Monthly Archives: January 2015

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the January 22, 2015 update (reflecting data through January 16) is -.807.

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

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

The NFCI chart below was last updated on January 22, 2015 incorporating data from January 5,1973 to January 16, 2015, on a weekly basis.  The January 16, 2015 value is -.65:

(click on chart to enlarge image)

NFCI 1-22-15

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 22, 2015:

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

The ANFCI chart below was last updated on January 22, 2015 incorporating data from January 5,1973 to January 16, 2015, on a weekly basis.  The January 16 value is .02:

ANFCI 1-22-15

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 22, 2015:

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 2049.19 as this post is written

The State of the Union Address – Notable Excerpts

I found President Obama’s State of the Union Address last night (January 20, 2015) to contain some noteworthy comments.  While I could comment extensively on many parts of the speech, for now I will indicate excerpts that I found most relevant with regard to the economic situation, and may comment upon them at a future point.  I am highlighting these excerpts for many reasons; it should be noted that I do not necessarily agree with any or all of them.

Here are the excerpts I found most relevant, in the order they occurred in the speech:

Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999.  Our unemployment rate is now lower than it was before the financial crisis.  More of our kids are graduating than ever before; more of our people are insured than ever before; we are as free from the grip of foreign oil as we’ve been in almost 30 years.

also:

The shadow of crisis has passed, and the State of the Union is strong.

At this moment – with a growing economy, shrinking deficits, bustling industry, and booming energy production – we have risen from recession freer to write our own future than any other nation on Earth.  It’s now up to us to choose who we want to be over the next fifteen years, and for decades to come.

Will we accept an economy where only a few of us do spectacularly well?  Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?

also:

America, Rebekah and Ben’s story is our story.  They represent the millions who have worked hard, and scrimped, and sacrificed, and retooled.  You are the reason I ran for this office.  You’re the people I was thinking of six years ago today, in the darkest months of the crisis, when I stood on the steps of this Capitol and promised we would rebuild our economy on a new foundation.  And it’s been your effort and resilience that has made it possible for our country to emerge stronger.

We believed we could reverse the tide of outsourcing, and draw new jobs to our shores.  And over the past five years, our businesses have created more than 11 million new jobs.

also:

We believed that sensible regulations could prevent another crisis, shield families from ruin, and encourage fair competition.  Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices.  And in the past year alone, about ten million uninsured Americans finally gained the security of health coverage.

At every step, we were told our goals were misguided or too ambitious; that we would crush jobs and explode deficits.  Instead, we’ve seen the fastest economic growth in over a decade, our deficits cut by two-thirds, a stock market that has doubled, and health care inflation at its lowest rate in fifty years.

So the verdict is clear.  Middle-class economics works.  Expanding opportunity works.  And these policies will continue to work, as long as politics don’t get in the way.  We can’t slow down businesses or put our economy at risk with government shutdowns or fiscal showdowns.  We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street, or refighting past battles on immigration when we’ve got a system to fix.  And if a bill comes to my desk that tries to do any of these things, it will earn my veto.

Today, thanks to a growing economy, the recovery is touching more and more lives.  Wages are finally starting to rise again.  We know that more small business owners plan to raise their employees’ pay than at any time since 2007.  But here’s the thing – those of us here tonight, we need to set our sights higher than just making sure government doesn’t halt the progress we’re making.  We need to do more than just do no harm.  Tonight, together, let’s do more to restore the link between hard work and growing opportunity for every American.

also:

In fact, at every moment of economic change throughout our history, this country has taken bold action to adapt to new circumstances, and to make sure everyone gets a fair shot.  We set up worker protections, Social Security, Medicare, and Medicaid to protect ourselves from the harshest adversity.  We gave our citizens schools and colleges, infrastructure and the internet – tools they needed to go as far as their effort will take them.

also:

Of course, nothing helps families make ends meet like higher wages.  That’s why this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work.  Really.  It’s 2015.  It’s time.  We still need to make sure employees get the overtime they’ve earned.  And to everyone in this Congress who still refuses to raise the minimum wage, I say this:  If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it.  If not, vote to give millions of the hardest-working people in America a raise.

These ideas won’t make everybody rich, or relieve every hardship.  That’s not the job of government.  To give working families a fair shot, we’ll still need more employers to see beyond next quarter’s earnings and recognize that investing in their workforce is in their company’s long-term interest.  We still need laws that strengthen rather than weaken unions, and give American workers a voice.  But things like child care and sick leave and equal pay; things like lower mortgage premiums and a higher minimum wage – these ideas will make a meaningful difference in the lives of millions of families.  That is a fact.  And that’s what all of us – Republicans and Democrats alike – were sent here to do.

Second, to make sure folks keep earning higher wages down the road, we have to do more to help Americans upgrade their skills.

America thrived in the 20th century because we made high school free, sent a generation of GIs to college, and trained the best workforce in the world.  But in a 21st century economy that rewards knowledge like never before, we need to do more.

By the end of this decade, two in three job openings will require some higher education.  Two in three.  And yet, we still live in a country where too many bright, striving Americans are priced out of the education they need.  It’s not fair to them, and it’s not smart for our future.

That’s why I am sending this Congress a bold new plan to lower the cost of community college – to zero.

also:

Since 2010, America has put more people back to work than Europe, Japan, and all advanced economies combined.  Our manufacturers have added almost 800,000 new jobs.  Some of our bedrock sectors, like our auto industry, are booming.  But there are also millions of Americans who work in jobs that didn’t even exist ten or twenty years ago – jobs at companies like Google, and eBay, and Tesla.

