Monthly Archives: January 2014

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 31, 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 January 31, 2014 titled “ECRI Recession Watch:  Weekly Update.”  These charts are on a weekly basis through the January 31 release, indicating data through January 24, 2014.

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

Dshort 1-31-14 - ECRI-WLI 133.8

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

Dshort 1-31-14 - ECRI-WLI-YoY 3.3 percent

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

Dshort 1-31-14 ECRI-WLI-growth-since-1965 4.3

 

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1781.25 as this post is written

Consumer Confidence Surveys – As Of January 31, 2014

Doug Short had a blog post of January 31 (“Michigan Consumer Sentiment:  Little Changed“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

Dshort 1-31-14 - Conference-Board-consumer-confidence-index

Dshort 1-31-14 - Michigan-consumer-sentiment-index

There are a few aspects of the above charts that I find highly noteworthy.  Of course, the continuing subdued absolute levels of these two surveys is disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this blog.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1785.26 as this post is written

The Perils Of Asset Bubbles

I have written many posts concerning asset bubbles as my analyses indicate that:

  • many immensely large asset bubbles currently exist
  • today’s asset bubbles are exceedingly complex in nature
  • asset bubbles are largely misunderstood
  • asset bubbles pose an immense threat to the financial system
  • their future resolution is profoundly problematical

Of course, asset bubbles are often referred to as “speculative bubbles,” which is especially apropos.

While asset bubbles form for a variety of reasons, one primary factor in their recent (from a historical perspective) formation is abnormally low interest rates.  While there are many ways to depict this, one way is to view the real Federal Funds rate.  A recent chart from Doug Short is seen below:

Dshort 1-28-14 Real-FFR

As one can see from the above chart, prolonged negative periods of the real Fed Funds rate has proven very problematical in subsequent periods.  Whereas in the ’70s it led to high inflation, in the early 2000’s it first distended the housing bubble, and post-2008 has led to the distension – to grotesque dimensions – of various asset bubbles.

While this negative real Federal Funds Rate factor is a notable one, it should be noted that it is but one of many factors that cumulatively have resulted in a highly fetid “witches’ brew.”

Despite asset bubbles’ problematical aspects, many asset holders have benefited immensely from them.  As I mentioned in the January 30, 2012 post, titled “A Note On Asset Bubbles” :

It should be noted that asset bubbles are often widely seen as attractive and/or beneficial during their expansion phase.

However, as I also noted in that post, few people foresaw the longer-term ramifications of the housing bubble, which is especially problematical as the housing bubble’s existence was obvious and the consequences of its “deflation” or “bursting” should have been easily envisioned.

Given the (vastly) prolonged nature of some of the current asset bubbles, many undoubtedly see them as being enduring “fixtures” in the financial system.  By outward appearances, it would likely seem absurd to even contemplate draconian downside price targets for various asset classes.  Similarly, it would seem equally difficult to envision those who are ultra-wealthy suffering vast percentage losses of their net worth.

However, in the United States we do have a prior post-Federal Reserve period in which many ultra-wealthy people “lost everything,” with that period being the Great Depression.  This loss of wealth was highlighted in the October 7, 2011 post titled “The Plight Of The Wealthy During Depressions.”

While, in an overall sense, I believe there to be similarities between the current economic period and that preceding The Great Depression, I do believe that our current economy and financial system on an “all things considered” basis have vastly problematical underlying dynamics that dwarf those existent prior to and during The Great Depression.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1794.19 as this post is written

Velocity Of Money – Charts Updated Through January 30, 2014

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 2013, and were last updated as of January 30, 2014.  As one can see, two of the three measures are at all-time lows for the periods depicted:

Velocity of MZM Money Stock, current value = 1.407 :

MZMV_1-30-14 1.407

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 30, 2014:

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

Velocity of M1 Money Stock, current value = 6.506 :

M1V_1-30-14 6.506

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 30, 2014:

http://research.stlouisfed.org/fred2/series/M1V

Velocity of M2 Money Stock, current value = 1.566 :

M2V_1-30-14 1.566

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 30, 2014:

http://research.stlouisfed.org/fred2/series/M2V

 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1797.37 as this post is written

St. Louis Financial Stress Index – January 30, 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 January 30, incorporating data from December 31,1993 to January 24, 2014, on a weekly basis.  The January 24, 2014 value is -.963:

(click on chart to enlarge image)

STLFSI_1-30-14 -.963

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

STLFSI_1-30-14 -.963 1-year

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 30, 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 1798.09 as this post is written

The State of the Union Address – Notable Excerpts

I found President Obama’s State of the Union Address (transcript from the Wall Street Journal) last night 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 all of them.

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

Let’s face it:  That belief has suffered some serious blows. Over more than three decades, even before the Great Recession hit, massive shifts in technology and global competition had eliminated a lot of good, middle-class jobs, and weakened the economic foundations that families depend on.

Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better.  But average wages have barely budged.  Inequality has deepened.  Upward mobility has stalled.  The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by, let alone to get ahead.  And too many still aren’t working at all.

also:

Opportunity is who we are.  And the defining project of our generation must be to restore that promise.  We know where to start:  The best measure of opportunity is access to a good job. With the economy picking up speed, companies say they intend to hire more people this year.  And over half of big manufacturers say they’re thinking of insourcing jobs from abroad.  (Applause.)

also:

The ideas I’ve outlined so far can speed up growth and create more jobs.  But in this rapidly changing economy, we have to make sure that every American has the skills to fill those jobs.  The good news is we know how to do it.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1792.50 as this post is written

House Prices Reference Chart

As a reference for long-term house price index trends, below is a chart, updated with the most current data (through November, except for the Case-Shiller National Index, which is through September), from the CalculatedRisk blog post of January 28 titled “Comment on House Prices: Real Prices, Price-to-Rent Ratio, Cities” :

(click on chart to enlarge image)

CR 1-28-14 - NominalHPNov2013

 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1792.50 as this post is written

Durable Goods New Orders – Long-Term Charts Through December 2013

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 229,319 ($ Millions) :

(click on charts to enlarge images)

DGORDER_1-28-14 229319

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

DGORDER_1-28-14 229319 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER] ; U.S. Department of Commerce: Census Bureau ; accessed January 28, 2014;

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

_________

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 1793.34 as this post is written

VIX Monthly And Weekly Charts Since Year 2000

For reference purposes, below are two charts of the VIX from year 2000 through yesterday’s (January 27, 2014) close.

Here is the VIX Monthly chart, depicted on a LOG scale, with price labels as well as the 13- and 34-month 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)

EconomicGreenfield 1-28-14 VIX Monthly LOG Since 2000

Here is the VIX Weekly chart, depicted on a LOG scale, with price labels as well as the 13- and 34-week 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)

EconomicGreenfield 1-28-14 VIX Weekly LOG Since 2000

 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1781.56 as this post is written