S&P 500 Snapshot: Four-Day Rally Ends Click to view

October 22nd, 2014 Doug Short

The S&P 500 got off to a reasonably good start following the pre-market Goldilocks inflation data (not too hot, not too cold), and retirees learned they would get a 1.7% Social Security COLA for 2015. The index hit its 0.41% intraday high about two hours after the open. It then began drifting lower with some accelerated selling the final hour. It closed with a -0.73% loss, just off its -0.74% intraday low, and snapping a four-day rally.

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What If Chained CPI Had Been Used to Calculate COLAs Since 2002? Click to view

October 22nd, 2014 Doug Short

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

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

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Chained CPI Versus the Standard CPI: Breaking Down the Numbers Click to view

October 22nd, 2014 Doug Short

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

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

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The Big Four Economic Indicators: Disappointing Real Retail Sales Click to view

October 22nd, 2014 Doug Short

With this morning’s release of the September Consumer Price Index, we can now calculate Real Retail Sales. I reported the nominal Advance Retail Sales last week, which showed September at -0.3% (-0.32% at two decimals) month-over-month, down from 0.6% in August. That was much worse that the mainstream forecasts. When we adjust for inflation, September sales came in even worse at a -0.41%.

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What Inflation Means to You: Inside the Consumer Price Index Click to view

October 22nd, 2014 Doug Short

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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Population-Adjusted Real Retail Sales: Another Perspective on the Economy Click to view

October 22nd, 2014 Doug Short

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

Earlier this month, the Advance Retail Sales Report showed that sales in September declined 0.3% month-over-month, as I reported in my real-time update.

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

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Consumer Price Index Rose Slightly in September; Social Security COLA for 2015 Will Be 1.7% Click to view

October 22nd, 2014 Doug Short

The Bureau of Labor Statistics released the September CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.66%, down from the previous month's 1.99%. Year-over-year Core CPI (ex Food and Energy) came in at 1.72% (rounded to 1.7%), little changed from the previous month's 1.70%. The non-seasonally adjusted month-over-month Headline number was up 0.08%, and the Core number was up 0.23%. On a seasonally-adjusted basis, the all items index was up 0.1%.

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S&P 500 Snapshot: Biggest Gain in More Than a Year Click to view

October 21st, 2014 Doug Short

Europe was in rally mode when the US markets opened, and the EURO STOXX 50 would subsequently close with a 2.19% gain. The S&P 500 opened at its intraday low, up 0.28%, and headed higher through the day to its 2.02% high in the final hour. Its closing gain of 1.96% was its best one-day performance since its 2.18% surge on October 10th of last year.

The yield on the 10-year Note closed at 2.23%, up 3 bps from yesterday's close.

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Anticipating the 2015 Cost of Living Adjustment for Social Security Click to view

October 21st, 2014 Doug Short

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

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Weekly Gasoline Price Update: Down Another Nine Cents Click to view

October 20th, 2014 Doug Short

It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny Regular dropped another nine cents and Premium eight cents. Regular is now at its lowest price since January 2011.

According to GasBuddy.com, only one state (Hawaii) has Regular above $4.00 per gallon. The highest continental average price is in California at 3.49. Missouri has the cheapest Regular at $2.76.

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S&P 500 Snapshot: IBM Plunges, But Day Three of the Broader Rally Click to view

October 20th, 2014 Doug Short

With no economic news today, there was little to distract from IBM's pre-market announcement of disappointing Q3 earnings. The company (my employer in a special business unit from 1984 to 1997) plunged at the open. It trimmed its closing loss to -7.17%. The popular press reports that the Oracle of Omaha (aka Warren Buffett) lost about $1 Billion today, based on his latest SEC filings. In contrast, after today's close Apple announced strong earnings and upward sales guidance. It was up 2.14% today and is trading higher after the close.

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A New Look at the Total Return Roller Coaster Click to view

October 20th, 2014 Doug Short

Note from dshort: I received a recent email on historical total returns that prompted an update to my Roller Coaster Return series. I've updated the charts below based on monthly data through the September close.

