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dshort – Advisor Perspectives

World Markets Weekend Update: The Selloff Resumes

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February 6th, 2016

The week-over-week change in our aggregate world market watch list was a healthy 1.10% gain, up from 0.68% the previous week, which was preceded by harshly negative numbers the first two weeks of 2016. Appropriately enough, Japan's Nikkei was the top performer, up 3.30% for the week, with most of the gain triggered by the Bank of Japan's announced policy of negative interest rates. Global indexes surged following the announcement. China's Shanghai is the conspicuous outlier, plunging 6.14% for the week despite a 3.09% rally on the news from Japan.

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S&P 500 Snapshot: A Selloff to End the Week

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February 5th, 2016

Our benchmark S&P 500 ended the week with selloff in two waves. The index sank at the open and trended downward to a late morning low. It then traded sideways until a second wave of selling after the lunch hour sent the index to its -2.23% intraday low. A bit of buying in the final hour trimmed the loss to -1.85%. Technology stocks were particularly hard hit, as reflected in the -3.25% plunge in the NASDAQ. The 500 is now down 8.02% year-to-date and 11.77% off its record close on May 21st of last year.

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The Big Four Economic Indicators: January Nonfarm Employment

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February 5th, 2016

Note: This commentary has been updated to include Nonfarm Employment for January. As the adjacent thumbnail of the past year illustrates, Nonfarm Employment remains in its upward trend. The January report of 151K new jobs was substantially below expectations (Investing.com was looking for 190K), and the December number was revised downward by 30K from 292K to 262K.

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ECRI Weekly Leading Index: Another Decrease from the Previous Week

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February 5th, 2016

ECRI's latest weekly data point shows a fractional decrease from the previous week's number. The WLI annualized growth indicator (WLIg) is at -2.3, a decrease of 0.2 from the previous week, and well off its interim low of -4.7 in mid-January. The YoY is now at -0.77%, in negative territory for the majority of the last 52 weeks.

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The Civilian Labor Force, Unemployment Claims and the Business Cycle

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February 5th, 2016

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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December Trade Deficit Up from Revised November

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February 5th, 2016

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

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January New Jobs Disappoints Forecast; Downward Revisions to 2015

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February 5th, 2016

Today's report of 151K new nonfarm jobs in January was lower than the Investing.com forecast of 190K. December's nonfarm payrolls was revised downward by a 30K. Further downward revisions were made to 2015 numbers. The unemployment rate declined slightly to 4.9%.

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Putting the Recent Market Volatility in Context

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February 4th, 2016

The increase in market volatility has been a major focus of the popular financial press during the opening weeks of 2016. Let's examine the historical context for market volatility over the past nine-plus years, specifically since January 2007. Our preferred measure of volatility is the daily price range in the S&P 500: The percent change from the intraday low to the intraday high. To illustrate this bit of market behavior, we've charted the intraday range, the red dots in the accompanying chart, along with a 20-day moving average of this measure.

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New Jobless Claims: Up 8K, Worse Than Forecast

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February 4th, 2016

Today's seasonally adjusted 285K new claims, up 8K from last week's revised number, was worse than the Investing.com forecast of 280K. The four-week moving average is at 284,750, up from last week's revised 282,750.

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Weekly Heating Oil Price Update: Now at $2.08 per Gallon

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February 3rd, 2016

With winter in full swing, we've been thinking about the cold weather and thus our heating bill. Commodities saw their prices drop in 2015 with a 41% decline in energy. With the warmer weather this holiday season and warmer forecasts thanks to El Niño, heating oil prices will likely continue to drop. We're already seeing lower prices than at this time last year.

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ISM Non-Manufacturing: January Growth Continues at Slower Rate

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February 3rd, 2016

Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 53.3 percent, down 2.5 percent from last month's seasonally adjusted 55.8 percent. Today's number came in below the Investing.com forecast of 55.1 percent.

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Anticipating January Employment: ADP Report at 205K

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February 3rd, 2016

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 January estimate of 205K new nonfarm private employment jobs from ADP, a drop from December's 267K, revised upward from 257K.

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Light Vehicle Sales Per Capita: Our Latest Look at the Long-Term Trend

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February 3rd, 2016

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 62.8%.

