Archive for March, 2010

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Largest Employers

Friday, March 19th, 2010

Crain’s recently came out with their list of the largest Chicago-area employers.  What I found notable was that the top 5 employers are various government entities (federal, state and local).

Of course, this situation is not unique to the Chicago area.  Many states have a large percentage of their total jobs as government jobs.

While many might be indifferent to this situation – assuming that a “job is a job” – from an overall economic standpoint it is troubling on various fronts.

One such front that deserves special attention is that which I discuss in the “America’s Economic Future: ‘Greenfield’ or ‘Brownfield’?” article.

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SPX at 1161.65 as this post is written

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America’s Economic Future – A Comment

Thursday, March 18th, 2010

Those familiar with this blog know that I believe (based off of my overall analysis) that our current purported economic recovery is not sustainable.

As I have indicated in previous writings, we as a nation need to be more “strategic” in nature if we are to attain true Sustainable Prosperity.

One critical question that we should be asking, from a strategic standpoint, is what is the value of a recovery if it is not sustainable?  The answer is that there is very little if any value to such a recovery.  In fact, a very strong case can be made that there will be strong negative repercussions stemming from such an unsustainable recovery.

Another issue, from a strategic standpoint, is one of opportunity cost.  The opportunity cost of attaining a recovery that subsequently fails vs. a true sustainable recovery is enormous.  This is especially true in our current economic environment where many factors such as the national debt are at truly ominous levels.

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SPX at 1165.42 as this post is written

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The US Dollar

Wednesday, March 17th, 2010

On January 13 I wrote the following blog post concerning the overall situation of the US Dollar:

http://www.economicgreenfield.com/2010/01/13/the-us-dollar-a-few-comments/

In that post, I wrote that there appeared to be few if any signs that a severe US Dollar decline was impending.

However, the situation has changed.  When viewed from a technical analysis perspective, US Dollar seems vulnerable to a decline when viewed on at least the daily and weekly timeframes.

In addition, from a fundamental perspective, the actions we (as a nation) have been taking to “improve” our economic situation imperil the dollar.  These actions are almost innumerable, but certainly include ultra-low interest rates, large-scale deficit spending, and large-scale “money printing”.

As the following chart shows, from a long-term monthly perspective the US Dollar seems to have resistance around the 80 level:

chart courtesy of StockCharts.com

On an “all things considered” basis I believe we are now at the point where the US Dollar price should be intensely monitored as it appears highly vulnerable.

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SPX at 1164.2 as this post is written

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Updates On Economic Indicators

Monday, March 15th, 2010

Here are some indicators that are supposed to predict and/or depict economic activity.  These indicators have been discussed in previous blog posts:

The USA TODAY/IHS Global Insight Economic Outlook Index:

http://www.usatoday.com/money/economy/economic-outlook.htm

an excerpt dated 2/24: “The February update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, above 4% in January through April followed by slower but solid growth in May through July. The slower growth is expected as inventory boosts slow and the government’s monetary and fiscal stimulus programs end.”

The ECRI WLI (Weekly Leading Index):

http://www.businesscycle.com/news/press/1764/

an excerpt dated March 12:  “(Reuters) – A gauge of future U.S. economic growth rose slightly in the latest week while its yearly growth index continued to fall to a 31-week low, upholding expectations the economy will likely decelerate starting mid-year, a research group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index was 130.6 for the week ended March 5, up from 129.8 the previous week.”

Fortune’s Big Picture Index:

http://money.cnn.com/magazines/fortune/storysupplement/recovery_index/index.html

-I was unable to obtain updated values for this index-

The Dow Jones ESI (Economic Sentiment Indicator)

http://solutions.dowjones.com/economicsentimentindicator/

This indicator was at 38.1 as of March 1; as seen on the chart, this index seems to be holding at a relatively steady level since November.

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

http://www.philadelphiafed.org/research-and-data/real-time-center/business-conditions-index/

Here is the latest chart (updated as of March 6) of this indicator:

The Conference Board LEI (Leading Economic Index) and CEI (Coincident Economic Index)

www.conference-board.org

Per a news release of February 18, the January LEI was at 107.4 and the January CEI was at 100.1.  There exists a notable gap between these two measures.

“New Financial Conditions Index”

I had a post of this index on Wednesday, which can be found here:

http://www.economicgreenfield.com/2010/03/10/new-financial-conditions-index/

_________

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.

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SPX at 1149.99 as this post is written

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The March Wall Street Journal Economic Forecast Survey

Sunday, March 14th, 2010

I found the March Wall Street Journal Economic Forecast Survey contained three sets of interesting material.

