Broad-Based Indicators Of Economic Activity

May 22nd, 2013

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.

The current levels of each are notable, as they are vacillating from a short-term perspective and their long-term trends continue to sink.

Doug Short, in his blog post of May 21, titled “The Philly Fed Business Conditions Index” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a couple of perspectives.

Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.

The CFNAI MA-3:

(click on charts to enlarge images)

Dshort 5-21-13 Chicago-Fed-CFNAI-recession-indicator

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The ADS Index, 91-Day MA:

Dshort 5-21-13 ADS-index-91-day-MA

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Also shown in the Doug Short’s aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.

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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 1669.16 as this post is written

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Current Economic Situation

May 22nd, 2013

With regard to our current economic situation,  my thoughts can best be described/summarized by the posts found under the 24 “Building Financial Danger” posts.

My thoughts concerning our ongoing economic situation – with future implications – can be seen on the page titled “A Special Note On Our Economic Situation,” which has been found near the bottom of every blog post since August 15, 2010.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1669.16 as this post is written

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Updates Of Economic Indicators May 2013

May 21st, 2013

Here is an update on various indicators that are supposed to predict and/or depict economic activity.  These indicators have been discussed in previous blog posts:

The May Chicago Fed National Activity Index (CFNAI)(pdf) updated as of May 20, 2013:

cfnai_monthly_MA3 5-20-13

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The ECRI WLI (Weekly Leading Index):

As of 5/17/13 (incorporating data through 5/10/13) the WLI was at 130.2 and the WLI, Gr. was at 7.0%.

A chart of the WLI, Gr. since 2000, from Doug Short’s blog of May 17 titled “Recession Watch: ECRI’s Weekly Leading Indicator Declines” :

Dshort 5-17-13 - ECRI-WLI-growth-since-2000 7.0

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

Here is the latest chart, depicting 12-31-07 through 5-11-13:

ads_2007_12-31-07-5-11-13

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The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:

As per the May 17 press release, the LEI was at 95.0 and the CEI was at 105.6 in April.

An excerpt from the May 17 release:

Says Ataman Ozyildirim, economist at The Conference Board: “After a slight decline in March, the U.S. LEI rebounded in April, led by housing permits and the interest rate spread. Labor market conditions also contributed, although consumers’ outlook on the economy remains weak. In general, the LEI points to a continuing economic expansion with some upside potential. Meanwhile, the CEI, a measure of current conditions, has returned to a slow growth path, despite declining industrial production in April.”

Here is a chart of the LEI from Doug Short’s blog post of May 17 titled “Conference Board Leading Economic Index:  April Rebound Suggests Continuing Economic Expansion“ :

Dshort 5-17-13 CB-LEI

 

_________

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 1666.29 as this post is written

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May 17 Gallup Poll Results Concerning Amount Needed To “Get By”

May 20th, 2013

On May 17, Gallup published the poll results titled “Americans Say Family of Four Needs Nearly $60K to ‘Get By’“.

A couple of excerpts:

The federal poverty threshold for a family of four is just under $24,000; however, Americans believe such a family unit living in their community needs more than double that — $58,000, on average — just to “get by.” That estimate reflects 29% of Americans saying these families need up to $50,000 in annual income, 47% saying they need between $50,000 and $99,999, and 10% saying they need $100,000 or more.

also:

The current estimate, from Gallup’s April 11-14 Economics and Finance poll, is only a bit higher than what Gallup found six years ago, in 2007. At that time, Americans estimated that the smallest amount a family of four needed to get by in their community was just over $52,000.

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My comments:

I find these poll results to be interesting for a number of reasons.  A few notes:

First, it should be noted that $58,000 is an average, and varies significantly depending on a variety of factors as seen in the survey.  Also, it should be noted that while the average figure is $58,000, the median is $50,000.

Second, the question asked, as seen in the survey, is “What is the smallest amount of money a family of four needs to make each year to get by in your community?”  There appears to be no further clarification of what “get by” means.  I am led to wonder if this “get by” terminology is perceived by respondents as a “core needs” state or also includes such things as building savings and/or saving for college education.  My sense is that it is more skewed toward “core needs,” and may closely resemble the “paycheck to paycheck” condition that I have often commented upon.