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?

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Vehicle Miles Traveled: A Structural Change in Our Behavior Click to view

October 20th, 2014 Doug Short

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

Travel on all roads and streets changed by 0.4% (1.0 billion vehicle miles) for August 2014 as compared with August 2013 (see report). The less volatile 12-month moving average is up 0.03% month-over-month. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is down 0.05% month-over-month and down 0.3% year-over-year.

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World Markets Weekend Update: The Selloff Moderates ... Except for Japan Click to view

October 18th, 2014 Doug Short

The world market selloff moderated over the past week, except for Japan's Nikkei 225. The top performer in my gang of eight world indexes (and the sole gainer) was Germany's DAX, which rose 0.70%. At the bottom of the heap, the Nikkei plunged 5.02%. The S&P 500, like most of the others on the list, posted its 4th weekly loss, down 1.02%

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S&P 500 Snapshot: A Friday Rally Trims the Weekly Loss to -1.02% Click to view

October 17th, 2014 Doug Short

The S&P 500 opened higher and rallied to its 1.90% intraday high in the late morning. The afternoon was a bit less jubilant, and the index finished Friday with a 1.29% advance, thus ending a highly volatile week with a loss of 1.02%. This was the fourth consecutive weekly decline -- the longest such string of red since the four-week selloff in summer of 2011. Prior to that was the six-week dive in May of 2011.

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ECRI Recession Watch: Weekly Update Click to view

October 17th, 2014 Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.4, up slightly from the previous week's 134.1. The WLI annualized growth indicator (WLIg) is at 1.0, down from 1.5 the previous week.

ECRI's website now features a summary the recent findings of their Long Leading Index of Global Growth (LLIGG) and their Coincident Index of Global Growth (CIGG).

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Michigan Consumer Sentiment at Highest Level Since July 2007 Click to view

October 17th, 2014 Doug Short

The Preliminary University of Michigan Consumer Sentiment for October came in at 86.4, a rise from the September Final of 84.6. This is the highest level since July 2007. Today's number was above the Investing.com forecast of 84.1.

See the chart below for a long-term perspective on this widely watched indicator. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

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The Four Totally Bad Bear Recoveries: Where Are We Now? Click to view

October 17th, 2014 Doug Short

Note from dshort: At the request of The Advisory Group in San Francisco, here’s updated comparison of four major cyclical bear markets. The numbers are through yesterday’s close.

The 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, 2) The 2000 Tech bust and 4) the post-2007 Financial Crisis. The series includes nominal, real, total-return and real total-return comparisons.

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S&P 500 Snapshot: A Volatile Road to Nowhere Click to view

October 16th, 2014 Doug Short

The pre-open economic news today was the big drop in new jobless claims, now at a 14-year low. Interestingly enough, index futures dropped on the news, perhaps because the actual trough in claims in 2000 was on April 15, 2000. It was preceded by the S&P 500 Tech Bubble peak three weeks earlier on March 24th.

The S&P 500 opened lower and sold off to its -1.47% intraday low about 45 minutes later. The index then zigzagged to its 0.73% intraday high in the early afternoon. The volatile session ended by essentially going nowhere, up 0.01% at the close.

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Philly Fed Business Outlook: Slightly Slower Growth Click to view

October 16th, 2014 Doug Short

The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. The latest gauge of General Activity came in at 20.7, a small decrease from last month's 22.5. The 3-month moving average came in at 23.7, down from 24.8 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook slipped to 54.5 from last month's 56.

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New Jobless Claims Hit a 14+ Year Low Click to view

October 16th, 2014 Doug Short

In the week ending October 11, the advance figure for seasonally adjusted initial claims was 264,000, a decrease of 23,000 from the previous week's unrevised level of 287,000. This is the lowest level for initial claims since April 15, 2000 when it was 259,000.

Sidebar on the BLS's Attention Grabber: The April 2000 claims level mentioned in today's report was sixteen market days after the S&P 500 hit its record close at the top of the Tech Bubble.

