Monthly Archives: May 2013

St. Louis Financial Stress Index – May 23, 2013 Update

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 23, incorporating data from December 31,1993 to May 17, 2013, on a weekly basis.  The May 17, 2013 value is -.718 :

(click on chart to enlarge image)

STLFSI_5-23-13 -.718

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

STLFSI_5-23-13 -.718 1 year

 

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 24, 2013:

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

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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 1650.51 as this post is written

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of May 17, 2013:

from page 17:

(click on charts to enlarge images)

CY Bottom-Up EPS vs. Top-Down Mean EPS (Trailing 26-Weeks) 

EconomicGreenfield 5-24-13 FactSet 5-17-13 EPS Forecasts

from page 18:

Calendar Year Bottom-Up EPS Actuals & Estimates

EconomicGreenfield 5-24-13 FactSet 5-17-13 EPS Forecasts CY Actual and Estimates

 

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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 many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1650.51 as this post is written

S&P500 Earnings Estimates For Years 2013, 2014, And 2015

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings tag)

The following estimates are from Exhibit 12 of “The Director’s Report” of May 23, 2013, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts:

Year 2013 estimate:

$110.89/share

Year 2014 estimate:

$123.46/share

Year 2015 estimate:

$135.99/share

_____

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 many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1646.93 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2013 & 2014 – As Of May 18, 2013

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings tag)

For reference purposes, the most current estimates are reflected below, and are as of May 18, 2013:

Year 2013 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $109.69/share

-From a “top down” perspective, operating earnings of $113.07/share

-From a “top down” perspective, “as reported” earnings of $107.18/share

Year 2014 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $123.38/share

-From a “top down” perspective, operating earnings of $121.80/share

-From a “top down” perspective, “as reported” earnings of $117.53/share

_____

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 many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1655.35 as this post is written

Broad-Based Indicators Of Economic Activity

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

The ADS Index, 91-Day MA:

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

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.

_________

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

Current Economic Situation

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

Updates Of Economic Indicators May 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

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

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

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

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

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.

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

Walmart’s Q1 2014 Results – Comments

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

 

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

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:

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

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

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