ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

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2015-07-31 00:00:00 Moving Averages: June Month-End Update by Doug Short (Article)

Valid until the market close on June 30, 2015

The S&P 500 closed May with a monthly gain of 1.05%. All three S&P 500 MAs and three of the five Ivy Portfolio ETF MAs are signaling "Invested". In the table, monthly closes that are within 2% of a signal are highlighted in yellow.

2015-07-30 00:00:00 Market Cap to GDP: A New Interim High for the Buffett Valuation Indicator by Doug Short (Article)

With today's release of the Advance Estimate for Q2 GDP along with revisions for the past 12 quarters, we can now have a fresh look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP.

2015-07-30 00:00:00 Moving Averages: Month-End Preview by Doug Short (Article)

Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the open on the last day of the month, all three S&P 500 strategies are signaling "invested" -- unchanged from last month. Three of the five Ivy Portfolio ETFs - iShares Barclays 7-10 Year Treasury (IEF),Vanguary REIT Index ETF (VNQ), and PowerShares DB Commodity Index Tracking (DBC) - are signaling "cash", compared with last month's single DBC cash signal.

2015-07-30 00:00:00 Q2 GDP Advance Estimate at 2.3%, Close to Mainstream Forecasts by Doug Short (Article)

The Advance Estimate for Q2 GDP, to one decimal, came in at 2.3 percent, a substantial increase from the 0.6 percent of Q1, which is an upward revision from -0.2 percent prior to today's annual revisions. Today's number came in a tad on the light side of most mainstream estimates. The WSJ survey of economists had median and mean forecasts of 2.6 and 2.7, respectively. Investing.com was looking for 2.6.

2015-07-30 00:00:00 Q1 GDP Per Capita at -1.1 for Third Estimate by Doug Short (Article)

The Third Estimate for Q1 GDP, to one decimal, came in at -0.2 percent, a 0.5 increase from the -0.7 percent of the Second Estimate. But with a per-capita adjustment, the data series is currently at -1.1 percent (-1.08 percent to two decimal places). The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

2015-07-29 00:00:00 June Pending Home Sales Snap a Five-Month String of Increases by Doug Short (Article)

Earlier today the National Association of Realtors released the June data for their Pending Home Sales Index. The NAR reports that "after five consecutive months of increases, pending home sales slipped in June but remained near May’s level, the highest in over nine years." The adjacent chart gives us a snapshot of the index since 2001.

2015-07-28 00:00:00 Home Price Rose at a Slightly Slower Pace, Year-over-Year, in May by Doug Short (Article)

With this morning's release of the May S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices were down fractionally month over month and rose across the country over the last 12 months but at a slower pace. The seasonally adjusted 20-city index, the most closely watched of the Case-Shiller series, was down -0.2% from the previous month. Nonseasonally adjusted it was up 4.9% from a year ago.

2015-07-28 00:00:00 Home Ownership Drops to a New Interim Low by Doug Short (Article)

As residential real estate prices rise, home ownership continues to decline. The Census Bureau has now released its latest quarterly report with data through Q2. Here is a snapshot of the nonseasonally adjusted series with a 4-quarter moving average to highlight the trend.

2015-07-27 00:00:00 S&P 500 Snapshot: Day Five of the Selloff by Doug Short (Article)

The big pre-open news today was the historic -8.48% Monday rout in the Shanghai Composite, an event that no doubt rattled the optimists hoping that the China benchmark index had bottomed out last week. Euro zone indexes also saw some suffering, with DAX and CAC 40 both deep in the red and destined to close with -2.5% losses. The S&P 500 dropped at the open, ignoring a modest improvement in June Durable Goods. A rebound attempt topped out in late morning, and the index spent the day drifting lower to its -0.58% close, its fifth consecutive finish in the red.

2015-07-27 00:00:00 June Durable Goods: A Bit of a Bounce by Doug Short (Article)

The latest new orders headline number at 3.4% percent was above the Investing.com estimate of 3.0% percent. This series is down -2.8 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 0.8 percent month-over-month (MoM), a bit above the Investing.com estimate of 0.5 percent. However, the core measure is down -4.5 percent YoY. If we exclude both transportation and defense for an even more fundamental "core", the latest number was up 1.1 percent MoM, but down -3.0 percent YoY.

2015-07-27 00:00:00 The "Real" Goods on the June Durable Goods Data by Doug Short (Article)

Earlier today the Census Bureau posted the Advance Report on June Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's now review Durable Goods data with two adjustments. In the charts below the gray line shows the goods orders divided by the Census Bureau's monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index for All Commodities, chained in today's dollar value.

2015-07-27 00:00:00 Forecasting Q2 GDP: Gazing Into the Crystal Ball by Doug Short (Article)

The big economic number this week will be the Q2 Advance Estimate for GDP on Thursday at 8:30 AM ET. With the Q1 GDP of -0.2% behind us, what do economists see in their collective crystal ball for Q2 of 2015? Let's take a look at the latest GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.

2015-07-25 00:00:00 World Markets Weekend Update: The Previous Week's Rally Suffers a Setback (Except for China) by Doug Short (Article)

Seven of the eight indexes on our world watch list gave back part of their gains from the previous week. The one positive outlier was the manic-depressive Shanghai Composite, which advanced 2.87% over the past five sessions. The Western indexes fared the worst of our gang of eight. The UK's FTSE 100 was the worst loser and a negative outlier in that its -2.88% decline more than eradicated its gain from the previous week.

2015-07-24 00:00:00 New Home Sales Decline to 482K by Doug Short (Article)

This morning's release of the June New Home Sales from the Census Bureau at 482,000 was well below general expectations, and the previous month was revised downward. The Investing.com forecast was for 546K. Here is the opening from the report:

2015-07-24 00:00:00 The Median Household Income Declined Fractionally in June by Doug Short (Article)

The Sentier Research monthly median household income data series is now available for June. The nominal median household income was down $60 month-over-month but up $1,250 year-over-year. That's a 0.1% MoM decrease and a 2.3% YoY increase. Adjusted for inflation, the latest income was down $235 MoM and up $1,150 YoY. The real numbers equate to a -0.4% MoM decrease and a 2.1% YoY increase.

2015-07-23 00:00:00 Chicago Fed: Economic Growth Picked Up Slightly in June by Doug Short (Article)

"Index shows economic growth picked up slightly in June": This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report:

2015-07-23 00:00:00 Conference Board Leading Economic Index Increased Again in June by Doug Short (Article)

The Latest Conference Board Leading Economic Index (LEI) for June is now available. The index rose 0.6 percent, which follows a 0.8 percent May increase. The latest indicator value came in above the 0.2 percent forecast by Investing.com.

2015-07-23 00:00:00 Understanding the CFNAI Components by Doug Short (Article)

The Chicago Fed's National Activity Index, which we reported on earlier today, is based on 85 economic indicators drawn from four broad categories of data:

  • Production and Income
  • Employment, Unemployment, and Hours
  • Personal Consumption and Housing
  • Sales, Orders, and Inventories

2015-07-23 00:00:00 Kansas City Fed Survey: Manufacturing Less Negative in July by Doug Short (Article)

The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico. The latest index came in at -7, which indicates slowing activity. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey. The three-month moving average, which helps us visualize trends, is at its lowest level since mid-2009.

2015-07-22 00:00:00 FHFA House Price Index Rose 0.4% in May by Doug Short (Article)

The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. U.S. house prices rose in May, up 0.4 percent on a seasonally adjusted basis from the previous month. Year-over-year the index is up 5.7% (nonseasonally adjusted). Investing.com had forecast a 0.5 percent MoM increase.

2015-07-22 00:00:00 Existing-Home Sales Highest in Eight Years by Doug Short (Article)

This morning's release of the June Existing-Home Sales shows the highest sales in eight years to a seasonally adjusted annual rate of 5.49 million units from a slight downward revision of 5.32 million in May (previously 5.35 million). The Investing.com consensus was for 5.40 million. The latest number represents a 3.2% increase from the previous month and a 9.6% increase year-over-year.

2015-07-21 00:00:00 Vehicle Miles Traveled: The Latest Look at Our Evolving Behavior by Doug Short (Article)

The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through May.

"Travel on all roads and streets changed by 2.7% (7.3 billion vehicle miles) for May 2015 as compared with May 2014." The less volatile 12-month moving average is up 0.19% month-over-month and 2.84% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is a smaller change, up 0.11% month-over-month and up only 1.68% year-over-year.

2015-07-21 00:00:00 The Big Four Economic Indicators: Industrial Production by Doug Short (Article)

Earlier today the Federal Reserve released its annual revisions to Industrial Production. Prior to the revisions, Industrial Production had risen 26.2% since the end of the Great Recession in June 2009. The revisions trim the rise to 22.8%. The indicator is -0.74% off its nominal high in December of last year, down from -0.55% before the revisions.

2015-07-21 00:00:00 The Four Totally Bad Bear Recoveries: Where Is Today's Market? by Doug Short (Article)

This chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They are:

  1. The Crash of 1929
  2. The Oil Embargo of 1973
  3. The 2000 Tech Bubble bust and,
  4. The Financial Bubble and Crisis.

2015-07-20 00:00:00 Secular Trends in Residential Building Permits and Housing Starts by Doug Short (Article)

Over the long haul the two series offer a compelling study of trends in residential real estate. Here is an overlay of the two series since the 1959 inception of the Starts data and the Permits data, which began being tracked a year later. The monthly data points are preserved as faint dots. The trends are illustrated with 6-month moving averages of data divided by the Census Bureau's mid-month population estimates.

2015-07-20 00:00:00 NYSE Margin Debt: Up 1.2% over the Previous Month by Doug Short (Article)

Note: The NYSE has released new data for margin debt, now available through June. We've updated the charts in this commentary to include the latest numbers.

The NYSE margin debt data is about a month old when it is published. The latest debt level is up 1.2% month-over-month. Real (inflation-adjusted) debt rose 0.82% month-over-month and is 1.3% off its record high two months prior in April.

2015-07-17 00:00:00 Michigan Consumer Sentiment: Down Slightly but Still Positive Outlook by Doug Short (Article)

The University of Michigan preliminary Consumer Sentiment for July came in at 93.3, a decrease from the 96.1 June final reading. Investing.com had forecast 96.1 for the July preliminary. This is the eighth month above 90 since the 2003 to 2005 expansion.

2015-07-17 00:00:00 ECRI Weekly Leading Index: "Recoveries Remain Resilient" by Doug Short of Advisor Perspectives (dshort.com)

ECRI currently features an article suggesting that concern over negative trend growth is no reason to panic. Recession is not imminent as we are not yet in a "window of vulnerability." The article also discusses Spain's recent cyclical upturn and warns that one shouldn't assume that a cyclical upturn also means positive long-term trend growth. The overall message is not to "fret about recession just yet".

2015-07-17 00:00:00 The Big Four Economic Indicators: Weak June Real Retail Sales by Doug Short (Article)

Nominal Retail Sales in June fell -0.27%, and the two previous months were revised downward from 1.21% in May to 1.03% and from 0.24% to 0.03% in April. June Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, came in at -0.59% month-over-month. This was the fifth monthly decline over the past seven months. The chart below gives us a close look at the monthly data points in this series since the end of the last recession in mid-2009. The linear regression helps us identify variance from the trend.

2015-07-17 00:00:00 Inflation: An X-Ray View of the Components by Doug Short (Article)

Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2015-07-17 00:00:00 Understanding Secular Trends in Inflation by Doug Short (Article)

The Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the year-over-year inflation rate at 0.12%. It is substantially below the 3.84% average since the end of the Second World War and its 10-year moving average, now at 2.14%.

2015-07-17 00:00:00 June Consumer Price Index: Year-over-Year Core at 1.8% by Doug Short (Article)

The Bureau of Labor Statistics released the June CPI data this morning. The year-over-year unadjusted Headline CPI came in at 0.12% (rounded to 0.1%), up from -0.04% (rounded to 0.0%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.76% (rounded to 1.8%), up fractionally from the previous month's 1.72% (rounded to 1.7%). Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

2015-07-17 00:00:00 What Inflation Means to You: Deconstructing the Consumer Price Index by Doug Short (Article)

Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which I'll refer to hereafter as the CPI.

2015-07-17 00:00:00 New Residential Housing Starts Above Forecast for June by Doug Short (Article)

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for June new residential housing starts. The latest reading of 1.17M was above the Investing.com forecast of 1.10M.

2015-07-17 00:00:00 New Residential Building Permits Highest Since 2007 by Doug Short (Article)

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for June new residential building permits. The latest reading of 1.343M was well above the Investing.com forecast of 1.150M.

2015-07-16 00:00:00 A Close Look at Trends in Employment for 13 Age Groups by Doug Short (Article)

The columns in the adjacent chart are arranged by age group from left to right. Teen employment is down 56% while at the opposite end, employment of the 75+ age group is up 121%. The stair steps in between are a clear indication of the aging workforce over this time frame.

2015-07-14 00:00:00 NFIB: "Small Business Takes Significant Hit in June" by Doug Short (Article)

The latest issue of the NFIB Small Business Economic Trends is out today. The update for June came in at 94.1, a 4.2 point decline from the previous month. The index is now at the 21st percentile in this series. The Investing.com forecast was for 98.6. Here is the opening summary of the news release.

2015-07-13 00:00:00 Baby Boomer Employment Across Time by Doug Short (Article)

The 20th century Baby Boom was one of the most powerful demographic events in the history of the United States. We've created a series of charts to show seven age cohorts of the employed population from 1948 to the present. What we see is essentially the "Boomer Bulge" in employment across time. Those born between 1946 and 1964 continue to grow the employment of the two oldest cohorts. It will be interesting to see how long those two trends continue.

2015-07-12 00:00:00 ECRI Weekly Leading Index Continues With Little to No Change by Doug Short of Advisor Perspectives (dshort.com)

ECRI's most recent article suggests that wage inflation does not support the case for a rate increase. "The recent rise in wage inflation, having become an obvious fact, is increasingly being used to support the case for rate hikes – including by Fed Chairman Janet Yellen, who now sees these “tentative signs of stronger wage growth” as a harbinger of inflation."

2015-07-09 00:00:00 Treasury Snapshot: A Look at Recent Volatility by Doug Short (Article)

US Equity indexes have had a volatile week so far, with chronic Grexit tensions being trumped by anxieties over the deflating bubble in Chinese equities. Treasury yields have shared in the volatility. The closing yield on the 10-year note has had a 27 basis-point range over the last nine sessions: 2.49% on June 26 to 2.22% at yesterday's close, which was 10 bps below today's close.

2015-07-08 00:00:00 APViewpoint Presents: Generating Tax Alpha with Effective Asset Location by Doug Short (Article)

A live, CFP/IMCA CE-eligible webinar presented by Michael Kitces on Wednesday, July 8, at 4:15 pm ET. While asset allocation and diversification are standard practices among advisors, the question of how to identify and optimize asset class locations to address each client’s time horizons, and the expected return and tax efficiency of the underlying investments, is far more challenging.

2015-07-08 00:00:00 Trends in the Teenage Workforce by Doug Short (Article)

Last week CNN Money featured an article with the optimistic and intriguing title "More American teens are getting jobs. That's good for everyone." After reading the article, we decided to revise one of our monthly charts on Labor Force Participation to include the age 16-19 cohort -- one we've lumped in the past with the 20-24 year-olds. The first chart below features the three-month moving averages of the non-seasonally adjusted participation rates to better highlight the trends.

2015-07-07 00:00:00 Numbers Needed for the Prime U.S. Workforce to Recover by Doug Short (Article)

At last year's Jackson Hole Symposium, Fed Chair Janet Yellen delivered an extended analysis of "Labor Market Dynamics and Monetary Policy". Her speech essentially reviewed the ongoing debate over the mix of cyclical versus structural factors in employment since the Great Recession.

Here is an updated series of charts illustrating some structural changes in the workforce that are far more significant than the cyclical impact of the Great Recession.

2015-07-06 00:00:00 Demographic Trends for the 50-and-Older Work Force by Doug Short (Article)

Note: This commentary has been updated with the latest numbers from last week's Employment Report.

This is not the scenario that would have been envisioned a generation ago for the "Golden Years" of retirement. Consider: Today nearly one in three of the 65-69 cohort and almost one in five of the 70-74 cohort are in the labor force.

2015-07-06 00:00:00 Another Look at Long-Term Trends in Employment by Age Group by Doug Short (Article)

The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution). The result is the participation rate expressed as a percent.

2015-07-03 00:00:00 Treasury Yields in Perspective by Doug Short (Article)

Let's have a look at a long-term perspective on Treasury yields. The chart here shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%.

2015-07-02 00:00:00 The Big Four Economic Indicators: Nonfarm Employment by Doug Short (Article)

Nonfarm Employment has been in a steady upward trend. Today's report of 223K new nonfarm jobs in June was a bit below expectations. More significant is the fact that May nonfarm payrolls were revised downward by 26K from 280K to 254K and April downward by 34K from 221K to 187K, a total revision of -60K for the two months. The unemployment rate ticked down two notches from 5.5% to 5.3%, a drop driven by a larger decline in the labor force (432K) than the reduction in the unemployed (375K).

2015-07-02 00:00:00 Market Valuation, Inflation and Treasury Yields: More Clues from the Past by Doug Short (Article)

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns. In a "normal" market environment -- one with conventional business cycles, Federal Reserve policy, interest rates and inflation -- current valuation levels would be a serious concern.

But these are different times.

2015-07-02 00:00:00 June New Jobs Came In Below Forecast and May Was Revised Down by 26K by Doug Short (Article)

Today's report of 223K new nonfarm jobs in June was a bit below the Investing.com forecast of 230K. More significant is the fact that May nonfarm payrolls were revised downward by 26K from 280K to 254K and April downward by 34K from 221K to 187K, a total revision of -60K for the two months. The unemployment rate ticked down two notches from 5.5% to 5.3%, a drop driven by a larger decline in the labor force (432K) than the reduction in the unemployed (375K).

2015-07-02 00:00:00 The Market Remains in Overvaluation Territory by Doug Short (Article)

Here is a summary of the four market valuation indicators we update on a monthly basis.

  • The Crestmont Research P/E Ratio
  • The cyclical P/E ratio using the trailing 10-year earnings as the divisor
  • The Q Ratio, which is the total price of the market divided by its replacement cost
  • The relationship of the S&P Composite price to a regression trendline

2015-07-02 00:00:00 The Civilian Labor Force, Unemployment Claims and the Business Cycle by Doug Short (Article)

What does the ratio of unemployment claims tell us about where we are in the business cycle and our current recession risk? At present, the ratio for Continued Claims has been trending down. Excluding the 1981 recession, the Initial Claims trough lead time for a recession has ranged from 7 to 22 months with an average of 12 months if we include the 1981 recession and 14 months if we exclude it. Admittedly, the last recession is an extreme example, but the Initial Claims trough preceded its December 2007 onset by a whopping 22 months.

2015-07-01 00:00:00 Anticipating the Employment Report for June by Doug Short (Article)

The economic mover and shaker this week is tomorrow's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, the most publicized being the month-over-month change in Total Nonfarm Employment.

Today we have the June estimate of 237K new nonfarm private employment jobs from ADP, up from the May's 203K, which is an upward revision from 200K. Also the April number was revised upward by 14K.

2015-07-01 00:00:00 Light Vehicle Sales Per Capita: Another Look at the Long-Term Trend by Doug Short (Article)

For the past few years we've been following a couple of transportation metrics: Vehicle Miles Traveled and Gasoline Volume Sales. For both series we focus on the population adjusted data. Let's now do something similar with the Light Vehicle Sales report from the Bureau of Economic Analysis. This data series stretches back to January 1976. Since that first data point, the Civilian Noninstitutional Population Age 16 and Over (i.e., driving age not in the military or an inmate) has risen 61.9%.

2015-07-01 00:00:00 Is the Stock Market Cheap? by Doug Short (Article)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2015-07-01 00:00:00 Regression to Trend: A Perspective on Long-Term Market Performance by Doug Short (Article)

Quick take: At the end of June the inflation-adjusted S&P 500 index price was 91% above its long-term trend, a slight decline from the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

2015-07-01 00:00:00 Secular Bull and Bear Markets by Doug Short (Article)

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? At this point, six years later, the S&P 500 has set an inflation-adjusted record high.

Let's examine the past to broaden our understanding of the range of historical trends in market performance. An obvious feature of this inflation-adjusted series is the pattern of long-term alternations between up-and down-trends.

2015-07-01 00:00:00 The Q Ratio and Market Valuation: June Update by Doug Short (Article)

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies.

2015-07-01 00:00:00 ISM Manufacturing Index: 30th Consecutive Month of Expansion by Doug Short (Article)

Today the Institute for Supply Management published its monthly Manufacturing Report for June. The latest headline PMI was 53.5 percent, an increase of 0.7% from the previous month and slightly above the Investing.com forecast of 53.1. This was the 30th consecutive month of expansion.

2015-07-01 00:00:00 Crestmont Market Valuation Update by Doug Short (Article)

Quick take: Based on the June S&P 500 average of daily closes, the Crestmont P/E is 97% above its arithmetic mean and at the 98th percentile of this fourteen-plus-decade monthly metric.

2015-06-27 00:00:00 ECRI Weekly Leading Index: Little to No Change by Doug Short of Advisor Perspectives (dshort.com)

ECRI's most recent article suggests that wage inflation does not support the case for a rate increase. "The recent rise in wage inflation, having become an obvious fact, is increasingly being used to support the case for rate hikes – including by Fed Chairman Janet Yellen, who now sees these “tentative signs of stronger wage growth” as a harbinger of inflation."

2015-06-25 00:00:00 The PCE Price Index Remains Disappointingly Below Target by Doug Short (Article)

The Personal Income and Outlays report for May was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.22%, little changed from 0.16% the previous month. The latest Core PCE index (less Food and Energy) at 1.24% is a slight decline from the previous month's 1.29% YoY.

The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012.

2015-06-25 00:00:00 Two Measures of Inflation and Fed Policy by Doug Short (Article)

The BEA's Personal Consumption Expenditures Chain-type Price Index for May shows core inflation below the Federal Reserve's 2% long-term target at 1.24%. The latest Core Consumer Price Index release, also data through May, is higher at 1.72%. The Fed is on record as using Core PCE data for its primary inflation gauge.

2015-06-25 00:00:00 The Big Four Economic Indicators: Real Personal Income by Doug Short (Article)

Personal Income (excluding Transfer Receipts) in May rose 0.61% and is up 4.3% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.30%. The real number is up 4.07% year-over-year. Real PI less TR is one of those indicators that warrants adjustment for population growth.

2015-06-25 00:00:00 May Real Disposable Income Per Capita Rose a Fractional 0.12% by Doug Short (Article)

With the release of today's report on May Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita.

The May nominal 0.43% month-over-month increase in disposable income drops to 0.12% when we adjust for inflation. The year-over-year metrics are 3.00% nominal and 2.77% real.

2015-06-24 00:00:00 Visualizing GDP: A Look Inside the Q1 Third Estimate by Doug Short (Article)

The chart below is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics:

2015-06-22 00:00:00 Gasoline Volume Sales and our Changing Culture by Doug Short (Article)

The Department of Energy's Energy Information Administration (EIA) monthly data on volume sales is several weeks old when it released. The latest numbers, through mid-April, are now available. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

2015-06-19 00:00:00 ECRI: "Shifting Patterns in Recessions and Recoveries" by Doug Short of Advisor Perspectives (dshort.com)

ECRI's most recent article presents slides and notes from ECRI's Lakshman Achuthan talk at the Madrid Fund Forum conference. He discussed the relationship between lower trend growth and recessions. "ECRI believes that minimally we're returning to a period of more frequent recessions, as we saw in much of the twentieth century....Going back to at least the 1970s, growth has been stair-stepping down during each successive expansion."

2015-06-17 00:00:00 WSJ Economists' June Forecasts for 10-Year Yields and the Fed Funds Rate by Doug Short (Article)

This afternoon the Fed will release the FOMC Minutes for its May meeting followed by Chair Yellen's press conference. In advance of the Fed information, let's take a quick look at a couple of items in the June Wall Street Journal survey of economists, starting with where the Federal Reserve is headed with the Fed Funds Rate, which is currently holding steady at 13 percent.

2015-06-17 00:00:00 GDP Forecasts: The Latest from the WSJ Economists and the Fed by Doug Short (Article)

Earlier this month the Wall Street Journal did its monthly survey of economists on a variety of economic metrics, including of course GDP. Sixty-six of the 72 economists solicited participated. Here is a look at the range of forecasts for 2015 annual GDP. We've calculated the median (middle), mean (average) and mode (most frequent). We've also documented the range of Fed forecasts in today's projections.

2015-06-12 00:00:00 ECRI: "Trend Real GDP Growth Is Converging to 1% a Year" by Doug Short of Advisor Perspectives (dshort.com)

ECRI's most recent article offers a compelling analysis of the relationship between GDP and two key factors: productivity and the labor force: "With productivity growth and potential labor force growth both averaging 1/2% a year, trend real GDP growth is converging to 1% a year."

2015-06-11 00:00:00 Household Net Worth: The "Real" Story by Doug Short (Article)

Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth that is 54.5% above the 2009 trough and 25.2% above the 2007 peak and at an all-time high. The nominal Q1 net worth is up 2.0% from the previous quarter and up 5.7% year over year.

2015-06-11 00:00:00 The Fed Balance Sheet: What Is Uncle Sam's Largest Asset? by Doug Short (Article)

Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam's balance sheet?

  • A) U.S. Official Reserve Assets
  • B) Total Mortgages
  • C) Taxes Receivable
  • D) Student Loans

2015-06-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2015-06-02 00:00:00 Equity Valuations, Recessions and Stock Market Declines by Doug Short (Article)

Earlier this year I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the adjacent chart, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:

2015-05-31 00:00:00 The S&P 500, Dow and Nasdaq Since Their 2000 Highs by Doug Short (Article)

This update is a response to a standing request from a couple of sources that we also share with regular visitors to my Advisor Perspectives pages. The request is for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. Here two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which is usually just refer to as the CPI).

