Monthly Archives: January 2014

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 January 24, 2014:

from page 17:

(click on charts to enlarge images)

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

FactSet Earnings Insight 1-24-14 CY2014 and CY2015

from page 18:

Calendar Year Bottom-Up EPS Actuals & Estimates

FactSet Earnings Insight 1-24-14 CY2001-CY2015

 

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1783.42 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” (pdf) of January 24, 2014, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts:

Year 2013 estimate:

$108.97/share

Year 2014 estimate:

$120.46/share

Year 2015 estimate:

$133.31/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 1790.29 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2013 & 2014 – As Of January 16, 2014

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 January 16, 2014:

Year 2013 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $107.38/share

-From a “top down” perspective, operating earnings of N/A

-From a “top down” perspective, “as reported” earnings of $99.42/share

Year 2014 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $121.30/share

-From a “top down” perspective, operating earnings of $123.63/share

-From a “top down” perspective, “as reported” earnings of $119.70/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 1794.28 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 24, 2014 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 twelve sources :

Other past notable year 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 January 24, 2014 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the January 24 release, indicating data through January 17, 2014.

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

Dshort 1-24-14 - ECRI-WLI 133.9

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

Dshort 1-24-14 - ECRI-WLI-YoY 3.9 percent

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

Dshort 1-24-14 - ECRI-WLI-growth-since-1965 4.2

_________

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 1799.18 as this post is written

Updates Of Economic Indicators January 2014

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

The January 2014 Chicago Fed National Activity Index (CFNAI)(pdf) updated as of January 23, 2014:

cfnai_monthly_MA3 1-23-14

The ECRI WLI (Weekly Leading Index):

As of 1/17/14 (incorporating data through 1/10/14) the WLI was at 134.5 and the WLI, Gr. was at 3.7%.

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

Here is the latest chart, depicting 12-31-07 through 1-18-14:

ads_12-31-07 to 1-18-14

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

As per the January 23 press release, the LEI was at 99.4 and the CEI was at 108.1 in December.

An excerpt from the January 23 release:

“Despite month-to-month volatility in the final quarter of 2013, the U.S. LEI continues to point to gradually strengthening economic conditions through early 2014,” said Ataman Ozyildirim, Economist at The Conference Board. “The LEI was lifted by its financial components in December, but consumer expectations for business conditions and residential construction continue to pose risks.”

Here is a chart of the LEI from Doug Short’s blog post of January 23 titled “Conference Board Leading Economic Index Edged up in December“ :

Dshort 1-23-14 - 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 1828.46 as this post is written

St. Louis Financial Stress Index – January 23, 2014 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 January 23, incorporating data from December 31,1993 to January 17, 2014, on a weekly basis.  The January 17, 2014 value is -1.013:

(click on chart to enlarge image)

STLFSI_1-23-14 -1.013

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

STLFSI_1-23-14 -1.013 1-year

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 2014:

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 1824.75 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 32 “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 1826.71 as this post is written

Additional Thoughts Concerning Deflation

I have written a variety of posts concerning “deflationary pressures” and deflation as I continue to believe that deflationary conditions are on the horizon, and that such deflationary conditions will cause, as well as accompany, inordinate economic hardship. [note: to clarify, for purposes of this discussion, when I mention “deflation” I am referring to the CPI going below zero. Also, I have been using the term “deflationary pressures” as a term to describe deflationary manifestations within an environment that is still overall inflationary but heading towards deflation.]

For reference purposes, here is a chart of the Core CPI and Core PCE, as seen in Doug Short’s update of January 17, 2014 titled “Two Measures of Inflation:  CPI and the PCE Price Index and Fed Policy” :

Dshort 1-17-14 - CPI-PCE-core-comparison

I consider it highly notable that while various “deflationary pressures” continue to manifest expectations of deflation among various parties and measures remain (almost entirely) nonexistent.  For example, one can see in the various professional economic forecasts mentioned in this blog economic forecasters have virtually no expectation of deflation either in the near-term or for the next few years. As well, continually low readings from the Federal Reserve Bank of Atlanta’s series titled “Deflation Probabilities” continue to show negligible possibilities for deflation.  Furthermore, businesses don’t appear to have significant concern over deflationary conditions.  This can be seen in a variety of measures and surveys, with one being seen in my ProfitabilityIssues.com post of January 15 titled “Businesses’ Forecasts Of Long-Term Inflation And Year-Ahead Unit Sales Growth.”  This negligible expectation by businesses concerning deflation – or even a significant lessening of the aggregate price level – seems especially notable given many overt signs of increased discounting and other indications of mounting pricing pressures.