First, it contained the survey results and comments of economists with regard to what impact interventions (The Federal Reserve’s actions as well as that of the ARRA) have played in “rescuing the U.S. economy from the financial crisis.”

Second, according to the survey, “…the economists put the odds of a double-dip recession at just 17%…”

Third, to the question “How confident are you that Congress and the president will act to reduce the long-term budget deficit before a major financial market crisis?” these responses were interesting:

“We usually do the right thing after having exhausted all other options.”

“Their record of fiscal discipline is horrific.”

Otherwise, the various forecast averages for such measures as the Ten-Year Treasury Yield, GDP and Unemployment Rate remain largely unchanged.  As seen in the detail, there hasn’t been material change in the average of these forecasted measures for months.

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with the consensus estimates and much of the commentary in these forecast surveys.

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SPX at 1149.99 as this post is written
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Notable S&P500 Price Action

Friday, March 12th, 2010

The climb in the S&P500 has been notable over the last few sessions.  According to SentimenTrader.com, through yesterday, “Yet another up day pushed the S&P 500 futures to its 10th straight gain, only the second time since their inception (01/15/87 was the other).”

Here is a chart of the S&P500 price action of the last two months:

chart courtesy of StockCharts.com

This is yet another notable occurrence presently in the markets.  I will be commenting more on some notable market aspects shortly.

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SPX at 1149.65 as this post is written

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“New Financial Conditions Index”

Wednesday, March 10th, 2010

I ran across the following paper titled “Financial Conditions Indexes: A Fresh Look after the Financial Crisis” (pdf) dated February 22, 2010.

This paper discusses and explains this new attempt to create a “financial conditions index” that will accurately predict economic activity.

From the abstract: “As of the end of 2009, our FCI showed financial
conditions at somewhat worse-than-normal levels. The main reason is that quantitative credit measures (e.g. asset-backed securities issuance) remain very weak, especially once we control for past economic growth. Thus, our analysis is consistent with an ongoing modest drag from financial conditions on economic growth in 2010.”

Here is a chart of the “New FCI” from page 43 of the report:

I will reserve comment on this “New FCI” as I have yet to thoroughly review the paper and the “New FCI” methodology.

However, I find it interesting and hope to include it with the other financial and economic indicators I periodically (the last being the January 11 post) review.

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SPX at 1143.84 as this post is written

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Article On Asset Bubbles

Tuesday, March 9th, 2010

On January 25 Fortune had an article on asset bubbles titled “Beware the 4 new asset bubbles.”

The four purported bubbles mentioned in the article are Gold, oil, the stock market, and Treasuries.  I have discussed each of these markets, with the exception of oil, in previous posts.

I found the logic and discussion in the article interesting, although I did not agree with various aspects of the article.  I especially disagree with the logic about housing, for reasons I have recently written about.

It is very important for investors to understand whether the markets they are investing in are indeed experiencing bubbles.   My previously written posts are found under the “Bubbles” Category.

Of course, the existence and prevalence of bubbles also has massive ramifications for the economy, especially when viewed from the standpoint of Sustainable Prosperity.

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SPX at 1137.15 as this post is written

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The “Double-Dip” Scenario

Monday, March 8th, 2010

Lately there have been an increasing number of people citing the possibility of a “double-dip” recession.  Much of this scenario is predicated upon the belief that as government stimulus spending fades, so too will economic activity.

This March 5 article from CNBC.com summarizes some of the opinions regarding the double-dip reasoning and possibilities.

I find these worries about a “double-dip” recession interesting for many reasons.  Perhaps chief among these reasons is that even among those who think a “double-dip” recession is likely, these people don’t seem to believe that any further economic weakness will be worse than that which we experienced during the trough set in late ’08-early ’09.

I’m not sure for the reasoning behind this belief; and I have seen none offered.  However, per my previous posts I don’t believe this is a logical conclusion.

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SPX at 1138.70 as this post is written

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Another Ponzi Scheme

Sunday, March 7th, 2010

I have been intermittently commenting upon the growing number of investment frauds being uncovered.   Those posts can be found under the “investment frauds” tag.

Here is yet another alleged Ponzi scheme as seen in Thursday’s Wall Street Journal article titled “SEC Charges Couple in Florida Ponzi Scheme.”

As seen in the article, this alleged scheme is stated at $135 million.

It is difficult to say how widespread investment frauds are and how much investment fraud is yet to be uncovered.

However, based upon a variety of factors I would say that there is much investment fraud still “out there” (i.e. yet to be uncovered) and the true figure will likely prove to be eye-popping.

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SPX at 1138.70 as this post is written

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