Third, the referenced February 9, 2007 poll results has a median figure of $45,000 compared to the aforementioned current median figure of $50,000.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1666.78 as this post is written

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Walmart’s Q1 2014 Results – Comments

May 20th, 2013

I found various notable items in Walmart’s Q1 2014 earnings call transcript (pdf) dated May 16, 2013.  I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly conference call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Mike Duke, president and CEO of Wal-Mart Stores, Inc, page 4:

As you know, I like to visit customers in their local markets around the world. I recently traveled to stores throughout South America and the U.S. It’s gratifying to see how important EDLP is for our customers. Our mission is simple and focused – to help people save money so they can live better.

comments from Jeff Davis, EVP of finance and treasurer of Wal-Mart Stores, Inc, page 6:

Gross profit increased 1.2 percent, primarily driven by supply chain productivity and merchandise mix within our U.S. business segments. The gross profit rate was relatively flat to last year.

comments from Bill Simon, president and CEO of Walmart U.S., page 10:

Similar to what you’ve heard from companies in various industries that have reported earnings, top line revenue was challenged by a number of issues. These included a $9 billion reduction in IRS estimated tax refunds versus last year, and we cashed less in income tax refunds than the prior year. Additionally, the 2 percent increase in payroll taxes, reduced inflation and some of the most unfavorable spring weather we’ve seen in recent years across much of the country impacted our business.

also:

In addition, as we gave guidance last quarter, we expected an increase in the level of grocery inflation, but it did not materialize in a meaningful way. We experienced very modest inflation, much lower than last year, and in fact, we had some deflation in areas like dry grocery.

comments from Bill Simon, president and CEO of Walmart U.S., page 11:

Our commitment to the productivity loop is a long-term, sustainable strategy. We will continue to be strategic about the price investments, monitoring competitor price gaps, market share and other data to ensure we maintain an appropriate balance between price investments and margin.

comments from Bill Simon, president and CEO of Walmart U.S., page 16:

This year started with many challenges for our core customer; nevertheless, I’m confident in our position and in the ability of our teams to execute. We believe that our strategy works under any economic environment and our underlying business remains strong.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1667.47 as this post is written

 

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Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 17, 2013 Update

May 17th, 2013

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

The movement of the ECRI WLI and WLI, Gr. is particularly notable at this time, as ECRI publicly announced on September 30, 2011 that the U.S. was “tipping into recession,” and ECRI has reiterated the view that the U.S. economy is currently in a recession, seen most recently in these four sources :

Other past notable 2012 reaffirmations of the September 30, 2011 recession call by ECRI were seen (in chronological order)  on March 15 (“Why Our Recession Call Stands”) as well as various interviews and statements the week of May 6, including:

Also, subsequent to May 2012:

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Below are three long-term charts, from Doug Short’s blog post of May 17 titled “Recession Watch:  ECRI’s Weekly Leading Indicator Declines.”  These charts are on a weekly basis through the May 17 release, indicating data through May 10, 2013.

Here is the ECRI WLI (defined at ECRI’s glossary):

(click on charts to enlarge images)

Dshort 5-17-13 - ECRI-WLI 130.2

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This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

Dshort 5-17-13 ECRI-WLI-YoY 4.9 percent

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This last chart depicts, on a long-term basis, the WLI, Gr.:

Dshort 5-17-13 - ECRI-WLI-growth-since-1965 7.0

 

_________

I post various economic 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 1665.02 as this post is written

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St. Louis Financial Stress Index – May 16, 2013 Update

May 17th, 2013

On March 28, 2011 I wrote a post (“The STLFSI“) about the  St. Louis Fed’s Financial Stress Index (STLFSI) 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 May 16, incorporating data from December 31,1993 to May 10, 2013, on a weekly basis.  The May 10, 2013 value is -.756 :

(click on chart to enlarge image)

STLFSI_5-16-13 -.756

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Here is the STLFSI chart from a 1-year perspective:

STLFSI_5-16-13 -.756 1-year

 

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 17, 2013:

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

_________

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 1650.47 as this post is written

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Charts Of Equities’ Performance Since March 9, 2009 And January 1, 1980 – May 16, 2013 Update

May 16th, 2013

In the March 9, 2012 post (“Charts of Equities’ Performance Since March 9, 2009 And January 1, 1980“) I highlighted two charts for reference purposes.

Below are those two charts, updated through yesterday’s closing price.

