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dshort – Advisor Perspectives

S&P 500 Snapshot: The Rebound Stalls

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August 28th, 2015

Before the market opened, the Shanghai Composite posted another big gain, up 4.82%, but the European indexes would close fractionally above the flat line (the Euro STOXX 50 up only 0.18%). Our benchmark S&P 500 followed the European exemplar, struggling throughout the day in a narrow range around (mostly below) the opening price. The index ended the day with a rally in the final minutes to eke out a tiny gain of 0.06%, ending a volatile week with a gain of 0.91%.

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Moving Averages: Month-End Preview

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August 28th, 2015

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 "cash" -- changed from last month's all "invested" signal. Four of the five Ivy Portfolio ETFs - Vanguard REIT Index ETF (VNQ), PowerShares DB Commodity Index Tracking (DBC), and Vanguard FTSE All-World ex-US ETF (VEU), and Vanguard Total Stock Market ETF (VTI) - are signaling "cash", similar to last month's quadruple cash signal (IEF, VNQ, DBC, VEU).

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July Real Disposable Income Per Capita Rose 0.31%

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August 28th, 2015

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

The July nominal 0.39% month-over-month increase in disposable income drops to 0.31% when we adjust for inflation. The year-over-year metrics are 2.83% nominal and 2.52% real.

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Michigan Consumer Sentiment: Down Slightly from August Preliminary Reading

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August 28th, 2015

The University of Michigan Final Consumer Sentiment for August came in at 91.9, a slight decrease from the 92.0 Preliminary reading. Investing.com had forecast 93.0 for the August Final.

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ECRI Weekly Leading Index: Down Marginally from Last Week

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August 28th, 2015

ECRI's latest article discusses the large decline in global trade growth, specifically mentioning that YoY world trade growth is nearing zero. After almost four years of falling export prices and major policy stimulus, export price deflation is almost at a point that compares to the Global Financial Crisis. We are essentially in a "shrinking pie trade".

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The PCE Price Index Still Below Target

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August 28th, 2015

The Personal Income and Outlays report for July was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.30%, down from a revised 0.34% the previous month. The latest Core PCE index (less Food and Energy) at 1.24% is essentially unchanged from the previous month's 1.30% YoY.

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NYSE Margin Debt: Down 3.5% from the Previous Month

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August 28th, 2015

Note: The NYSE has released new data for margin debt, now available through July. 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 down 3.5% month-over-month and 4.7% off its real (inflation-adjusted) record high in April.

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Q2 GDP Per Capita at 3.1 for Second Estimate

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August 27th, 2015

The Second Estimate for Q2 GDP, to one decimal, came in at 3.7 percent, up from the 2.3 percent of the Advance Estimate. But with a per-capita adjustment, the data series is currently at 3.1 percent (3.05 percent to two decimal places). The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

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Visualizing GDP: A Closer Look Inside the Q2 Second Estimate

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August 27th, 2015

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.

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Q2 GDP Second Estimate at 3.7%, Better than Forecasts

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August 27th, 2015

The Second Estimate for Q2 GDP, to one decimal, came in at 3.7 percent, anincrease from the 2.3 percent Advance Estimate. Today's number was slightly better than most mainstream estimates with Investing.com at 3.2 and Briefing.com at 3.1.

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Kansas City Fed Survey: Manufacturing Declined Moderately in August

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August 27th, 2015

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 -9, 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.

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New Jobless Claims Slightly Better Than Forecast

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August 27th, 2015

Today's seasonally adjusted 271K new claims was slightly better than the Investing.com forecast of 274K. The four-week moving average at 272,750 is about 6K above the interim low.

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July Pending Home Sales Mostly Unchanged

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August 27th, 2015

Earlier today the National Association of Realtors released the July data for their Pending Home Sales Index. "Pending home sales were mostly unchanged in July, but rose modestly for the sixth time in seven months, according to the National Association of Realtors®".

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The "Real" Goods on the July Durable Goods Data

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August 26th, 2015

Earlier today the Census Bureau posted the Advance Report on July 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.

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July Durable Goods: New Orders Up 2%, Better Than Expected

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August 26th, 2015

The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at July's durable goods numbers. This update has more extensive data on factory orders. The latest new orders headline number is at 2.6% percent. This series is down -19.6 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 0.6 percent month-over-month (MoM), a bit above the Investing.com estimate of 0.4 percent. However, the core measure is down -2.5 percent YoY.

