dollar substantially decline from here, as I expect, the negative consequences will far outweigh any benefits.  The negative impact of a substantial Dollar decline can’t be overstated, in my opinion.

The following three charts illustrate various technical analysis aspects of the U.S. Dollar, as depicted by the U.S. Dollar Index.

First, a look at the monthly U.S. Dollar from 1983.  This clearly shows a long-term weakness, with the blue line showing technical support (until 2007):

(charts courtesy of StockCharts.com; annotations by the author)

(click on charts to enlarge images)

-

Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents both a trendline as well as a relatively good visual “best-fit” line.  The gray dotted line is the 200-day M.A. (moving average):

-

Lastly, a chart of the Dollar on a weekly LOG scale.  There are some clearly marked  channels here, with a potential large, prominent triangle featured (shown with two potential lower trendlines, one red and one dashed light blue line):

-

I will continue providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring…

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1416.18 as this post is written