2015-05-27 00:00:00 Forecasting Q1 Second Estimate GDP: Gazing Into the Crystal Ball by Doug Short (Article)

The big economic number this week will be the Q1 Second Estimate for GDP on Friday at 8:30 AM ET. With the BEA's Advance Estimate of 0.2% behind us, what do economists see in their collective crystal ball for Q1 of 2015? Let's take a look at the latest GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.

2015-05-23 00:00:00 ECRI: "Fed Rate Hike May Be Postponed Due to Inclement Data" by Doug Short of Advisor Perspectives (dshort.com)

Friday's release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 133.9, down slightly from 134.6 the previous week. The WLI annualized growth indicator (WLIg) is at 1.5, up from the previous week's 1.2, and off its interim low of -4.7 in mid-January.

2015-05-22 00:00:00 The Big Four Economic Indicators by Doug Short (Article)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. We are now tracking each of the four at the following individual links:

2015-05-20 00:00:00 A New Look at the Total Return Roller Coaster by Doug Short (Article)

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $18,300 for an annualized real return of 12.15%.

2015-05-18 00:00:00 WSJ Economists' May Forecasts for 10-Year Yields and the Fed Funds Rate by Doug Short (Article)

On Wednesday the Fed will release the FOMC Minutes for its April meeting. Meanwhile let's take a quick look at a couple of items in the May Wall Street Journal survey of economists, starting with where the Federal Reserve is headed with the Fed Funds Rate, which is currently hovering around 0.12 percent.

2015-05-07 00:00:00 Labor Productivity, Household Incomes and Corporate Profits: And the Winner Is? by Doug Short (Article)

Yesterday the Bureau of Labor Statistics released the preliminary data for Q1 Productivity and Costs. We learned that the headline metric, nonfarm business sector labor productivity, decreased at a 1.9 percent annual rate during the first quarter of 2015. Let's take a look at the BLS's complete data series for this index, which dates from 1947.

2015-05-05 00:00:00 The Market Remains in Overvaluation Territory by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators we update on a monthly basis.

2015-04-27 00:00:00 Forecasting Q1 GDP: Gazing Into the Crystal Ball by Doug Short (Article)

The big economic number this week will be the Q1 Advance Estimate for GDP on Wednesday at 8:30 AM ET. What do economists see in their collective crystal ball for Q1 of 2015? Let's take a look at the GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.

2015-04-22 00:00:00 Four Bad Bears: Some Comments from Bob Bronson by Doug Short (Article)

Earlier today I received an email from my friend Bob Bronson of Bronson Capital Markets Research. Bob offered some comments on the latest update in my periodic overview of bear market recoveries:

2015-04-03 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Friday's release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 132.6, up slightly from 131.5 the previous week. The WLI annualized growth indicator (WLIg) is at -2.5, up from the previous week's -3.3 and off its interim low of -4.9 in mid-January.

2015-03-29 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Friday's release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 131.6, up slightly from 131.2 the previous week. The WLI annualized growth indicator (WLIg) is at -3.2, up from the previous week's -3.6 and off its interim low of -4.9 in mid-January.

2015-03-21 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Today's new release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 131.1, down slightly from 131.6 the previous week. The WLI annualized growth indicator (WLIg) is at -3.7, up from the previous week's -4.0 and off its interim low of -5.0 in mid-January.

2015-03-20 00:00:00 The Declining Demand for Driving Vehicles by Doug Short (Article)

Paul Hodges, who writes a blog for ICIS.com on Chemicals and the Economy, recently sent me link to his fascinating study on the correlation between gasoline prices and the Department of Transportation's monthly statistics on vehicle miles driven. Paul offers a new perspective with a scatter chart showing the correlation between gasoline prices (vertical axis) and per-capita vehicle miles traveled on the horizontal axis.

2015-03-18 00:00:00 WSJ Economists' Forecasts for 10-Year Yields and the Fed Funds Rate by Doug Short (Article)

The big economic news today will start the statement from the Federal Open Market Committee at 2 PM ET and followed by Janet Yellen's press conference 30 minutes later. The economic press has been a veritable cacophony pundit views on whether the word "patient" remains or is discarded in the new statement. Here is the key sentence in the previous statement (emphasis added).

2015-03-10 00:00:00 A Warning Sign from the Latest Wage Data: Update by Doug Short (Article)

Note from dshort: I've added a second chart to show the correlation between hourly earnings and inflation.

Over the weekend, my virtual friend and occasional correspondent New Deal Democrat requested some assistance on visualizing Average Hourly Earnings of Production and Nonsupervisory Employees.

2015-03-07 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Today's new release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 130.6, unchanged from the previous week. The WLI annualized growth indicator (WLIg) is at -4.6, down from the previous week's -4.5 but off the interim low of -5.0 in mid-January.

2015-02-27 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Today's new release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 130.6, up slightly from 130.4 the previous week. The WLI annualized growth indicator (WLIg) is at -4.5, down from the previous week's -4.2 but off the interim low of -5.0 in mid-January.

2015-02-26 00:00:00 Equity Valuations, Recessions and Stock Market Declines by Doug Short of Advisor Perspectives (dshort.com)

When I initiated the dshort web page in late 2005, one of my routine topics was equity valuations, initially inspired by Nobel laureate Robert Shiller's book, Irrational Exuberance, the second edition of which was published earlier that year. I gradually expanded my focus from his cyclically adjusted price-to-earnings ratio (CAPE) to include Ed Easterling's Crestmont P/E, Nobel laureate James Tobin's Q Ratio and my own monthly regression analysis of the S&P 500.

2015-02-14 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Today's new release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 130.0, down from 130.8 the previous week. The WLI annualized growth indicator (WLIg) is at -4.3, down slightly from the previous week's -4.0, but up from the interim low of -5.0 in mid-January.

2015-02-13 00:00:00 The dshort Economic Calendar, Miami Style by Doug Short (Article)

Note from dshort: I'm in semi-vacation mode in southern Florida for the next few days. My routine updates on economic indicators will be posted on a somewhat delayed basis.

Today we spent Friday on a touring the Fairchild Topical Gardens a few miles south of Miami, 83 acres of amazing rare tropical plants including palms, cycads, flowering trees and vines. The gardens are all the more spectacular with the current exhibition of works by American artist Dale Chihuly.

2015-02-09 00:00:00 Revisions to the Nonfarm Payroll Jobs Report by Doug Short (Article)

In my latest Employment Update for January, I pointed out that the Bureau of Labor Statistics revised the December month-over-month change for Nonfarm Payroll Employment upward from 252K to 329K and November from 353K to 423K, a total of 147K to the upside. However, the BLS's initial estimate for this metric should be taken with the proverbial grain of salt. In this chart, I plot the change since the turn of the century from the first to third estimate for each month through November 2014, the most recent month for which we have three estimates.

2015-02-06 00:00:00 Earnings of Private Employees: A Big Recovery in January by Doug Short (Article)

First, here is a chart of the Average Hourly Earnings. I've included a linear regression through the data to highlight the trend. Hourly earnings increased at a faster pace through 2008, but the pace slowed from early 2009 onward. The December data point was a bit disturbing, a 5 cent month-over-month decline, the largest decline in the history of the series. However the January data point is a big bounce of 12 cents, the largest increase in the series.

2015-02-06 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Today's new release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 130.8, down from 131.6 the previous week. The WLI annualized growth indicator (WLIg) is at -4.0, up from the previous week's -4.3 and the interim -5.0 low in mid-January.

2015-01-30 00:00:00 Accentuate the Positive: The Psychological Inflation of Quarterly GDP by Doug Short (Article)

Note from dshort: I've updated the last chart in this commentary to include today's Q4 GDP Advance Estimate of real quarterly GDP. The BEA's annualized growth rate of 2.6% (2.64% to two decimals) is based on a 0.65% quarter-over quarter percentage change.

2015-01-29 00:00:00 Household Income versus Family (Tax-Unit) Income by Doug Short (Article)

My virtual acquaintance New Deal Democrat has posted an interesting article on real (inflation-adjusted incomes) based on annual IRS tax data through 2013. His discussion includes some comparisons between the Census Bureau's median Household Income data and the Family Unit average income. A Family Unit is the term used for an IRS designated Tax Unit (e.g., a couple with dependents, or a head of household with dependents, or a single person).

2015-01-28 00:00:00 Forecasting Q4 GDP: A Look at the WSJ Economists' Collective Crystal Ball by Doug Short (Article)

What do economists see in their collective crystal ball for Q4? Let's take a look at the GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.

Here's a snapshot of the full array of WSJ opinions about Q4 GDP. I've highlighted the values for the median (middle), mean (average) and mode (most frequent).

2015-01-23 00:00:00 Conference Board Leading Economic Index: About Those Benchmark Revisions by Doug Short (Article)

Today's release of the December Conference Board's Leading Economic Index included benchmark revisions in addition to the routine monthly revisions. Also the base year for the index was changed from 2004=100 to 2010=100. Today's press release included the following comment:

2015-01-16 00:00:00 Population-Adjusted Real Retail Sales: Another Perspective on the Economy by Doug Short (Article)

In real, population-adjusted terms, Retail Sales are at the level we first reached in December 2004.

Earlier this week, the Advance Retail Sales Report showed that sales in December declined 0.9% month-over-month, as I reported in my real-time update.

With the subsequent release of the Consumer Price Index, we can now dig a bit deeper into the "real" data, adjusted for inflation and against the backdrop of our growing population.

2015-01-14 00:00:00 Census Bureau Revisions to Retail Sales by Doug Short (Article)

Earlier today I posted my monthly update on Retail Sales. Those of us who routinely track this series know that the Advance Estimate will be followed by a second estimate next month and a third estimate the month after. How big are those revisions? Are they big enough to warrant skepticism about the Advance Estimate?

See for yourself. Here is a visualization of the cumulative change from the first to third estimates from January 2007 through October 2014, the most recent month for which we have all three data points.

2015-01-05 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month, which is 2,054.27.

2015-01-02 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Today's new release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 130.8, unchanged to one decimal place from the previous week. The WLI annualized growth indicator (WLIg) is at -3.9, down from -3.3 the previous week. This is its lowest level since February 2012.

2014-12-30 00:00:00 Household Incomes Across Time: The Divergence at the Top by Doug Short (Article)

Among the most interesting of the long-term economic indicators I track is the Census Bureau's annual data on the mean (average) household income received by each fifth (quintile) and top 5 percent. See my latest update here. A conspicuous pattern in the series is the widening of the spread in income growth that started during the 1980s.

2014-12-27 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Lakshman Achuthan made a recent appearance (December 24th) on Al Jazeera TV discussing the company's outlook for the US economy in 2015. Despite improvements in GDP and jobs data, Achuthan takes a cautious view. Among other things, he points out that latest year-over-year GDP growth rate of 2.7% (a more intuitive metric than the latest quarterly annualized rate of 5.0%), has happened before since the end of the last recession, only to slide back to lower levels. He identifies US manufacturing as a potentially weak area.

2014-12-04 00:00:00 Young Adults Then and Now: A Perspective on the Millennials by Doug Short (Article)

The Census Bureau has released a fascinating new study on young adults today compared with previous generations. Among other things, we learn that today's 18-34 population numbers 73 million, about 23 percent of the total population compared to 30 percent for that cohort in 1980. Millennials today are more highly educated but have lower employment rates and are more likely to be living in poverty. They are also less likely to be married and more likely to be living with parents.

2014-11-22 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, up from the previous week's 132.0. The WLI annualized growth indicator (WLIg) is at -2.4, down from -2.9 the previous week. ECRI's latest public statements have focused on Japan. The website now features a November 17th response to the announcement of Japan's Fourth Recession Since 2008.

2014-11-19 00:00:00 Understanding Investor Anxiety: A Perspective on Diversification by Doug Short (Article)

Diversification is a cornerstone of Modern Portfolio Theory and risk management. We spread our investments across a range of asset classes, rebalancing periodically, to ensure participation in the upside and reduce exposure to the downside. This is a time-honored strategy that works ... most of the time. But during the epic market downturn of the Financial Crisis, equity asset classes essentially marched in step to the same dismal drumbeat.

2014-11-12 00:00:00 Corporate Profit Margins versus Employee Compensation: A Rather Disturbing Comparison by Doug Short (Article)

Yesterday's collection of Advisor Perspectives articles particularly caught my attention: "Why Jeremy Grantham is Right about Corporate Profit Margins." The article includes a number of fascinating graphs, the first of which is a snapshot of US Corporate Margins since 1947 calculated by dividing Corporate Profits after Tax by Gross National Product.

The article inspired me to produce a chart of the Profit-to-GNP ratio, but with an added and rather sobering overlay: Employee Compensation (wages and salaries), which I've likewise divided by GNP.

2014-11-06 00:00:00 by Doug Short (Article)

It's been quite a while since I last updated the "Sweet Sixteen" inflation-adjusted Dow recoveries that I've been illustrating from time to time over the past five years. With yesterday's record close as an aftermath to the mid-term election results, it seems appropriate to have a look at the recovery since the Great Recession in the larger historical context of market recoveries.

2014-11-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month, which is 1,937.27. The ratios in parentheses use the monthly close of 2,018.05. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2014-10-27 00:00:00 Forecasting Q1 Second Estimate GDP: Gazing Into the Crystal Ball by Doug Short (Article)

One of the big economic numbers this month will be the Q3 Advance Estimate for GDP, due out on Thursday. For some the 2014 GDP context, the Q1 third estimate was negative at -2.1% followed by a strong rebound to 4.6% in the Q2 third estimate. The standard explanation for the Q1 contraction is the economic impact of an unseasonably cold winter.

What do economists see in their collective crystal ball for Q3? Let's take a look at the GDP forecasts from the latest Wall street Journal survey of economists conducted earlier this month.

2014-10-22 00:00:00 Chained CPI Versus the Standard CPI: Breaking Down the Numbers by Doug Short (Article)

The Consumer Price Index for Urban Consumers is the most familiar gauge of inflation in the US. The data for the non-seasonally adjusted series stretches back a century to January 1913. But in February of last year the big news was relative newcomer to the inflation metrics of the Bureau of Labor Statistics (BLS), the Chained CPI for Urban Consumers.

The reason the Chained CPI was a hot topic in the news in last year was that President Obama had proposed it in his 2014 budget as the method for determining cost of living adjustments for Social Security.

2014-10-22 00:00:00 What If Chained CPI Had Been Used to Calculate COLAs Since 2002? by Doug Short (Article)

Last year, President Obama's 2014 proposed budget recommended that, starting in 2015, COLAs should be calculated with the Chained Consumer Price Index for All Urban Consumers (Chained CPI). In this year's proposed budget for 2015, the President abandoned the proposed shift to the Chained CPI for Social Security adjustments.

Let's look at what the effect would have been over the years for a typical Social Security recipient if the Chained CP had been used since its inception.

2014-10-21 00:00:00 Anticipating the 2015 Cost of Living Adjustment for Social Security by Doug Short (Article)

Summary: Tomorrow the Social Security Administration will announce the Cost of Living Adjustment (COLA) for 2015. A forecast based on data so far is a COLA of 1.7%. But the Q3 decline in energy prices strengthens the odds of a lower 1.6% adjustment.

2014-10-14 00:00:00 APViewpoint TODAY: The Bond Market: How to Play it in 2014 and Beyond by Doug Short (Article)

Our next APViewpoint Event gives you the opportunity to gain investment insights and engage in Q&A with nationally recognized investment manager Jeffrey Gundlach.

Mark your calendar: TODAY, October 14th at 4:15pm EST. To register before the event...

2014-10-14 00:00:00 Millennials in Motion: Changing Travel Habits of Young Americans by Doug Short (Article)

Regular visitors to this website are aware of my keen interest in long-term trends in Vehicle Miles Traveled, Gasoline Prices and Gasoline Volume Sales.

Today the U.S. PIRG (U.S. Public Interest Research Group) has released a fascinating study on the travel habits of Millennials (those born between 1983 and 2000) and the profound implications for transportation policy. The full report is available for download in PDF format at the U.S. PIRG website.

2014-10-12 00:00:00 Japan's Amazing 25-Year Post-Bubble Drama by Doug Short (Article)

It's been quite a while since my last look at secular Japanese market and bond data. We're now just a few months from the 25th anniversary of the Nikkei 225's bubble top in 1989. The latest cyclical rally in the index an interim high at the end of December 2013, up 99.6% from its interim low in November of 2011. Its latest interim high in late September was up 100.5% from that 2011 low. The steroid effect of massive monetary intervention has evolved into an ongoing drama of volatility.

2014-10-10 00:00:00 Serge Perreault's Weekend Updates by Doug Short (Article)

Note from dshort: Earlier this month I announced a policy change on the publication of dshort - Advisor Perspectives guest contributions. I'm happy to announce that long-time contributor Serge Perreault's weekend updates on both the S&P 500 and Canada's TSX Composite Index are available in PDF format here.

2014-10-09 00:00:00 Market Tops and Bottoms Since 1950: The October Effect by Doug Short (Article)

We're now at an early point in the Q3 2014 earnings season, which happens, of course, in October, historically the most volatile month in the U.S. stock market. Let's step for a moment into the realm of market trivia and consider the October Effect in the stock market. In the S&P 500, October is the month that has, by far, hosted the most major market bottoms -- five of the ten in the chart below. As for market tops, October has hosted only one since 1950, the high on October 9, 2007 -- the seventh anniversary of which we celebrate today.

2014-10-08 00:00:00 Market Volatility: Octobers in the Dow by Doug Short (Article)

Anyone who follows the mainstream financial press is seeing an increasing number of articles about bear market risk. Today's Bloomberg guest piece by Barry Ritholtz is a classic example: Signs of a Bull Market Turning Bear.

The growth in investor anxiety is happening in October, historically the most volatile month for market performance. I took a few minutes to update a couple of charts to illustrate October volatility using the Dow and starting in 1900.

2014-10-08 00:00:00 The S&P 500 and Recessions by Doug Short (Article)

Note from dshort: Yesterday Political Calculations posted a fascinating article entitled Dividends: A Resurgence of Recessionary Conditions, which studies the correlation between recessions and the number of companies per month announcing dividend cuts. The article prompted me to update my long-term look at the S&P 500 and recessions.

2014-10-07 00:00:00 dshort - Advisor Perspectives Policy Change by Doug Short (Article)

Note from dshort: We've made an editorial decision to move the bulk of our guest contributions to the Advisor Perspectives commentary feed. Those guest contributors include:

  • Lance Roberts (STA Wealth Management)
  • Jeff Miller (New Arc Investments)
  • Mike "Mish" Shedlock (Sitka Pacific Capital Management)
...and several other regular contributors
My self-authored dshort commentaries will continue to appear as they have in the past.

2014-10-07 00:00:00 IMF Cuts Global Growth Forecast by Doug Short (Article)

Most weekends I post an update on world market performance with a focus on eight major world indexes denominated in their own currency. This morning my friend and master market technician Chris Kimble called attention to the IMF's report posted on their website: Global Growth Disappoints, Pace of Recovery Uneven and Country-Specific:

2014-10-06 00:00:00 New Updates at Crestmont Research by Doug Short (Article)

Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published collection of periodic updates to his ongoing analysis. The commentary below is based on his latest distribution email to subscribers.

2014-10-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1993.23. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2014-09-26 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, down slightly from the previous week's 135.6. The WLI annualized growth indicator (WLIg) is at 2.0, down slightly from the previous week's 2.1. On Wednesday, September 10th, Lakshman Achuthan appeared on Wall Street Journal Live, where he stated that Japan is on track for another recession. He included comments about what that means for Europe and the United States.

2014-09-25 00:00:00 Happiness Revisited: A Household Income of $75K? by Doug Short (Article)

Note from dshort: I've updated this commentary in the wake of the Census Bureau's release last week of the 2013 annual household income data from the Current Population Survey.

One of my favorite discussions on APViewpoint, which addressed "The Sad State of Happiness" included an indirect reference to a popular 2010 academic study by psychologist Daniel Kahneman and economist Angus Deaton. Their topic was the correlation between annual household income and day-to-day contentment.

2014-09-19 00:00:00 Median Household Income by State: A Sobering Look at the Data by Doug Short (Article)

The Census Bureau's annual household income reports for 2013 were published this week. I've now compiled a few tables for the 50 states and DC based on the Current Population Survey, a joint undertaking of the Census Bureau and Bureau of Labor Statistics, which includes annual data from 1984 to 2013. The details are fascinating, if somewhat sobering.

First, some context. The median US income in 2013 was $51,939, up from $22,415 in 1984 -- a 131.7% rise over the 29-year timeframe.

2014-09-17 00:00:00 U.S. Household Incomes: A 46-Year Perspective by Doug Short (Article)

The Census Bureau has now released its annual report household income data for 2013. It is posted on the Census Bureau website. What I'm featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2013 along with the statistics for the top 5%.

2014-09-17 00:00:00 Median Household Incomes by Age Bracket: 1967-2013 by Doug Short (Article)

Earlier today I updated my commentary on household income distribution to include the Census Bureau's release of the 2013 annual data. My focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 46-year history of this data series. The analysis offered some fascinating insights into U.S. household incomes.

2014-09-17 00:00:00 U.S. Household Incomes: A 46-Year Perspective by Doug Short of Advisor Perspectives (dshort.com)

The Census Bureau has now released its annual report household income data for 2013. It is posted on the Census Bureau website. What I'm featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2013.

2014-09-17 00:00:00 Median Household Incomes by Age Bracket: 1967-2013 by Doug Short of Advisor Perspectives (dshort.com)

Earlier today I updated my commentary on household income distribution to include the Census Bureau's release of the 2013 annual data. My focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 46-year history of this data series. The analysis offered some fascinating insights into U.S. household incomes.

2014-09-16 00:00:00 Median Household Income Growth: Deflating the American Dream by Doug Short (Article)

What is the single best indicator of the American Dream? Many would point to household income growth. The Census Bureau has now published some selected annual household income data in a new report: Income and Poverty in the United States: 2013. Last year the median (middle) household income was $51,939 -- a 1.8% year-over-year increase that shrinks to 0.3% when adjusted for inflation. Let's put the new release into a larger historical context.

2014-09-06 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, little changed from the previous week's 134.8. The WLI annualized growth indicator (WLIg) dropped to 1.8 from the previous week's 2.3. Last Friday, August 29th, ECRI treated the general public to a new commentary on its website focused on the Fed's seeming complacency about inflation becaused of stalled wage growth. ECRI sees a substantially higher inflation risk.

2014-09-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,961.53. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2014-09-01 00:00:00 A Labor Day Perspective: The Growth of our Services Economy by Doug Short (Article)

In honor of Labor Day, which was signed into law as a national holiday in 1894, I'd like to share some graphical snapshots of a major change in our nation's workforce over the decades.

The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. The first chart below is an overlay of the compete series of employment numbers for the two major categories, manufacturing and services industries.

2014-08-25 00:00:00 Median Household Income Since the Great Recession: Spotlighting the Young and Old by Doug Short (Article)

When we look at Real Median Household Income by age cohorts, we see that the income growth during the recovery has not be distributed evenly across the generations. The adjacent table features the non-seasonally adjusted real data by age groups on the second and fifth anniversaries of the recovery. The non-seasonally adjusted second anniversary, in June 2011, was two months before the seasonally adjusted monthly trough for all households.

2014-08-24 00:00:00 Measuring Real Wages: "Lies, Damn Lies, and Statistics" by Doug Short (Article)

Earlier this week I updated my commentary on "Five Decades of Middle Class Wages", an analysis of Real Average Hourly Earnings of Production and Nonsupervisory Employees. During the 21st century and especially since the end of the Great Recession, wages have clearly been stagnant.

But, as Mark Twain famously remarked, "there are three kinds of lies: lies, damned lies, and statistics."

2014-08-23 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.3, unchanged from the previous week. The WLI annualized growth indicator (WLIg) dropped to 2.8 from the previous week's 3.5. On Monday of this week, ECRI broke its silence to the general public with a new commentary on its website focused on housing affordability and home price growth

2014-08-21 00:00:00 Median Household Incomes after the Great Recession: Household Types and Educational Attainment by Doug Short (Article)

Yesterday I posted my analysis of selected features in Sentier Research's new report on the general decline in median household incomes since the end of the Great Recession in June 2009. My focus was on real income change by age groups and by racial/ethnic categories (more here). Today I'll examine the real income changes by household type and educational attainment.

2014-08-20 00:00:00 Median Household Incomes Five Years After the Great Recession by Doug Short (Article)

2014-07-29 00:00:00 Thoughts Ahead of Tomorrow's Advance Estimate of Q2 GDP by Doug Short (Article)

The big economic announcement tomorrow with be the Advance Estimate of Q2 GDP. Recall that the Advance Estimate of 0.1% for Q1 GDP underwent two downward revisions: -1.0% in the first revision and -2.9% in the second revision. Mainstream economists have been generally optimistic that the contraction in Q1 GDP was attributable to an unusually severe winter and that Q2 would show a significant bounce. The Investing.com estimate is for 3.0%. Briefing.com has a consensus of 3.2%, and its own forecast is for an even stronger 3.7%.

2014-07-19 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.2, down from the previous week's 136.2. The WLI annualized growth indicator (WLIg) slipped to 4.5 to 4.2.

2014-07-12 00:00:00 Eye on the Market Broadcast: A Deeper Look into the Labor Force by Doug Short (Article)

I've again had the honor of being a guest on David O. England's "Eye on the Market" radio broadcast. My first segment last month focused on household incomes. A second segment explored some of the complexities of the Bureau of Labor Statistics' Consumer Price Index.

The latest segment, which aired today, touches on some rather dramatic changes in the labor force participation rate by age groups. This is an area of interest I examine monthly in a series of updates following the BLS's release of the latest employment report.

