Monthly Archives: January 2013

Velocity Of Money – Charts Updated Through January 30, 2013

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 fourth quarter of 2012, and were last updated as of January 30, 2013.  As one can see, two of the three measures are at all-time lows for the periods measured:

Velocity of MZM Money Stock, current value = 1.387 :

MZMV_1-30-13 1.387

Velocity of M1 Money Stock, current value = 6.538 :

M1V_1-30-13 6.538

Velocity of M2 Money Stock, current value = 1.535 :

M2V_1-30-13 1.535

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1502.32 as this post is written

Corporate Profits As A Percentage Of GDP

In the December 3, 2012 post (“3rd Quarter Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the  long-term chart below (updated through 7-1-12), Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

CP-GDP 7-1-12

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1503.66 as this post is written

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

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

For reference, below are charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through December, last updated on January 28.  This value is 230,742 ($ Millions) :

(click on charts to enlarge images)

DGORDER_1-28-13 230742

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

DGORDER_1-28-13 Percent Change from Year Ago

 

_________

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 1499.84 as this post is written

Median Household Income Chart

I have written many blog posts concerning the worrisome trends in income and earnings.

Doug Short, in his January 25 blog post, titled “Median Household Incomes:  Down .5% in 2012” produced the chart below.  It is based upon data from Sentier Research, and it shows both nominal and real median household incomes since 2000, as depicted.  As one can see, post-recession real median household income (seen in the blue line since 2009) is especially worrisome.

(click on chart to enlarge image)

Dshort 1-25-13 household-income-monthly-median-since-2000

As Doug mentions in his aforementioned blog post:

Nominal household incomes rose 1.3% for the calendar year, but adjusted for inflation, household incomes declined by 0.5%. Real household incomes have essentially been flat for the past seven months and are down 7.9% thus far in the 21st century.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1501.79 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 25, 2013 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 two media sources of December 7, 2012:

“Reviewing the indicators used to officially decide U.S. recession dates, it looks like the recession began around July 2012.”

Other past notable 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 25 titled “ECRI ‘Recession’ Update – Leading Index Growth Hits a New Interim High.”  These charts are on a weekly basis through the January 25 release, indicating data through January 18, 2013.

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

(click on charts to enlarge images)

Dshort 1-25-13 ECRI-WLI 130.6

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

Dshort 1-25-13 ECRI-WLI-YoY 5.8 percent

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

Dshort 1-25-13 ECRI-WLI-growth-since-1965 7.2

_________

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 1502.04 as this post is written

St. Louis Financial Stress Index – January 24, 2013 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 24, incorporating data from December 31,1993 to January 18, 2013 on a weekly basis.  The January 18, 2013 value is -.515 :

(click on chart to enlarge image)

STLFSI_1-24-13 -.515

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

STLFSI_1-24-13 -.515 1-year

_________

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 1494.82 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 20 “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.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1494.81 as this post is written

Updates Of Economic Indicators January 2013

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 January Chicago Fed National Activity Index (CFNAI)(pdf) updated as of January 22, 2013:

cfnai_monthly_MA3 1-22-13

The ECRI WLI (Weekly Leading Index):

As of 1/18/13 (incorporating data through 1/11/13) the WLI was at 130.4 and the WLI, Gr. was at 6.1%.

A chart of the WLI, Gr. since 2000, from Doug Short’s blog of January 18 titled “ECRI’s Public Indicators Continue to Undermine Their Insistence That We’re in a Recession” :

Dshort 1-18-13 ECRI-WLI-growth-since-2000 6.1

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

Here is the latest chart, depicting 1-12-11 to 1-12-13:

ads_2yrs_1-12-11 - 1-12-13

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

As per the December 20 press release, the LEI was at 95.8 and the CEI was at 104.9 in November.

An excerpt from the December 20 release:

Says Ken Goldstein, economist at The Conference Board: “The indicators reflect an economy that remains weak in the face of strong domestic and international headwinds, as it faces a looming fiscal cliff. Growth will likely be slow through the early months of 2013.”

Here is a chart of the LEI from Doug Short’s blog post of December 20 titled “Conference Board Leading Economic Index:  Six-Month Growth at Zero” :

Dshort 12-20-12 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 1493.53 as this post is written

Recession Probability Models

There are a variety of economic models that are supposed to predict the probabilities of recession.

While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.

The first is the “Yield Curve as a Leading Indicator” from the New York Federal Reserve.  I wrote a blog post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.”

Currently (last updated January 15, using data through December) this “Yield Curve” model shows a 5.74% probability of a recession in the United States twelve months ahead.  It showed a 6.42% probability through November.

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

This model, last updated on January 2, 2013, currently shows a 7.34% probability using data through October.

Here is the FRED chart (last updated January 2) :

RECPROUSM156N_1-2-13 7.34 percent

The two models featured above can be compared against measures seen in recent blog posts.  For instance, as seen in the January 14 post titled “The January 2013 Wall Street Journal Economic Forecast Survey” economists surveyed averaged a 19% probability of a U.S. recession within the next 12 months.

Of course, there is a (very) limited number of prominent parties, such as ECRI (most recently featured in the January 18 post titled “Long-Term Charts Of The ECRI WLI & ECRI WLI,Gr. – January 18, 2013 Update“) that believe the U.S. is already experiencing a recession.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1485.98 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 18, 2013 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 two media sources of December 7, 2012:

“Reviewing the indicators used to officially decide U.S. recession dates, it looks like the recession began around July 2012.”

Other past notable 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 18 titled “ECRI’s Public Indicators Continue to Undermine Their Insistence That We’re in a Recesion.”  These charts are on a weekly basis through the January 18 release, indicating data through January 11, 2013.

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

(click on charts to enlarge images)

Dshort 1-18-13 ECRI-WLI 130.4

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

Dshort 1-18-13 ECRI-WLI-YoY 5.6 percent

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

Dshort 1-18-13 ECRI-WLI-growth-since-1965 6.1

_________

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 1483.05 as this post is written