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S&P 500 Snapshot: A Scary Day on Wall Street Click to view

October 15th, 2014 Doug Short

Today the S&P 500 turned in quite a dramatic performance. The index opened lower and plunged to its -3.04% intraday low in the early afternoon. That's the deepest intraday low since the -3.86% nosedive in November 2011. A buy-the-dip strategy subsequently kicked in, and the index closed the day with a greatly trimmed -0.81% decline.

The bond market saw comparable drama. The yield on the 10-year Note closed at 2.15%, down 6 bps from yesterday. However, the intraday volatility was stunning. The TNX 10-year yield index hit a morning low of 1.87%

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Census Bureau Revisions to Retail Sales Click to view

October 15th, 2014 Doug Short

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

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

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September Retail Sales: Even Worse Than Economists's Low Forecasts Click to view

October 15th, 2014 Doug Short

The Advance Retail Sales Report released this morning shows that sales in September came in at -0.3% (-0.32% at two decimals) month-over-month, down from 0.6% in August. Core Retail Sales (ex Autos) were -0.2%, down from 0.3% in August.

Today's numbers came in well below the Investing.com forecast of -0.1% for Headline Sales and 0.3% for Core Sales.

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Producer Price Index: First Decline in 13 Months Click to view

October 15th, 2014 Doug Short

Today's release of the September Producer Price Index (PPI) for Final Demand came in at -0.1% month-over-month seasonally adjusted. That's the first monthly decline since August of last year. Core Final Demand (less food and energy) was also lower at -0.2% from last month.

The unadjusted year-over-year change in Final Demand is up 1.6%, a decline from last month's YoY of 1.8%.

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Empire State Manufacturing: Huge Drop in Rate of Expansion Click to view

October 15th, 2014 Doug Short

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions continues is expanding at a much weaker pace. The headline number dropped 21 points to 6.17, down from 27.54 last month. That's the largest monthly decline since November 2011 and the second largest drop in the history of this series.

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Millennials in Motion: Changing Travel Habits of Young Americans Click to view

October 14th, 2014 Doug Short

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

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

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Small Business Optimism Drops Click to view

October 14th, 2014 Doug Short

The latest issue of the NFIB Small Business Economic Trends is out today. The October update for September came in at 95.3, down 0.8 points from the previous month's 96.1. In characteristic style, today's report subtitle has a dramatic slant, pointing out that the September drop "leaves the Index 5 points below its pre-recesson average". The index is now at the 26.6 percentile in this series, below its post-recession 96.6 high in May and back to a level it last consistently achieved in October 2007, two months before the last recession.

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Treasury Snapshot: Yields Continue Their Downward Trend Click to view

October 13th, 2014 Doug Short

With the bond market closed in celebration of Columbus Day, let's take a look at what's been happening of late for US Treasuries. The yields on the 10-, 20- and 30 year Treasuries have been trending downward since the end of 2013.

The latest Freddie Mac Weekly Primary Mortgage Market Survey puts the 30-year fixed at 4.12%, well off its 4.53% 2014 peak during the first week of January.

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Japan's Amazing 25-Year Post-Bubble Drama Click to view

October 12th, 2014 Doug Short

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

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Serge Perreault's Weekend Updates Click to view

October 10th, 2014 Doug Short

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

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Light Vehicle Sales Per Capita: A Better Look at the Long-Term Trend Click to view

October 10th, 2014 Doug Short

For the past few years I've been following a couple of transportation metrics: Vehicle Miles Driven and Gasoline Volume Sales. For both series I 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 60.4%.

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Market Cap to GDP: The Buffett Valuation Indicator Click to view

October 9th, 2014 Doug Short

Note from dshort: I've updated this commentary at the request of my good friend and master market technician Chris Kimble of Kimble Charting Solutions..

Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett. Back in 2001 he remarked in a Fortune Magazine interview that "it is probably the best single measure of where valuations stand at any given moment."

