Monthly Archives: February 2012

Durable Goods New Orders – Long-Term Charts Through January 2012

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, here are a few charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through January, last updated on February 28.  This January value is 206,090 ($ Millions) :

Here is the chart depicting the measure on a Percentage Change from a Year Ago basis:

Lastly, a chart from Doug Short’s post of February 28 titled “Durable Goods Orders Down a Stunning 4%, Far Below Expectations” showing the Durable Goods New Orders vs. the S&P500:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1373.44 as this post is written

The Velocity Of Money – Comments And Charts

In his Friday interview to CNBC, Lakshman Achuthan commented about the the velocity of money.  The excerpt from the transcript:

you look at the velocity of money. how often does money exchange — all that money that’s going in, they’re goosing the money supply, how often does it exchange in the economy? that’s a really important metric on the health of the economy. it has dropped to a record low in the united states.it’s near a record low in europe. it’s even near a record low inchina. okay? these are not symptoms of health.

For those unaware of the concept of the velocity of money, here is a definition as seen on the St. Louis Federal Reserve website:

Velocity is a ratio of nominal GDP to a measure of the money supply. It can be thought of as the rate of turnover in the money supply–that is, the number of times one dollar is used to purchase final goods and services included in GDP.

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.  All charts reflect quarterly data through the end of 2011, and were last updated as of January 27, 2012.  As one can see, two of the three are at or very near to all-time lows, as Lakshman Achuthan mentioned:

Velocity of MZM Money Stock, current value = 1.448:

Velocity of M1 Money Stock, current value = 7.09:

Velocity of M2 Money Stock, current value = 1.594:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1368.59 as this post is written

The ADS Index Presented In Various Charts

On October 27, 2009, I wrote a post titled “Aruoba -Diebold-Scotti Business Conditions (ADS)  Index.”

That post explained the then-new ADS Index, and I have been featuring a chart of the ADS in the monthly Updates On Economic Indicators.

On February 23, Doug Short published a post titled “The Philly Fed ADS Business Conditions Index”  which shows a variety of longer-term charts depicting the ADS Index.

There are three charts in that post that I find particularly notable, and they are shown below.

The first is a reference chart of the ADS Index since 2000:

The second chart displays the ADS Index in blue and the CFNAI (Chicago Fed National Activity Index), which is presented on a 3-month Moving Average basis (i.e. CFNAI-MA3), overlaid in red.  As well, a linear regression is shown for each measure:

Lastly, a chart that compares the ADS (depicted on a 91-day moving average) in blue vs. GDP in green and red, with linear regressions (dashed lines) of each:

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1358.38 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – February 24, 2012 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 that the U.S. was “tipping into recession,” and have reaffirmed that view on Friday.  I featured excerpts from their September 30 statement  in the October 3 post (“ECRI Recession Statement Of September 30 – Notable Excerpts“)

Below is a long-term chart, on a weekly basis through February 24, of the ECRI WLI (defined at ECRI’s glossary) from Doug Short’s blog post of February 24 titled “ECRI Defends Its Recession Call” :

(click on charts to enlarge images)

This next chart depicts, on a long-term basis, the WLI, Gr. through February 24:

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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 1365.74 as this post is written

St. Louis Financial Stress Index – February 23, 2012 Update

On March 28, 2011 I wrote a post (“The STLFSI“) about the  STLFSI (St. Louis Fed’s Financial Stress Index) 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 February 23, incorporating data from 12-31-93 to 2-17-12 on a weekly basis.  The present level is .363 :

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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 1363.46 as this post is written

Disturbing Charts (Update 6)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they depict such a tenuous situation now – 33 months after the official (as per the 9-20-10 NBER 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.  I regularly discuss many troubling characteristics of our economy in this EconomicGreenfield.com blog.

All of these charts (except one, as noted) are from The Federal Reserve, and represent the most recently updated data.

The following 8 charts are from the St. Louis Federal Reserve:

(click on charts to enlarge images)

Housing starts (last updated 2-16-12):

The Federal Deficit (last updated 2-13-12):

Federal Net Outlays (last updated 2-13-12):

State & Local Personal Income Tax Receipts  (% Change from Year Ago)(last updated 1-27-12):

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 2-21-12):

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated 2-21-12):

M1 Money Multiplier (last updated 2-16-12):

Median Duration of Unemployment (last updated 2-3-12):

This next chart is from the CalculatedRisk.com blog post of 2-3-12, titled “Graphs:  Unemployment Rate, Participation Rate, Jobs Added” and it shows (in red) the relative length and depth of this downturn and subsequent recovery from an employment perspective:

This last chart is of the Chicago Fed National Activity Index (CFNAI) and it depicts broad-based economic activity (last updated 2-21-12):

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1362.34 as this post is written

Walmart’s Q4 2012 Results – Comments

I found various notable items in Walmart’s Q4 2012 conference call transcript (pdf) dated February 21, 2012.  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 results; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Mike Duke, page 7:

Our core customers remain cautious about their finances, and they turn to Walmart and our EDLP promise to help them manage through today’s economic challenges.