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Market Remains Overvalued, Down from Last Month

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February 2nd, 2016

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: Clues from the Past

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February 2nd, 2016

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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The Q Ratio and Market Valuation: January Update

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February 2nd, 2016

Note: We've posted an update to incorporate the latest monthly close data through the end of January and the Federal Reserve's latest Z1 report released last month, data through Q3 of 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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The Big Four Economic Indicators: Real Personal Income for December

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February 2nd, 2016

Personal Income (excluding Transfer Receipts) in December rose 0.19% and is up 4.0% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.29%. The real number is up 3.4% year-over-year. Real PI less TR is one of those indicators that warrants adjustment for population growth to understand the long-term trends.

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Weekly Gasoline Price Update: Down Three Cents

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February 1st, 2016

It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium are down three cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $2.62 and Los Angeles,CA is averaging $2.73. Oklahoma has the cheapest at $1.47.

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December Disposable Income Per Capita Rose 0.22%, 0.31% When Adjusted for Inflation

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February 1st, 2016

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

The November nominal 0.22% month-over-month increase in disposable income come in at 0.31% when we adjust for inflation. The year-over-year metrics are 2.94% nominal and 2.35% real.

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Is the Stock Market Cheap?

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February 1st, 2016

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

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February 1st, 2016

Quick take: At the end of January the inflation-adjusted S&P 500 index price was 73% above its long-term trend, a decline from 87% 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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The Latest Look at Secular Bull and Bear Markets

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February 1st, 2016

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? At this point, almost seven 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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ISM Manufacturing Index: Fractional Increase

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February 1st, 2016

Today the Institute for Supply Management published its monthly Manufacturing Report for January. The latest headline PMI was 48.2 percent, an increase of 0.2% from the previous month and above the Investing.com forecast of 48.1.

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Crestmont Market Valuation Update

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February 1st, 2016

Quick take: Based on the January S&P 500 average of daily closes, the Crestmont P/E is 77% above its arithmetic mean and at the 96th percentile of this fourteen-plus-decade monthly metric.

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Two Measures of Inflation and Fed Policy

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February 1st, 2016

The BEA's Personal Consumption Expenditures Chain-type Price Index for December shows core inflation below the Federal Reserve's 2% long-term target at 1.41%, a statistically insignificant change from the previous month's 1.33%. The latest Core Consumer Price Index release, also data through December, is higher at 2.10%. The Fed is on record as using Core PCE data for its primary inflation gauge.

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The Core PCE Price Index Inches Higher But Remains Well Below Target

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February 1st, 2016

The Personal Income and Outlays report for December was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.58%, up from the previous month's 0.44%. The latest YoY Core PCE index (less Food and Energy) came in at 1.41%, little changed from the previous month's 1.38%, but the trend has inched higher from its interim low of 1.26% five month earlier.

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Market Cap to GDP: A Fractional Increase in the Buffett Valuation Indicator

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February 1st, 2016

With last week's Advance Estimate of Q4 GDP, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The indicator remains under 2 standard deviations from its mean. The current reading is 114.4%, up from 115.3% for the Second Estimate for Q3 GDP. It is off its 129.8% interim high in Q1 of 2105 year and below the +2SD level after seven quarters at or above that benchmark.

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Moving Averages: January Month-End Update

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January 29th, 2016

Valid until the market close on February 29, 2016

The S&P 500 closed January with a monthly loss of 5.07%. All three S&P 500 MAs are signaling "cash" and two 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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Visualizing GDP: A Closer Look Inside the Q4 Advance Estimate

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January 29th, 2016

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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Q4 GDP Per Capita at -0.10% for Advance Estimate

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January 29th, 2016

The Advance Estimate for Q4 GDP, to one decimal, came in at 0.7 percent, well below the 2.0 percent of the Q3 Third Estimate. But with a per-capita adjustment, the data series is currently at -0.1 percent. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

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Regional Fed Manufacturing Overview: January

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January 29th, 2016

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 is an overview of all five with an overlay and average of historical data.

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The Philly Fed ADS Business Conditions Index

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January 29th, 2016

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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Chicago PMI Jumps Back in January

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January 29th, 2016

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, jumped back up in January to a value of 55.6 from last month's 42.9. Values lower than 50.0 indicate contracting manufacturing activity.

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Michigan Consumer Sentiment: January Final Fractionally Below December

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January 29th, 2016

The University of Michigan Final Consumer Sentiment for January came in at 92.0, a 1.3 point decrease from the 93.3 January Preliminary reading and only a 0.6 point decrease from the December Final reading. Investing.com had forecast an even 93.0.