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Consumer Confidence Rebounds in August

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August 25th, 2015

The latest Conference Board Consumer Confidence Index was released this morning based on data collected through August 13. The headline number of 101.5 was a significant jump from the July final reading of 91, a downward revision of July's initial 99.8. Today's number was above the Investing.com forecast of 93.4.

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Richmond Fed: Manufacturing Dropped 13 Points

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August 25th, 2015

Today the Richmond Fed Manufacturing Composite Index dropped 13 points to 0 from last month's 13. Investing.com had forecast a decrease to 9. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 6.7, indicating expansion.

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FHFA House Price Index Up 1.2% in Q2

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August 25th, 2015

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 June, up 0.2 percent on a seasonally adjusted basis from the previous month and up 1.2% in Q2. Year-over-year the index is up 5.5% (nonseasonally adjusted). Investing.com had forecast a 0.4 percent MoM increase.

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New Home Sales at 507K

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August 25th, 2015

This morning's release of the July New Home Sales from the Census Bureau at 507,000 was slightly below general expectations, and the previous month was revised downward by 1K. The Investing.com forecast was for 510K.

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Understanding the CFNAI Components

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August 24th, 2015

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

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Weekly Gasoline Price Update: Regular and Premium Up While WTIC Lowest Since 2009

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August 24th, 2015

It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium went up by eight and seven cents respectively. WTIC plummeted to $38.24, its lowest since January 2009. According to GasBuddy.com, California has the highest average price for Regular at $3.47 with Los Angeles averaging $3.68. South Carolina has the cheapest at $2.10.

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Chicago Fed: Economic Growth Picked Up in July

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August 24th, 2015

"Index shows economic growth picked up in July": This is the headline for today's release of the Chicago Fed's National Activity Index.

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World Markets Weekend Update: A Global Meltdown

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August 22nd, 2015

All eight indexes on our world watch finished in the red this week ... deep in the red. India's SENSEX was the top performer, down a "mere" -2.50%. The other indexes posted weekly declines ranging from the Nikkei's -5.28% to the Shanghai Composite's -11.54%.

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Gasoline Volume Sales and our Changing Culture

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August 21st, 2015

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-June, 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.

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Vehicle Miles Traveled: A Look at Our Evolving Behavior

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August 20th, 2015

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

"Travel on all roads and streets changed by 3.9% (10.3 billion vehicle miles) for June 2015 as compared with June 2014." The less volatile 12-month moving average is up 0.39% month-over-month and 3.06% 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 0.31% month-over-month and up only 1.89% year-over-year.

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Conference Board Leading Economic Index Sees Fractional Decline in July

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August 20th, 2015

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

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Philly Fed Business Outlook: Manufacturing Activity Increased in August

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August 20th, 2015

The latest gauge of General Activity came in at 8.3, up from last month's 5.7. The 3-month moving average came in at 9.7, fractionally up from 9.2 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was up at 43.1, versus the previous month's 41.5.

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Existing-Home Sales Increase for Third Consecutive Month

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August 20th, 2015

This morning's release of the July Existing-Home Sales shows an increase for the third consecutive month to a seasonally adjusted annual rate of 5.59 million units from a slight downward revision of 5.48 million in June (previously 5.49 million). The Investing.com consensus was for 5.44 million. The latest number represents a 2.0% increase from the previous month and a 10.3% increase year-over-year.

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APViewpoint Presents Global Macro Outlook: The Real Vision Perspective from Grant Williams and Raoul

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August 19th, 2015

A live, CFP/IMCA CE-eligible webinar presented by APViewpoint on Tuesday, August 25, at 4:15 pm ET. The major strengthening of the US dollar is changing the global investment landscape. In this live Q&A session conducted by Advisor Perspectives CEO Robert Huebscher, Real Vision founders Grant Williams and Raoul Pal will discuss key macroeconomic drivers of asset price movements in international markets, focusing on how advisors can help their clients profit from opportunities created by favorable U.S. currency rates.

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Five Decades of Middle Class Wages: August 2015 Update

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August 19th, 2015

We've updated this series to include the today's release of the Consumer Price Index as the deflator and the final July monthly update. The initial update was based on a linear extrapolation of the CPI. The latest hypothetical annual earnings are at $35,402, down 14.6% from 42 years ago.

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Inflation: An X-Ray View of the Components

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August 19th, 2015

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.

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A Long-Term Look at Inflation

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August 19th, 2015

The Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the year-over-year inflation rate at 0.17%. It is substantially below the 3.84% average since the end of the Second World War and its 10-year moving average, now at 2.12%.