comments from Jeff Davis, page 10:

Gross profit as a percentage of net sales was 24.3 percent, a 40 basis point reduction compared to last year. All three segments contributed to the margin decline, and later you’ll hear more details from each segment.

comments from Bill Simon, page 16:

Despite moderating inflation in certain categories, grocery prices continue to be an issue for many of our customers. For the fourth quarter, total grocery inflation was approximately 4.0 percent. However, trade down and other initiatives reduced the net inflation impact on our customers to between 100 and 200 basis points.

comments from Bill Simon, page 20:

A challenging economy and rising gas prices will continue to drive customers to seek value. In the past, significant increases in gas prices over short periods of time have led to trip consolidation and higher ticket.  We’ll continue to help customers adapt to such trends.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1362.21 as this post is written

Updates On Economic Indicators February 2012

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 February Chicago Fed National Activity Index (CFNAI)(pdf) updated as of February 21, 2012:

The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the February 6 update titled “Index forecasts weaker growth” :

The January update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, increasing to 2.5% in January and then slowing to 1.6% in June. While employment, housing (mostly the multifamily sector) and consumer spending are slowly recovering, concerns about the Eurozone and world growth continue.

The ECRI WLI (Weekly Leading Index):

As of 2/17/12 the WLI was at 123.5 and the WLI, Gr. was at -3.7%.

A chart of the WLI, Gr. since 2000, from Doug Short’s blog of February 17 titled “ECRI Controversial Recession Call:  Fifth Consecutive Improvement in the Growth Index” :

The Dow Jones ESI (Economic Sentiment Indicator):

The Indicator as of January 9 was at 41.9, as seen below:

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

Here is the latest chart, depicting 2-11-10 to 2-11-12:

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

As per the February 17 release, the LEI was at 94.9 and the CEI was at 103.5 in January.

An excerpt from the February 17 release:

Added Ken Goldstein, economist at The Conference Board: “Recent data reflect an economy that started the year on a positive note.  The CEI shows some small signs of economic strengthening in the fourth quarter and continued to point in this direction in January. The LEI suggests these conditions will continue and could possibly even pick up this spring and summer.”

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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 1362.12 as this post is written

Building Financial Danger – February 21, 2012 Update

On October 17, 2011 I wrote a post titled “Danger Signs In The Stock Market, Financial System And Economy.”  This post is a brief sixth update to that post.

My overall analysis indicates a continuing elevated and growing level of danger.  There are many worldwide and U.S.-specific “stresses” of a very  complex nature, and many lack recognition, some completely so.

My views of this danger, and its implications regarding the financial markets and economy as a whole, were last discussed in the post of February 2, 2012, titled “Building Financial Danger – February 2, 2012 Update.”

In that post, I reiterated a point I first made on January 11 :

…my analyses indicate that the danger inherent in the financial system has reached a level at which a stock market crash – that would also involve (as seen in 2008) various other markets as well – has reached a level at which a near-term crash is (at least) a significant concern.

(note: the “next crash” has outsized significance, as discussed in the post of January 6, “The Next Crash And Its Significance“)

Since that February 2 post, there have been additional causes for concern, seen in many technical (analysis), sentiment and fundamental measures.  Various of these measures have been mentioned in this blog.

As reference, below is a 13-month daily chart of the S&P500, indicating both the 50dma and 200dma:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1364.58 as this post is written

The Bond Bubble – February 2012 Update

In previous posts I have discussed the Bond Bubble and its many facets.

Since my last update on August 15, 2011 (“The Bond Bubble – Update“), the yield on the 10-Year Treasury has roughly been in the 1.7%-2.4% range.  This is seen in the 3-year daily chart, LOG-basis, as shown below:

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

It should be noted that current rates on 10-Year Treasury Yields are, from a long-term historical view, extremely depressed.  This can be seen in a monthly chart of 10-Year Treasury Yields dating back to 1994, on a LOG-basis, with a red trendline :

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

From an even longer-term perspective, looking at a 222-year chart of long-term interest rates, which uses the 30-year bond when available, one can also gain a perspective on today’s abnormally low yields.  As seen on that chart, current yields on long-term interest rates have only been lower in one other time period in the 222-year history, with that other period being roughly 1940-1955.

Many investors, including those very prominent, currently believe that the biggest threat to the future value of bonds is inflation.  While I believe that the threat of inflation is a concern, there are various other factors that pose immense threats as well.

As I wrote in the aforementioned August 15, 2011 post:

While this Bond Bubble may have a little more “upside” left to it, I am of the belief that attempting to derive gains from bonds at this point is akin to “picking up pennies in front of a steamroller” – i.e. there is little to be gained, and much to be lost.

While the Bond Bubble continues, its risks to investors, financial markets and the economy in general has in no way diminished.

The perils of this bond bubble and its future “bursting” can hardly be overstated.  As I mentioned in the April 6, 2010 post (“The Threat Of Rising Interest Rates“) :

Falling interest rates over the last 20 years have been an “enabler” of much of our current day economy.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1361.23 as this post is written