The first is a daily chart of the S&P500 (shown in green), as well as five prominent (AAPL, IBM, WFM, SBUX, CAT) individual stocks, since 2005.  There is a blue vertical line that is very close to the March 6, 2009 low.  As one can see, both the S&P500 performance, as well as many stocks including the five shown, have performed strongly since the March 6, 2009 low:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

EconomicGreenfield 5-16-13 SPX v Others since 2005

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This next chart shows, on a monthly LOG basis, the S&P500 since 1980.  I find this chart notable as it provides an interesting long-term perspective on the S&P500′s performance.  The 20, 50, and 200-month moving averages are shown in blue, red, and green lines, respectively:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

EconomicGreenfield 5-16-13 SPX Monthly LOG since 1980

 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1655.99 as this post is written

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Postcard From The Stock Market Bubble

May 16th, 2013

This post is the latest I have written concerning the stock market.

For reference, below is a one-year daily chart of the S&P500 through May 15 (with a closing price of 1658.78), indicating both the 50dma and 200dma:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

EconomicGreenfield 5-16-13 SPX 1658.78

There are many aspects of the “price action” of the S&P500, as well as many individual stocks, that are notable.  I commented upon this in a variety of past posts, including that of February 19 (“Excessive Positive Sentiment And Froth In The Stock Market.”)

As I mentioned in that post:

Many stocks and indices show an increasingly “parabolic” trajectory.

Since that post, one can see from the above chart that the S&P500 has continued its rather remarkable upward trajectory, especially since mid-November.  The “parabolic” price action has intensified.  I believe this “parabolic” trajectory is highly notable when viewed from a long-term historical perspective.

While this strong rally is not in itself necessarily indicative of impending problems, there are a variety of measures that are cause for concern.  Some of those measures were discussed in the aforementioned February 19 post.  Many others also exist, including both those that are “technical” in nature as well as those that could be considered “fundamental” in nature.

Among commonly stated reasons (as seen in the popular media among others) for this strong stock market rally and resulting recent new record high levels in the S&P500 (as well as Dow Jones Industrials) include the oft-stated “accommodative” (or  ”easy money”) monetary policies as well as the “strong earnings” that are projected to further increase in 2013 & 2014.  The conclusion drawn by such reasoning is that unless there is a substantial change in either monetary policy, or a significant fundamentally-led change in earnings projections – neither of which is seen in prominent forecasts – the stock market’s current levels are not only “justified” but the stock market is seen by many as being “attractively” valued on such measures as (forward) PE Ratios.

My analyses, however, continues to indicate a starkly different conclusion.  I continue to view this stock market as not only an asset bubble, but also one that is exceedingly large.  While I concede that this view is very unique and not necessarily an “obvious” conclusion,  like many bubbles it will be evident in hindsight.

As well, my analyses indicate that the “popping” of this equity bubble will have a profound and lasting negative impact on the economy.  While many people believe that bursting equity bubbles don’t represent a substantial threat to the larger economy, I continue to believe that their analyses and conclusions are not pertinent to our present situation.

Cumulatively, this parabolic stock market and its various “mania” characteristics are yet another “danger signal” in the overall financial system.  As I have written, my overall analysis continues to indicate a building level of financial danger, very large by historical standards.  My analyses indicate that such danger and its resolution will have highly notable future consequences, including that of a stock market crash that is outsized by historical standards.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1658.78 as this post is written

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Uncertainty And Its Impact On The Economy

May 14th, 2013

One subject that is a major issue – and one that many believe is “holding back the economy” – is that of “uncertainty.”  This is a substantial concern to businesses, both large and small, as seen in recent business surveys including the NFIB Small Business Optimism Survey as well as the Deloitte “CFO Signals” Survey.

While this “uncertainty” seems to comprised of many factors, those prominent include government spending and budget issues; regulations; government requirements; and foreign and monetary policy.  Needless to say, the topics are wide-ranging and (potentially) complex.

While I don’t believe, as many do, that this “uncertainty” is the key issue that is constraining economic growth, I nonetheless believe it is a critical issue, especially to businesses.

An April 29 op-ed in the Wall Street Journal, “Uncertainty Is the Enemy of Recovery,” by Bill McNabb, focuses on the topic.

A couple of notable excerpts include:

Quite simply, if firms can’t see a clear road to economic recovery ahead, they’re not going to hire and they’re not going to spend. It’s what economists call a “deadweight loss”—loss caused by inefficiency.

also:

Three economists, Stanford University’s Nicholas Bloom and Scott Baker and the University of Chicago’s Steven Davis, have done invaluable work measuring the level of policy uncertainty over the past few decades. Their research (available at policyuncertainty.com) shows that, on average, U.S. economic policy uncertainty has been 50% higher in the past two years than it has been since 1985.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1648.03 as this post is written

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