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Q4 GDP Advance Estimate at 0.7%, Down from Q3 Third Estimate

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January 29th, 2016

The Advance Estimate for Q4 GDP, to one decimal, came in at 0.7 percent, down from the 2.0 percent for the Q3 Third Estimate. Today's number was on par with most mainstream estimates, with Investing.com forecasting 0.8 percent and Briefing.com forecasting 0.7 percent.

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Moving Averages: Month-End Preview

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January 28th, 2016

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 triple "invested" signal. Only one of the five Ivy Portfolio ETFs — iShares' Barclays 7-10 Year Treasury (IEF) — is signaling "invested", a change from last month's double invested signals.

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The "Real" Goods on the December Durable Goods Data

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January 28th, 2016

Earlier today the Census Bureau posted the Advance Report on December 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 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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Kansas City Fed Survey: Moderate Declines in January, Composite Unchanged

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January 28th, 2016

The latest index came remained at -9.0, which indicates declining 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 levels last seen in April.

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NYSE Margin Debt Renews Its Decline

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January 28th, 2016

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

The NYSE margin debt data is a few weeks old when it is published. The latest debt level is down 2.4% month-over-month and 9.0% off its real (inflation-adjusted) record high set in April 2015. The pattern in recent months is beginning to resemble what we saw following the market peaks in 2000 and 2007.

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December Pending Home Sales Show Slight Decline

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January 28th, 2016

Today the National Association of Realtors released the December data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales were mostly unchanged in December, but inched forward slightly, fueled by a large increase in the Northeast that outpaced declines in the other three major regions."

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Home Ownership Remains Near Its Interim Low

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January 28th, 2016

Over the last decade the general trend has been consistent: The rate of home ownership continues to decline. The Census Bureau has now released its latest quarterly report with data through Q4 2015. The seasonally adjusted rate for Q4 is 63.7 percent, up slightly from 63.6 in Q3. The nonseasonally adjusted Q4 number is 63.8 percent, slightly above the Q3 number and up from the 63.4 percent interim low in Q2.

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December Durable Goods Report Disappoints Expectations

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January 28th, 2016

The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the December durable goods numbers. The latest new orders headline number at -5.1 percent was below the Investing.com estimate of -0.6 percent. This series is down -0.6 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at -1.2 percent month-over-month (MoM), which was below the Investing.com estimate of -0.1% percent. The core measure is also down -3.2 percent YoY.

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New Home Sales Surprise Expectations

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January 27th, 2016

This morning's release of the December New Home Sales from the Census Bureau at 544K surprised general expectations, and the previous month was revised upward by 1K. The MoM increase was 10.8%. The Investing.com forecast was for 500K.

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Second Set of Updates at Crestmont Research

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January 26th, 2016

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

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Richmond Fed: Manufacturing Grew Modestly in January

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January 26th, 2016

Today the Richmond Fed Manufacturing Composite Index dropped 4 points to 2 from last month's 6. Investing.com had forecast a decrease to 3. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 1.7, indicating expansion.

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Consumer Confidence Improved in January

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January 26th, 2016

The latest Conference Board Consumer Confidence Index was released this morning based on data collected through January 14. The headline number of 98.1, was an increase from the December final reading of 96.3, which is an upward revision from 92.6. Today's number was above the Investing.com forecast of 96.5.

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Home Prices Rose 4.8% Year-over-Year in November

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January 26th, 2016

With today's release of the November S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices for the benchmark 20-city index were up month over month at 0.9%. The seasonally adjusted year-over-year change has hovered between 4.6% and 5.5% for the last twelve months.

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FHFA House Price Index Up 0.5% in November, New Nominal Peak

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January 26th, 2016

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 November, up 0.5 percent on a seasonally adjusted basis from the previous month and is at its nominal peak. Year-over-year the index is up 5.9% (nonseasonally adjusted). Investing.com had forecast a 0.4 percent MoM increase.

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Dallas Fed Manufacturing Outlook: Weakening Business Conditions

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January 25th, 2016

This morning we got the most recent Dallas Fed Manufacturing Outlook. The latest index came in at -34.6, a 13 point decrease from last month's revised -21.6. Annual revisions were made. The Investing.com forecast was for a reading of -15.0.

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Understanding the CFNAI Components

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January 23rd, 2016

The Chicago Fed's National Activity Index, which we reported on yesterday, 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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Vehicle Miles Traveled: A Look at Our Evolving Behavior

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January 22nd, 2016

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

"Travel on all roads and streets changed by 4.3% (10.4 billion vehicle miles) for November 2015 as compared with November 2014." The less volatile 12-month moving average was up 0.33% month-over-month and 3.6% 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 0.27% month-over-month and up 2.8% year-over-year.

