Monthly Archives: March 2014

St. Louis Financial Stress Index – March 20, 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 March 20, incorporating data from December 31,1993 to March 14, 2014, on a weekly basis.  The March 14, 2014 value is -1.034:

(click on chart to enlarge image)

STLFSI chart

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

STLFSI chart 1-year

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 20, 2014:

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 1872.01 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

Each week I have been posting two charts of the St. Louis Fed’s Financial Stress Index (STLFSI), which is supposed to measure stress in the financial system.

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

Here are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on March 19, incorporating data from January 5,1973 to March 14, 2014, on a weekly basis.  The March 14, 2014 value is -.95:

(click on chart to enlarge image)

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 20, 2014:

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

The ANFCI chart below was last updated on March 19, incorporating data from January 5,1973 to March 14, 2014, on a weekly basis.  The March 14, 2014 value is -.48:

(click on chart to enlarge image)

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 20, 2014:

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 1866.16 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 March 14, 2014:

from page 19:

(click on charts to enlarge images)

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

S&P500 earnings forecasts

from page 20:

Calendar Year Bottom-Up EPS Actuals & Estimates

S&P500 annual earnings

 

_____

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 1867.11 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 March 19, 2014, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts:

Year 2013 estimate:

$109.81/share

Year 2014 estimate:

$119.26/share

Year 2015 estimate:

$132.57/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 1869.78 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2013, 2014 & 2015 – As Of March 13, 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 March 13, 2014:

Year 2013 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $107.29/share

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

-From a “top down” perspective, “as reported” earnings of $100.23/share

Year 2014 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $120.34/share

-From a “top down” perspective, operating earnings of $124.42/share

-From a “top down” perspective, “as reported” earnings of $120.60/share

Year 2015 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $137.36/share

-From a “top down” perspective, operating earnings of $149.66/share

-From a “top down” perspective, “as reported” earnings of $147.50/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 1872.40 as this post is written

VIX Weekly And Monthly Charts Since Year 2000

For reference purposes, below are two charts of the VIX from year 2000 through yesterday’s (March 17, 2014) close.

Below is the VIX Weekly chart, depicted on a LOG scale, with price labels as well as the 13- and 34-week moving averages, seen in the cyan and red lines, respectively:

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

VIX Weekly Chart

Here is the VIX Monthly chart, depicted on a LOG scale, with price labels as well as the 13- and 34-month moving average, seen in the cyan and red lines, respectively:

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

VIX monthly chart

 

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1858.83 as this post is written

Was A Depression Successfully Avoided?

One of the central tenets arising from the Financial Crisis and the various interventions taken during the period was that by enacting the various interventions, an economic depression was avoided.

Now, over five years after the Financial Crisis, many global stock markets have been booming, economic growth has been evident in many measures, and the overwhelming consensus among prominent economic forecasters is that the odds of a near-term recession are low, generally ranging from 0% to 15%.  The near-term odds of deflation, according to economic forecasters and models, is at or very near zero.

As I discussed in the February 24, 2014 post, titled “Economic Expansion, Recession Or Depression?“, while GDP and various other measures over the last five years indicate expansion, the expansion has been “subpar” – as well, many other measures are at (highly) disconcerting levels.  Regardless of how one chooses to categorize this economic situation, from a broader perspective, perhaps the main questions should be how “durable” and sustainable is this increase in economic activity?  Is the financial system and economy structurally more sound now than previously?  Is the financial system more or less susceptible to future major disruptions and upheaval?

As I explained in the September 18, 2013 post titled “Has The Financial System Strengthened Since The Financial Crisis?”, there are a broad array of underlying problems inherent in today’s financial system.  While various aspects of economic growth have occurred, the existence and continual propagation of these various problems is alarming.  Various aspects and manifestations of these problem areas are plainly evident, and have been highlighted throughout this site.  However, most lack recognition, especially compared to the recognition afforded to various statistics such as records achieved in the stock market.

While the overwhelming consensus believes that overall economic expansion will continue unabated, as will stock market gains, what seems ignored are the risks inherent in today’s underlying financial structure.  That many are unaware of these risks is not to say that such risks do not exist – in fact, not only do they exist, but they are growing, as I have explained in the “Building Financial Danger” posts.

Perhaps the central question with regard to these various risks and underlying structural frailties is what level of damage will result from them.  If one uses history as a guide, one might be led to believe that any resulting damage may be significant, but over the intermediate- and long-term, able to be overcome and transcended, such as (purportedly) experienced during the post-Financial Crisis period.

While I don’t believe that today’s economy and financial system are directly comparable to that of the Great Depression, I do believe that the two periods have similarities.  While no one likes to contemplate a future rife with economic adversity, I do believe that our current economy and financial system on an “all things considered” basis have vastly problematical working dynamics much more pernicious than those existent prior to and during The Great Depression.  As such, due to the magnitude and complexity of the economic problems inherent in today’s economy, my analyses continue to indicate that additional oncoming weakness will (unfortunately) not only be severe in nature, but also constitute what I have previously referred to as a “Super Depression,” whose main attribute will be problems of an intractable nature, with concomitant economic and societal ramifications.

The magnitude of these economic problems must be properly recognized and rectified if any true long-term economic vitality is to be realized.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1858.83 as this post is written

Euro Vs. The U.S. Dollar

One of my ongoing concerns is the (declining) 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) over the last five years:

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

(click on charts to enlarge images)

Euro v Dollar

 

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1847.07 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – March 14, 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 March 14, 2014 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the March 14 release, indicating data through March 7, 2014.

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

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 3-14-14 - ECRI-WLI-YoY 2.6 percent

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

ECRI WLI,Gr.

 

_________

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 1842.15 as this post is written

The March 2014 Wall Street Journal Economic Forecast Survey

The March Wall Street Journal Economic Forecast Survey was published on March 13, 2014.  The headline is “Economists See China Slowdown as Biggest Threat to U.S. Recovery.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the Economist Q&A.

Two excerpts I found notable:

When asked what overseas force has the greatest potential to slow U.S. growth, 27 of the 49 economists—not all of whom answered every question asked—cited China’s weakening economy. Only eight pointed to the Ukraine standoff and six thought the biggest risk could be a new crisis in the Middle East. The survey was conducted March 7-11 as the crisis in Crimea unfolded.

also:

With the outlook holding steady, forecasters continue to think faster growth rather than recession is the more likely surprise for 2014. On average, respondents give a 38% chance that real GDP will grow above 3% this year and only 12% odds of another recession starting.

The current average forecasts among economists polled include the following:

GDP:

full-year 2014:  2.7%

full-year 2015:  3.0%

full-year 2016:  2.9%

Unemployment Rate:

December 2014: 6.2%

December 2015: 5.7%

December 2016: 5.5%

10-Year Treasury Yield:

December 2014: 3.39%

December 2015: 3.92%

December 2016: 4.31%

CPI:

December 2014:  1.9%

December 2015:  2.1%

December 2016:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2014: $96.06

for 12/31/2015: $94.71

 

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

_____

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 necessarily 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 1845.54 as this post is written