As compared to the above, there does appear to be increased recognition concerning the possibility of deflation internationally.  This can be seen in many measures and commentary, such as Haver’s January 15 “EMU Inflation Hits the Lower Bound.”

There are likely many reasons why there is a pronounced lack of concern over future U.S. deflation.  Of course, one obvious reason is that near-term deflation is indeed not going to happen – i.e. the aforementioned widely-held expectations concerning no near-term deflation are indeed correct.  Conversely, other reasons may explain why – despite many overt signs of building “deflationary pressures” as well as clear recent downward trends in CPI and other measures – that near-term deflation is not a concern.  One of these reasons may well be that incidents of U.S. deflation have been, over the long-term, very infrequent.  This pronounced lack of occurrence may have fostered (considerable) complacency.  This long-term infrequency can be seen in Doug Short’s long-term CPI chart, as seen in his January 16 update titled “A Long-Term Look at Inflation” :

Dshort 1-16-14- inflation-1872-present

Another reason – likely correlated to the infrequent (from the long-term perspective) incidents of deflation – is the seemingly (very) widely held belief that the Federal Reserve can prevent deflation.  This belief is likely highly buttressed by the above chart – given that since 1913 (when the Federal Reserve was created) both the frequency and magnitude of deflation has noticeably decreased.

Also, because of this relative lack of deflation over the past 100 years, not only may there be (considerable) complacency regarding the possibility of deflation – but there may be a widespread inability to “spot” or “predict” impending deflation.  As I mentioned in the November 14 post (“Thoughts Concerning Deflation”):

Given that deflationary episodes have been recently relatively nonexistent, “seeing” and “proving” explicit signs of such an impending condition is especially challenging.

In conclusion, I continue to believe that deflationary conditions are on the horizon.  As discussed in the aforementioned November 14 post, deflation often accompanies financial-system distress.  My analyses continue to show an exceedingly complex future financial condition in which a very large “financial meltdown” will occur, during which outright deflation will both accompany and exacerbate economic and financial conditions.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1844.86 as this post is written

Recession Measures – Updated

This post is the latest update to a series of blog posts seen on the CalculatedRisk.com blog.  The original blog post of April 12, 2010, is titled “Recession Measures.” In it, Bill McBride discussed key measures that the NBER uses to determine recoveries, and posted four charts.

Here are those charts, updated in his January 18, 2014 post titled “Recovery Measures – Three out of Four Ain’t Bad.”  The charts are constructed in a fashion different than most – in a “percent of peak” fashion.  As defined, “The following graphs are all constructed as a percent of the peak in each indicator.  This shows when the indicator has bottomed – and when the indicator has returned to the level of the previous peak.  If the indicator is at a new peak, the value is 100%.”  Periods of recession, as defined by the NBER, are shown as blue bars.

Here are the four charts, updated through the dates shown:

(click on images to enlarge)

Real Gross Domestic Product, above its pre-recession peak:

CR 1-18-14 - RMGDPQ32013

Real Personal Income Less Transfer Payments, above its pre-recession peak :

CR 1-18-14 - RMPersonalIncomeNov2013

Industrial Production, above its pre-recession peak :

CR 1-18-14 - RMIPDec2013

Payroll Employment, still .9% below the pre-recession peak:

CR 1-18-14 - RMEmployDec2013

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1846.91 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 17, 2014 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 had reiterated the view that the U.S. economy was in a recession through (at least) the November 4, 2013 Bloomberg interview seen below:

Other past notable year 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 January 10, 2014 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the January 17 release, indicating data through January 10, 2014.

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

Dshort 1-17-14 - ECRI-WLI

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

Dshort 1-17-14 - ECRI-WLI-YoY

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

Dshort 1-17-14 - ECRI-WLI-growth-since-1965

 

_________

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 1836.90 as this post is written