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Gasoline Volume Sales and our Changing Culture

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January 22nd, 2016

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-November, 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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Conference Board Leading Economic Index: Slight Decrease in December

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January 22nd, 2016

The Latest Conference Board Leading Economic Index (LEI) for December is now available. The index decreased 0.2 percent to 123.7 from November's revised 123.9. The latest indicator value came in below the -0.1 percent forecast by Investing.com.

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Existing-Home Sales Jumped in December

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January 22nd, 2016

This morning's release of the December Existing-Home Sales shows a jump from last month to a seasonally adjusted annual rate of 5.46 million units from 4.76 million in November. The Investing.com consensus was for 5.20 million. The latest number represents a 14.7% increase from the previous month and a 7.7% increase year-over-year.

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

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January 22nd, 2016

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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Chicago Fed: Economic Growth Below Average in December

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January 22nd, 2016

"Index shows economic growth below average in December": This is the headline for today's release of the Chicago Fed's National Activity Index.

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Secular Trends in Residential Building Permits and Housing Starts

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January 21st, 2016

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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Philly Fed Manufacturing Index: Activity Contracts Modestly in January

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January 21st, 2016

The latest Manufacturing Index came in at -3.5, up from last month's revised -10.2. The 3-month moving average came in at -6.5, up from a revised -7.3 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was up at 19.1, versus the previous month's 24.1. Annual historical revisions were made to this index.

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A Long Term Look at Inflation

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January 20th, 2016

The Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the year-over-year inflation rate at 0.73%. It is substantially below the 3.80% average since the end of the Second World War and its 10-year moving average, now at 1.97%.

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Inflation: A Six-Month X-Ray View

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January 20th, 2016

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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The Big Four Economic Indicators: December Real Retail Sales

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January 20th, 2016

Nominal Retail Sales in December declined 0.11% (rounded to -0.1%). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, came in at 0.0% month-over-month (rounded from 0.001%). 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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What Inflation Means to You: Inside the Consumer Price Index

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January 20th, 2016

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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New Residential Housing Starts in December Come in a Bit Shy of Forecast

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January 20th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for December new residential housing starts. The latest reading of 1.149M was below the Investing.com forecast of 1.200M.

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New Residential Building Permits: December Numbers Better Than Forecast

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January 20th, 2016

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for November new residential building permits. The latest reading of 1.232M was above the Investing.com forecast of 1.200M.

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December Consumer Price Index: Up Slightly from November

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January 20th, 2016

The Bureau of Labor Statistics released the December CPI data this morning. The year-over-year unadjusted Headline CPI came in at 0.73%, up from 0.50% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.10% (rounded to 2.1%), little changed from the previous month's 2.02% (rounded to 2.0%).

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NAHB Housing Market Index: Unchanged in January

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January 19th, 2016

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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The Big Four Economic Indicators: December Industrial Production Contracts Yet Again

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January 15th, 2016

Today's report on Industrial Production for December shows a month-over-month decline of 0.4 percent (0.36 percent to two decimal places), which was below the Investing.com consensus of a 0.2 percent decline. The previous three months were revised downward. this indicator has posted a monthly decline for ten of the last twelve months and is down 1.75% year-over-year, a year-over-year level that is lower than at the start of all ten recessions since 1950.

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Empire State Manufacturing Disappoints Forecast, Declined at Fastest Pace Since Recession

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January 15th, 2016

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -19.4 (-19.37 to two decimals) shows a significant decrease from last month's -6.21, which signals a faster decline in activity. The Investing.com forecast was for a reading of -4.0.

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Producer Price Index: A Slight Decrease in December

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January 15th, 2016

Today's release of the December Producer Price Index (PPI) for Final Demand came in at -0.2% month-over-month seasonally adjusted, down from 0.3% in November. It is down -1.0% year-over-year, the twelfth consecutive month of YoY shrinkage. Core Final Demand (less food and energy) came in at 0.1% MoM, down from 0.3% the previous month and is up 0.3% YoY. The Investing.com forecasts were for -0.2% headline and 0.1% core.