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Market Tops and Bottoms Since 1950: The October Effect Click to view

October 9th, 2014 Doug Short

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

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Market Volatility: Octobers in the Dow Click to view

October 8th, 2014 Doug Short

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

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

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The S&P 500 and Recessions Click to view

October 8th, 2014 Doug Short

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

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Real Earnings of Private Employees Signs of Improvement Click to view

October 7th, 2014 Doug Short

Here is a look at two key numbers in last week's monthly employment report for July:

  • Average Hourly Earnings
  • Average Weekly Hours
The government has been tracking the data for Production and Nonsupervisory Employees for decades. But coverage of Total Private Employees only dates from March 2006.

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IMF Cuts Global Growth Forecast Click to view

October 7th, 2014 Doug Short

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

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Continuing Proof of a Structural Change in the U.S. Workforce Click to view

October 7th, 2014 Doug Short

Last month Fed Chair Janet Yellen delivered an extended analysis of "Labor Market Dynamics and Monetary Policy" at the annual Jackson Hole Symposium. Her speech essentially reviewed the ongoing debate over the cyclical versus structural factors in employment since the Great Recession.

Over the weekend I've updated a series of charts that support my view that the U.S. workforce has undergone structural changes that are far more significant than the cyclical impact of a recession -- even the so-called "Great Recession".

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dshort - Advisor Perspectives Policy Change Click to view

October 7th, 2014 Doug Short

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

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

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Demographic Trends in the 50-and-Older Work Force Click to view

October 6th, 2014 Doug Short

Note from dshort: I’ve updated this commentary 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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New Updates at Crestmont Research Click to view

October 6th, 2014 Doug Short

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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Structural Trends in Employment by Age Group Click to view

October 6th, 2014 Doug Short

Note from dshort: I’ve updated this commentary with the latest numbers from last week’s Employment Report.

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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Inside the World of Multiple Jobholders: Two Decades of Trends Click to view

October 4th, 2014 Doug Short

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 slightly less than 5% 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 Workforce Part-Time Employment Ratio: Looking Better for the Core Age Group Click to view

October 3rd, 2014 Doug Short

Key Observation: In July 2012 and again in August 2013 the full-time/part-time gap narrowed, and it was yet narrower this summer. Even more encouraging is that fact that the bounce in part-time employment last month was the smallest September increase in this history of this BLS data series, which dates back to 1986

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The Civilian Labor Force, Unemployment Claims and Recession Risk Click to view

October 3rd, 2014 Doug Short

Note from dshort: I’ve updated this commentary to include the latest labor force data in today’s employment report.

A long-term chart of the seasonally-adjusted 4-week moving average of Initial Claims gives a rather distorted view of the economy. Why? Because it doesn’t take into account the 104% growth in the Civilian Labor Force since January 1967. For a better understanding of the weekly Initial Claims data, let’s view the numbers as a percent ratio of the Civilian Labor Force.

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ISM Non-Manufacturing: Somewhat Slower Growth in September Click to view

October 3rd, 2014 Doug Short

Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 58.6 percent, down from last month's 59.6 percent, which was a record high for this relatively new indicator that only dates back to January 2008, the second month of the Great Recession. Today's number came in a tick above the Investing.com forecast of 58.5.

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A September Surge in New Jobs with Unemployment Dropping to 5.9% Click to view

October 3rd, 2014 Doug Short

Today's report of 248K new nonfarm jobs was substantially better than the Investing.com forecast of 215K, and it was accompanied by a major upward revision of the August data from 142K to 180K new jobs. The unemployment rate dropped from 6.1% to 5.9%, beating the Investing.com expectation of no change.

The post-recession duration of unemployment remains high at 31.5 weeks, although that's well off the 40.7-week all-time high in late 2011.

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Market Valuation Overview Click to view

October 3rd, 2014 Doug Short

Here is a summary of the four market valuation indicators I updated at the beginning of the month.

