Monthly Archives: June 2012

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – June 29, 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, 2011 that the U.S. was “tipping into recession,” and ECRI has reaffirmed that view since, including a notable statement on March 15 (“Why Our Recession Call Stands”) as well as various interviews and statements the week of May 6, including:

Bloomberg video, May 9:  ”Lakshman Achuthan on Renewed U.S. Recession Call: Video

ECRI, May 9:  ”Revoking Recession:  48th Time’s The Charm?

Wall Street Journal video, May 9: “Free Market Economies Have Business Cycles

ECRI, May 11, “Rising GDP Doesn’t Rule Out Recession.”

Below are three long-term charts, from Doug Short’s blog post of June 29 titled “ECRI Recession Call: Weekly Leading Index Up Fractionally.”  These charts are on a weekly basis through the June 29 release, indicating data through June 22.

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

(click on charts to enlarge images)

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

This last chart depicts, on a long-term basis, the 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 1362.13 as this post is written

St. Louis Financial Stress Index – June 28, 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 June 28, incorporating data from December 31,1993 to June 22, 2012 on a weekly basis.  The June 22, 2012 value is .388 :

_________

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 1329.04 as this post is written

Durable Goods New Orders – Long-Term Charts Through May 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 May, last updated on June 27.  This value is 217,154 ($ Millions) :

(click on charts to enlarge images)

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

Lastly, a chart from Doug Short’s post of June 27 titled “Durable Goods Orders Up 1.1%, Above Expectations” showing the Durable Goods New Orders vs. the S&P500′s monthly average of daily closes:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1331.85 as this post is written

House Prices Reference Chart

As a reference for long-term house price index trends, below is a chart, updated through the April data, from the CalculatedRisk blog post of June 26 titled “Real House Prices and Price-to-Rent Ratio” :

(click on chart image to enlarge)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1319.99 as this post is written

Zillow June 2012 Home Price Expectations Survey – Summary & Comments

On June 24, the Zillow June 2012 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An accompanying image is seen below: (click on chart image to enlarge)

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the Case-Shiller US National Home Price Index (NSA), will slowly climb after 2012.

The detail of the June 2012 Home Price Expectations Survey (pdf) is interesting.  Of the 114 survey respondents, 8 (of the displayed responses) forecast a cumulative price decrease through 2016; and of those 8, only 1 (Gary Shilling) foresees a double-digit percentage cumulative price drop, at 16.98%.

The Median Cumulative Home Price Appreciation for years 2012-2016 is seen as -.50%, .87%, 3.52%, 6.61%, and 10.34%, respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Gary Shilling’s above-referenced forecast)  will prove too optimistic in hindsight.  Although a 16.98% decline is substantial, from a longer-term historical perspective such a decline is rather tame in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, (even) from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post titled “What’s Ahead For The Housing Market – A Look At The Charts.”

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1313.72 as this post is written

Updates On Economic Indicators June 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 June Chicago Fed National Activity Index (CFNAI)(pdf) updated as of June 25, 2012:

The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the May 24 update titled “Index forecasts weaker growth” :

The May update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, slowing to 2.0% during the summer months. 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 6/22/12 (incorporating data through 6/15/12) the WLI was at 121.3 and the WLI, Gr. was at -3.5%.

A chart of the WLI, Gr. since 2000, from Doug Short’s blog of June 22 titled “ECRI Recession Call Update:  Weekly Leading Index Slips Again” :

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

Here is the latest chart, depicting 6-16-10 to 6-16-12:

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

As per the June 21 release, the LEI was at 95.8 and the CEI was at 104.3 in May.

An excerpt from the June 21 release:

Says Ataman Ozyildirim, economist at The Conference Board: “The LEI rose in May, reversing the slight decline in April. Weakness in the average workweek in manufacturing, stock prices and consumer expectations kept the LEI from rising further. Its six-month growth rate remains in expansionary territory and well above its growth at the end of 2011, pointing to a relatively low risk of a downturn in the second half of 2012.”

