U.S. Dollar Decline – September 1, 2015 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, and the red line representing a (past) trendline:

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

(click on charts to enlarge images)

U.S. dollar monthly

Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents a (past) trendline.  The gray dotted line is the 200-day M.A. (moving average):

U.S. Dollar daily

Lastly, a chart of the Dollar on a weekly LOG scale.  There are two clearly marked channels, with possible technical support depicted by the dashed light blue line:

U.S. Dollar weekly

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1972.18 as this post is written

Consumer Confidence Surveys – As Of August 28, 2015

Doug Short had a blog post of August 28, 2015 (“Michigan Consumer Sentiment: Down Slightly from August Preliminary Reading“) 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)

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 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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1983.69 as this post is written

Euro Vs. The U.S. Dollar – August 28, 2015 Update

One of my ongoing concerns is the level and future resiliency of the U.S. Dollar.

For reference, below is a chart that I find notable.  It provides a comparison of the Euro (on the top plot) to the Dollar (found on the bottom plot) on a daily basis, with price labels, over the last five years:

(chart courtesy of StockCharts.com; chart creation by the author)

(click on charts to enlarge images)

euro and U.S. dollar

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1980.99 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“2nd Quarter 2015 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 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 August 27, 2015

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1984.25 as this post is written

2nd Quarter 2015 Corporate Profits

Today’s GDP release (Q2, 2nd Estimate)(pdf) was accompanied by the BLS Corporate Profits report 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 (last updated August 27, 2015, with a value of $1823.7 Billion):

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 August 27, 2015; https://research.stlouisfed.org/fred2/series/CP

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1959.03 as this post is written

The S&P500 Vs. The Shanghai Stock Exchange Composite Index – August 27, 2015

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 and Shanghai Stock Exchange Composite Index

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1940.51 as this post is written

Durable Goods New Orders – Long-Term Charts Through July 2015

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

For reference, below are charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through July, updated on August 26, 2015. This value is $241,108 ($ Millions):

(click on charts to enlarge images)

Durable Goods New Orders

Here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

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 August 26, 2015;

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

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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 1894.06 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 August 20, 2015 update (reflecting data through August 14) is -.968.

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 26, 2015 incorporating data from January 5,1973 to August 21, 2015, on a weekly basis.  The August 21, 2015 value is -.74:

NFCI chart

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 2015:

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

The ANFCI chart below was last updated on August 26, 2015 incorporating data from January 5,1973 to August 21, 2015, on a weekly basis.  The August 21 value is .24:

ANFCI chart

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 2015:

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 1896.78 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 25, 2015 titled “Real Prices and Price-to-Rent Ratio in June”:

(click on chart to enlarge image)

house prices

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1867.61 as this post is written

Money Supply Charts Through July 2015

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 August 21, 2015 depicting data through July 2015, with value $13,436.9 Billion:

MZM money supply

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

MZMSL percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 2015:

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 August 20, 2015, depicting data through July 2015, with value $12,059.4 Billion:

M2 money supply

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

M2SL percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed August 26, 2015:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1867.61 as this post is written