So no one knows for certain which industries will generate the jobs of the future.  But we do know we want them here in America.  That’s why the third part of middle-class economics is about building the most competitive economy anywhere, the place where businesses want to locate and hire.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2034.50 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 January 16, 2015:

from page 24:

(click on charts to enlarge images)

2015 and 2016 S&P500 earnings forecast trends

from page 25:

S&P500 earnings 2005-2016

_____

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 2021.74 as this post is written

S&P500 Earnings Estimates – Years 2014 Through 2016

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 20, 2015, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts:

Year 2014 estimate:

$116.89/share

Year 2015 estimate:

$124.43/share

Year 2016 estimate:

$139.76/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 2015.06 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2014 & 2015 – As Of January 16, 2015

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, 2015:

Year 2014 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $115.82/share

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

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

Year 2015 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $122.74/share

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

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

_____

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 2019.42 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 16, 2015 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.

Below are three long-term charts, from Doug Short’s blog post of January 16, 2015 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the January 16 release, indicating data through January 9, 2015.

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 1-16-15 - ECRI-WLI-YoY -1.9 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 2007.69 as this post is written

The January 2015 Wall Street Journal Economic Forecast Survey

The January Wall Street Journal Economic Forecast Survey was published on January 15, 2015.  The headline is “WSJ Survey:  Economists See 2015 GDP Growth at 3%.”

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” section.

Two excerpts:

The roster of 66 economists—not all of whom answered every question—is on average slightly more upbeat about the 2015 economy. Inflation-adjusted gross domestic product is forecast to grow 3% across the four quarters of 2015, better than the 2.6% rate estimated for 2014. Wages are expected to pick up as the labor market tightens.

also:

Cheaper oil also means that inflation—as measured by the consumer-price index—will turn into deflation temporarily, many economists say. The average of the forecasts sees the CPI up only 0.5% in the 12 months ended in June, and one-quarter of respondents expects the percentage change to be negative, with the headline CPI declining as much as 1%.

Deflation will be short-lived, however, as oil prices head north and other prices in the core index—which excludes food and energy—continue to increase, said Tom Porcelli of RBC Capital Markets.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 11.54%; December’s average response was 11.45%.

The current average forecasts among economists polled include the following:

GDP:

full-year 2014:  2.6%

full-year 2015:  3.0%

full-year 2016:  2.8%

full-year 2017:  2.7%

Unemployment Rate:

December 2015: 5.2%

December 2016: 4.9%

December 2017: 4.8%

10-Year Treasury Yield:

December 2015: 2.87%

December 2016: 3.55%

December 2017: 4.00%

CPI:

December 2015:  1.6%

December 2016:  2.3%

December 2017:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2015: $63.03

(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 1992.67 as this post is written

Disturbing Charts (Update 17)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 67 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.

These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

All of these charts are from the Federal Reserve, and represent the most recently updated data.

(click on charts to enlarge images)

Housing starts (last updated 12-16-14):

housing starts

US. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, January 14, 2015.

The Federal Deficit (last updated 10-15-14):

federal deficit

US. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, January 14, 2015.

Federal Net Outlays (last updated 10-15-14):

Federal Net Outlays

US. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, January 13, 2015.

State & Local Personal Income Tax Receipts  (% Change from Year Ago)(last updated 7-30-14):

EconomicGreenfield 1-15-15 ASLPITAX 7-30-14 Percent Change From Year Ago

US. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, January 14, 2015.

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 1-9-15):

total loans and leases

Board of Governors of the Federal Reserve System (US), Loans and Leases in Bank Credit, All Commercial Banks [TOTLL], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTLL/, January 14, 2015.

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated 1-9-15):

total bank credit

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, January 14, 2015.

M1 Money Multiplier (last updated 1-2-15):

money multiplier

Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, January 14, 2015.

Median Duration of Unemployment (last updated 1-9-15):

median duration of unemployment

US. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, January 14, 2015.

Labor Force Participation Rate (last updated 1-9-15):

labor force participation rate

US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, January 14, 2015.

The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated 12-22-14):

CFNAI MA-3

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFNAIMA3/, January 14, 2015.

I will continue to update these charts on an intermittent basis as they deserve close monitoring…

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2011.27 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the January 8, 2015 update (reflecting data through January 2) is -.954.

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

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

The NFCI chart below was last updated on January 14, 2015 incorporating data from January 5,1973 to January 9, 2015, on a weekly basis.  The January 9, 2015 value is -.71:

(click on chart to enlarge image)

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 14, 2015:

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

The ANFCI chart below was last updated on January 14, 2015 incorporating data from January 5,1973 to January 9, 2015, on a weekly basis.  The January 9 value is .06:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 14, 2015:

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 2009.30 as this post is written

A Chart Of Recent S&P500 Price Volatility – January 12,2015 Update

This post is an update to past posts regarding stock market volatility.

While I track many different measures of volatility, I find the following chart to be both simple and clear in depicting the recent increased volatility in the stock market.

Overall, my analyses indicates that there are many reasons for this volatility, and the volatility is notable.

This chart depicts the S&P500 in 60 minute intervals from November 1, 2014 through Friday’s (January 9, 2015) close.   The blue line depicts a 50-period (hour) moving average.

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

S&P500 60-minute intervals

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2044.81 as this post is written