2014-07-10 00:00:00 On a Personal Note: "It is Wealth to be Content" by Doug Short (Article)

Last month the Advisor Perspectives newsletter featured an interesting article by best-selling author Dan Solin on "The Sad State of Happiness". Dan opened the article with some compelling observations:

"I have never met anyone who did not want to be happy. Yet few of us take concrete steps toward that goal. Part of the problem is that too many of us confuse happiness with increased wealth."

His article prompted a series of comments in APViewPoint. I was particularly struck by a comment from financial guru Larry Swedroe:

2014-06-28 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.4, down from the previous week's adjusted 135.3. The WLI annualized growth indicator (WLIg) is unchanged at 4.3 (the previous week adjusted down from 4.4).

2014-06-22 00:00:00 Eye on the Market Broadcast: Household Incomes and Inflation by Doug Short (Article)

Yesterday I had the honor of being a guest on David O. England's Eye on the Market radio broadcast. The first of two segments focused on median household incomes. In particular I discussed the Census Bureau's most recent data, through 2012, for the 50 states with special attention to Illinois, where David hosts his program.

2014-06-10 00:00:00 The Buffett Valuation Indicator: Some Interesting Odds and Ends by Doug Short (Article)

In response to reader requests, I began publishing periodic updates on the so-called "Buffett Indicator" earlier this year. My most recent update triggered some emails that mostly fall into two categories. The first asks why the big difference between the two "Buffett Indicator" snapshots.

2014-06-06 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, down from the previous week's adjusted 135.3. The WLI annualized growth indicator (WLIg) fell to 4.8 from 5.3. Last Friday (May 30th), ECRI posted a brief overview of post-recession GDP forecasts from the Fed's Open Market Committee and the less optimistic series from the Congressional Budget Office.

2014-06-06 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, down from the previous week's adjusted 135.3. The WLI annualized growth indicator (WLIg) fell to 4.8 from 5.3. Last Friday (May 30th), ECRI posted a brief overview of post-recession GDP forecasts from the Fed's Open Market Committee and the less optimistic series from the Congressional Budget Office.

2014-05-30 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.4, down from the previous week's 135.1. The WLI annualized growth indicator (WLIg) rose to 5.3 from 5.0. That's the highest since June of last year.

2014-05-30 00:00:00 Real Median Household Income Fell 0.42% in April by Doug Short of Advisor Perspectives (dshort.com)

The Sentier Research monthly median household income data series is now available for April. The nominal median household income was down $84 month-over-month and up only $1,420 year-over-year. Adjusted for inflation, it was down $222% MoM and only $409 YoY. The real numbers equate to a -0.42% MoM decline and a 0.78% YoY increase.

2014-05-23 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.1, down from the previous week's 136.3. The WLI annualized growth indicator (WLIg) rose to 5.0 from 4.9. That's the highest since June of last year.

2014-05-20 00:00:00 Median Home Price and Salary Required in 27 Major Cities by Doug Short (Article)

Tim Manni, the Managing Editor at HSH.com, has a new commentary out entitled "The Salary You Must Earn to Buy a Home in 27 Metros". The opening tease is a question:

"How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?"

The article is a must-read for anyone interested in US real estate trends and income demographics. Here is a slightly edited version of the Tim's table of the key data.

2014-04-25 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, up from last week?s 133.6 (revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.3 from last week?s 3.0. Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.0% at yesterday?s close, although off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.

2014-04-11 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, up from last week's 133.6 (revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.3 from last week's 3.0.

2014-04-07 00:00:00 Get More Insights Each Week with Advisor Perspectives by Doug Short (Article)

If you enjoy the timely economic and market research you get each day on dshort.com, I invite you to join the 400,000 other financial advisors who receive a wealth of investment insights each week on Advisor Perspectives.

Delivered every Tuesday morning, Advisor Perspectives offers actionable investment strategies, market insights and practice management advice.

2014-04-04 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.6, unchanged last week (which was revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.0 from last week?s 2.9. Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.9% at yesterday?s close, fractionally off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.

2014-03-28 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.5, up from 133.0 last week (a revision from 132.9). The WLI annualized growth indicator (WLIg) at one decimal place rose to 2.9 from last week's 2.3.

2014-03-21 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.9, down from 133.6 last week (a revision from 133.8). The WLI annualized growth indicator (WLIg) at one decimal place rose to 2.3 from last week's 2.1 (a revision from 2.3).

2014-03-14 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.8, up fractionally from 133.5 last week. The WLI annualized growth indicator (WLIg) at one decimal place rose to 2.3 from last week's 1.8.

2014-03-10 00:00:00 The Chronic Employment Data Conflict: Establishment versus Household Surveys by Doug Short (Article)

2014-03-07 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 135.5, up from 131.8 last week. The WLI annualized growth indicator (WLIg) at one decimal place rose to 1.8 from last week's 1.7.

2014-02-28 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.8, down from 123.3 last week. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 1.7 from last week's 2.5 .

2014-02-21 00:00:00 The Big Four Economic Indicators: Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

With yesterday's release of the January Consumer Price Index, we can now calculate Real Retail Sales for the underlying sales data released on February 13th. Nominal Retail Sales had fallen 0.4% month-over-month, the second month of contraction, and are up only 0.3% year-over-year. When we adjust for inflation, January sales were down 0.6% MoM. The YoY change was a fractional 0.1% growth. Real sales are down 0.9% from their all-time high in November.

2014-02-20 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, unchanged from last week. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 2.5 from last week's 3.2 (a downward revision from 3.3).

2014-02-14 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, unchanged from last week. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 3.3 from last weeks 4.2. Last weekend, ECRI posted a new publicly available commentary on the companys website: Failure to Launch. The brief text concludes with this remark: It is now quite clear that the economy is decelerating, not accelerating, with growth in ECRIs Weekly Coincident Index ... falling rapidly.

2014-02-07 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, down from last weeks downward revision from 133.7. The WLI annualized growth indicator (WLIg) at one decimal place slipped to 4.2 from last weeks 4.3.

2014-02-04 00:00:00 by Doug Short (Article)

This morning the Congressional Budget Office published its Budget and Economic Outlook: 2014 to 2024.

In 2013, the U.S. took in $2,774 Billion in Revenues against $3,454 Billion in Outlays, which amounts to a calendar year deficit of $680 Billion.

The debt held by the public at the end of the year was $11.98 Trillion.

2014-02-04 00:00:00 Taxes, Entitlements and Federal Debt: New Update by Doug Short (Article)

This morning the Congressional Budget Office published its Budget and Economic Outlook: 2014 to 2024.

In 2013, the U.S. took in $2,774 Billion in Revenues against $3,454 Billion in Outlays, which amounts to a calendar year deficit of $680 Billion.

The debt held by the public at the end of the year was $11.98 Trillion.

2014-02-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1824.35. The ratios in parentheses use the monthly close of 1782.59. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2014-01-31 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.8, unchanged at one decimal place from last weeks downward revision from 133.9. The WLI annualized growth indicator (WLIg) at one decimal place rose to 4.3, up from last weeks 4.2.

2014-01-31 00:00:00 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

The December month-over-month Real Personal Income less Transfer Payments came in at a disappointing -0.21% (-0.2% rounded to one decimal). The year-over-year change is -2.47% (rounded to -2.5%). However, the YoY metric is radically skewed by the December 2012 end-of-year tax-planning strategy whereby income was captured in 2012 to avoided expected tax increases.

2014-01-27 00:00:00 Greg Morris: Investing with the Trend: A Rules-based Approach to Money Management by Doug Short (Article)

Gregory L. Morriss latest book, Investing with the Trend: A Rules-based Approach to Money Management, was published on December 31 of last year, the same day the Dow and S&P 500 set new all-time highs. The Dow was up 153.2% from its March 2009 low and the S&P 500 had risen an even more impressive 173.2%. These massive rallies were the reversal of devastating drawdowns during the Great Financial Crisis. The Dow and S&P 500 had declined 53.8% and 56.8%, respectively, since their pre-crisis all-time highs in October 2007.

2014-01-26 00:00:00 Best Stock Market Indicator Update by Doug Short (Article)

2014-01-24 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.9, down from last weeks 134.3. The WLI annualized growth indicator (WLIg) to one decimal place rose to 4.2, up from last weeks 3.5.

2014-01-22 00:00:00 Charting Down Under: The Australia All Ordinaries Index by Doug Short (Article)

2014-01-22 00:00:00 In the Spirit of Martin Luther King: Reflections on Income Inequality by Doug Short of Advisor Perspectives (dshort.com)

Last night my wife and I were looking for something to stream on Netflix, and I remembered that The Butler was available on Red Box (which has a vending machine about a 90-second walk from our residence).

2014-01-21 00:00:00 Gallups Report on Boomer Reluctance to Retire: Confirmed by My Research by Doug Short (Article)

Yesterday Gallup released another in its series of studies of Boomer behavior, this time focusing on attitudes toward retirement. The article opens with some generalizations that come as no surprise to those of us who study the governments monthly employment data:

"True to their "live to work" reputation, some baby boomers are digging in their heels at the workplace as they approach the traditional retirement age of 65. While the average age at which U.S. retirees say they retired has risen steadily from 57 to 61 in the past two decades, boomers...."

2014-01-20 00:00:00 In the Spirit of Martin Luther King: Reflections on Income Inequality by Doug Short (Article)

Last night my wife and I were looking for something to stream on Netflix, and I remembered that The Butler was available on Red Box (which has a vending machine about a 90-second walk from our residence).

About 34 minutes into the film, Vice President Nixon (John Cusack) enters the White House kitchen, where the butler (Forest Whitaker) and two other staff members (Cuba Gooding, Jr. and Lenny Kravitz) are kneading dough (no pun intended). The opportunistic Nixon passes out some campaign buttons and turns the scene into a research session:

2014-01-17 00:00:00 The Big Four Economic Indicators: Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

With yesterdays release of Decembers CPI, we can now calculate Real Retail Sales for December. Month-over-month real sales came in at -0.07% (-0.1% rounded to one decimal). This indicator is now fractionally off its all-time high set the previous month. Although real December sales were a bit disappointing, this indicator rose 3.57% year-over-year, and it was positive for nine of the 12 months.

2014-01-17 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.5, up from last weeks 133.4 (an upward revision from 133.0). The WLI annualized growth indicator (WLIg) to one decimal place rose to 3.7, up from last weeks 2.5.

2014-01-13 00:00:00 Thoughts on Fridays Nonfarm Payroll: A 50-Year Perspective by Doug Short (Article)

Fridays employment report generated a surge of economic commentaries focused on the unexpectedly low 74K increase in Nonfarm Employment. Forecasters were looking for a number closer to 200K. The blogosphere exploded with a range of opinions, the more dramatic of which spoke of the "huge miss" in new jobs.

In retrospect, I believe Dennis Gartman, founder of the Gartman Letter, offered one of the most intelligent opinions on the topic in his CNBC interview.

2014-01-13 00:00:00 Demographic Trends in the 50-and-Older Work Force by Doug Short of Advisor Perspectives (dshort.com)

In my earlier update on demographic trends in employment, I included a chart illustrating the growth (or shrinkage) in six age cohorts since the turn of the century. In this commentary well zoom in on the age 50 and older Labor Force Participation Rate (LFPR).

2014-01-10 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.0, up from last weeks 133.0. The WLI annualized growth indicator (WLIg) to one decimal place came in at 2.5, up from last weeks 1.9.

2014-01-10 00:00:00 The Big Four Economic Indicators: Today's Strange Nonfarm Payrolls in Context by Doug Short of Advisor Perspectives (dshort.com)

The January Employment Report gives us a look at the December Nonfarm Employment along with extensive revisions back to January 2009. The big stunner today was the meager 74K new jobs in December against expectations of around 196K. This sucker punch from the Establishment Data was accompanied by the equally stunning news that the unemployment rate declined from 7.0-6.7%. The two numbers, of course, are from two completely different surveys - the jobs number from the Establishment Survey of business and government and the unemployment rate from the Household Survey of the general population.

2014-01-06 00:00:00 Market Valuation Overview: Yet More Expensive by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I update during the first days of the month.

2014-01-03 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.9, up from last weeks 131.9. The WLI annualized growth indicator (WLIg) to one decimal place came in at 1.8, unchanged from last week.

2014-01-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1807.78. The ratios in parentheses use the monthly close of 1848.36.

2013-12-30 00:00:00 NYSE Margin Debt Is Fractionally Off Its Real All-Time High by Doug Short of Advisor Perspectives (dshort.com)

The New York Stock Exchange publishes end-of-month data for margin debt on the NYXdata website, where we can also find historical data back to 1959. Lets examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

2013-12-27 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.9, up from last weeks 130.9. The WLI annualized growth indicator (WLIg) to one decimal place, slipped to 1.9, down from 2.1 last week.

2013-12-13 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.4, down from last weeks 132.7 (adjusted from 132.8). The WLI annualized growth indicator (WLIg) to one decimal place, slipped to 2.8, down from 2.9 last week.

2013-12-10 00:00:00 Thoughts on Student Debt by Doug Short (Article)

2013-12-06 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.8, up from last weeks 132.3. The WLI annualized growth indicator (WLIg) to one decimal place, rose to 2.9, up from 2.6 last week.

2013-12-04 00:00:00 Driving Declines in Americas Cities by Doug Short (Article)

One of my favorite long-term economic indicators has been the historical pattern of vehicle miles driven. I post a monthly update on the topic shortly after the Department of Transportations Office of Highway Information publishes its latest data on Traffic Volume Trends.

My preferred way to analyze the data is on a per-capita basis, so I was particularly interested in a study release earlier today by U.S. PRIG on the decline of driving in major cities.

2013-12-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1783.54. The ratios in parentheses use the monthly close of 1805.81. For the earnings, see the table created from Standard & Poors latest earnings spreadsheet.

2013-11-22 00:00:00 A Twenty-Year Look at the 30-Year Treasury Bond by Doug Short (Article)

What about the 30-year Treasury? Earlier this week I received an email from Floyd Flanagan featuring an interesting pair of monthly charts, courtesy of Stockcharts.com, for the 30-year Treasury Bond going back 20 years. The left side below shows the 30-year price index, the right side the yield. Floyd has annotated the two with support and resistance.

2013-11-22 00:00:00 The Big Four Economic Indicators: Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

The underlying sales data were stronger than expected, and the disinflationary October headline CPI boosted the number higher. in light of the general pessimism over the government shutdown and congressional face-off on debt ceiling, the October numbers are indeed surprising.

2013-11-22 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.2, up from last weeks 131.0 (revised from 131.1). The WLI annualized growth indicator (WLIg) to one decimal place, rose to 2.4, up from 2.2 last week.

2013-11-19 00:00:00 The Dow Panic of 1907 and the 2008 Financial Crisis by Doug Short (Article)

Note from dshort: This morning I received a request to update a chart set from an article I posted nearly two years ago. The request comes from a student in an online course covering the staggering expanse of world history since 1300. Apparently the Financial Panic of 1907 was an included topic.

The charts illustrate the dramatic market behavior during the Panic of 1907 and the Financial Crisis of 2008. A century separated these two momentous market episodes, and the underlying causes were quite different....

2013-11-15 00:00:00 The Big Four Economic Indicators: Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2013-11-14 00:00:00 by Doug Short (Article)

Earlier today Gallup released its latest survey on holiday spending plans. The title of the article nicely summarizes their findings: Americans Trimming Their Holiday Spending Plans..

The Gallup chart accompanying the piece shows the spending estimates for the same week all the way back to 1999. Of course, over the 15-year time frame, the value of the dollar has shrunk considerably. If you adjust for inflation using the Consumer Price Index, that November 1999 dollar is worth about 72 cents today.

2013-11-08 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.0, down from last weeks 131.4 (revised from 131.5). The WLI annualized growth indicator (WLIg) to one decimal place, rose to 1.8, up from 1.7 last week.

2013-11-06 00:00:00 Forecasting Q3 GDP: A Look at the WSJ Economists Collective Crystal Ball by Doug Short (Article)

Tomorrow will be the first of two big days for economic news. Thats the day we get the Advance Estimate of Q3 GDP -- a rear-view metric, to be sure, and one that will be subject to revision for the following two months, not to mention annual revisions and the periodic comprehensive revisions (the last of which tweaked GDP data back to 1929). And on Friday we get the blockbuster October Employment Report, which presumably is a more critical data set for Fed policy.

Meanwhile the latest GDP forecasts from Wall Street Journals monthly survey of economists are available.

2013-11-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

ere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1720.03.

2013-11-01 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.5, up from last weeks 131.1. The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 1.7, down from 2.0 last week.

2013-10-28 00:00:00 The Part-Time Employment Story: Fact Versus Fiction by Doug Short (Article)

A few days ago my friend Jeff Miller, the CEO of New Arc Investments and mastermind of A Dash of Insight, posted a thoughtful assault on the many financial pundits who have argued that "the big employment theme for this year has been an assertion that new jobs were of low quality and mostly part-time."

Jeff included a chart from one of my monthly updates cited in his commentary.

2013-10-25 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.1, up from last weeks 130.3 (revised from 130.4). The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 2.0, down from 2.7 (a downward revision from 2.8).

2013-10-18 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 130.4, down from last weeks 130.3 (revised from 130.4). The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 2.8, down from 3.6 (a downward revision from 3.9).

2013-10-04 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.1, down from last weeks 132.9. The WLI annualized growth indicator (WLIg) to one decimal place, remains unchanged at 4.8% (with last weeks number revised downward from 4.9).

2013-10-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1687.17. The ratios in parentheses use the monthly close of 1681.55. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2013-09-27 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.9, up from last weeks 132.3 (revised down from 132.4). The WLI annualized growth indicator (WLIg) rose to 4.9% from last weeks 4.5%.

2013-09-26 00:00:00 Thoughts on Student Debt: New Update by Doug Short (Article)

2013-09-21 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.4, to one decimal place unchanged from last weeks 132.4 (revised down from 132.3). The WLI annualized growth indicator (WLIg) rose to 4.5% from last weeks 4.3%.

2013-09-13 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 132.3, an increase from last weeks 131.5. The WLI annualized growth indicator (WLIg) rose to 4.1% from last weeks 3.9%.... At this point the company is still featuring a commentary posted at the end of July, Becoming Japan, which highlights the decline in GDP growth for Japan and seven other major economies, including the US.

2013-09-12 00:00:00 The 21st Century Decline of the Core Labor Force by Doug Short (Article)

2013-09-06 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Last year ECRI switched focus to their version of the Big Four Economic Indicators that I routinely track. But when those failed last summer to "roll over" collectively (as ECRI claimed was happening), the company published a new set of indicators to support their recession call in a commentary entitled The U.S. Business Cycle in the Context of the Yo-Yo Years (PDF format). Subsequently the company took a new approach to its recession call in a publicly available commentary on the ECRI website: What Wealth Effect?.

2013-09-06 00:00:00 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Ive now updated this commentary to include todays release of the August Nonfarm Employment data. As the adjacent thumbnail illustrates, the trend in this indicator has been ever upward, but at a frustratingly slow pace. Todays announcement of only 169K new jobs was below forecasts. Moreover, the nonfarm jobs number for July was revised downward from 188K to 172K and the June number was revised downward from 162K to 104K for a combined decline of 74K from last months report.

2013-09-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1670.09. The ratios in parentheses use the monthly close of 1632.97. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2013-09-02 00:00:00 Come September: The Weakest Month in US Market History by Doug Short (Article)

2013-08-30 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, an increase from last weeks 131.0 (revised from 131.1). The WLI annualized growth indicator (WLIg) declined to 4.2% from last weeks 4.5%.

2013-08-24 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.1, a decline from last weeks 131.2. The WLI annualized growth indicator (WLIg) declined to 4.5 from last weeks 4.7%.

2013-08-22 00:00:00 Median Household Incomes After the Great Recession: Household Types and Educational Attainment by Doug Short (Article)

2013-08-21 00:00:00 Median Household Incomes: The Real Truth About the U.S. Economic Recovery, Four Years Later by Doug Short (Article)

2013-08-16 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.2, a decline from last weeks 131.5 (a downward revision from 131.8). The WLI annualized growth indicator (WLIg) declined to 4.7 from last weeks 4.9%.

2013-08-09 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.8, essentially unchanged from last weeks 131.7 (a downward revision from 131.8). At the end of July the company posted a new commentary, Becoming Japan, which highlights the decline in GDP growth for Japan and seven other major economies, including the US. Also this week ECRIs Lakshman Achuthan defended his companys recession call on Bloomberg TV.

2013-08-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1668.68. The ratios in parentheses use the monthly close of 1685.73. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2013-07-31 00:00:00 by Doug Short (Article)

How do you get from Nominal GDP to Real GDP? You extract inflation from the numbers. The Bureau of Economic Analysis (BEA) uses its own GDP deflator for this purpose....

Had Real GDP been calculated with the average deflator over the past 14 quarters (which is 1.75%), it would have been 0.64%, which rounds to 0.6%.

2013-07-30 00:00:00 Consumer Confidence: What Does It Say About the Economy? by Doug Short (Article)

This morning at 10 AM we got the latest Conference Board Consumer Confidence number, an indicator that gets widespread attention and that is generally considered one of the more important monthly metrics. But what does this data series really tell us about the economy? How well does it correlate with major economic indicators? It might seem intuitive that increases in consumer confidence correlates with improvements in income, jobs growth, retail sales, etc.

But does a quick look at correlations between consumer confidence and major economic indicators support such an assumption?

2013-07-26 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, up slightly from last weeks 130.2. The WLI annualized growth indicator (WLIg) remains unchanged at 4.5%.

2013-07-19 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.2, up slightly from last weeks 130.1 (revised from 130.2). The WLI annualized growth indicator (WLIg) rose to 4.5% from 4.3% last week (revised from 4.6%).

2013-07-12 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

ECRI posts its proprietary indicators on a one-week delayed basis to the general public, but last year the company switched its focus to a version of the Big Four Economic Indicators Ive been tracking for the past year. In recent months, however, those indicators have slipped below the fold, replaced by the mixed bag of whatever Indicator du Jour might look recessionary, as in the "Yo-Yo Years" commentary.

2013-07-05 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 130.4, down slightly from last weeks 130.6. The WLI annualized growth indicator (WLIg) fell to 5.3% from 5.8% last week.

2013-07-04 00:00:00 21st Century Independence Days by Doug Short (Article)

On July 4, 1776, the American colonies declared independence from the Kingdom of Great Britain. Over the years Independence Day has become a symbol of America and its values.

The 21st century has presented some stunning challenges to the United States: The popping of the Tech Bubble, the attack on the Trade Towers, wars in Afghanistan and Iraq, Hurricane Katrina, the collapse of residential real estate, the Financial Crisis, the Oil Catastrophe in the Gulf of Mexico, the outing of the One Percent, the Fiscal Cliff debacle -- the list goes on and on.

2013-07-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1618.77. The ratios in parentheses use the monthly close of 1606.28. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2013-06-25 00:00:00 Charting Canada: The TSX Composite / S&P 500 Ratio by Doug Short (Article)

2013-06-23 00:00:00 The Recent Surge in Yields: How Does It Compare with the Past? by Doug Short (Article)

2013-06-21 00:00:00 Regardless of a QE Taper, the US Market Is Due for a Correction by Doug Short of Advisor Perspectives (dshort.com)

The media response to the post-FOMC market behavior has been dramatic. Today weve even been treated to some intra-Fed fisticuffs, with St. Louis Fed President James Bullard openly criticizing his colleagues for apparently giving presumably lame-duck Chairman Bernanke license to discuss QE taper timelines in his Wednesday press conference.

2013-06-21 00:00:00 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (dshort.com)

Ultimately my opinion remains unchanged: The ECRIs credibility depends on major downward revisions to the key economic indicators -- especially the July annual revisions to GDP -- that will be sufficient to validate their early recession call. Of course, the July revisions will be quite controversial this year, with some major accounting changes and revisions in annual GDP back to 1929. So if we dont get the downward revisions to support ECRI, they can always question the accounting changes in the revision process.

2013-06-21 00:00:00 Regardless of a QE Taper, the US Market Is Due for a Correction by Doug Short (Article)

2013-06-19 00:00:00 WSJ Economists Forecasts for 10-Year Yields and the FFR by Doug Short (Article)

In advance of todays FOMC meeting outcome and Chairman Bernankes press conference, lets take a quick look at a couple of items in the latest Wall Street Journal survey of economists -- this one conducted June 7-11. With the recent controversy over the direction of Treasury yields, a key issue addressed in the survey is where economists expect the 10-year yield to be across six timeframes: mid-year and year end 2013 through 2015.

2013-06-17 00:00:00 Congratulations to Mish Shedlock by Doug Short (Article)

2013-06-14 00:00:00 ECRI Recession Watch: New Update by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, up slightly from last weeks 131.0 (revised from 130.9). The WLI annualized growth indicator (WLIg) rose to 6.6% from 6.4% last week (revised from 6.3%).... Two weeks ago the company took a new approach to its recession call in its most recent publicly available commentary on the ECRI website: What Wealth Effect? More...

2013-06-13 00:00:00 Nikkei 225: The Abenomics Rally and Aftermath ... So Far by Doug Short (Article)

2013-05-31 00:00:00 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

Ive now updated this commentary to include April Real Personal Income less Transfer Payments. As Ive discussed before, the adjacent thumbnail shows the major spike in incomes triggered by pulling early 2013 income forward in November and December (bonuses, dividends, etc.) to manage the tax risks of the Fiscal Cliff. At this point weve recovered from the post-strategy dip, so the trend going forward will give a more realistic sense of where this indicator is heading.

2013-05-24 00:00:00 Recession Watch: ECRIs Weekly Leading Indicator Up Slightly by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) is at 130.6, up slightly from last weeks 130.1 (a downward revision from 130.2). The WLI annualized growth indicator (WLIg) dropped to 6.8% from 7.0% last week.