Here is a chart of the LEI from Doug Short’s blog post of June 21, titled “Conference Board Leading Economic Index: Up .3% in May” :

 

_________

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 1316.35 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – June 22, 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, 2011 that the U.S. was “tipping into recession,” and ECRI has reaffirmed that view since, including a notable statement on March 15 (“Why Our Recession Call Stands”) as well as various interviews and statements the week of May 6, including:

Bloomberg video, May 9:  ”Lakshman Achuthan on Renewed U.S. Recession Call: Video

ECRI, May 9:  ”Revoking Recession:  48th Time’s The Charm?

Wall Street Journal video, May 9: “Free Market Economies Have Business Cycles

ECRI, May 11, “Rising GDP Doesn’t Rule Out Recession.”

Below are three long-term charts, from Doug Short’s blog post of June 22 titled “ECRI Recession Call: Weekly Leading Index Slips Again.”  These charts are on a weekly basis through the June 22 release, indicating data through June 15.

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

(click on charts to enlarge images)

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

This last chart depicts, on a long-term basis, the 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 1335.02 as this post is written

Ben Bernanke’s June 20, 2012 Press Conference – Notable Aspects

On Wednesday, June 20, 2012 Ben Bernanke gave his scheduled press conference.

Here are Ben Bernanke’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript.  These comments are excerpted from the “Transcript of Chairman Bernanke’s Press Conference“(preliminary)(pdf) of June 20, 2012, with accompanying Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, June 2012 (pdf).

Bernanke’s responses as indicated to the various questions:

Continue reading

Articles Remembering Anna J. Schwartz

Two well-written articles remembering the life of Anna J. Schwartz include the June 21 New York Times article titled “Anna Schwartz, Economist Who Worked With Friedman, Dies at 96” as well as the June 22 Bloomberg BusinessWeek article titled “Anna Schwartz, Economist Milton Friedman’s Co-Author, Dies at 96.”

Although both article are well worth reading in their entirety, I would like to highlight some excerpts from the Bloomberg BusinessWeek article:

The first book that Schwartz wrote with Friedman, “A Monetary History of the United States, 1867-1960,” had “critical influence” on the outlook “of a generation of policy makers,” Bernanke said in 2003, when he was a Fed governor.

Published in 1963, the book advanced the idea that the Great Depression had been triggered by the central bank’s reduction in the U.S. money supply from 1928 until the early 1930s. That contradicted the prevailing view that it resulted from the 1929 stock-market crash.

also:

In a 2008 interview with Barron’s, Schwartz said the government needed to stop injecting liquidity into markets and reacting to the credit crisis with ad hoc programs.

“If I regret one thing, it’s that Milton Friedman isn’t alive to see what’s happening today,” she told the magazine. Referring to Bernanke, she said, “It’s like the only lesson the Federal Reserve took from the Great Depression was to flood the market with liquidity. Well, it isn’t working.”

Schwartz said in a July 2009 commentary for the New York Times that Bernanke, the architect of the central bank’s emergency programs, didn’t deserve reappointment as Fed chief.

“Mr. Bernanke seems to know only two amounts: zero and trillions,” she said, referring to his policy of holding the target interest rate near zero and the expansion of the Fed’s assets to $2 trillion in July 2009, more than double the level of early 2008. The U.S. Senate’s 70-30 vote to approve Bernanke for a second four-year term in 2010 marked the greatest opposition to a Fed chairman since the office became subject to Senate confirmation in 1978.

My comments: 

For those unaware, the aforementioned “A Monetary History of the United States, 1867-1960” seems to have had an almost monumental influence on multiple fronts.  While my thoughts on the book are complex – especially with regard to its description and interpretation of The Great Depression – the book appears to have had immense influence on both the putative causes of The Great Depression as well as a preeminent reference as how to avoid Depression conditions.  It strongly appears as if the book has had a strong influence on Ben Bernanke’s economic interpretations and actions.

I highlighted the quotes and thoughts from Anna Schwartz concerning the various intervention efforts from 2007, as well as her thoughts on Ben Bernanke’s actions, as I believe these thoughts deserve greater recognition.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1331.50 as this post is written

St. Louis Financial Stress Index – June 21, 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 June 21, incorporating data from December 31,1993 to June 15, 2012 on a weekly basis.  The June 15, 2012 value is .525 :

_________

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 1325.51 as this post is written