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What Inflation Means to You: Inside the Consumer Price Index

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August 19th, 2015

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.

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The Big Four Economic Indicators: July Real Retail Sales Show Improvement

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August 19th, 2015

Nominal Retail Sales in July rose 0.6%, and the two previous months were revised upward. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, came in at 0.44% month-over-month. 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.

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Secular Trends in Residential Building Permits and Housing Starts

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August 19th, 2015

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.

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July Consumer Price Index: Year-over-Year Core Remains at 1.8%

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August 19th, 2015

The Bureau of Labor Statistics released the July CPI data this morning. The year-over-year unadjusted Headline CPI came in at 0.17% (rounded to 0.2%), up from 0.12% (rounded to 0.1%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.80%, essentially unchanged from the previous month's 1.76% (rounded to 1.8%). Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

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New Residential Building Permits: Largest MoM Decline Since 2008

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August 18th, 2015

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for July new residential building permits. The latest reading of 1.119M was slightly below the Investing.com forecast of 1.232M.

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New Residential Housing Starts Slightly Above Forecast for July

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August 18th, 2015

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for July new residential housing starts. The latest reading of 1.20M was slightly above the Investing.com forecast of 1.19M.

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How Business Friendly Is Your State?

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August 18th, 2015

Thumbtack.com has now published its fourth annual Small Business Friendliness Survey, with responses from nearly 18,000 businesses in the United States. The objective is to rate their state and city governments across a broad range of policy factors.

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NAHB Housing Market Index: Up One Point

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August 17th, 2015

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.

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Empire State Manufacturing Tumbled to Lowest Level Since 2009

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August 17th, 2015

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -14.9 (-14.92 to two decimals) shows a decrease from last month's 3.8, which signals a decline in activity.This is the lowest level since 2009. The Investing.com forecast was for a reading of 5.00.

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Treasury Yields: A Long-Term Perspective

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August 16th, 2015

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%.

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Treasury Snapshot: A Look at the 2015 Trends

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August 15th, 2015

US Equity indexes had a relatively subdued week. The benchmark S&P 500 rose a fractional 0.67% and has traded in a relatively narrow range for the past six months, despite chronic Grexit tensions, the bubble in Chinese equities and central bank intervention. The yield on the 10-year note closed on January 2nd at 2.12%. It hit its year-to-date low of 1.68% a month later and its YTD closing high of 2.50% on June 10th. It has since fallen 30 bps to close the past week at 2.20%.

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The Big Four Economic Indicators: An Upturn in Industrial Production

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August 14th, 2015

According to the Federal Reserve: "Industrial production increased 0.6 percent in July after moving up 0.1 percent in June. In July, manufacturing output advanced 0.8 percent primarily because of an increase in motor vehicle assemblies. The output of motor vehicles and parts jumped 10.6 percent, and production elsewhere in manufacturing edged up 0.1 percent."

Today's headline number is the strongest since last November.

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Producer Price Index Remains Negative Year-over-Year

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August 14th, 2015

Today's release of the July Producer Price Index (PPI) for Final Demand came in at 0.2% month-over-month seasonally adjusted. That follows the previous month's 0.4% increase. Core Final Demand (less food and energy) came in at 0.3% month-over-month following a 0.3% change the month before. The Investing.com forecasts were for 0.1% headline and 0.1% core.

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Retail Sales: July Retail Sales Stage a Comeback

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August 13th, 2015

The Census Bureau's Advance Retail Sales Report released this morning shows that seasonally adjusted sales in July increased 0.6% month-over-month and up 2.4% year-over-year. Core Retail Sales (ex Autos) came in at 0.4% MoM and 1.3% YoY. The Investing.com forecasts were 0.5% for Headline Sales and 0.4% for Core Sales. Today's report shows a welcome improvement over the June data.

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Job Openings & Labor Turnover: The Latest Clues to the Business Cycle

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August 12th, 2015

The latest JOLTS report (Job Openings and Labor Turnover Summary), data through June, is now available. The first chart below shows four of the headline components of the overall series, which the BLS began tracking in December 2000. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends.

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What Would It Take for the Prime U.S. Workforce to Fully Recover?

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August 12th, 2015

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.

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Demographic Trends for the 50-and-Older Work Force

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August 11th, 2015

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.

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Another Look at Long-Term Trends in Employment by Age Group

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August 11th, 2015

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.