2013-05-19 00:00:00 The Real Mega-Bears: New Update by Doug Short (Article)

Note from dshort: In response to a special request and in light of the strong market performance in the S&P 500 and meteoric rise in the Nikkei 225, Ive updated my Mega-Bear weekly chart series through Fridays close.


Its time again for an update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.

2013-05-17 00:00:00 Recession Watch: ECRI's Weekly Leading Indicator Declines by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you havent seen anything yet."

2013-05-10 00:00:00 Recession Watch: ECRI's Weekly Leading Indicator Continues to Show Improvement by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you havent seen anything yet."

2013-05-03 00:00:00 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Ive now updated this commentary to include April Nonfarm Employment, which included the prior month revision. As the adjacent thumbnail illustrates, this indicator has trended upward in a relatively smooth trajectory over the past 13 months.

2013-05-02 00:00:00 Just Two Recession Indicators: Shamelessly Spinning the Data by Doug Short (Article)

I received an email from a reader asking my opinion of a Zero Hedge article published yesterday: Just Two Recession Indicators, the two being retail sales and personal income less transfer payments. The former takes its message from an eight-year chart of retail sales for clothing and general merchandise lifted from BloombergBriefs.com (which requires a $1495 subscription, so its not on my daily reading list). The second highlights a widely circulated chart from David Rosenberg.

2013-05-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,570.70. The ratios in parentheses use the monthly close of 1,597.57. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2013-05-01 00:00:00 Sell in May? A Brief Sanity Check by Doug Short (Article)

2013-04-26 00:00:00 Will the Real GDP Please Stand Up? (The Deflator Makes a Difference) by Doug Short (Article)

How do you get from Nominal GDP to Real GDP? You extract inflation from the numbers. The Bureau of Economic Analysis (BEA) uses its own GDP deflator for this purpose, which is somewhat different from the BEAs deflator for Personal Consumption Expenditures and quite a bit different from the better-known Bureau of Labor Statistics inflation gauge, the Consumer Price Index.

Lets take a look at what "Real" GDP would look like if it were calculated with these other gauges.

2013-04-26 00:00:00 Recession Watch: ECRI's Weekly Leading Indicator Rises Again by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you havent seen anything yet."

2013-04-23 00:00:00 Checking in on the WSJ Economists Forecasts for GDP by Doug Short (Article)

The big economic update this week will be Fridays release of the Advance Estimate for Q1 2013 GDP. Earlier this month the Wall Street Journal did its monthly survey of economists on a variety of economic metrics, including GDP. Forty-nine of the 52 economists solicited participated. Before we look at the Q1 forecasts, lets first review their outlook for 2013 annual GDP. Ive also highlighted the range of Fed forecasts, projections that date from the meeting of the Federal Open Market Committee on December 11-12, 2012 and released last month. Ive calculated the median

2013-04-19 00:00:00 Recession Watch: ECRI's Weekly Leading Indicator Rises by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you havent seen anything yet."

2013-04-19 00:00:00 Struggling to Get Ahead: The Age Demographics of Weekly Earnings by Doug Short (Article)

2013-04-12 00:00:00 ECRI's Weekly Leading Indicator Shows a Small Improvement by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is now at 130.1, up from 129.1 last week (revised from 129.2). The WLI annualized growth indicator (WLIg) remains unchanged at 6.2%.

2013-04-05 00:00:00 ECRI's Recession Indicators Decline from the Previous Week by Doug Short of Advisor Perspectives (dshort.com)

Today ECRI has added a new headline on the website, Employment Growth Hits New Low, based on data from todays jobs report. Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you havent seen anything yet."

2013-04-04 00:00:00 Labor Force Participation Rate Since 1987: Some Eerie Demographic Trends by Doug Short (Article)

2013-04-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,550.83. The ratios in parentheses use the monthly close of 1,569.19. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.

2013-03-29 00:00:00 ECRI Recession Indicator: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) to one decimal place is unchanged from last week. It is now at 129.7, the same as last weeks downward revision from 129.8. The WLI annualized growth indicator (WLIg) has risen fractionally to 6.6%, up from last weeks 6.3%. Those of us who regularly follow ECRIs publicly available data and commentaries understand that there is no logical connection between ECRIs proprietary indicators and their "pronounced, pervasive and persistent" recession call of September 2011.

2013-03-25 00:00:00 Regression to Trend: Debunking the Alternate CPI by Doug Short (Article)

2013-03-22 00:00:00 ECRIs "Recession" Indicators: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)

The only new ECRI-related news since last Fridays update is a CBS Moneywatch commentary, Can the stock market rise while the economy stalls? ECRI liked the commentary well enough to reprint it on the companys website. It basically reiterates Achuthans point in the "Yo-Yo Years" essay that its possible for the market to rise during a recession, citing three such instances (of the 15 recessions) since the Roaring Twenties.

2013-03-20 00:00:00 Cyclial P/E 10 Ratios at S&P 500 Peaks Prior to Bear Markets by Doug Short (Article)

Earlier this week I posted a commentary Is This Bull Market Fundamentally Driven? A Look at PE Expansion. The content was largely reprinted from an analysis at the Wall Street Rant website. Among the many email responses I received about the post, one in particular stood out. Jonathan Schoolar, a long-time veteran of the investment industry, wrote:

2013-03-20 00:00:00 WSJ Economists GDP Forecasts versus the Fed by Doug Short (Article)

Now that Cyprus is on the back burner, at least for the time being, the big news today was the publication of the FOMC minutes along with the Feds three-year economic projections (2013-2015). Actually, these projections date from the meeting of the Federal Open Market Committee on December 11-12, 2012. In other words, like a lot of government data, theyre a bit stale by the time of publication. However, these are slow-moving data series, so time is not exactly of the essence.

2013-03-18 00:00:00 Is This Bull Market Fundamentally Driven? A Look at PE Expansion by Doug Short (Article)

Earlier today the anonymous author of Wall Street Rant sent me a link to a commentary that asks the intriguing question Is This Bull Market Fundamentally Driven?

The approach used in the commentary to answer the question is to do some simple math with the Cyclically Adjusted P/E (CAPE) popularized by Yale Professor Robert Shiller.

2013-03-15 00:00:00 ECRIs Recession Call: Proprietary Indicators Still Not Cooperating by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in todays update. It is now at 129.9 versus the previous weeks 129.5 (revised upward from 129.3). The WLI annualized growth indicator (WLIg) has eased, now at 6.3, down from last weeks 6.4 (an upward revision from 6.2).

2013-03-15 00:00:00 The Big Four Economic Indicators: Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

With the exception of Real Personal Income Less Transfer Payments (e.g., Social Security, Supplementary Security Income, workers compensation, etc.), the Big Four continue to show expansion. The seemingly bizarre income data is the result of the end-of-year strategy of early bonuses and moving forward of 2013 income to avoid higher taxes. Weve seen this situation before in the 1990s. The PI anomaly is the reason the average for the Big Four (the gray line above) has shows contraction for the past two months.

2013-03-13 00:00:00 Some Stunning Demographic Trends in Employment by Doug Short of Advisor Perspectives (dshort.com)

I spent much of yesterday reviewing the latest employment report from the Bureau of Labor Statistics (BLS). They have a wealth of employment data, much of which stretches back to 1948. My focus was the Labor Force Participation Rate (LFPR) with some specific attention to gender and age. The LFPR is a simple computation: You take the Civilian Labor Force and divide it by the Civilian Noninstitutional Population. The result is the participation rate expressed as a percent.

2013-03-08 00:00:00 ECRI "Recession" Update: Lakshman Achuthan Stands his Ground by Doug Short of Advisor Perspectives (dshort.com)

The big news this week is the ECRI's Chief Operating Officer and spokesman, Lakshman Achuthan, returned to the media circuit with interviews yesterday on Bloomberg, CNBC and Yahoo's Daily Ticker. In addition, ECRI has published a new commentary available to the general public.

2013-03-05 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,512.31. The ratios in parentheses use the monthly close of 1,514.68. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2013-03-01 00:00:00 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)

ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance.

2013-03-01 00:00:00 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

I've now updated this commentary to include the January Personal Income data, the red line in the chart below. As expected, the January brought the inevitable reversal of the dramatic advance in the November and December data, which was a result of moving income forward to manage the tax risk in anticipation of the Fiscal Cliff. The -4.7% decline in January essentially cancels the 1.4% rise in November and 3% rise in December.

2013-02-26 00:00:00 Another Eurozone Stress Test? by Doug Short (Article)

2013-02-24 00:00:00 Memories of the First Daytona 500 by Doug Short (Article)

As I type this, the 55th Daytona 500 is about to get underway. The spotlight this year is on Danica Patrick, in pole position with an amazing qualifying average 196.4 miles per hour.

But for me, the Daytona 500 that has a cherished place in my heart was the first race at the newly constructed speedway in 1959. My father, who had just turned 33 nine day before, was the painting contractor responsible for the pristine buildings around the track. He was comped infield tickets for the first 500, and I, three months shy of my 12th birthday, accompanied him to the race.

2013-02-22 00:00:00 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)

ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...

2013-02-15 00:00:00 ECRI "Recession" Update: Propietary Indicators Take a Pause by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in today's update. It is now at 129.6 versus the previous week's 130.2.The WLI annualized growth indicator (WLIg) also eased, now at 8.3, down from last week's 8.9. WLIg has been in expansion territory since August 10th of last year, but is is fractionally off its interim high set last week.

2013-02-11 00:00:00 Sequestration and National Defense: Some Historical Background by Doug Short (Article)

Early last week one of my colleagues at Advisor Perspectives asked about the correlation between GDP and Defense spending. I pondered the question over the weekend, which also prompted me to think about defense spending in general and how it has changed over the years.

For openers, here is a chart based on data from the Bureau of Economic Analysis (BEA) showing nominal National Defense Consumption Expenditures & Gross Investment, a quarterly data series that is a subcomponent of GDP stretching back to 1947.

2013-02-08 00:00:00 ECRI "Recession" Update: Leading Index Growth Sets Another Interim High by Doug Short of Advisor Perspectives (dshort.com)

First a flashback for those of us who have followed ECRI's media appearances: we know that the company adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...

2013-02-07 00:00:00 ECRI Indicator Set to Post Another Interim High Tomorrow by Doug Short (Article)

This morning I received a pair of charts from Dwaine van Vuuren in anticipation of tomorrow's weekly update from ECRI on the company's Weekly Leading Index (WLI) and Weekly Index Growth (WLIg).

The two charts illustrate the why many of us continue to be amazed at ECRI's adamant position on its September 2011 recession call and its subsequent assertion that a recession started in July of last year.

2013-02-07 00:00:00 The Long Term Market Trend: What If We Ignore Inflation/Deflation? by Doug Short (Article)

2013-02-04 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,480.40. The ratios in parentheses use the monthly close of 1,498.11.

2013-02-01 00:00:00 ECRI "Recession" Update: Leading Index Growth Hits Another Interim High by Doug Short of Advisor Perspectives (dshort.com)

ECRI posts its proprietary indicators on one-week delayed basis to the general public, but ECRI's Lakshman Achuthan has switched focus to his company's version of the Big Four Economic Indicators I've been tracking for the past several months. See, for example, this November 29thBloomberg video that ECRI continues to feature on their website. Achuthan pinpoints July as the business cycle peak, thus putting us in at the beginning of the eighth month of a recession.

2013-02-01 00:00:00 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Note from dshort: This commentary has been revised to include the latest Nonfarm Employment data released today.... Nonfarm Employment rose 0.12% in January, following 0.15% and 0.18% gains in December and November, respectively. The Year-over-year increase is 1.52%. Nonfarm employment has been the tortoise of the Big Four, slow and steady. The average MoM change over the past 12 months has been 0.13%, and the range has been 0.07% to 0.20% -- no contractions.

2013-01-29 00:00:00 WSJ Economists' GDP Forecasts: 1.6% for Q4 2012 and 1.7 in Q1 2013 by Doug Short (Article)

A big economic announcement this week will be tomorrow's Advance Estimate for Q4 GDP from the Bureau of Economic Analysis. The final number for Q3 GDP was 3.1%. The general consensus is that Q4 will show a significant decline in this broad measure of the economy. Investing.com weighs in at 1.8%. According to Briefing.com, the consensus for Q4 is 1.0%. However, Briefing.com's own estimate, I should point out, is considerably lower at 0.1%.

2013-01-28 00:00:00 Core CAPEX as a Recession Indicator by Doug Short (Article)

A few months ago Business Insider posted a commentary with the attention-grabbing headline: DAVID ROSENBERG: Here's Your Big Red Flag That We Could Be Heading For Recession. Rosenberg has frequently included CAPEX among his various recession indicators, but he focuses on a specific manipulation of the data: the year-over-year three-month moving average.

Is this something we should really worry about? Or is it cherry picking by a recession doomster?

2013-01-25 00:00:00 ECRI "Recession" Update: Leading Index Growth Hits a New Interim High by Doug Short of Advisor Perspectives (dshort.com)

For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article,The Tell-Tale Chart, makes clear their public focus on the Big Four.

2013-01-24 00:00:00 ECRI WLI Set to Post a 95-week High Tomorrow by Doug Short (Article)

This morning I received a pair of charts from Dwaine van Vuuren in anticipation of tomorrow's weekly update from ECRI on the company's Weekly Leading Index (WLI) and Weekly Index Growth (WLIg).

The two charts illustrate the why many of us are baffled by ECRI's adamant position on its September 2011 recession call and its more recent assertion that a recession started in July.

2013-01-18 00:00:00 ECRI's Public Indicators Continue to Undermine Their Insistance That We're in a Recession by Doug Short of Advisor Perspectives (dshort.com)

For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article, The Tell-Tale Chart, makes clear their public focus on the Big Four.

2013-01-16 00:00:00 The Big Four Economic Indicators: Real Retail Sales and Industrial Production Both Rise by Doug Short of Advisor Perspectives (dshort.com)

The charts don't all show us the individual behavior of the Big Four leading up to the 2007 recession. To achieve that goal, I've plotted the same data using a "percent off high" technique. In other words, I show successive new highs as zero and the cumulative percent declines of months that aren't new highs. The advantage of this approach is that it helps us visualize declines more clearly and to compare the depth of declines for each indicator and across time (e.g., the short 2001 recession versus the Great Recession). Here is my own four-pack showing the indicators with this technique.

2013-01-11 00:00:00 ECRI's Imaginary Recession: Now in Its Seventh Month by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data. It is now at 128.3 versus the previous week's 126.6 (which is an upward revision from 126.4). Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.1, up from last week's 5.0. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.

2013-01-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,422.29. The ratios in parentheses use the monthly close of 1,426.19.

2012-12-28 00:00:00 ECRI Update: Flunking Recession 101 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data. It is now at 128.3 versus the previous week's 127.2. Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.4, up from last week's 4.6. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.

2012-12-21 00:00:00 ECRI Update: The Recession Call Is Further Undermined by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the latest public data. It is now at 127.2 versus the previous week's 127.4. However, the WLI annualized growth indicator (WLIg) rose, now at 4.6, up from last week's 3.9. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.

2012-12-21 00:00:00 The Big Four Economic Indicators: Real Personal Incomes Improve Significantly By Doug Short by Doug Short of Advisor Perspectives (dshort.com)

The weight of these four in the decision process is sufficient rationale for the St. Louis FRED repository to feature achart four-packof these indicators along with the statement that "the charts plot four main economic indicators tracked by the NBER dating committee." Here are the four as identified in the Federal Reserve Economic Data repository. See the data specifics in the linkedPDF filewith details on the calculation of two of the indicators.

2012-12-14 00:00:00 ECRI Weekly Update: Walking the Recession Plank by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data to its highest level since early August of 2011. It is now at 127.7, up from a downwardly revised 126.7 in the previous week. See the WLI chart. The WLI annualized growth indicator (WLIg) also rose, now at 4.4 from last week's 3.5. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.

2012-12-14 00:00:00 The Big Four Economic Indicators: Industrial Product and Retail Sales Brighten the Picture by Doug Short of Advisor Perspectives (dshort.com)

This morning I've added two more of the Big Four for November: Industrial Production from the Federal Reserve, the purple line in the chart below and Real Retail Sales, the green line.

2012-12-12 00:00:00 Thoughts on the Expiration of the Bush-Era Tax Cuts by Doug Short (Article)

We're now nearing the end of the second week of December. For my household, the potential expiration of the Bush-Era tax cuts impacts one major financial decision: My annual rollovers of a portion of a traditional IRA to a Roth IRA, which I started in 2010, when income limitations on eligibility for Roth IRA conversions were lifted indefinitely. Should I stick to my current strategy? Or should I make a jumbo rollover in anticipation of the expiration of the Bush-Era tax cuts?

2012-12-07 00:00:00 ECRI Weekly Update: More Recession Flag Waving by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.8, up from an upwardly revised 126.2 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) also rose, now at 3.5 from last week's 3.4. WLIg has been in expansion territory since August 24th, althout it is off its high at 6.0 on October 12th.

2012-12-05 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1394.52. The ratios in parentheses use the monthly close of 1,416.18. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-12-02 00:00:00 Measuring the Performance of the Ivy Portfolio by Doug Short (Article)

I've been posting a monthly moving average update for the five ETFs in featured in Mebane Faber and Eric Richardson's Ivy Portfolio since the spring of 2009, when I featured my review of the book. For ETF performance tracking and backtesting, I use ETFReplay.com, an excellent website for analyzing the performance of individual ETFs and ETF portfolios based on customized moving-average strategies.

2012-11-30 00:00:00 ECRI Weekly Update: Beating the Recession Drum by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.3, up from 125.4 in the previous week. The WLI annualized growth indicator (WLIg) declined to 3.4, down from last week's 3.6. WLIg has been in expansion territory since August 17th, although it is now at a six-week low, with the high at 6.0 on October 12th.

2012-11-26 00:00:00 Median Household Incomes: The "Real" Story by Doug Short of Advisor Perspectives (dshort.com)

The traditional source of household income data is the Census Bureau, which publishes annual household income data each September for the previous year. Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates.

2012-11-23 00:00:00 ECRI Weekly Leading Index: Index Rises, Growth Diminishes by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data (released Wednesday in advance of the Thanksgiving holiday). It is now at 125.7, up from 125.4 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) declined to 3.8, down from last week's 4.3. WLIg has been in expansion territory for thirteen weeks, although it is now at a seven-week low, with the high at 6.0 on October 12th.

2012-11-23 00:00:00 Meditations on Black Friday by Doug Short (Article)

As I type this, black Friday is now in its evening hours. Anyone who knows me will tell you I'm not much of a shopper. I sometimes quip that when you die you go to one of two places: Heaven or shopping.

So it was with some morbid fascination that I picked up a copy of yesterday's Raleigh News & Observer. The Thanksgiving issue of this normally thin newspaper had an astonishing thickness of nearly two inches, swollen beyond recognition by the Black Friday ad inserts.

2012-11-16 00:00:00 ECRI Weekly Leading Index: The Slippage Continues by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined again in the numbers released today. It is now at 125.4, down from its interim high of 127.6 set five weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 4.4, down from last week's downard revision to 5.0. WLIg has been in expansion territory for twelve weeks, although it is now at a five-week low, with the revised high at 6.0 on October 12th.

2012-11-16 00:00:00 The Big Four Economic Indicators: Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-11-15 00:00:00 Profit Margin Squeeze: More Tightening by Doug Short (Article)

Here is a follow-up on one aspect of the latest Philly Fed's Business Outlook Survey, which I reported on earlier today. The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index, which was updated through September last week. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data.

2012-11-15 00:00:00 Post Office Reports Record Loss of $15.9B by Doug Short (Article)

First Class Postage Across Time

Earlier this year I spotted a fascinating study at The Economist of the cost of snail mail in Europe, North America and Australia. Of the eighteen countries documented in the article, the US has the cheapest first class stamp.

So it came as no surprise when I saw this morning's news item that the US Post Office reported a record loss $15.9B for their fiscal year, which ended on September 30th.

2012-11-13 00:00:00 Debt, Taxes and Politics: A Perspective on Federal Tax History by Doug Short (Article)

With the Bush tax cuts set to expire at the end of December, let's take a moment to reflect on the history of U.S. federal debt and personal taxation, the latter of which began in 1913.

The first chart is a snapshot of federal debt based on data from the U.S. Treasury and the 2013 Federal Budget issued by the Office of Management and Budget (OMB). The chart also shows the OMB six-year forecast through 2017.

2012-11-11 00:00:00 Presidential Elections Since 1896: Does the Market Express an Opinion? by Doug Short (Article)

In previous commentaries this week I've been reporting on the historical patterns of pre- and post-election market behavior. Here is a wrap-up featuring the 30 presidential elections during the 116-year history of the Dow with some focus on outlier election weeks.

As an opening gambit, I'd like to share a bit of feedback on my latest World Markets Weekend Review.

2012-11-09 00:00:00 ECRI Weekly Leading Index: Off Its Interim High by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined in the numbers released today. It is now at 126.2, down from its interim high of 127.6 set four weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 5.1, down from last week's 5.9. WLIg has now spent eleven consecutive weeks in expansion territory, although it is now at a five-week low.

2012-11-09 00:00:00 The Market Aftermath of Presidential Elections by Doug Short (Article)

In previous commentaries this week I've been reporting on the historical patterns of pre- and post-election market behavior. Here is another follow-up, posted before the market opens on the last day of the presidential election week.

Below are two tables, one for the S&P 500 and the other for the Dow, showing the index performance immediately prior to the election and for the Wednesday and Thursday after the election.

2012-11-07 00:00:00 The Day After Presidential Elections: Usually Not Good for the Market (Updated) by Doug Short (Article)

Note from dshort: I've updated the table in this commentary with today's gruesome post-election performance in the S&P 500. To repeat my observations in today's market close update:

2012-11-07 00:00:00 The Day After Presidential Elections: Usually Not Good for the Market, Part 2 by Doug Short (Article)

In response to several requests, I've written a part 2 to my earlier commentary on pre- and post-election market behavior. The original piece examined the S&P 500 since the middle of the last century. Now let's take a longer look back at the Dow Jones Industrial Index, which was launched in the spring of 1896, the year William McKinley was elected to his first term as president.

2012-11-02 00:00:00 ECRI Weekly Leading Index: Still Jogging in Place by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the numbers released today. It is now at 126.6, down from last week's 126.7 (revised from 126.8). Likewise, the WLI growth indicator (WLIg) slipped slightly, now at 5.9, down from last week's 6.0. WLIg has now spent ten consecutive weeks in expansion territory, although it is off its interim high of 6.1. But for the past six weeks the WLI has been jogging in place in a narrow range (126.2 to 126.7).

2012-10-31 00:00:00 Politics, the Economy and the Market Across Time by Doug Short (Article)

With the presidential election just a few days away, I thought this might be a good time to recall the larger historical context of the US economy and markets with an eye on the party in power.

First up, here is a look at GDP by party in control of the White House and Congress. Since the inception of quarterly GDP in 1947, Real Quarterly GDP has averaged 4.0 percent during Democratic administrations and 2.6 percent during Republican administrations.

2012-10-26 00:00:00 ECRI Weekly Leading Index: Running in Place by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally in the numbers released today. It is now at 126.8, up from last week's 126.6 (revised from 126.7). However, the WLI growth indicator (WLIg) slipped slightly in expansion territory, not at 6.0, down from last week's 6.1. WLIg has now spent nine consecutive weeks of in expansion territory. But essentially the WLI has been running in place for the past five weeks.

2012-10-25 00:00:00 Shadow Weekly Leading Index Project: 1st Estimate for the Friday Update by Doug Short (Article)

Thursday 25th October 2012, 2nd estimate: The official ECRI figures for Friday 26th October are expected to be lower than last week at 126.27 (126.7) with a growth metric of +5.81 (+6.68). Recession probability within 4-6 weeks is 0.61% (0.5%).

2012-10-23 00:00:00 Richmond Fed Manufacturing Composite: A Turn for the Worse by Doug Short (Article)

In the past I haven't routinely followed the regional manufacturing indexes, but I posted my first-ever snapshot of the Richmond Fed composite in July. Last month a reader who resides in the district requested an update, and I was happy to oblige. This particular Fed region represents Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. Since I hale from the Carolinas, it seems natural that I should pay attention. So I took a look at the new data, released today at 10 AM EST.

2012-10-23 00:00:00 Anticipating Friday's Q3 Advance Estimate And the Long Road That Follows by Doug Short (Article)

Friday we get the Advance Estimate for Q3 GDP. But, seriously, how useful is the Advance Estimate? We will get a Second Estimate a month later and a Third Estimate a month after that. And then next July, the Q2 GDP release will be accompanied by annual revisions for all the quarters of the previous few years. And periodically the annual revisions go back several years. The July 2011 update modified the data back to Q2 2003. And the July 2009 modifications involved a major overhaul of GDP back to its 1929 origin.

2012-10-22 00:00:00 WSJ Economists' GDP Forecasts: 1.7 in Q3 and 1.8 in Q4 by Doug Short (Article)

The big economic announcement this week will be the Friday Advance Estimate for Q3 GDP from the Bureau of Economic Analysis. The final number for Q2 GDP was 1.3%. The general consensus is that Q3 will show an improvement in this broad measure of the economy. Forexpros weighs in at 1.8%. According to Briefing.com, the consensus for Q3 is 1.9%. Briefing.com's own estimate, I should point out, is considerably lower at 0.9%. Thus, we might well ask the question: How wide is the range of opinions among economists on this benchmark metric?

2012-10-19 00:00:00 ECRI Weekly Leading Index: Index Slips, But Growth Rises by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute declined in the numbers released today. It is now at 126.7, down from last week's 127.6 (revised from 127.7). However, the WLI growth indicator rose further in expansion territory to 6.1, up from last week's 5.7. WLIg has now posted sixteen consecutive weeks of improvement and is at its highest level since May 20, 2011. The divergence between the WLI and its growth derivative is probably attributable to apparent anomaly in the BLS's weekly unemployment data over the past two weeks.