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Retail Sales: December Numbers Are a Huge Disappointment

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January 15th, 2016

The Census Bureau's Advance Retail Sales Report released this morning shows that seasonally adjusted sales in December decreased 0.1% month-over-month and are up 2.2% year-over-year. Core Retail Sales (ex Autos) also declined 0.1% MoM and are up only 1.2% YoY. The Investing.com forecasts were 0.1% for Headline and 0.2% for Core Sales.

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Treasury Snapshot: 10-Year Note at 2.08%

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January 13th, 2016

The Fed finally raised rates last month and ended the almost decade-long ZIRP policy. Let's take a closer look at US Treasuries since the decision. The yield on the 10-year note ended the day today at 2.08%, which is at the higher end of the year-to-date range of 1.68% to 2.50%. The yield on the 2-year note closed today at 0.91%, below its 1.09% interim high set the last week of 2015.

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

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January 12th, 2016

Last week's Employment Report for December surprised forecasts. The unemployment rate remained unchanged at 5.0% and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) rose to 292K with November's number revised upward to 261.0.

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Demographic Trends for the 50-and-Older Work Force

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January 12th, 2016

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 about one in five of the 70-74 cohort are in the labor force.

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Job Openings & Labor Turnover: Clues to the Business Cycle

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January 12th, 2016

The latest JOLTS report (Job Openings and Labor Turnover Summary), data through November, 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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NFIB: Small Business Survey "Remains Flat"

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January 12th, 2016

The latest issue of the NFIB Small Business Economic Trends is out today. The headline number for December came in at 95.2, up 0.4 from the previous month's 94.8. The index is at the 26th percentile in this series. Today's number came in a bit below the Investing.com forecast of an increase to 95.4.

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Another Look at the Total Return Roller Coaster

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January 11th, 2016

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 $17,357 for an annualized real return of 11.08%.

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The Labor Market Conditions Index for December

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January 11th, 2016

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 December data came in at 2.9, up from a revised 2.7 in November. Various revisions were made to the last 13 of 19 months

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The Latest Look at Long-Term Trends in Employment by Age Group

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January 11th, 2016

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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Multiple Jobholders: Two Decades of Trends as of December

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January 11th, 2016

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 we've illustrated in a pie chart.

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

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January 8th, 2016

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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New Updates at Crestmont Research

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January 7th, 2016

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.

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

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January 4th, 2016

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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November Median Household Income at a New Post-Recession High

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December 29th, 2015

The Sentier Research monthly median household income data for November came in at $56,746. The nominal median rose $75 month-over-month and is up $2,812 year-over-year. That's an increase of 0.1% MoM and 5.2% YoY. Adjusted for inflation, the latest income was up $58 MoM and $2,574 YoY. The real numbers equate to increases of 0.1% MoM and 4.8% YoY.

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Brace Yourself: Our Latest Look at Student Debt

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December 16th, 2015

College Tuition and Fees constitute one of the biggest threats to our economic outlook. Here is a chart of data from the relevant Consumer Price Index sub-component reaching back to 1978, the earliest year Uncle Sam provides a breakout for College Tuition and Fees. As an interesting sidebar, we've thrown in the increase in the cost of purchasing a new car as well as the more substantial increase for the broader category of medical care, both of which pale in comparison.

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The Fed's Financial Accounts: What Is Uncle Sam's Largest Asset?

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December 14th, 2015

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

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

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Household Net Worth: The "Real" Story

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December 10th, 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 55.1% above the 2009 trough and 25.9% above the 2007 peak but off the all-time high set in Q2. The nominal Q3 net worth is down 1.4% from the previous quarter but up 2.9% year over year.

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Forecasting Q3 GDP 2nd Estimate: Gazing Into the Crystal Ball

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November 23rd, 2015

The big economic number tomorrow will be the Q3 Second Estimate for GDP. The volatile first two quarters are behind us with their real annualized rates of 0.6% in Q1 and 3.9% in Q2, and the Advance Estimate for Q3 came in at 1.5%. What do economists see in their collective crystal ball for Q3 Second Estimate? 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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APViewpoint Events presents: A Live Debate: Should the Fed Raise Interest Rates?

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November 13th, 2015

Two industry thought leaders face off on the most contentious economic issue confronting advisors and investors today: the Fed’s stance on interest rates. In this live, Munk-style debate moderated by Larry Siegel, John and Frank will take opposing sides.John and Frank will answer attendees’ questions during the webinar and will also be available to continue the discussion on APViewpoint. Attendees can also vote on the proposition both before and after the debate. Results for both votes will be compared to determine the “winner.”