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NFIB: Small Business Index Up 1.3 in July

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August 11th, 2015

The latest issue of the NFIB Small Business Economic Trends is out today. The update for July came in at 95.4, a 1.3 point increase from the previous month. The index is now at the 27th percentile in this series. The Investing.com forecast was for 95.4. Here is the opening summary of the news release.

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Multiple Jobholders: Two Decades of Trends as of July

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August 10th, 2015

What are the long-term trends for multiple jobholders in the US? The Bureau of Labor Statistics has two decades of historical data to enlighten us on that topic, courtesy of Table A-16 in the monthly Current Population Survey.

At present, multiple jobholders account for about five percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which I've illustrated in a pie chart.

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The Labor Market Conditions Index for July Shows Weak Expansion

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August 10th, 2015

The Labor Market Conditions Index (LMCI) is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. It is a dynamic factor model of labor market indicators, essentially a diffusion index subject to extensive revisions based on nineteen underlying indicators in nine broad categories (see the table at the bottom for details). Today's release of the July data indicates expansion at 1.1. Hiistorical revisions were made, with the June value revised from 0.8 to 1.4.

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Ratio of Part-Time Employed Remains Higher Than the Pre-Recession Levels

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August 10th, 2015

Let's take a close look at Friday's employment report numbers on Full and Part-Time Employment. Buried near the bottom of Table A-9 of the government's Employment Situation Summary are the numbers for Full- and Part-Time Workers, with 35-or-more hours as the arbitrary divide between the two categories. The source is the monthly Current Population Survey (CPS) of households. The focus is on total hours worked regardless of whether the hours are from a single or multiple jobs.

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Trends in the Teenage Workforce

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August 10th, 2015

Last month 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 revised one of our monthly charts on Labor Force Participation to include the age 16-19 cohort -- one we elsewhere combine 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.

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The Civilian Labor Force, Unemployment Claims and the Business Cycle

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August 7th, 2015

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.

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The Big Four Economic Indicators: July Nonfarm Employment

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August 7th, 2015

As the adjacent thumbnail of the past year illustrates, Nonfarm Employment has been in a steady upward trend. Today's report of 215K new nonfarm jobs in July was a bit below expectations. However, the June number was revised upward by 14K and May by 6K, which gives us a net gain of 235K for July. The unemployment rate remains unchanged at 5.3%.

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July New Jobs Below Forecast but May and June Revised for a 235K Net Gain

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August 7th, 2015

Today's report of 215K new nonfarm jobs in July was a bit below the Investing.com forecast of 223K. However, May nonfarm payrolls were revised upward by 6K and June upward by 14K for a total of +20K and a total net gain for May through July of 235K. The unemployment rate remained unchanged at 5.3%.

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ISM Non-Manufacturing: 66th Consecutive Month of Growth

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August 5th, 2015

Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 60.3 percent, up 4.3% percent from last month's 56%. Today's number came in above the Investing.com forecast of 56.2 percent.

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Anticipating the Employment Report for July: ADP Number Disappoints

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August 5th, 2015

The economic mover and shaker this week is Friday'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 (the PAYEMS series in the FRED repository). Today we have the July estimate of 185K new nonfarm private employment jobs from ADP, down from the June's 229K, which is a downward revision from 237K. Also, the May number was revised downward by 6K.

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Trade Balance Up 2.9B from Revised May Headline

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August 5th, 2015

The International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with revisions that go back several months, with data going back to 1992. This report details U.S. exports and imports of goods and services.

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The Market Remains in Overvaluation Territory

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August 4th, 2015

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

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Market Valuation, Inflation and Treasury Yields: More Clues from the Past

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August 4th, 2015

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.

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Light Vehicle Sales Per Capita: A New Look at the Long-Term Trend

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August 3rd, 2015

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 62%.

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The Q Ratio and Market Valuation: June Update

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August 3rd, 2015

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.

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Two Measures of Inflation and Fed Policy

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August 3rd, 2015

The BEA's Personal Consumption Expenditures Chain-type Price Index for June shows core inflation below the Federal Reserve's 2% long-term target at 1.29%. The latest Core Consumer Price Index release, also data through June, is higher at 1.76%. The Fed is on record as using Core PCE data for its primary inflation gauge.

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Crestmont Market Valuation Update

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August 3rd, 2015

Quick take: Based on the July S&P 500 average of daily closes, the Crestmont P/E is 96% above its arithmetic mean and at the 98th percentile of this fourteen-plus-decade monthly metric.