2012-10-16 00:00:00 The Big Four Economic Indicators: Updated Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

The latest updates to the Big Four was today's release of the September Industrial Production, which rose 0.4 percent over the previous month following a 1.4 percent decline the month before. Yesterday the Census Bureau's Retail Sales number was released, and with today's release of the Consumer Price Index we can calculate Real Retail Sales. The latest 0.6% increase gives us a strong three-month upward trend after four months of flat or contracting data. Both indicators beat analysts' expectations.

2012-10-12 00:00:00 ECRI Weekly Leading Indicators: Time to Recant the Recession Call? by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) made a strong advance in the numbers released today. It is now at 127.7, up from last week's 126.2 (revised from 126.3). See the WLI chart below. The WLI growth indicator (WLIg) now marks its eighth week in expansion territory at 5.7, up from last week's 4.6. WLIg has now posted fifteenth consecutive weeks of improvement and is at its highest level since May 27, 2011.

2012-10-12 00:00:00 ECRI's Weekly Leading Index Has One Very Strong Correlation by Doug Short (Article)

Last week I received an email from Pablo Corna, at Grupo A.J.Vierci in Paraguay, regarding the relationship between ECRI's Weekly Leading Indicator (WLI) and the S&P 500. How well ECRI's indicators correlate with recessions is a matter of strong debate. However, at least since the turn of the century, a smoothed year-over-year percent change of the WLI has shown a remarkably strong correlation with the S&P 500 monthly closes.

2012-10-09 00:00:00 Median Household Income Growth: Deflating the American Dream by Doug Short of Advisor Perspectives (dshort.com)

What is the single best indicator of the American Dream? Many would point to household income growth. My study of the Census Bureau's data shows a 600.7% growth in median household incomes from 1967 through 2011. The ride has been bumpy, but it equates to a 4.5% annualized growth rate. Sounds impressive, but if you adjust for inflation using the Census Bureau's method, that nominal 600.7% total growth shrinks to 19.0%, a "real" annualized growth rate of 0.4%.

2012-10-05 00:00:00 ECRI Weekly Leading Indicators: Mixed Signals in Latest Data by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally after eight consecutive weeks of growth. It is now at 126.3, down from last week's 126.6 (revised from 126.7). See the WLI chart below. However, the WLI growth indicator (WLIg) now marks its seventh week in expansion territory at 4.7, up from last week's 3.8. WLIg has now posted fourteen consecutive weeks of improvement and is at its highest level since June 3, 2011.

2012-10-04 00:00:00 Median Household Incomes: The Grim Reality by Doug Short of Advisor Perspectives (dshort.com)

Last month I posted a pair of commentaries on median household incomes based on latest annual data released by the Census Bureau. The first looked at the distribution of household incomes by quintile and the top 5 percent. The second examined median household incomes by age bracket. More recently Sentier Research, an organization that focuses on income and demographics, published a fascinating report on median household incomes. The data in their report differs from the Census Bureau's data in three key respects.

2012-10-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,443.42. The ratios in parentheses use the monthly close of 1,440.67. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-09-28 00:00:00 The Big Four Economic Indicators: Updated Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process.

2012-09-28 00:00:00 ECRI Weekly Leading Index Growth at Highest Level Since June 2011 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the eighth consecutive week, now at 126.7, up from last week's 125.3 (revised from 124.7). See the WLI chart below. The WLI growth indicator (WLIg) now marks its sixth week in expansion territory at 3.8 (up from last week's 2.7). It has now posted thirteen consecutive weeks of improvement and is at its highest level since June 10, 2011.

2012-09-26 00:00:00 Asia is Falling: Let's Chase the Spin by Doug Short (Article)

First there are the facts: Asian stocks are falling at a particular point in time. But that information for the human psyche (at least for those of us who follow the markets), is woefully inadequate. Why are Asian stocks falling? We must have a rationale for every moment in market time.

Or so it would appear.

2012-09-26 00:00:00 Shanghai Composite Update by Doug Short (Article)

Last night the financial press featured the decline in the Asia-Pacific markets: "Asian Stocks Fall on Investor Concern on Stimulus Effect" and "Asian shares fall on wariness over Spain".

Japan's Nikkei fell 2.03%, dropping it below the 9,000 level. But that's a line in the sand that the Nikkei has crisscrossed many times.

More striking was the 1.24% selloff in the Shanghai Composite. Why?

2012-09-23 00:00:00 The Shanghai Tower and Aftermath: New Update (Revised) by Doug Short (Article)

Note from dshort: After publishing my latest Shanghai Composite look back, I received an email from Michael in Sweden asking "Shouldn't the Shanghai chart be in real prices (inflation adjusted)? I guess it would even be more symmetric."

I've updated the commentary below to accommodate the suggestion with an additional chart.

2012-09-21 00:00:00 ECRI Weekly Leading Index Growth at Highest Level Since July 2011 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the seventh consecutive week, now at 125.4, up from last week's 124.7 (revised from 124.9). See the WLI chart below. The WLI growth indicator (WLIg) now marks its fifth week in expansion territory at 2.7 (up from last week's 1.9). It has now posted twelve consecutive weeks of improvement and is at its highest level since July 29, 2011.

2012-09-19 00:00:00 Boomer Demographics: The Shift Ahead by Doug Short (Article)

Following up on my posts yesterday on the Census Bureau's latest data for household incomes (by quintile and age bracket), I've now updated my U.S. population pyramids based on Census Bureau's historical data and estimates.

I've been maintaining a set of these pyramids to give us snapshots at 10-year intervals spanning seven decades. My pyramids differ from the ones available at the Census Bureau website in one key respect.

2012-09-16 00:00:00 The Market and Quantitative Easing: A Quick Snaphot by Doug Short (Article)

Late last month I featured an interesting chart by Phil Gose, of Capital Resource Management in Iowa. The chart featured the S&P 500 with annotations on key events, including Fed intervention, over the past five years. At that time many market pundits were speculating that Fed Chairman Bernanke will use his Jackson Hole, Wyoming, speech to set the stage for another round of Quantitative Easing, aka QE3. And that's exactly what he did. The actual announcement of QE3 came in the press release at the end of the two-day September FOMC meeting last Thursday. Here is Phil's updated chart....

2012-09-14 00:00:00 The Big Four Economic Indicators: Updated Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are: Industrial Production, Real Income, Employment and Real Retail Sales.

2012-09-14 00:00:00 ECRI Defends Its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute rose for the 6th consecutive week, now at 124.9 from last week's 124.1. The WLI growth indicator now marks its fourth week in expansion territory at 2.1. It has now posted eleven consecutive weeks of improvement. The big news is yesterday's Bloomberg TV interview, in which Lakshman Achuthan, ECRI's COO, reasserted his company's recession call made a year ago on September 21st and his belief that the recession has already begun.

2012-09-12 00:00:00 Average Hourly Earnings: Deciphering Historical Trends by Doug Short (Article)

What can we learn about the economy from the Bureau of Labor Statistics' monthly data on Average Hourly Earnings? A widely circulated FRED chart of the year-over-year percent change in hourly earnings paints a grim picture. But a closer look at the data suggests that the recent trend is but a small part of a much larger pattern -- one that contributes to a fundamental understanding of the US economy.

2012-09-07 00:00:00 The Big Four Economic Indicators: Updated Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-09-07 00:00:00 Economic Data Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fifth consecutive week, now at 123.7 from last week's 123.5 (revised from 123.6). See the WLI chart below. The WLI growth indicator (WLIg) is in its second week in expansion territory at 1.0 (up from last week's 0.5). It has now posted ten consecutive weeks of improvement.

2012-09-05 00:00:00 Eye on Friday's Employment Report by Doug Short (Article)

Friday's Employment Situation report is the big economic indicator this week, especially in the context of the presidential election and the Democratic National Convention, which ends the night before the August employment numbers are release. The most recent unemployment rate, through July is 8.3%, up from 8.2% the month before. The best post-recession number was 8.1% in April. The Briefing.com consensus is for the August report to show 130K new jobs, down from 163K last month, and for the unemployment to rate to remain unchanged.

2012-09-05 00:00:00 Eye on the Russell 2000 by Doug Short (Article)

In response to request of from Lyle, a long-time visitor to the website and virtual acquaintance, I've created some charts of the Russell 2000 small-cap stock index. The format is the same as my S&P 500 monthly updates of the 10- and 12-month simple moving averages and the 10-month exponential moving average.

In addition, Lyle's email caused me to think about the behavior of large- and small-cap stocks at major market turning points (more about that below).

2012-09-04 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,403.45. The ratios in parentheses use the monthly close of 1,406.58. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-08-31 00:00:00 ECRI's Embarrassing Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fourth consecutive week, now at 123.6 from last week's 123.3. See the WLI chart below. The WLI growth indicator (WLIg) has risen into expansion territory at 0.6 after nine consecutive weeks of improvement.

2012-08-28 00:00:00 Anticipating Jackson Hole by Doug Short (Article)

Many market pundits are speculating Fed Chairman Bernanke will use his Jackson Hole, Wyoming, to set the stage for another round of Quantitative Easing, aka QE3. Phil Gose, of Capital Resource Management in Iowa, sent me an interesting chart of the S&P 500 with annotations on key events, including Fed intervention, over the past five years.

2012-08-27 00:00:00 Charting Canada: The S&P/TSX Composite Index by Doug Short (Article)

Note from dshort: In response to an email from Dana in Canada, here's a quick look at Canada's S&P/TSX Composite Index and how it stacks up in recent years against the indexes in my weekly world markets update.

2012-08-24 00:00:00 Economic Data Continues to Refute ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 123.3 from last week's 123.0 (an upward revision from 122.8). See the WLI chart below. The WLI growth indicator (WLIg) is at -0.1, less negative than the -0.4 for last week, which is an upward revision from the previously reported -0.6.

2012-08-22 00:00:00 WSJ Economists' 10-Year Yield Forecasts: The Big Spread by Doug Short (Article)

Earlier this month the Wall Street Journal posted the results of its August Survey of economists conducted August 3-6 (xls file). Let's take another look at their estimates for 10-year yields. The various Federal Reserve strategies in recent years (ZIRP, QE1, QE2 and Operation Twist) have focused on lowering interest rates, for which the 10-year note yield is an interesting "tell".

2012-08-21 00:00:00 Chicago Fed National Activity Index Revisions by Doug Short (Article)

In my CFNAI update yesterday I repeated my warning that "it's unwise to read very much into the data for any specific month. Also data revisions frequently make the real-time headline subsequently inaccurate. The 3-month moving average is a better number to watch."

The two latest reports offer a classic illustration of the point.

2012-08-17 00:00:00 ECRI Weekly Leading Index Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute rose slightly to 122.8 from last week's 122.5. See the WLI chart below. The WLI growth indicator is at -0.6, less negative than the -1.1 for last week, which is an upward revision from the previously reported -1.3. As of today, the ECRI website continues to feature Lakshman Achuthan's July 10th Bloomberg TV interview, in which he reaffirmed his company's recession call and stated that we're already in a recession.

2012-08-10 00:00:00 An Update on Market Volatility: Siesta Time by Doug Short (Article)

Let's review the recent volatility, or absence thereof) in the S&P 500. The first chart below features an overlay of the index and the CBOE Volatility Index (VIX) since 2007. The current levels of this index are well below the 20 level, a traditional traditionally associated with increased market risk. A recent WSJ article summarizes the usual interpretation of this indicator.

2012-08-10 00:00:00 ECRI Recession Call: Weekly Leading Index Improves, Growth Index Little Changed by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 122.5 from last week's 122.1 (a tiny revision from the previously reported 122.2). See the WLI chart below. At one decimal place, the WLI growth indicator (WLIg) is unchanged at -1.3 as reported in Friday's public release of the data through August 3. At two decimal places, WLIg is slightly less negative at -1.28 compared to last week's -1.35.

2012-08-03 00:00:00 ECRI Recession Call: Weekly Leading Index Slips But Growth Index Improves by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 122.2 from last week's 122.7 (a tiny revision from the previously reported 122.8). See the WLI chart below. However, the WLI growth indicator (WLIg) improved, now at -1.3 as reported in Friday's public release of the data through July 27, an improvement over the previous week's -1.7, which was an upward revision from -2.3.

2012-08-03 00:00:00 The Big Four Economic Indicators: Updated Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-08-01 00:00:00 The Big Four Economic Indicators: What They're Telling Us About the Economy by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general understanding that there are four big indicators that the committee weighs heavily in their cycle identification process.

2012-08-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,359.78. The ratios in parentheses use the monthly close of 1,379.32. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-07-27 00:00:00 ECRI Recession Call: Weekly Leading Index Improves by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose to 122.8 from last week's 121.8 (a tiny revision from the previously reported 121.9). See the WLI chart below. The WLI growth indicator (WLIg) also improved, now at -1.6 as reported in Friday's public release of the data through July 20, an improvement over the previous week's -2.3.

2012-07-26 00:00:00 Rates Update: 30-Year Fixed at Historic Low by Doug Short (Article)

The one new historic low today is the 30-year fixed mortgage. The Freddie Mac weekly survey published today puts the average at 3.49%, down four basis points from last week. For some near-term historical context, the average was 4.08% just four months ago. Here is an updated snapshot of Treasury yields and the 30-year fixed since the onset of Operation Twist.

2012-07-20 00:00:00 ECRI Recession Call: Weekly Leading Index Declines by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.9 from last week's 122.9, a downward revision from 123.2. See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.3 as reported in Friday's public release of the data through July 13, an improvement over the previous week's -2.7 (a downward revision from -2.2).

2012-07-20 00:00:00 European Markets Update by Doug Short (Article)

US markets are struggling today, but with another 90 minutes in the trading day, the losses are nothing like the selloff in Europe. Below is a table of today's performance for the major European indexes followed by a six-pack of indexes I track most closely. Greece's Athens General Index is not included in the table. It actually rose 1.59% today.

2012-07-19 00:00:00 The Big Four Economic Indicators: What They're Telling Us about a Recession by Doug Short of Advisor Perspectives (dshort.com)

The ongoing debate about an impending recession in the US grew more conspicuous last week when ECRI's Lakshman Achuthan not only reiterated his company's recession call, but also went so far as to declare that we're already in a recession. There is, however, a general assumption that there are four big indicators that the committee weighs heavily in their cycle identification process. They are Industrial Production, Real Income, Employment, Real Retail Sales.

2012-07-19 00:00:00 The Ultimate ''Real'' Death Cross: Stranger Still by Doug Short (Article)

I received a number of emails following my illustrations of the "Ultimate" Death Cross, a bizarre concept referenced by Societe Generale analyst Albert Edwards: the 50-200 month moving-average crossover in the S&P 500. That's right. Not day, not week, but month. The question I was asked repeatedly is this: What would this indicator look like if we adjusted for inflation? Well, I couldn't resist having a look myself. Here are the same two charts I posted earlier this week, but now adjusted for inflation using the Consumer Price Index as the deflator.

2012-07-17 00:00:00 And Now for Something Completely Different: The ''Ultimate'' Death Cross by Doug Short (Article)

James Ross, the University Architect at UNC Wilmington and an astute observer of the economy, called my attention to an amusing Business Insider piece published yesterday: "The S&P Is On The Verge Of The Ultimate Death Cross". The piece mentions a note published Monday by Societe Generale analyst Albert Edwards, who points out that the S&P is on the verge of an "ultimate" death cross. And what, pray tell, is that? A 50-200 moving average crossover, based on months, not days (or even weeks).

2012-07-13 00:00:00 ECRI Recession Call: Weekly Leading Index Improves Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 123.2 from last week's 121.9. The WLI growth indicator (WLIg) rose fractionally, now at -2.2 as reported in Friday's public release of the data through July 6, an improvement over the previous week's -2.8 (a slight upward revision from -2.9).

2012-07-12 00:00:00 GDP Forecasts in the July WSJ Survey of Economists by Doug Short (Article)

On July 27th we will get the Advance Estimate for Q2 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal's July survey of economists is now available.... In a nutshell, the consensus of WSJ economists, who were surveyed during July 6-10), is for a decline in GDP from the Q1 1.9 percent. The Q2 forecasts ranged from 0.7 to 2.5 percent. The median (middle) and mode (most frequent) both came in at 1.8 percent. The mean (average) forecast was slightly lower at 1.7 percent.

2012-07-12 00:00:00 Fed Intervention and the Market: Historic 30-Year Mortgage Low by Doug Short (Article)

Note from dshort: I've updated the charts in this commentary in commemoration of yet another all-time low in the 30-year fixed-rate mortgage as tracked by Freddie Mac. Note also that the last chart now reflects the July WSJ forecasts for the 10-year note yield. Today's closing yield of 1.50% is just three basis points off the record low of June 1st, and the 30-year is just four basis points off its June 1st low.

2012-07-06 00:00:00 ECRI Recession Call: Weekly Leading Index Again Improves by Doug Short of Advisor Perspectives (dshort.com)

Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 121.9 from last week's 121.7 (which was a slight upward revision from 121.5). See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.9 as reported in Friday's public release of the data through June 29, an improvement over the previous week's -3.6.

2012-07-04 00:00:00 21st Century Independence Days by Doug Short (Article)

On July 4, 1776, the American colonies declared independence from the Kingdom of Great Britain. Over the years Independence Day has become a symbol of America and its values.

The 21st century has presented some stunning challenges to the United States: The popping of the Tech Bubble, the attack on the Trade Towers, wars in Afghanistan and Iraq, Hurricane Katrina, the collapse of residential real estate, the Financial Crisis, the Oil Catastrophe in the Gulf of Mexico, the federal debt debacle, the outing of the One Percent -- the list goes on and on.

2012-07-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1323.48. The ratios in parentheses use the monthly close of 1,362.16. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-06-29 00:00:00 ECRI Recession Call: Weekly Leading Index Up Fractionally by Doug Short of Advisor Perspectives (dshort.com)

Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.5 from last week's 121.2 (a slight downward revision from 121.3). See the chart below. However, the WLI growth indicator (WLIg) declined fractionally, now at -3.6 as reported in Friday's public release of the data through June 22, down from the previous week's -3.5.

2012-06-27 00:00:00 GDP Forecasts in the June WSJ Survey of Economists by Doug Short (Article)

Tomorrow we'll get the Third Estimate for Q1 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal's June survey of economists was posted a couple of weeks ago, and the Federal Reserve weighed in with its GDP estimates last week. Let's see what their various crystal balls and tea leaves are telling them about the future.

2012-06-22 00:00:00 ECRI Recession Call: Weekly Leading Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.3 from last week's 121.8 (a slight downward revision from 121.9). See the chart below. The WLI growth indicator (WLIg) also declined, now at -3.5 as reported in Friday's public release of the data through June 15, down from the previous week's -3.0.

2012-06-20 00:00:00 WSJ Economists' 10-Year Yield Forecasts: The Growing Spread by Doug Short of Advisor Perspectives (dshort.com)

Earlier this week the Wall Street Journal posted the results of its June Survey of economists. In the past my main interest in these forecasts has been the GDP estimates. But today my attention is fixed on the estimates for 10-year yields. The various Federal Reserve strategies in recent years (ZIRP, QE1, QE2 and Operation Twist) have focused on lowering interest rates, for which the 10-year note yield is an interesting "tell".

2012-06-19 00:00:00 WSJ Economists' 10-Year Yield Forecasts: The Growing Spread by Doug Short (Article)

Earlier this week the Wall Street Journal posted the results of its June Survey of economists. In the past my main interest in these forecasts has been the GDP estimates. But today my attention is fixed on the estimates for 10-year yields. The various Federal Reserve strategies in recent years (ZIRP, QE1, QE2 and Operation Twist) have focused on lowering interest rates, for which the 10-year note yield is an interesting "tell".

2012-06-18 00:00:00 Spain, Italy and Greece: The Day After by Doug Short (Article)

The day after the Greek election, Euro STOXX 50 index closed lower today, with a couple of the euro zone indexes, Spain and Italy, posting sharp losses. The 10-year yields in Spain and Italy are, not surprisingly on the rise. One notable exception, although perhaps not a "major" European index, was the Athens General, which posted a strong gain (chart below). Here is a quick snapshot, courtesy of Bloomberg.

2012-06-17 00:00:00 The Collapse of the Athens Index: Update by Doug Short (Article)

Note from dshort: As I type this note, the Greek election is just a few hours away. The general perception is that none of the political parties will win a parliamentary majority. At the request of a reader, here is an updated snapshot of the Greek stock market, one month after my initial post on the topic.

2012-06-15 00:00:00 ECRI Recession Call: Weekly Leading Index Up Slightly, But Growth Index Declines by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.9 from last week's 121.3 (a downward revision from 122.3). See the chart below. However, the WLI growth indicator (WLIg) slipped, now at -3.0 as reported in Friday's public release of the data through June 8, down from the previous week's -2.2 (a sizable downward revision from -0.7).

2012-06-08 00:00:00 ECRI Recession Call Update: Weekly Leading Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 121.6 from last week's 122.3 (a downward revision from 122.4). See the chart below. The WLI growth indicator (WLIg) also slipped, now at -2.0 as reported in Friday's public release of the data through June 1, down from the previous week's -0.7 (a downward revision from -0.6). The ECRI numbers are extremely close to the RecessionAlert estimates, posted yesterday, which anticipated 121.9 and -1.9% for the WLI and WLIg metrics.

2012-06-05 00:00:00 Pulse of Commerce Index: May Gain of 0.8% In a Now Discontinued Index by Doug Short (Article)

The latest Ceridian-UCLA Pulse of Commerce Index (PCI), a measure of the economy based on diesel fuel consumption, is now available.

Each month I've looked forward to the publication of the Pulse of Commerce Index. I'm sad to report that today's report was posted with the accompanying message: "Please note that the May 2012 Ceridian-UCLA Pulse of Commerce Index by UCLA Anderson School of Management will be the last report issued."

2012-06-02 00:00:00 ECRI Recession Call Update: Another Weekly Leading Index Decline by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 122.4 from last week's 123.0 (a slight downward revision of 123.1). The WLI growth indicator also slipped, now at -0.6 as reported in Friday's public release of the data through May 25, down from the previous week's 0.1. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.

2012-06-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2012, which is 1,341.27. The ratios in parentheses use the monthly close of 1,310.33. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-05-30 00:00:00 How Big Are the PIIGS? (Bigger than you may realize!) by Doug Short (Article)

My topic is the relative size (in a basic economic sense) of the five countries that constitute the PIIGS -- to one another and to the world as a whole. To make comparisons, I'm using GDP based on purchasing power parity (PPP). My source for the data is the IMF (International Monetary Fund), specifically the IMF's World Economic Outlook Databases.

2012-05-30 00:00:00 Spain, Italy, and Greece: Market Update by Doug Short (Article)

While we wait for the closing bell on Wall Street, here's a quick look at today's weak performance in Europe. The Bloomberg table below shows the breadth of today's decline in the major European indexes. Spain, once again, is the worst performer, which is not surprising, given current spotlight on its financial struggles.

2012-05-26 00:00:00 ECRI Recession Call Update: Weekly Leading Index Declines Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 123.1 from a slight downward revision of 124.4 (see the fifth chart below). The WLI growth indicator also slipped, now at 0.1 as reported in Friday's public release of the data through May 18, down from the previous week's 0.4. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.

2012-05-23 00:00:00 European Markets: Oops! by Doug Short (Article)

My quick snapshot yesterday of major European markets showed a massive rally, which I playfully suggested was driven by a "Don't bet against the EU Summit" sentiment. Well, the market today showed that yesterday's bet belonged in the same category as Facebook IPO (if somewhat less extreme). The Bloomberg table below shows the savagery of today's decline in the major European indexes. Not surprisingly, the worst performers were Spain and Italy.

2012-05-23 00:00:00 The 2012 Durable Goods Benchmark Revisions by Doug Short (Article)

Tomorrow morning the Census Bureau will release the Advance Report on April Durable Goods, and I'll post my updates shortly thereafter. The new report will be based on the benchmark revisions published in the Census Bureau on May 18th (available in PDF format). The revisions are substantial, as I'll illustrate below. But first, let's get a sense of the relative size of durable goods new orders as compared to GDP.

2012-05-22 00:00:00 European Markets: 'Don't Bet Against the EU Summit' by Doug Short (Article)

My quick snapshot yesterday of major European markets showed the two major Eurozone peripheral nations, Spain and Italy, as outliers with daily losses, following the grim example of the vanishing market economy of Greece.

Flash forward 24 hours: Today, in advance of Wednesday's EU summit in Brussels, all the major European markets participated in a strong rally -- with Italy and Spain among the leaders. What we're seeing is perhaps the EU equivalent of "Don't bet against the Fed."

2012-05-21 00:00:00 Spain, Italy, Greece and the Forthcoming EU Summit by Doug Short (Article)

Most of the major European indexes closed modestly higher today, the first day of a week that includes a highly anticipated EU summit, and a day after Gavyn Davies featured a sobering chart in his FT commentary, The Anatomy of the Eurozone Bank Run.

The EURO STOXX 50 index gained a quarter of a percent, and the Bloomberg table of European Stocks, which includes the STOXX 50 and the eight largest country indexes, showed only two declines for the day.

2012-05-16 00:00:00 Whither 2012 GDP? Comparing the WSJ Survey and Fed Projections by Doug Short (Article)

Earlier this week the Wall Street Journal posted the results of its May Survey of economists. Naturally I charted some of the data, focusing on GDP, but I held off on sharing it until we got the latest Federal Reserve GDP projections, published at 2 PM today.First, some context: The BEA's Advance Estimate for Q1 GDP came in at 2.2 percent, a decline from the 3.0 percent Final Estimate for Q4 2011. The average GDP since the inception of quarterly GDP reporting in the late 1940s is 3.3 percent, which is nearly double the 1.7 percent 10-year moving average of GDP through the end of 2011.