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Access the latest research from mutual fund thought leaders

November 10th, 2015

Access research from the fund industry as soon as it is available. We curate the most relevant research reports from top analysts and firms, and we write a one-paragraph abstract with a link to read the full report. This is a free service from Advisor Perspectives, the parent company of dshort.

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Intuit Small Business Index: Up Fractionally

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November 10th, 2015

The latest Intuit Small Business Employment Index (SBI) came out this morning, which measures employment in firms with fewer than 20 employees with data going back to 2007. The real-time data comes directly from Intuit software, not from surveys, and is the only source of monthly data on small business revenues, expenses, and payroll data. It allows for a much earlier read on the health of small businesses.

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Student Loan Debt: A Closer Look

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October 28th, 2015

Many reports on student loan debt over the last decade have focused on the rapid growth of educational debt per student. Here we examine loan debt through current costs of undergraduate education and enrollment, and student aid over time.

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Forecasting Q3 GDP: Gazing Into the Crystal Ball

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October 21st, 2015

The big economic number next week will be the Q3 Advance Estimate for GDP on Thursday the 29th at 8:30 AM ET. With the volatile first two quarters behind us with their real annualized rates of 0.6% in Q1 and 3.9% in Q2, what do economists see in their collective crystal ball for Q3 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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Household Incomes: The Value of Higher Education

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October 19th, 2015

What is the value of education for household income? The Census Bureau's annual survey data for 2014 published last month gives us some interesting insights into this question. The median income for all households with a householder age 25 and older was $55,283. The chart below shows the median annual household income for nine cohorts by educational attainment. We've rounded the data points to the nearest $100, e.g. $55.3K for all households.

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Household Incomes: The Decline of the "Middle Class"

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October 13th, 2015

The median household is the statistical center of the Middle Class. In terms of income, this class has not fared well in recent decades. Let's take a closer look at a troubling aspect of the Census Bureau's latest annual household income data, issued last month. In this update we'll focus on the growing gap between the median (middle) and mean (average) household incomes across the complete time frame of the Census Bureau's annual reporting, which began in 1967, to the release last month of the annual data for 2014.

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Household Incomes Across Time: The Divergence at the Top

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October 7th, 2015

Among the most interesting of the long-term economic indicators we track is the Census Bureau's annual data on the mean (average) household income received by each fifth (quintile) and top 5 percent. See our 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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Baby Boomer Employment Across Time

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October 5th, 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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Median Household Income Growth: Deflating the American Dream

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September 23rd, 2015

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: 2014". Last year the median (middle) household income was $53,657 — a 0.13% year-over-year increase that shrinks to -1.48% when adjusted for inflation. Let's put the new release into a larger historical context.

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Median Home Price and Salary Required in 27 Major Cities

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September 23rd, 2015

Tim Manni, the Managing Editor at HSH.com, features a periodic update entitled "The Salary You Must Earn to Buy a Home in 27 Metros". The key question is:

"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?"

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Median Household Purchasing Power for the 50 States and DC

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September 22nd, 2015

Last week we posted an update on the median household income by 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 2014. Let's now look at the actual purchasing power of those median incomes. For this adjustment we're using the "C2ER Cost of Living Index" produced by C2ER, the Council for Community and Economic Research.

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

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September 18th, 2015

The Census Bureau's annual household income reports for 2014 is now available. We'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 2014. The details are fascinating.

First, some context. The median US income in 2014 was $53,657, up from $22,415 in 1984 -- a 139.4% rise over the 30-year time frame.

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Median Household Incomes by Age Bracket: 1967-2014

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September 17th, 2015

Earlier today we updated our commentary on household income distribution to include the Census Bureau's release of the 2014 annual data. Our 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. But the classification misses the implications of age for income. Households are by no means locked into the same quintile over time.

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U.S. Household Incomes: A 47-Year Perspective

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September 17th, 2015

The Census Bureau has now released its annual report household income data for 2014. This update features an analysis of the quintile breakdown of data from 1967 through 2014 along with the statistics for the top 5%.

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Debt, Taxes and Politics: A Perspective on Federal Tax History

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September 14th, 2015

With the focus on the Federal Reserve and conflicting expectations of a September rate hike, let's take a long look back at federal debt and taxes.

The first chart is a snapshot of federal debt with government forecasts through 2018.

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Equity Valuations, Recessions and Stock Market Declines

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September 10th, 2015

Note from Doug: In response to a request, I've updated the data in this article through the August month-end numbers.

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:

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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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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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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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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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