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Regional Fed Manufacturing Overview

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August 3rd, 2015

The Federal Reserve System consists of twelve Federal Reserve Banks, twenty five branches, and the Board of Governors in Washington, D.C. Each bank serves a larger regional district. Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. Here we introduce an overview of all five with an overlay and average of historical data.

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Is the Stock Market Cheap?

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August 3rd, 2015

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.

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The Big Four Economic Indicators: Real Personal Income for June

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August 3rd, 2015

Personal Income (excluding Transfer Receipts) in June rose 0.47% and is up 3.9% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.24%. The real number is up 3.55% year-over-year. Real PI less TR is one of those indicators that warrants adjustment for population growth.

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ISM Manufacturing Index: 31st Consecutive Month of Expansion

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August 3rd, 2015

Today the Institute for Supply Management published its monthly Manufacturing Report for July. The latest headline PMI was 52.7 percent, a decrease of 0.8% from the previous month and below the Investing.com forecast of 54.7. This was the 31st consecutive month of expansion.

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Regression to Trend: A Look at Long-Term Market Performance

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August 3rd, 2015

Quick take: At the end of July the inflation-adjusted S&P 500 index price was 90% 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.

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Secular Bull and Bear Markets

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August 2nd, 2015

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.

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Moving Averages: July Month-End Update

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July 31st, 2015

Valid until the market close on July 31, 2015

The S&P 500 closed July with a monthly gain of 1.98%. 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.

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Market Cap to GDP: The Buffett Valuation Indicator Remains in Levitation Mode

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July 30th, 2015

With today's release of the Advance Estimate for Q2 GDP along with revisions for the previous 12 quarters, we now have a fresh look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The latest data keeps the indicator in levitation mode at a new interim high.

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Millennials and the Labor Force: A Look at the Trends

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July 29th, 2015

We have added Millennials to our series of employment demographics. The general consensus is that the Millennial cohort consists of people born between the early 1980s to the early 2000s. In this study we will focus on the Bureau of Labor Statistics data for the those born between 1981 and 2000.

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Home Price Rose at a Slightly Slower Pace, Year-over-Year, in May

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July 28th, 2015

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.

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Home Ownership Drops to a New Interim Low

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July 28th, 2015

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.

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Forecasting Q2 GDP: Gazing Into the Crystal Ball

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July 27th, 2015

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.

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Dallas Fed Manufacturing Outlook Rose for a Second Month but Still in Negative Territory

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July 27th, 2015

This morning we got the most recent Dallas Fed Manufacturing Outlook. The latest index came in at -4.6, still negative but rose for the second month in a row. The Investing.com forecast was for a reading of -3.5.

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The Median Household Income Declined Fractionally in June

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July 24th, 2015

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.

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The Philly Fed ADS Business Conditions Index

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July 24th, 2015

The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but relatively little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index.

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The Four Totally Bad Bear Recoveries: Where Is Today's Market?

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July 21st, 2015

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.

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Baby Boomer Employment Across Time

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July 13th, 2015

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.

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WSJ Economists' June Forecasts for 10-Year Yields and the Fed Funds Rate

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June 17th, 2015

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.

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Household Net Worth: The "Real" Story

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June 11th, 2015

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.

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The Fed Balance Sheet: What Is Uncle Sam's Largest Asset?

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June 11th, 2015

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

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The S&P 500, Dow and Nasdaq Since Their 2000 Highs

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May 31st, 2015

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).

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A New Look at the Total Return Roller Coaster

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May 20th, 2015

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%.

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Labor Productivity, Household Incomes and Corporate Profits: And the Winner Is?

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May 7th, 2015

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.

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Four Bad Bears: Some Comments from Bob Bronson

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April 22nd, 2015

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:

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The Declining Demand for Driving Vehicles

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March 20th, 2015

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.

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Household Income versus Family (Tax-Unit) Income

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January 29th, 2015

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).

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Household Incomes Across Time: The Divergence at the Top

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December 30th, 2014

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.

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Happiness Revisited: A Household Income of $75K?

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September 25th, 2014

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.

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Median Household Income by State: A Sobering Look at the Data

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September 19th, 2014

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.

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Median Household Incomes by Age Bracket: 1967-2013

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September 17th, 2014

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.

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U.S. Household Incomes: A 46-Year Perspective

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September 17th, 2014

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%.

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Median Household Income Growth: Deflating the American Dream

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September 16th, 2014

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.

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