2012-05-11 00:00:00 ECRI Update: Reaffirming the Recession Call ... Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in todays public release of the data through May 4. This is essentially unchanged from last week. However, the underlying WLI again rose fractionally from an adjusted 124.6 to 125.4 (see the fourth chart below). The big news this week, however, is not the weekly data update but ECRI's latest reaffirmation of its recession call in a Bloomberg interview with ECRIs Lakshman Achuthan earlier this week. Ive embedded a link to the nine-minute video on the Bloomberg website.

2012-05-09 00:00:00 The Pain in Spain: A Turn for the Worse by Doug Short (Article)

Last month I posted an overlay of Spain's benchmark index, the IBEX 35 and the S&P 500. Today's news that the Spanish 10-year yield closed north of 6% prompted me to take another look at the IBEX. The index closed the day with a loss of 2.77%, setting a new low, 57.28% off its 2007 high -- fractionally below the -57.25% trough on March 9, 2009. Here is an update of the overlay.

2012-05-04 00:00:00 ECRI Weekly Leading Indicator: Third Consecutive Decline by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0 as reported in today's public release of the data through April 27. This is the third consecutive week-over-week decline since January 6th. However, the underlying WLI again rose fractionally from an adjusted 124.0 to 124.7.

2012-05-02 00:00:00 Market Valuation Indicators: Overvaluation Relatively Unchanged by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. The Crestmont Research P/E Ratio, The cyclical P/E ratio using the trailing 10-year earnings as the divisor, The Q Ratio, which is the total price of the market divided by its replacement cost, The relationship of the S&P Composite to a regression trendline.To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression.

2012-04-27 00:00:00 ECRI Weekly Leading Indicator: The Growth Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.6 as reported in today's public release of the data through April 20. This is the second consecutive week-over-week decline since January 6th. However, the underlying WLI rose fractionally from an adjusted 123.8 to 124.1.

2012-04-20 00:00:00 ECRI Weekly Leading Indicator: The Growth Index Slip by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.2 as reported in today's public release of the data through April 13. This is the first week-over-week decline since January 6th, over three months ago. The underlying WLI contracted more dramatically from an adjusted 125.9 to 123.9 (see the fourth chart below). This is the largest decline, in percentage terms, since August 19th of last year.

2012-04-18 00:00:00 WSJ Economists' GDP Forecasts: 2.2% in Q1, Rising to 2.4% in Q2 by Doug Short (Article)

On Friday of next week (April 27th) we'll get the Advance Estimate for Q1 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal's April Survey of economists is now available. Let's see what their crystal ball is telling them about Q1 GDP.

2012-04-15 00:00:00 The Pain in Spain by Doug Short (Article)

Since posting my routine weekend update on world market indexes, I've received a couple of requests to include Spain's benchmark index, the IBEX 35, in the series. The eight indexes I include in that update make my illustrations about as cluttered as I can deal with. But the requests triggered my own curiosity about the Spanish index. My solution was to create an overlay of the S&P 500 and the IBEX since 2007.

2012-04-13 00:00:00 ECRI Weekly Leading Indicator: The Growth Index Continues to Improve by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.4 as reported in today's public release of the data through April 6. This is the thirteenth consecutive week of improving data for the Growth Index and the highest reading since August 5th of last year. However, underlying WLI contracted slightly, decreasing from an adjusted 126.3 to 125.7

2012-04-06 00:00:00 ECRI Weekly Leading Indicator Growth Is Now Positive by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.0 as reported in today's public release of the data through March 30. This is the twelfth consecutive week of improving data for the Growth Index and the first postive reading since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.8 to 126.5 (see the fourth chart below).

2012-04-03 00:00:00 Market Valuation Indicators: Overvaluation Increases by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns.

2012-04-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2012, which is 1,389.24. The ratios in parentheses use the monthly close of 1,408.47. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2012-03-30 00:00:00 ECRI Weekly Leading Indicator Is Poised for Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0, the pivot point between growth and contraction, as reported in today's public release of the data through March 23rd. This is the eleventh consecutive week of improving data for the Growth Index and the highest level since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.4 to 125.9 (see the fourth chart below).

2012-03-23 00:00:00 ECRI Indicators Improve, But Beware the ''Yo-Yo Years'' by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -0.4 in today's public release of the data through March 16th. This is the tenth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.0 to 125.7 (see the fourth chart below).

2012-03-16 00:00:00 ECRI Reaffirms Its Recession Call with New Analysis by Doug Short of Advisor Perspectives (dshort.com)

The WLI growth indicator of the ECRI came in at -1.4 in today's public release of the data through Mar. 9th. This is the 9th consecutive week of improvement data for the Growth Index and the highest level since Aug. 5th of last year. The underlying WLI also improved, increasing from an adjusted 124.6 to 125.1. The big news this week is the ECRI commentary: Why Our Recession Call Stands. The most interesting revelation in the commentary involved a shift to the year-over-year WLI change from ECRI's favored, and rather arcane, method of calculating the WLI growth series from the underlying WLI.

2012-03-09 00:00:00 ECRI's Weekly Leading Index Improves (Slightly) Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -2.6 in today's public release of the data through March 9th. This is the eighth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, increasing from an adjusted 124.1 to 124.3 (see the third chart below). Here again is a recent media appearance by Lakshman Achuthan, the Co-founder of ECRI, defending ECRI's recession call on with CNNMoney.

2012-03-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for February 2012, which is 1,352.49. The ratios in parentheses use the monthly close of 1,365.68. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 15.0 (15.2) ? P/E10 ratio = 21.9 (22.1)

2012-03-02 00:00:00 Market Valuation Indicators: Overvaluation Inreases by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. ? The Crestmont Research P/E Ratio ? The cyclical P/E ratio using the trailing 10-year earnings as the divisor ? The Q Ratio, which is the total price of the market divided by its replacement cost ? The relationship of the S&P Composite to a regression trendline To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression.

2012-03-02 00:00:00 ECRI Continues to Defend its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.0 in today's public release of the data through February 24th. This is the seventh consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, incresing from an adjusted 123.1 to 124.2 (see the third chart below).

2012-03-01 00:00:00 Real Personal Consumption Expenditures and Recessions by Doug Short (Article)

2012-02-24 00:00:00 ECRI Defends its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.5 in today's public release of the data through February 10th. This is the sixth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. However, the underlying WLI decreased fractionally from an adjusted 123.4 to 123.2 (see the third chart below). This is the second week of slippage in the underlying index.

2012-02-23 00:00:00 Economic Risk: The Gasoline Wild Card by Doug Short (Article)

Of the many risks facing the US economy, the one I find most immediately concerning is the rapidly increasing rise in gas prices. My latest weekly gasoline update showed a 36-cent rise in gas prices, regular and premium, over the past nine weeks. In fact, it was about nine weeks ago that I filled the tank on our Prius at $2.98 a gallon just south of Myrtle Beach. Today the best price I can find in this area is $3.42.

2012-02-17 00:00:00 ECRI's Controversial Recession Call: Fifth Consecutive Improvement in the Growth Index by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.7 in today's public release of the data through February 10th. This is the fifth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. The underlying WLI decreased fractionally from an adjusted 123.6 to 123.5

2012-02-16 00:00:00 Profit Margin Squeeze: New Update by Doug Short of Advisor Perspectives (dshort.com)

The accompanying charts offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey through yesterday's release. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data.

2012-02-15 00:00:00 Taxes, Entitlements and the Growing Federal Debt Crisis by Doug Short (Article)

Earlier this week I shared my historical perspective on Debt, Taxes and Politics. Let's now take a closer look at Uncle Sam's balance sheet for last year and the official government projections for 2012 and the decade beyond. With the intensifying election year debates on the federal budget, it seems particularly appropriate to understand the broader context.

2012-02-10 00:00:00 ECRI's Puzzling Recession Call: The Growth Index Contraction Eases Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -4.3 in its latest reading, data through February 3rd. The latest public data point is a reduced contraction from last week's -5.3 (a slight downward revision from the previously reported -5.2). This is the highest level (i.e., least negative) since August 26th of last year. The underlying WLI increased fractionally from an adjusted 123.0 to 123.3.

2012-02-09 00:00:00 Syria, Assad and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)

Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.

2012-02-08 00:00:00 Syria, Assad and the Arab Spring by Doug Short (Article)

Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.

2012-02-03 00:00:00 ECRI Recession Call: Growth Index Contraction Eases Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -5.2 in its latest reading, data through January 27. The latest public data point is a reduced contraction from last week's -6.6 (a slight downward revision from -6.5). This is the highest level (i.e., least negative) since late August. The underlying WLI increased fractionally from an adjusted 122.7 to 123.2 (see the third chart below).

2012-02-02 00:00:00 Market Valuation Indicators: Overvaluation Inreases by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the month. ? The Crestmont Research P/E Ratio, The cyclical P/E ratio using the trailing 10-year earnings as the divisor, The Q Ratio, which is the total price of the market divided by its replacement cost, The relationship of the S&P Composite to a regression trendline. These indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns.

2012-02-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for January 2012, which is 1,300.58. The ratios in parentheses use the monthly close of 1,312.41. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 14.3 (14.1) ? P/E10 ratio = 21.3 (21.5)

2012-01-27 00:00:00 The New Conference Board Leading Economic Index by Doug Short (Article)

Yesterday the Conference Board released its latest Leading Economic Index (LEI) for the U.S., an announcement I haven't yet featured with a series of charts and commentary. Frankly, I'm still grappling with the major overhaul of the index, which includes extensive changes that extend to its earliest data in 1959. But here is a first effort at highlighting the changes.

2012-01-27 00:00:00 ECRI Recession Call: Growth Index Contraction Eases Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).

2012-01-20 00:00:00 ECRI Recession Call: Growth Index Contraction Eases by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.5 in its latest reading, data through January 13. The latest public data point is a reduced contraction from last week's -8.6, and the underlying WLI rose from an adjusted 121.1 to 123.4 (see the third chart below). The growth index had slipped lower over the past two weeks, but the latest data point is the highest (i.e., least negative) since early September.

2012-01-13 00:00:00 Demographic Headwinds: The Decline of Peak Spenders by Doug Short of Advisor Perspectives (dshort.com)

"S&P 500 to Fall 30-50% in 2012." Dent's grim forecast is primarily based on the demographics of the peak spending years, an age cohort he refers to in the interview as 46-50. Economists and market analysts often think of retiring boomers as the primary drag on the economy with their the transition from the accumulation to the decumulation phase of their life-cycle. But if we understand of the crucial role of consumption for our economic health, a significant decline in the number of peak spenders is a demographic headwind that will challenge us for years to come.

2012-01-13 00:00:00 ECRI Recession Call: Growth Index Contracts Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -8.4 in its latest reading, data through January 6. The latest public data point is a slightly deeper contraction from last week's -8.2, although the underlying WLI rose a point from 120.2 to 121.2 (see the third chart below). The index had been hovering in a narrow range between -7.4 to -7.8 for the previous seven weeks but has slipped lower over the past two weeks.

2012-01-12 00:00:00 Demographic Headwinds: The Decline of Peak Spenders by Doug Short (Article)

Demographer Harry Dent was recently a featured guest on Bloomberg TV in an interview that was promoted with the frightening tease "S&P 500 to Fall 30-50% in 2012." See the video clip below for the complete interview.

The rationale for Dent's grim forecast is primarily based on the demographics of the peak spending years, an age cohort he refers to in the interview as ages 46 to 50. If we use the Census bureau five-year data groupings, the cohort in question is Age 45-49 (which is the range Dent normally refers to in his publications).

2012-01-06 00:00:00 The Great Leading Indicator Smackdown: New Update by Doug Short (Article)

Periodically I update a series of overlays comparing the ECRI Weekly Leading Index (WLI) and the Conference Board's monthly updates of its index of Leading Economic Indicators (LEI). The most recent LEI update was published on December 22 (data through November), and today we have the latest WLI, based on data through December 30th. As we will see in the charts below, the two indicators continue to exhibit a major divergence.

2012-01-06 00:00:00 ECRI Recession Call: Growth Index Shows Further Contraction by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -8.2 in its latest reading, data through December 30. The latest public data point is a deeper contraction from last week's -7.6. The index had been hovering in a narrow range between -7.4 to -7.8 for the previous seven weeks but has now slipped lower.

2012-01-06 00:00:00 The Great Leading Indicator Smackdown: New Update by Doug Short of Advisor Perspectives (dshort.com)

Periodically I update a series of overlays comparing the ECRI Weekly Leading Index (WLI) and the Conference Board's monthly updates of its index of Leading Economic Indicators (LEI). The most recent LEI update was published on December 22 (data through November), and today we have the latest WLI, based on data through December 30th. As we will see in the charts below, the two indicators continue to exhibit a major divergence.

2012-01-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for December 2011, which is 1243.32. The ratios in parentheses use the monthly close of 1,257.60. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 13.8 (14.0) ? P/E10 ratio = 20.5 (20.7)

2012-01-03 00:00:00 Market Valuation Indicators: Overvaluation Remains High by Doug Short of Advisor Perspectives (dshort.com)

Here is a summary of the four market valuation indicators I updated at the beginning of the months. ? The Crestmont Research P/E Ratio. ? The cyclical P/E ratio using the trailing 10-year earnings as the divisor. ? The Q Ratio, which is the total price of the market divided by its replacement cost. ? The relationship of the S&P Composite to a regression trendline. To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression.

2011-12-30 00:00:00 ECRI Recession Call: Growth Index Virtually Unchanged for Seven Weeks by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.6 in its latest reading, data through December 23. The latest public data point is virtually unchanged from last week's -7.7. The index has been hovering in a narrow range between -7.4 to -7.8 for the past seven weeks. Those of us who follow this indicator are nervously awaiting a confirmation or reversal of the trend.

2011-12-23 00:00:00 ECRI Recession Call: Growth Index Goes Slightly More Negative by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.7 in its latest reading, data through December 16. The latest public data point is fractionally more negative than last week's -7.5. The index has been hovering in a narrow range between -7.4 to -7.8 for the past six weeks.

2011-12-16 00:00:00 ECRI Recession Call: Growth Index Contraction Moderates Fractionally by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.5 in its latest reading, data through December 9. The latest public data point is fractionally less negative than last week's -7.7, which is a downward revision from -7.6. CRI's recession call is, to say the least, quite controversial in financial circles. The perma-bears are generally supportive of the forecast, while the predominantly bullish mainstream financial view ranges from skeptical to dismissive.

2011-12-09 00:00:00 ECRI Update: Lakshman Achuthan Explains the ECRI Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.6 in its latest reading, data through December 2. The latest public data point is fractionally less negative than last week's -7.8. Yesterday Lakshman Achuthan, the Co-founder of ECRI, spoke with Tom Keene on Bloomberg Television's Surveillance Midday. It was sufficiently representative of the ECRI view that it's also available on the ECRI website here, with bold heading Recession Update. The eight-minute video is well worth watching in its entirely.

2011-12-09 00:00:00 Market Valuation Indicators: Overvaluation Remains High by Doug Short of Advisor Perspectives (dshort.com)

This interim update was prompted by yesterday's release of the Q3 Fed Flow of Funds data, which triggered a downward revision of the Q Ratio from high to moderate overvaluation.

2011-12-02 00:00:00 ECRI Recession Watch: Growth Index Reverses Trend and Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.8 in its latest reading, data through November 25. The latest public data point is more negative than last week's downwardly revised -7.4 (previously -7.3). Today's update reverses the trend off its interim low of -10.1 on October 14.

2011-12-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for October 2011, which is 1226.41. The ratios in parentheses use the monthly close of 1,246.96. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2011-11-26 00:00:00 ECRI Recession Watch: Decline in Growth Index Continues to Moderate by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index growth indicator of the Economic Cycle Research Institute posted -7.3 in its latest reading, data through November 18. The latest public data point is less negative than last week's upwardly revised -7.8 and continues the trend off its interim low of -10.1 on October 14. Earlier this month I posted the November 7th CNBC interview with Lakshman Achuthan, the Co-founder of ECRI. I'm again including video because ECRI continues to feature it on their website here, which I see as ongoing evidence that they stand behind their recession forecast.

2011-11-18 00:00:00 ECRI Recession Watch: Decline in Growth Index Continues to Moderate by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.9 in its latest reading, data through November 11. The latest public data point is less negative than last week's -8.5 and continues the trend off its interim low of -10.1 on October 14. Last week I posted the November 7th CNBC interview with Lakshman Achuthan, the Co-founder of ECRI. I'm again including video because ECRI continues to feature it on their website, which I see as evidence that they stand behind their recession forecast.

2011-11-11 00:00:00 ECRI Recession Watch: Growth Index Decline Moderates by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index growth indicator of the Economic Cycle Research Institute posted -8.5 in its latest reading. The latest public data point is less negative than last week's -9.4, and trending above its interim low of -10.1 on October 14. ECRI has come under some harsh criticism this past week, starting with a CNBC interview of Lakshman Achuthan, the Co-founder of ECRI. About half-way through the interview, the discussion turns into an uninformative debate in which Achuthan speaks of a "contagion among the forward leading indicators" but dodged requests for specifics.

2011-11-04 00:00:00 ECRI Recession Watch: Growth Index Is Off Its Interim Low by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -9.4 in its latest reading, data through October 28, off its interim low of -10.1 set over the previous two weeks. (Note: last week's original level of -10.0 was revised downward to -10.1.) On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.Institute had announced to its private clients on September 21st.

2011-11-02 00:00:00 Market Valuation Indicators: Increased Overvaluation After the October Rally by Doug Short of Advisor Perspectives (dshort.com)

Below is a summary of the four market valuation indicators I regularly follow. As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns. At present they continue to suggest a cautious long-term outlook and guarded expectations.

2011-10-28 00:00:00 ECRI Recession Watch: Growth Index Virtually Unchanged by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -10.0 in its latest reading, data through October 21, a fractionally change from the previous week's -10.1. On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.

2011-10-24 00:00:00 WSJ Economists' Q3 GDP Forecasts: 2.1 in Q3 and 2.0 in Q4 by Doug Short of Advisor Perspectives (dshort.com)

One of the big economic announcements in the week ahead will be the Advance Estimate for Q3 GDP. The final number for Q2 GDP was 1.3%. Economists in general are optimistic that Q3 will show an improvement in this broad measure of the economy. The consensus for Q3 is 2.2%. But what sort of distribution of opinions do we find among the economists? Is the range of opinions wide or narrow? Let's review the data in the Wall Street Journal's October survey of economists. Fifty of the 56 economists solicited for survey responded.

2011-10-21 00:00:00 ECRI Recession Watch: Growth Index Drops Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now posted 11 consecutive declines since early August. The interim high of 8.0 was set in the week ending on April 15. The latest reading, data through October 14, is -10.1, down from the previous week's -9.7. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000.

2011-10-21 00:00:00 Libya, Ghaddafi and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)

While the US and Europe have remained fixated on the simmering sovereign debt crisis in Euroland, the Arab world has been experiencing waves of demonstrations, protests and civil wars that have seen the fall of three major regimes thus far in 2011, with several others struggling to find equilibrium. The underlying forces behind the Arab Spring are complex and vary from country to country. But a key factor is demographics, as a glance at the population pyramids below suggests.

2011-10-14 00:00:00 ECRI Recession Watch: Growth Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has posted 10 consecutive declines since early August. The interim high of 8.0 was set in the week ending on April 15. The latest reading, data through October 7, is -9.6, down from the previous week's -8.7. On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.

2011-10-13 00:00:00 Boomer Demographics: The Shift Ahead by Doug Short of Advisor Perspectives (dshort.com)

I looked at developments in U.S. demographics from 1980 to the present with a focus on the Boomer bulge. Then I examined current day demographics for several major countries around the globe. I've developed a set of population pyramids for the U.S. that start with 1981 and span7 decades at 10-year intervals using the U.S. Census Bureau data. Let's look at some comparative numbers for these seven snapshots. I've calculated the Elderly Dependency Ratios for each. As this ratio shifts higher, the productive population is increasingly burdened by the cost of entitlement programs.

2011-10-07 00:00:00 ECRI Recession Watch: Growth Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

Last week, September 30th, the Economic Cycle Research Institute (ECRI) publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st. One week later, the Weekly Leading Index (WLI) growth indicator of the ECRI has posted another week-over-week decline, now at -8.1 from the previous week's -7.2 (latest publicly available data as of September 30). The interim high of 8.1 was set in the week ending on April 15.

2011-10-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for September 2011, which is 1173.88. The ratios in parentheses use the monthly close of 1131.42. For the latest earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 13.3 (12.9) ? P/E10 ratio = 19.7 (19.0)

2011-09-30 00:00:00 ECRI Makes a Recession Call by Doug Short of Advisor Perspectives (dshort.com)

Today the ECRI publicly announced that the U.S. is tipping into a recession. Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there's nothing that policy makers can do to head it off. ECRI's recession call isn't based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down before the Arab Spring and Japanese earthquake to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes.

2011-09-23 00:00:00 ECRI Growth Metric: Revised Data, Still Declining by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted another week-over-week decline, now at -6.7 from last week's -6.1, which is an upward revision from -7.1. In fact, with today's release, the publicly available ECRI data has been revised as far back as January 14th, with increasingly significant revisions from Q2 forward. The formula for the ECRI indicators is not published, but my speculation, based on the timing of the revisions, is that the Q2 Fed Flow of Funds release on September 13th occasioned the updates.

2011-09-16 00:00:00 WSJ Economists' GDP Forecasts: 2.0 in Q3 But Slow Improvement Thereafter by Doug Short of Advisor Perspectives (dshort.com)

Yesterday the WSJ released the results of their September survey of 56 economists, mostly from major financial firms with a handful from academic institutions. The September survey is available in Excel format here. I spent some time studying the results and have made a little snapshot to help us understand what these mainstream professional economists are forecasting for quarterly GDP for the next six quarters through the end of 2012. The chart below includes the responses of each economist. The six forecast series are arranged horizontally from low to high.

2011-09-16 00:00:00 ECRI Growth Metric Goes Yet Further Negative by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update of the publicly available data available (through September 9) now puts the decline at -7.1, down from last week's revised -6.6 (previously -6.2). The interim high of 8.0 was set in the week ending on April 15. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000.

2011-09-14 00:00:00 Retail Sales: The "Real" Consumer And Their Recession-Level Spending by Doug Short of Advisor Perspectives (dshort.com)

The Retail Sales Report released this morning shows that retail sales in August were flat. The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted recessions and the approximate range of two major economic episodes. The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales has taken us (in nominal terms) 2.9% above November 2007 pre-recession peak.

2011-09-13 00:00:00 U.S. Household Incomes: A 43-Year Perspective by Doug Short of Advisor Perspectives (dshort.com)

The Census Bureau has released the household income data for 2010. It is posted on their website. What I'm featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2010. Most people think in nominal terms, so the first chart below illustrates the current dollar values across the 43-year period (in other words, the value of a dollar at the time receivednot adjusted for inflation). The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households.

2011-09-09 00:00:00 ECRI Growth Metric Drops Yet Deeper into Negative Territory by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index growth indicator of the Economic Cycle Research Institute has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update of the publicly available data available (through September 2) now puts the decline at -6.2, down from last week's revised -4.4. The interim high of 8.0 was set in the week ending on April 15. See the CNBC video clip featuring Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI, discussing the risk of a new recession.

2011-09-06 00:00:00 The Great Shift From Manufacturing to Services by Doug Short of Advisor Perspectives (dshort.com)

In honor of Labor Day, which was signed into law as a national holiday in 1894, I spent some time this morning studying a topic I've occasionally mentioned: The shift in the United States from a manufacturing to a services economy. The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. The first chart below is an overlay of the compete series of employment numbers for the two major categories, manufacturing and services. When I say major, I'm referring to the domination of the labor market by these two industries.

2011-09-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for August 2011, which is 1185.31. The ratios in parentheses use the monthly close of 1218.89. For the latest earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.

2011-09-02 00:00:00 ECRI Growth Metric Drops Deeper into Negative Territory by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) dropped deeper into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update, data through August 26, now puts the decline at -4.3, down from last week's revised -2.1. The interim high of 8.0 was set in the week ending on April 15. See the CNBC video clip featuring Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI, which aired on Wednesday, August 31st, just before the ADP jobs report.

2011-09-01 00:00:00 Recession? No. We're in the Second Great Contraction by Doug Short of Advisor Perspectives (dshort.com)

Here are some charts of troughs to peaks that show why so many people believe the U.S. is still mired in a recession. For those of us who do accept the NBER recession call, the charts support the characterization of our economic condition as The Second Great Contraction. Since the beginning of quarterly GDP data, which has been tracked since 1947, the U.S. has never had an official recession without having achieved new highs in Real GDP and nonfarm employment. Let's hope that continues. But ultimately the debate over recession boundaries is a minor quibble in the ongoing economic reality.

2011-08-26 00:00:00 The ECRI Weekly Leading Index: Growth Metric Slips Further into Negative Territory by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update, data through August 19, now puts the decline at -2.9, down from last week's -0.1. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-08-19 00:00:00 The ECRI Weekly Leading Index: Growth Metric Goes (Fractionally) Negative by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has been oscillating in a narrow range (1.5 to 2.0 in the latest revision) for the past several weeks. However today's update, data through August 12, has touched negative territory with a -0.1 reading. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-08-18 00:00:00 A Long-Term Look at Inflation by Doug Short of Advisor Perspectives (dshort.com)

The August 2011 Consumer Price Index for Urban Consumers (CPI-U) released today puts the July year-over-year inflation rate at 3.63%, which is fractionally below the 3.96% average since the end of World War II. For a comparison of headline inflation with core inflation, which is based on the CPI excluding food and energy, see this new feature. For better understanding of how CPI is measured and how it impacts your household, see my Inside Look at CPI components. For an even closer look at how the components are behaving, see this X-Ray View of the data for the past five months.

2011-08-15 00:00:00 The "Real" Mega-Bears by Doug Short of Advisor Perspectives (dshort.com)

I'm posting my usual update shortly after reading an interesting, if rather disturbing, WSJ article, This Time, Maybe the U.S. Is Japan. It's time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high. The chart below is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior.

2011-08-12 00:00:00 ThECRI Weekly Leading Index: Consistently Indicating Slow Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has been oscillating in a narrow range (from 1.6 to 2.1) for the past seven weeks, with the latest reading at 1.7. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-08-03 00:00:00 Will the "Real" GDP Please Stand Up? by Doug Short of Advisor Perspectives (dshort.com)

How do you get from Nominal GDP to Real GDP? You subtract inflation. The Bureau of Economic Analysis uses its own GDP Deflator for this purpose, which is somewhat different from the BEA's deflator for Personal Consumption Expenditures and quite a bit different from the better-known Bureau of Labor Statistic's inflation gauge, the Consumer Price Index. Now that we have the preliminary read on Q2 GDP and some rather stunning revisions for the past three years, I've updated my trio of charts showing quarterly Real GDP since 1960 with the official and two variant adjustment techniques.

2011-08-02 00:00:00 Crestmont Market Valuation Update by Doug Short of Advisor Perspectives (dshort.com)

The recent article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Ed's method for determining where the market is headed. His analysis is quite compelling. Accordingly I have added the Crestmont data to my monthly market valuation updates. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart I've been sharing on a monthly basis for the past few years.

2011-07-30 00:00:00 Visualizing GDP: The Consumer Is Key... and at the Razor's Edge by Doug Short of Doug Short

Over this time frame, we see that the personal consumption expenditures component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. As the Q2 GDP component analysis clearly illustrates, personal consumption expenditures, at 0.07 of the real GDP 1.29, is at the razor's edge of positive territory.

2011-07-29 00:00:00 The ECRI Weekly Leading Index: Stabilization Continues by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) rose to 2.0 from a downward revision of 1.6 for last week (originally 1.7). The economy seems to be stabilizing after eleven consecutive weeks of decline. The interim high, now adjusted upward to 8.0, was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-28 00:00:00 WSJ Economists' GDP Forecasts: Weak Q2 But a Stronger 2nd Half by Doug Short of Advisor Perspectives (dshort.com)

Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. I've made a little snapshot to help us understand what these mainstream professional eoconomists are forecasting for quarterly GDP for the rest of the year. The markers are arranged from low to high for each quarter so we get a clear idea of the distribution of responses.

2011-07-22 00:00:00 The ECRI Weekly Leading Index: Stabilizing at Slow Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) remained steady at 1.7 the same level as the two previous weeks. The economy seems to be stabilizing after eleven consecutive weeks of decline. The interim high, now adjusted upward to 8.0, was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-21 00:00:00 The Shape of Market Bubbles (with a Footnote on Gold) by Doug Short of Advisor Perspectives (dshort.com)

In my weekly updates of major worlds markets, one of the charts includes an overlay of the amazing bubble in the Shanghai Composite Index. In this commentary we'll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let's take a long view of the index.

2011-07-19 00:00:00 WSJ Economists's Forecasts for the 10-Year Note by Doug Short of Advisor Perspectives (dshort.com)

Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. Now that the July forecast is available, I spent a few minutes this morning reviewing the 2011 and 2012 year-end forecasts for 10-year yields. The chart below illustrates the responses of the 55 economists solicited in the July survey.

2011-07-15 00:00:00 Inflation: A Five-Month X-Ray View by Doug Short of Advisor Perspectives (dshort.com)

Here is a table showing the annualized change over the past five months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2011-07-15 00:00:00 The ECRI Weekly Leading Index: Slow Growth Stabilizing? by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) remained steady at 1.7 ? the same as last week's 1.7, which was a downward revision from 1.9. Is the economy beginning to stabilize after eleven consecutive weeks of decline? The interim high of 7.8 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-08 00:00:00 Taxes, Entitlements and the Federal Debt Crisis by Doug Short of Doug Short

Let's take a closer look at Uncle Sam's balance sheet for last year and the official government projections for 2011 and the decade beyond. With the looming congressional showdown on the debt ceiling, it seems particularly appropriate to understand the broader context. For a quick review of 2010, here is a slide I created for a presentation at the Retirement Income Industry Association (RIIA) conference. 2010 entitlement costs exceeded the entire tax revenue for the year. However, according to the Congressional Budget Office, entitlements only accounted for about 55% of 2010 spending.

2011-07-08 00:00:00 The ECRI Weekly Leading Index: Eleven Consecutive Weeks of Slowing Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 1.8 from last week's 1.9, a downward revision from 2.0. This is the eleventh consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-05 00:00:00 Market Valuation Indicators Continue to Signal Caution by Doug Short of Doug Short

Here are the four market valuation indicators I regularly follow: The Crestmont Research P/E Ratio, The cyclical P/E ratio using the trailing 10-year earnings as the divisor, The Q Ratio, which is the total price of the market divided by its replacement cost and the relationship of the S&P Composite to a regression trendline. To facilitate comparisons, I've adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression. Based on the S&P 500 monthly data, the market is overvalued somewhere in the range of 34% to 48%.

2011-07-01 00:00:00 The ECRI Weekly Leading Index: Ten Consecutive Weeks of Slowing Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 2.0 from last week's 2.9. This is the tenth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-07-01 00:00:00 Crestmont Market Valuation Update by Doug Short of Doug Short

The recent article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Eds method for determining where the market is headed. His analysis is quite compelling. Accordingly I have added the Crestmont data to my monthly market valuation updates. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart Ive been sharing on a monthly basis for the past few years. The Crestmont P/E of 19.3 is 41% above its average of 13.7. This valuation level is almost identical what we saw in my latest S&P Composite regression to trend update.

2011-06-30 00:00:00 Quantitative Easing Versus the 1940 Fall of France by Doug Short of Doug Short

In real (inflation/deflation-adjusted) terms, when did the US market permanently regain the high reached in 1929? The first chart illustrates two answers to the question. One uses the real price and the other uses the real total return. The remaining charts compare market performance since 2000 with the equivalent elapsed time following the peak in 1929. As the final chart shows, the current real total return over the past eleven plus years has been worse than the performance over the equivalent timeframe during the Great Depression ? at least until the second round of quantitative easing.

2011-06-24 00:00:00 The ECRI Weekly Leading Index: The Ninth Week of Slowing Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 2.9 from last week's 3.6 (a downward revision from 3.7). This is the ninth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-06-17 00:00:00 The ECRI Weekly Leading Index: Eight Weeks of Declining Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 3.7 from last week's 4.1. This is the eighth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-06-15 00:00:00 Inflation: A Five-Month X-Ray View by Doug Short of Doug Short

Here is a table showing the annualized change over the past five months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2011-06-10 00:00:00 The ECRI Weekly Leading Index: A Seventh Week of Declining Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 4.1 from last week's 4.9. This is the seventh consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15.

2011-06-03 00:00:00 Will the "Real" GDP Please Stand Up? by Doug Short of Doug Short

How do you get from Nominal GDP to Real GDP? The Bureau of Economic Analysis (BEA) uses its own GDP Deflator for this purpose. In a recent commentary Rick Davis, the founder of Consumer Metrics Institute, made some interesting observations on the BEA's adjustment technique. His comments prompted me to investigate what Real GDP would look like if we used the PCE Deflator or the Consumer Price Index for the adjustment.

2011-06-03 00:00:00 The ECRI Weekly Leading Index: A Sixth Week of Declining Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 4.9 from last week's 5.0. This is the sixth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-06-01 00:00:00 Crestmont Market Valuation Update by Doug Short of Doug Short

The recent series of articles by guest contributor Ed Easterling triggered a great deal of interest in the Crestmont P/E ratio. Accordingly I have added the Crestmont data to my monthly market valuation posts. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart I've been updating monthly for the past few years. The Crestmont P/E of 20.2 is 47% above its average of 13.7. This valuation level is almost identical what we saw in my latest S&P Composite regression to trend update and somewhat higher than the 40% above mean for the Cyclical P/E10.

2011-05-27 00:00:00 The ECRI Weekly Leading Index: A Fifth Week of Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 5.0 from last week's 5.3. This is the fifth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-05-20 00:00:00 The ECRI Weekly Leading Index: A Fourth Week of Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 5.3 from last week's 6.4. This is the fourth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s.

2011-05-19 00:00:00 Profit Margin Squeeze Continues to Grip the Economy by Doug Short of Doug Short

The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index (data through April). The other is an indicator constructed from two data series in the Philadelphia Feds Business Outlook Survey through todays release. It is the spread between the Philly Feds prices paid (input costs) and received (prices charged) data. A major risk factor for margin squeeze is the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor.

2011-05-13 00:00:00 Inflation: A Four-Month X-Ray View by Doug Short of Doug Short

Here is a table showing the annualized change over the past four months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

2011-05-13 00:00:00 Retail Sales: The "Real" Story by Doug Short of Doug Short

I delayed my commentary on the latest Retail Sales Report until today because my focus is on "real" (inflation-adjusted) and population-adjusted retail sales data. Now that we have the April CPI report, let's analyze the numbers. Retail sales rose 0.5% in April. The chart below shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted the approximate range of two major economic episodes. The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact.

2011-05-13 00:00:00 The ECRI Weekly Leading Index: A Third Week of Fractional Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 6.4 from last week's 6.6. This is the third week of fractional decline from the 11-month interim high of 7.7 for the week ending on April 15.

2011-05-06 00:00:00 The ECRI Weekly Leading Index: A Second Week of Fractional Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 6.7 from last week's 7.5. This is the second week of fractional decline from the 11-month interim high of 7.7 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-05-06 00:00:00 The Philly Fed ADS Business Conditions Index by Doug Short of Doug Short

The Philly Fed Aruoba-Diebold-Scotti Business Conditions Index is not very well known. But as this commentary demonstrates, it has had an amazing correlation with the better known Chicago Fed National Activity Index (CFNAI). Check out the parallel regressions in the two Fed indicators with a regression through GDP over the same time frame.

2011-05-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Here's the latest update of my preferred market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2011, which is 1,363.61. The ratios in parentheses use the March monthly close of 1331.51. For the latest earnings, see the adjacent table from Standard & Poor's.

2011-04-29 00:00:00 The ECRI Weekly Leading Index: Down Fractionally by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined fractionally to 7.5 from last week's eleven-month high of 7.7. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-04-23 00:00:00 The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) increased to 7.7 from by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) increased to 7.7 from a slight downward revision (6.8 to 6.7) for the previous week. This is this highest level since May 14, 2010.

2011-04-20 00:00:00 Understanding Your Capital by Doug Short of Doug Short

For many years financial planners embraced the image of a three-legged stool to explain sources of retirement income: Social Security, Pensions, Personal Savings. Of course, as we all know, for most people the stool now has only two legs, making it a rather wobbly support. Over the past few decades, private pensions have essentially disappeared. They may still be available for government and some union employees, but pensions in the world of private business are generally available only to a shrinking number of older workers who were grandfathered into a now closed system.

2011-04-19 00:00:00 Inflation, the Education Bubble, and the Odds of a Disastrous Retirement by Doug Short of Doug Short

Mish Shedlock featured an article with a title that summarizes a huge financial problem: The Education Bubble; Student Loan Debt Passes Credit Card Debt, Expected to Hit $1 Trillion. Mish's article especially resonates with my own research on the astonishing inflation in college tuition and fees, an imminent disaster that's been in the making for decades. This chart shows the relative growth of education costs as compared to the consumer price index. College tuition and fees is a mere 1.5% of the overall CPI. But for households that pay these expenses with student loans, the burden is high.

2011-04-15 00:00:00 The ECRI Weekly Leading Index Continues to Hold Steady by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) has held relatively steady over the past eight weeks. The Growth Index is now at 6.7 based on data through April 8. The average of the past eight weeks is 6.6 with a range of 6.2 to 7.1 (unchanged from last week). The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom.

2011-04-13 00:00:00 Price and Earnings Growth Across Market History by Doug Short of Doug Short

Last week guest contributor Chris Turner's article on S&P 500 Trailing Earnings offered a fascinating perspective on the relationship between price and earnings in the S&P 500 since the late 1980s. His research prompted me to create a series of charts documenting the relative growth of price and earnings from various starting points in market history to the present. The chart below is an overlay of the real (inflation-adjusted) S&P Composite price and earnings since 1871. I've also plotted a 10-year moving average of earnings for those who share my interest in the cyclical P/E ratio.

2011-04-08 00:00:00 The ECRI Weekly Leading Index: Growth Is Holding Steady by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) has held relatively steady over the past seven weeks. The Growth Index is now at 6.7 based on data through April 1. The average of the past seven weeks is 6.6 with a range of 6.2 to 7.1.

2011-04-07 00:00:00 S&P 500 Trailing Earnings and What They Suggest Going Forward by Doug Short of Doug Short

When questioned the other day about the relationship between trailing earnings and the S&P 500, I was inspired to create the chart below to study the problem. It is based on Standard & Poor's Senior Index Analyst Howard Silverblatt's S&P earnings estimates spreadsheet. It shows the one-year trailing earnings for S&P 500 in blue with a linear regression to highlight the trend. The five-year average of trailing earnings in is shown in red. The Standard & Poor's one-year trailing estimates through 2012 are highlighted in yellow. The quarterly closes of the index itself are depicted in green.

2011-04-04 00:00:00 The ECRI Weekly Leading Index: Holding Steady by Doug Short of Doug Short

The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turn negative 17 times when no recession followed, but 14 of those declines were only slightly negative and most of them reversed after relatively brief periods. Three other three negatives were deeper declines.

2011-04-04 00:00:00 Three Market Valuation Indicators Continue to Signal Caution by Doug Short of Doug Short

Here is a combined perspective on the three market valuation indicators I routinely follow and most recently updated on Friday: The relationship of the S&P Composite to a regression trendline. The cyclical P/E ratio using the trailing 10 year earnings as the divisor. The Q Ratio, the total price of the market divided by its replacement cost. This post is essentially an overview and summary by way of chart overlays of the three. To facilitate comparisons, I've adjusted the Q Ratio and P/E10 to their arithmetic mean, which I represent as zero.

2011-04-04 00:00:00 Taxes, Entitlements, and Our Monstrous Budget Crisis by Doug Short of Doug Short

From time to time I've shared my historical perspective on Debt, Taxes and Politics. Let's now look at what's happening this week. Congress continues to squabble over trivial budget cuts for the 2011 fiscal year, for which the Congressional Budget Office projects a staggering deficit of $1.48 trillion. Meanwhile the word is out that tomorrow Republicans will unveil a plan to cut $4 trillion from the budget, primarily from Medicare and Medicaid, over the next decade. Against these political maneuverings, a partial government shutdown looms if congress can't pass a budget by Friday.

2011-04-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

A standard way to investigate market valuation is to study the historic Price-to-Earnings (P/E) ratio using reported earnings for the trailing twelve months (TTM). Proponents of this approach ignore forward estimates because they are often based on wishful thinking, erroneous assumptions, and analyst bias.

2011-04-01 00:00:00 Market Valuation: The Message from the Q Ratio by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.

2011-03-27 00:00:00 The ECRI Weekly Leading Index: Slight Moderation in Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues its rise. The Growth Index is now at 6.5 based on data through March 18. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

2011-03-25 00:00:00 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short

A major risk factor for margin squeeze is the increase in commodity prices over the past several months. The latest turmoil in the North Africa and the Middle East has now put oil prices in the spotlight. At present, in light of the unemployment rate and the ongoing demographic shift, the rise in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.

2011-03-18 00:00:00 What Inflation Means to You: Inside the Consumer Price Index by Doug Short of Doug Short

The Fed justified the current round of quantitative easing "to promote a stronger pace of economic recovery" The Fed is trying to increase inflation, operating at the macro level. But what does an increase in inflation mean at the micro level, specifically to your household? Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers.

2011-03-18 00:00:00 The ECRI Weekly Leading Index Continues Its Climb by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-11 00:00:00 The ECRI Weekly Leading Growth Index Up Slightly by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-10 00:00:00 The Q Ratio: Updated with Latest Federal Reserve Data by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the US, which is released quarterly. The first chart shows Q Ratio from 1900 to the present. I've extrapolated the ratio since the latest Fed data based on a combination of the price of VTI, the Vanguard Total Market ETF, and an extrapolation of the Z.1 data itself.

2011-03-09 00:00:00 Household Income Growth Versus Two Major Expenses by Doug Short of Doug Short

In a previous post I illustrated the growth of household incomes since 1967 based on Census Bureau data. Let's trim the timeline and compare the growth of two major household expenses ? medical costs and college tuition and fees.

2011-03-07 00:00:00 U.S. Household Incomes: A 42-Year Perspective by Doug Short of Doug Short

In preparation for a presentation at the Retirement Income Industry Association later this month, I've been researching household incomes in the United States. My data source is the Census Bureau, which has a quintile breakdown of data from 1967 through 2009. The pie chart here shows that the top fifth of households in 2009 took home 50% of the nation's income. The middle fifth received 15% and bottom fifth 3%. The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households

2011-03-04 00:00:00 The ECRI Weekly Leading Index Moves Higher Into Positive Territory by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-01 00:00:00 The Q Ratio Moves Yet Further Into Nosebleed Territory by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.

2011-02-25 00:00:00 The ECRI Weekly Leading Index Moves Higher Into Positive Territory by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues its rise ? now at 6.1. The current number is based on data through February 18.

2011-02-22 00:00:00 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short

At present, in light of the unemployment rate and the ongoing demographic shift, the surge in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.

2011-02-18 00:00:00 The ECRI Weekly Leading Index: Moving Higher Into Positive Territory by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 4.9. The current number is based on data through February 11.

2011-02-17 00:00:00 Inflation: A Look Inside the Latest CPI Releases by Doug Short of Doug Short

Core CPI is still substantially below the Fed's inflation target of 2%, but both headline and Core CPI have begun to rise in recent months. If we extrapolate the latest rise over the next year, Core CPI would hit the Fed's target rate by the end of summer. Of course, monthly CPI numbers are too volatile to place any confidence is extrapolations of this sort.

2011-02-11 00:00:00 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 4.5. The current number is based on data through February 4. The adjusted sequence for the last five weeks has been a steady range: 3.6, 4.1, 3.5, 3.6, 4.5.

2011-02-04 00:00:00 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 3.7. The current number is based on data through January 28. The adjusted sequence for the last four weeks has been a steady range: 3.6, 4.1, 3.5, 3.7.

2011-02-04 00:00:00 Death by Treasuries by Doug Short of Doug Short

Are Treasuries rolling over? Check out the astonishing rise in yields over the past week. In some respects the Fed's quantitative easing has been quite effective ? for example in punishing the risk-adverse savers who've invested in Treasuries.

2011-02-02 00:00:00 Three Market Valuation Indicators Continue to Signal Caution by Doug Short of Doug Short

As I've frequently pointed out, these indicators (relationship of the S&P Composite to a regression trendline, The cyclical P/E ratio, and the Q ration) aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns. At present they suggest a cautious outlook and guarded expectations.

2011-02-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Here's the latest update of my preferred market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for January 2011, which is 1282.62. The ratios in parentheses use the January monthly close of 1286.12 (which this month gives a similar ratio to one decimal place as the monthly average).

2011-02-01 00:00:00 The Q Ratio Moves Yet Further Into Nosebleed Territory by Doug Short of Doug Short

The average (arithmetic mean) Q ratio is about 0.71. In the chart below I've adjusted the Q Ratio to an arithmetic mean of 1 (i.e., divided the ratio data points by the average). This gives a more intuitive sense to the numbers. For example, the all-time Q Ratio high at the peak of the Tech Bubble was 1.82 ? which suggests that the market price was 158% above the historic average of replacement cost. The all-time lows in 1921, 1932 and 1982 were around 0.30, which is about 57% below replacement cost. That's quite a range.

2011-01-28 00:00:00 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement, although the latest 3.5 is slightly below the previous week's 4.1. The current number is based on data through January 21.

2011-01-25 00:00:00 Economic Forecast Failures: The 10-Year Yield by Doug Short of Doug Short

Earlier today I analyzed the Wall Street Journal survey of economist forecasts for Q4 GDP. How accurate are economists' forecasts in general? It varies, of course, but sometimes they miss by a long shot. Consider, for example, the forecasts for 10-year Treasury yields in the October 2010 WSJ survey.

2011-01-21 00:00:00 The ECRI Weekly Leading Index Continues to Improve by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement. The latest weekly number is based on data through January 14.

2011-01-19 00:00:00 Market Valuation Since the 1990s by Doug Short of Doug Short

Many analysts dismiss the apparent market overvaluation implied by charts such as these. Eventually we will find out if the 1990s shift in valuations was a permanent change or a reversion to historic valuations lies ahead.

2011-01-07 00:00:00 The ECRI Weekly Leading Index Continues to Improve by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement. The latest weekly number is based on data through December 31.

2011-01-04 00:00:00 The Q Ratio Moves Further Into Nosebleed Territory by Doug Short of Doug Short

The mean-adjusted charts above indicate that the market remains significantly overvalued by historical standards ? by about 62% in the arithmetic-adjusted version and 75% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2011-01-04 00:00:00 Three Market Valuation Indicators All Signal Caution by Doug Short of Doug Short

Let's check out the latest overlays of the three valuation indicators I routinely follow: The relationship of the S&P Composite to a regression trendline; The cyclical P/E ratio using the trailing 10-year earnings as the divisor; and The Q Ratio.

2011-01-03 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Here's the latest update of my preferred market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for December 2010, which is 1241.53. The ratios in parentheses use the December monthly close of 1257.64 (which this month gives the same ratio to one decimal place as the monthly average).

2010-12-28 00:00:00 Consumer Confidence Index: Down Slightly But Well Below the Historical Trend by Doug Short of Doug Short

Let's take a step back and put the Director of the Consumer Research Center's rather rosy interpretation of consumer confidence in a larger perspective. The chart below is intended to help evaluate the historical context for this index as a leading indicator of the economy. Toward this end I have included recessions and GDP. The linear regression through the index data shows the long-term trend of this very volatile indicator. Today's 52.5 reading is significantly below the 85.3 of the current regression level (38.5% below, to be precise).

2010-12-28 00:00:00 Gasoline Prices: The Holiday Present We Didn't Want by Doug Short of Doug Short

On our brief Christmas afternoon drive home from a family gathering in Clayton NC, we spotted a Wal-Mart service station sign for $3.01.9 regular gas. The post-Thanksgiving holiday season is not one I normally associate with high gas prices. As the chart below shows, the general pattern is for gasoline prices to peak in the summer and decline after Labor Day. This year has run counter to the pattern by a significant degree.

2010-12-23 00:00:00 Politics and GDP: Which Party Is Best for the Economy? by Doug Short of Doug Short

Here is a snapshot of the average GDP by political party in control of the White House and Congress. Of course, GDP lags any policy changes that impact its components, so the table must be viewed in the historical context of the chart below. Draw your own conclusions.

2010-12-23 00:00:00 The ECRI Weekly Leading Index Turned Positive ? The First Time Since May by Doug Short of Doug Short

The question, had been whether the latest WLI decline that began the the Q4 of 2009 was a leading indicator of a recession or a false negative. The published index has never dropped to the current level without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director is now on record stating that we've avoided a double dip. The revised GDP for Q3, coming in at 2.6, confirms the ECRI stance.

2010-12-17 00:00:00 The ECRI Weekly Leading Index: A Hair's Breadth from Turning Positive by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 28th consecutive week, coming in at -0.1. However, the rate of contraction has been lessening for the past 20 weeks. The latest weekly number, based on data through December 10, is a tiny fraction below the positive range. How tiny? The -0.1 is rounded from -0.052.

2010-12-16 00:00:00 Inflation: A Look Inside the Latest CPI Release by Doug Short of Doug Short

Headline CPI has remained essentially flat for the past six months. Core CPI has generally trended downward over the past year, but the latest annualized rate saw a fractional rise from 0.61% to 0.77%, which is still substantially below the Fed's core inflation target of 2%. Was there a driver for this change? A quick glance at the chart suggests that Housing made the difference. Housing makes up 42% of the Headline CPI, and it moved from a negative annualized rate of -0.24% to 0.01%.

2010-12-14 00:00:00 The Fed's QE2 Intervention: A Disaster in the Works? by Doug Short of Doug Short

QE2 is a gambit. At face value, we must assume that speeding the recovery and increasing core inflation to the target rate are the true motives. The Fed says as much, and the concern of the sole dissenter, Thomas Hoenig about long-term inflation risks, reinforces this view. On the other hand, blog commentators have speculated on a range of ulterior prime motives ? ranging from bank bailouts to funding Uncle Sam with interest-free loans, etc.

2010-12-11 00:00:00 The ECRI Weekly Leading Index: Still Negative But Continuing to Improve by Doug Short of Doug Short

On Friday, December 10 the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 27th consecutive week, coming in at -1.5. However, the rate of contraction has been lessening for the past 19 weeks. The latest weekly number is based on data through December 3.

2010-12-10 00:00:00 The Q Ratio Is Moving Into Nosebleed Territory by Doug Short of Doug Short

The mean-adjusted charts above indicate that the market remains significantly overvalued by historical standards ? by about 59% in the arithmetic-adjusted version and 72% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-12-07 00:00:00 Inflation and Market Valuation by Doug Short of Doug Short

Here is a rather different look at the pattern of cyclical P/E10 ratios that form the basis of my monthly valuation update Is the Stock Market Cheap? Instead of the usual chronological sequence of ratios, the scatter diagram I made plots the monthly ratios according to the annualized inflation rate on the horizontal axis. I've set vertical gridlines at 4% intervals and marked the average (arithmetic mean) P/E10 for each 4% vertical band.

2010-12-06 00:00:00 What Inflation Means to You: Inside the Consumer Price Index by Doug Short of Doug Short

The universal response is to moan over price increases and take delight when prices are cheaper. But in reality, households vary dramatically in the impact that inflation has upon them. The one thing we can be certain about is this: An increase in inflation will have a painful effect on lower income households, those on fixed incomes, and any household whose discretionary spending is more dream than reality.

2010-12-03 00:00:00 The ECRI Weekly Leading Index: Still Negative But Improving by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 26th consecutive week, coming in at -2.4. However, the rate of contraction has been lessening for the past 18 weeks.

2010-12-01 00:00:00 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

Our mean-adjusted charts indicate that the market remains significantly overvalued by historical standards ? by about 49% in the arithmetic-adjusted version and 62% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-12-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

In times of critical importance, the conventional P/E ratio often lags the index to the point of being useless as a value indicator. "Why the lag?" you may wonder. "How can the P/E be at a record high after the price has fallen so far?" The explanation is simple. Earnings fell faster than price.

2010-11-19 00:00:00 The ECRI Weekly Leading Index: Negative Growth But Improving by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 24th consecutive week, coming in at -4.5. The rate of contraction has been lessening for the past 16 weeks. The latest weekly number is based on data through November 12. On October 29, economist Lackshman Achuthan, the managing director of the Economic Cycle Research Institute, gave assurances on CNBC that ''we're not going to go into a new recession anytime soon.''

2010-11-17 00:00:00 QE2 and Mortgage Rates: Measuring the Fed's Strategy by Doug Short of Doug Short

How will we know if the new round of quantitative easing is a success? An early sign will be that a variety of rates will fall ? at least until the economy reaches liftoff, which probably means sustained real GDP north of 3.3% (the long-term GDP average). I'm already tracking Treasury yields on a regular basis (Treasury Yield Snapshot). Spreads are widening, which should be pleasing to the Fed, but the rising yields at the short end are probably not the Fed's intention.

2010-11-12 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 23rd consecutive week, coming in at -5.7, an improvement from last week's -6.5. The rate of contraction has been lessening over the two months. The latest weekly number is based on data through November 5.

2010-11-05 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index of the Economic Cycle Research Institute registered negative growth for the 22nd consecutive week, coming in at -6.5, unchanged from last week. The rate of contraction has been lessening over the past eight weeks. While the published index has never dropped to the current level without the onset of a recession, the ECRI managing director is now on record stating that we've avoided a double dip. Doug Short presents charts of the index, gross domestic product and the federal funds rate since 1965.

2010-11-02 00:00:00 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market, calculated as the total price of the market divided by the replacement cost of all its companies. Doug Short presents charts of the Q Ratio since 1900. The mean-adjusted charts indicate that the market remains significantly overvalued by historical standards - by about 48 percent in the arithmetic-adjusted version and 60 percent in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-11-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

After dropping to 13.4 in March 2009, the S&P 500 price-to-earnings ratio using trailing earnings averaged over 10 years has rebounded to 21.4. The historic average is 16.35, suggesting that the stock market is expensive. Secular declines have ranged in length from over 19 years to as few as three. The current decline is now in its 10th year. Doug Short provides charts of the P/E10 ratio since 1871.

2010-10-29 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 21st consecutive week, coming in at -6.5, a fractional improvement over last week's -6.9. The rate of contraction has been lessening over the past eight weeks. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1965.

2010-10-22 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's Weekly Leading Index registered negative growth for the 20th consecutive week, coming in at -6.8, a fractional improvement over last week's -7.0. While the rate of contraction has been lessening over the past seven weeks, the magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, gross domestic product and the federal funds rate since 1967.

2010-10-15 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 19th consecutive week, coming in at -6.9, a fractional improvement over last week's -7.0. While the rate of contraction has been lessening over the past six weeks, the magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data going back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate going back to 1967.

2010-10-12 00:00:00 Small Business Sentiment, Cautious Consumers and the Stealth Recession by Doug Short of Doug Short

The National Federation of Independent Businesses small business optimism index rose fractionally this month, from 88.8 to 89.0. Doug Short presents a chart comparing the small business optimism index with the Consumer Metrics Institute's weighted composite index going back to 2005. The chart suggests that the government's stimulus measures had a temporary impact on consumer discretionary spending, but little or no impact on small business sentiment. The recession may officially be over, but the small business optimism index is still in recession territory.

2010-10-08 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 18th consecutive week, coming in at -7.0, an improvement over last week's -7.8. While the rate of contraction has been lessening over the past five weeks, the magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate going back to 1967.

2010-10-01 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 17th consecutive week, coming in at -7.8, an improvement over last week's -8.7. The latest weekly number is based on data through September 24. The magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-10-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Doug Short presents charts of the S&P 500 P/E and P/E10 ratios since 1870. The Financial Crisis of 2008 triggered an accelerated decline toward value territory, with the P/E10 ratio dropping to the upper fourth quintile of historic values in March 2009. The price rebound since the 2009 low pushed the ratio back into the first quintile, and it is now positioned just below the lower boundary around 20. By this historic measure, the market is expensive.

2010-10-01 00:00:00 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market, calculated by dividing the total price of the market by the replacement cost of all its companies. The current Q ratio suggests that the market remains significantly overvalued by historical standards - by about 41 percent in the arithmetic-adjusted version and 52 percent in the geometric-adjusted version. Periods of over- and under-valuation, however, can last for many years at a time. Doug Short presents charts of the Q ratio since 1900.

2010-09-24 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Economic Cycle Research Institute's weekly leading index registered negative growth for the 16th consecutive week, coming in at -8.7, an improvement over last week's -9.3, which is a downward revision from -9.2. The magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-09-21 00:00:00 Three Market Valuation Indicators by Doug Short of Doug Short

Doug Short presents historical overlay charts of three different valuation indicators: the real S&P composite regression to trend, the real P/E 10 adjusted to its arithmetic mean, and the Q ratio adjusted to its arithmetic mean. Based on the latest S&P 500 monthly data, the index is overvalued by 41 percent, 34 percent or 28 percent, depending on which of the three metrics you choose.

2010-09-20 00:00:00 The Q Ratio Indicates a Significantly Overvalued Market by Doug Short of Doug Short

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The charts indicate that the market remains significantly overvalued by historical standards - by about 41 percent in the arithmetic-adjusted version and 52 percent in the geometric-adjusted version. Periods of over- and under-valuation, however, can last for many years at a time.

2010-09-17 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the Economic Cycle Research Institute's weekly leading index registered negative growth for the 15th consecutive week, coming in at -9.2, a slight improvement over last week's -10.1. The index had been hovering around -10 for the previous five weeks. The magnitude of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-09-10 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the weekly leading index of the Economic Cycle Research Institute registered negative growth for the 14th consecutive week, coming in at -10.1, a fractional improvement over last week's -10.2, which was a downward revision from -10.1. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the index, GDP and the federal funds rate since 1967.

2010-09-03 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the weekly leading index of the Economic Cycle Research Institute registered negative growth for the 13th consecutive week, coming in at -10.1, a fractional decline from last week's -9.9. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short presents charts of the weekly leading index, GDP and the federal funds rate since 1967.

2010-09-01 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Doug Short provides charts of the S&P 500 since 1870, adjusted for both inflation and 10-year trailing earnings. The financial crisis of 2008 triggered an accelerated decline in the PE/10 toward value territory, with the ratio dropping to the upper fourth quintile in March 2009. The price rebound since the 2009 low pushed the ratio back into the first quintile, and it is now positioned just below the lower boundary around 20. By this historic measure, the market is expensive.

2010-09-01 00:00:00 The Q Ratio and Market Valuation by Doug Short of Doug Short

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The charts indicate that the market remains significantly overvalued by historical standards - by about 33 percent in the arithmetic-adjusted version and 44 percent in the geometric-adjusted version. Periods of over- and under-valuation, of course, can last for many years at a time.

2010-08-27 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

On Friday the weekly leading index of the Economic Cycle Research Institute registered negative growth for the 12th consecutive week, coming in at -9.9, a fractional improvement from last week's -10.1. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession. Doug Short provides charts of the weekly leading index, gross domestic product and the federal funds rate going back to 1967.

2010-08-23 00:00:00 We're Underperforming the Great Depression by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute and the federal funds rate going back to 1967. The index registered negative growth for the 11th consecutive week on Friday, coming in at -10.0, a fractional improvement from last week's -10.2. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data. The index has never dropped to the current level without the onset of a recession.

2010-08-20 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute and the federal funds rate going back to 1967. The index registered negative growth for the eleventh consecutive week on Friday, coming in at -10.0, a fractional improvement from last week's -10.2. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data. The index has never dropped to the current level without the onset of a recession.

2010-08-16 00:00:00 Treasury Yields in Perspective by Doug Short of Doug Short

Doug Short presents charts of inflation, 10-year Treasury bond yields and the federal funds rate since 1962. Last week the Fed said it will reinvest payments on mortgage assets it holds into Treasury bonds. Not surprisingly, yields fell, with the 10-Year Treasury index, for example, closing the week down 4.6 percent from its level the hour before the Fed announcement. As the charts illustrate, Treasury bond yields have occasionally led the market. How the Treasury bond market plays out over the next few months will be of critical importance to equity markets and the economy as a whole.

2010-08-13 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute, gross domestic product and the federal funds rate. The index registered negative growth for the ninth consecutive week on Friday, coming in at -9.8, a fractional improvement from last week's -10.3. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data back to 1967. The published index has never dropped to the current level without the onset of a recession.

2010-08-10 00:00:00 What if There Hadn't Been a Tech Bubble? by Doug Short of Doug Short

Doug Short presents charts of the correlation of the cyclical P/E10 ratio and inflation from 1881 to the present, including one chart that removes the effects of the tech bubble. The charts suggest that the overvaluation of today's market traces its roots much further back - perhaps to the early 1990s.

2010-08-06 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts comparing the Economic Cycle Research Institute's weekly leading index, gross domestic product and the federal funds rate. On Friday the index registered negative growth for the eighth consecutive week, coming in at -10.3, a fractional improvement from last week's -10.7. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. The index has never dropped to the current level without the onset of a recession.

2010-08-05 00:00:00 Valuing the S&P 500: As-Reported Earnings Estimates by Doug Short of Doug Short

Doug Short provides a monthly market valuation update based on the cyclical P/E ratio using the 10-year average of as-reported earnings, and includes a table showing the earnings for most recent quarters and the estimates for the rest of the year. Based on Wednesday's close of 1120.46, the P/E ratio based on the trailing 12-month earnings for Q2 is the difference between a P/E of 16.8 (latest earnings) versus 17.6 (July 21 earnings).

2010-08-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

Doug Short provides charts of the S&P 500 P/E10 ratio since 1870. The historical average of the S&P 500 P/E10 ratio is 16.35. By this historic measure, at 21.7, the market is expensive.

2010-08-02 00:00:00 The Q Ratio and Market Valuation by Doug Short of Doug Short

Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The Q Ratio is the total price of the market divided by the replacement cost of all its companies, and is a popular method of estimating the fair value of the stock market. The charts indicate that the market remains significantly overvalued by historical standards - by about 39 percent in the arithmetic-adjusted version and 51 percent in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-07-30 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short presents charts of gross domestic product, the Economic Cycle Research Instititute's weekly leading index and the federal funds rate since 1965. On Friday the WLI registered negative growth for the seventh consecutive week, coming in at -10.7. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s.

2010-07-29 00:00:00 Debt, Taxes and Politics by Doug Short of Doug Short

Doug Short provides charts of gross federal debt as a percentage of GDP, with estimates to 2015. As the charts illustrate, there is logic to the ratio increases within the historical context of two World Wars and the Great Depression. Likewise, the steadily decreasing ratio over the next 35 years enabled the tax cuts in 1964. With the 2001 and 2003 tax cuts expiring this year, will the gross federal debt be a factor in determining the direction of future tax rates? Who knows? This is, after all, a congressional election year.

2010-07-23 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides charts comparing the Economic Cycle Research Institute's Weekly Leading Index to GDP and the federal funds rate. On Friday the index registered negative growth for the seventh consecutive week, coming in at -10.5. This number is based on data through July 16th. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to the current level without the onset of a recession.

2010-07-16 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides a chart showing the correlation between the Economic Cycle Research Institute's weekly leading index growth index, gross domestic product and recessions. The index has just registered negative growth for the sixth consecutive week, coming in at -9.8. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967.

2010-07-15 00:00:00 A Short History of Stock Dividends by Doug Short of Doug Short

Doug Short provides charts of the inflation-adjusted price of the S&P composite and dividend yields, as well as real price growth and dividend growth since 1971. As the charts illustrate, risk has returned with a vengeance. Aging Boomers may finally recognize the value of dividend income, especially as their paycheck days draw nearer to a close. Perhaps dividends will someday reemerge as a mainstay of investing. The one certainty is this: It won't happen overnight.

2010-07-13 00:00:00 Total Return or Total Disappointment? by Doug Short of Doug Short

Doug Short provides charts of the S&P Composite since 1929 adjusted for real price and real total return. As the charts show, for the past 21 months, the secular bear market that began in 2000 has substantially underperformed the equivalent timeframe during the Great Depression.

2010-07-12 00:00:00 Annualized Total Return Roller Coaster by Doug Short of Doug Short

Doug Short provides charts of the annualized rate of return of the S&P 500 over 10-, 20- and 30-year intervals. Imagine that 10 years ago you invested $10,000 in the S&P 500. How much would it be worth today, adjusted for inflation with dividends reinvested? Brace yourself: Your investment would have shrunk to $6,956, an annualized return of -3.57 percent. That's a loss of 30.4 percent. As many households have discovered, investing in equities carries risk. Households approaching retirement should understand this risk and make rational decisions about fixed income alternatives.

2010-07-09 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

The Economic Cycle Research Institute's weekly leading index growth metric has had a respectable (but by no means perfect) record for forecasting recessions. Doug Short provides a chart showing the correlation between the WLI, gross domestic product and recessions. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to the current level without the onset of a recession.

2010-07-02 00:00:00 Is the Stock Market Cheap? by Doug Short of Doug Short

This commentary looks at various metrics of market valuation. The TTM P/E ratio is shown to ?often lag the index to the point of being useless.? The more reliable P/E 10 (the Shiller P/E) is 20.6 and in the first quintile of historical valuations, indicating the market is expensive. The Shadow Stats inflation-adjusted P/E 10 shows the market is fairly priced, but this is an unreliable indicator.

2010-07-02 00:00:00 The Q Ratio and Market Valuation by Doug Short of Doug Short

The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. The mean-adjusted data indicate that the market remains significantly overvalued by historical standards - by about 37 percent in the arithmetic-adjusted version and 48 percent in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time.

2010-07-02 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the fourth consecutive week, coming in at -7.7. The rate of decline from the peak in October 2009 is unprecedented since the metric was first devised in 1967. The ECRI Weekly Leading Indicator has never dropped to this level without the onset of a recession.

2010-07-01 00:00:00 Regression to Trend by Doug Short of Doug Short

Looking at various metrics describing today's economy, Doug Short poses the question, 'Are you bearish or bullish about the market?' Short looks at the bearish view, the bullish alternative, and various methods for calculating consumer prices. He ultimately concludes that the ideal method is 'somewhere between the revised BLS method and the historic method preserved by John Williams of Shadow Government Statistics' and comes down on the bearish side.

2010-06-30 00:00:00 Financial Life Cycle Planning by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? Let's take a look.

2010-06-25 00:00:00 Market Volatility Update by Doug Short of Doug Short

The Chicago Board Options Exchange Volatility Index (VIX), which shows the market's expectation of 30-day volatility, has been rising to the 'above 30' warning level. It briefly crossed above 30 intraday but closed a shade lower at 29.74. Doug Short provides a chart series showing the VIX and S&P 500 over two timeframes.

2010-06-25 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides charts of gross domestic product and the Economic Cycle Research Institute's weekly leading index since 1965. The WLI just registered negative growth for the third consecutive week, coming in at -6.9. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. The index has never dropped to -6.9 without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped to -6.8.

2010-06-21 00:00:00 The ECRI Weekly Leading Index by Doug Short of Doug Short

Doug Short provides charts comparing gross domestic product, the Economic Research Institute's weekly leading index and the federal funds rate since 1965, with recessionary periods marked off. A significant decline in the weekly leading index has been a leading indicator for six of the seven recessions since 1965. The question, of course, is whether the latest WLI decline is a leading indicator of a recession or a false negative. Unfortunately, the federal funds rate is already at zero. Can the Fed still take steps to avoid a double-dip?

2010-06-18 00:00:00 Sixteen Dow Recoveries: Update by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? The Dow closed yesterday (June 17th) 59.4% above the March 2009 low after reaching an interim closing high up 71.1% on April 26th. Compared to the other 15 rallies at the equivalent point, the current rally is in 7th place. The volatile recovery after the Crash of 1929 leads the pack by a wide margin. Second and third place date from yet earlier periods, as does the fifth place.

2010-06-17 00:00:00 Consumer Metrics Institute's Growth Index by Doug Short of Doug Short

Doug Short provides charts comparing the Consumer Metrics Institute's growth index with gross domestic product and the S&P 500 since 2005. Thus far the growth index has been an effective leading indicator of GDP. As such, a double-dip recession appears to be a distinct possibility amidst the end of the various government stimulus efforts, the potential contagion of the financial stress in Europe, the ongoing environmental catastrophe in the Gulf of Mexico and another round of consumer belt-tightening.

2010-06-16 00:00:00 Debt-to-GDP, Federal Tax Brackets and Politics by Doug Short of Doug Short

Doug Short provides charts of gross U.S. federal debt as a percentage of GDP since 1900, with key historical events and presidential administrations highlighted. As the charts illustrate, the recent financial crisis and steep market decline triggered a dramatic acceleration in the ratio. With the 2001 and 2003 tax cuts expiring this year, will the gross federal debt be a factor in determining the future direction of the country's tax rates? Who knows? This is, after all, a congressional election year.

2010-06-14 00:00:00 Flag Day and Leading Indicators by Doug Short of Doug Short

Doug Short provides overlay charts of the S&P 500 and the Economic Cycle Research Institute's Weekly Leading Index. The Weekly Leading Index recently hit a 44-week low and descended into negative territory. This would seem to indicate dramatic slowing of the U.S. economy in the months ahead. Short also provides a chart of the 91-day 'Trailing Quarter' Daily Growth Index with an overlay of GDP. If this indicator has credibility, then a prospect of a double-dip recession, something that's happened only once since the Great Depression, cannot be easily dismissed.

2010-06-11 00:00:00 The Q Ratio and Market Valuation by Doug Short of Doug Short

Doug Short provides charts comparing the Q ratio of the S&P 500 and market valuations from 1900 through Q1 2010, updated to include new flow of funds data from the Federal Reserve. The mean-adjusted charts indicate that the market remains significantly overvalued by historical standards - by about 37 percent in the arithmetic-adjusted version and 48 percent in the geometric-adjusted version. Periods of over- and under-valuation, of course, can last for many years at a time.

2010-06-09 00:00:00 The Market and Recessions by Doug Short of Doug Short

A new article in The Atlantic asks the question "Are We Slipping Back into a Recession?" The article cites five reasons why the recovery is in trouble and five reasons why it's on track (with one reason used on both sides of the debate). For a long-term historical context on recessions in the U.S., Doug Short republishes an article originally posted on July 9, 2009, shortly after the end of the latest recession (according to the unofficial consensus). The article includes inflation-adjusted and nominal charts of U.S. stock market prices since 1871, with recessionary periods highlighted.

2010-06-08 00:00:00 The Shape of Market Bubbles by Doug Short of Doug Short

Doug Short provides an overlay chart of four major bubbles across market history to see the variety of shapes a bubble can take. The overlay includes the 2007 Shanghai Composite bubble, the 2000 Nasdaq technology bubble, the 1929 Dow bubble and the 1989 Nikkei bubble. As the chart illustrates, bubbles usually go unrecognized by the majority of market participants until their late stages. The left side of the bubble is usually more gradual than the collapse, although the incredible rise of the Shanghai market is a notable exception.

2010-06-07 00:00:00 Three Market Valuation Indicators by Doug Short of Doug Short

Doug Short provides two charts of the Q Ratio and P/E10 ratio of the S&P 500 Composite Index in order to facilitate comparisons: one adjusted to the arithmetic mean of the two ratios, and the other to their geometric mean. Based on the monthly averages of daily closes in the S&P 500 for the month of May (1125.06), the index is overvalued by 26 percent, 33 percent or 39 percent, depending on which of the three metrics you choose.

2010-06-04 00:00:00 Variations on the Q Ratio by Doug Short of Doug Short

The Q ratio, developed by Nobel Laureate James Tobin, is a popular method for estimating the fair value of the stock market. It consists of the total price of the market divided by the replacement cost of all its companies. Doug Short provides charts of the Q ratio since 1900. The mean-adjusted charts indicate that the market remains significantly overvalued by historical standards - by about 39 percent in the arithmetic-adjusted version and 50 percent in the geometric-adjusted version. Periods of over- and under-valuation, however, can last for many years at a time.

2010-06-01 00:00:00 Secular Bull and Bear Markets by Doug Short of Doug Short

Doug Short examines an inflation-adjusted chart of the S&P Composite. An obvious feature of the chart is a pattern of long-term alternations between upward and downward trends, or secular bull and bear markets. Secular bull years total 80 versus 52 for the bears, a 60:40 ratio. The latest monthly average of daily closes is 33 percent above trend after having fallen only 6 percent below trend in March of last year. Previous bottoms were considerably further below trend. Will the March 2009 bottom be different?

2010-05-27 00:00:00 World Markets: Revised Update by Doug Short of Doug Short

Doug Short provides provides a an overlay chart of world markets since March 9, 2009. The chart, he writes, illustrates the synchronous behavior of international stock indices. The question going forward is whether the correction to date is a long-term low or an interim low with more downside to come. Short also provides a chart of the Shanghai Composite Index since 2000, which includes a classic market bubble.

2010-05-24 00:00:00 Market Musings: Manic-Depressive Mondays by Doug Short of Doug Short

On Friday CNBC ran a piece observing that Mondays have strongly outperformed the other days of the week in 2010. Doug Short provides two pairs of tables that allow us to compare the behavior of weekdays during two nasty bear markets and the rallies that followed. Monday has indeed behaved strangely over the past decade. The key factor is whether we're in a bull or a bear market. Now that CNBC has publicized the 'buy on Friday, sell on Monday concept,' however, Short wouldn't put much 'stock' in this strategy going forward.

2010-05-21 00:00:00 Sixteen Dow Recoveries: Update by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? Doug Short overlays the first 500 days of sixteen recoveries in the Dow Jones Industrial Average since its creation in 1896 in a new chart, as well as a chart based on Dow daily closes with the sixteen rallies highlighted. The question is whether the rally of the past 14 months is the early stages of a secular bull market, or whether the future will resemble something closer to the early 1900s, the late 1960s-1970s, or something in between.

2010-05-18 00:00:00 Learning from the S&P 500 Monthly Moving Averages by Doug Short of Doug Short

Doug Short analyzes monthly closes of the S&P 500 since 1950 to back-test several monthly moving average strategies versus buy and hold. The results suggest that in secular bull and bear markets, passive management is a successful strategy on the way up, but is a losing proposition on the way down. The reverse is true for active management with simple moving averages. It's unlikely to outperform buy and hold on the way up, but outperformance on the way down is a virtual guarantee. Unfortunately it's impossible to pin-point those secular tops and bottoms and change strategy on a dime.

2010-05-13 00:00:00 Japan's Post-Bubble Rallies by Doug Short of Doug Short

Doug Short provides an updated chart that gives a close-up view of cyclical rallies and their durations during Japan's secular bear market, now in its 20th year, as well as a table that documents advances, declines and elapsed time for each cycle.

2010-05-05 00:00:00 Market Valuation and the Consumer Price Index by Doug Short of Doug Short

In response to a reader question, Doug Short posts a chart displaying real values of the S&P 500 using the 'Alternative CPI' from economist John Williams. The alternative inflation measure, which employs the original methodology used by the Bureau of Labor Statistics before 1982, produces market valuations that are much flatter over time than the official BLS inflation statistics, and lend yet another point of conflict in the perennial debate between the bulls and the bears and the inflationists and deflationists.

2010-05-03 00:00:00 Regression to Trend by Doug Short of Doug Short

About the only certainty in the stock market is that, over the long haul, overperformance turns into underperformance and vice versa. Is there a pattern to this movement? Doug Short applies some simple regression analysis to this question. A regression trend line drawn through the S&P Composite stretching back to 1871 clarifies the secular pattern of variance from the trend ? those multi-year periods when the market trades above and below trend. That regression slope represents an annualized growth rate of 1.7 percent.

2010-04-22 00:00:00 Sixteen Dow Recoveries - Another Look by Doug Short of Doug Short

This post features a return of Doug Short's analysis of how the Dow?s recovery compares to prior major recoveries, altered to adjust for reader feedback. Short has included an inflation-adjusted overlay chart, removed the 1932 rally (an outlier that scrunches up other rallies), and extended the timeline so we can see what followed. The recovery since March 2009 is the second in the first decade of the 21st century, and it started from a lower low. As the charts show, history has witnessed several other examples of multiple recoveries in relatively close succession with lower starting points.

2010-04-19 00:00:00 Sixteen Dow Recoveries by Doug Short of Doug Short

How does the current Dow recovery compare with major recoveries in the past? Doug Short created an overlay of the first 500 days of 16 recoveries in the Dow Jones Industrial Average since its creation in 1896 to help answer that very question. Compared to the other 15 rallies at the equivalent point, the current rally is in fourth place. The volatile recovery after the Crash of 1929 leads the pack by a wide margin. Where do we go from here? Some of the historic 500-day rallies went on to substantially higher gains. On the other hand, several of the earliest rallies soon faltered.


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