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

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Market Valuation, Inflation and Treasury Yields: Clues from the Past Click to view

October 2nd, 2014 Doug Short

My 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 normal 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: New Update Click to view

October 2nd, 2014 Doug Short

Based on the latest Z.1 data, the Q Ratio at the end of the second quarter of 2014 was 1.12. As of the September close, the broad market was up about 2.4%. My latest estimate would put the ratio about 69% above its arithmetic mean and 83% above its geometric mean.

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Crestmont Market Valuation Update Click to view

October 2nd, 2014 Doug Short

Quick take: Based on the September S&P 500 average of daily closes, the Crestmont P/E is now 92% above its arithmetic mean and at the 98th percentile of this fourteen-decade monthly metric.

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Is the Stock Market Cheap? Click to view

October 2nd, 2014 Doug Short

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

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Regression to Trend: A Perspective on Long-Term Market Performance Click to view

October 2nd, 2014 Doug Short

Quick take: At the end of September the inflation-adjusted S&P 500 index price was 89% above its long-term trend, up from 85% above trend 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 S&P 500, Dow and Nasdaq Since Their 2000 Highs Click to view

October 1st, 2014 Doug Short

Here is a update in response to a standing request from a couple of sources that I 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. In response, I maintain 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). The charts below have been updated through the September 30th close.

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Forget Active vs. Passive: It's All About Factors Click to view

October 1st, 2014 Adam Butler, Mike Philbrick and Rodrigo Gordillo

We just love a good debate, and there seems to be quite a heated debate at the moment about the relative utility of passive versus active investing. Perhaps this debate is as timeless as investment management itself, but a flurry of recent studies may have finally armed passive advocates with enough ammunition to settle the argument once and for all.

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Three Reasons Why stocks Could Mint a Shiny Fourth Quarter for Investors Click to view

October 1st, 2014 Chris Kimble

Investors often enjoy a strong wind at their back in the fourth quarter, based on seasonal patterns and stock market history. Will 2014 be different?

When looking at the S&P 500, more than half of the index’s gains over the past 25 years took place during the final three months of the year.

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ISM Manufacturing Index: Disappointing September Growth Click to view

October 1st, 2014 Doug Short

Today the Institute for Supply Management published its monthly Manufacturing Report. The latest headline PMI at 56.6 came in lower the August 59.0 percent and below the Investing.com forecast of 58.5. The September level was the lowest since June.

Here is the key analysis from the report:

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Anticipating the Employment Report for September Click to view

October 1st, 2014 Doug Short

The economic mover and shaker this week is the Friday employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, probably the most publicized in the near term being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository).

Today we have the September estimate of 213K new nonfarm private employment jobs from ADP, which we can consider along with the estimate of 206K total new jobs from TrimTabs.

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Secular Bull and Bear Markets Click to view

October 1st, 2014 Doug Short

Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Without crystal ball, we simply don’t know. One thing we can do is examine the past to broaden our understanding of the range of possibilities. An obvious feature of this inflation-adjusted is the pattern of long-term alternations between up-and down-trends.

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Moving Averages: Month-End Update Click to view

September 30th, 2014 Doug Short

Valid until the market close on October 31, 2014

The S&P 500 closed September with a monthly loss of 1.55%. All three S&P 500 MAs and three of the five the Ivy Portfolio ETF MAs are signaling "Invested".

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Consumer Confidence Drops Click to view

September 30th, 2014 Doug Short

The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through September 18. The headline number of 86.0 was a surprising decline over the revised August final reading of 93.4, an upward revision from 92.4. Today's number was well below the Investing.com forecast of 92.5. The current level is a four-month-low.

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Moving Averages: Month-End Preview Click to view

September 30th, 2014 Doug Short

Here is a preview of the monthly moving averages I track after the close of the last business day of the month. All three S&P 500 strategies are now signaling "invested" -- unchanged from last month. Two of the five of the Ivy Portfolio ETFs, the PowerShares DB Commodity Index Tracking (DBC and the Vanguard FTSE All-World ex-US ETF (VEU), are signal cash "cash", with VEU as this month's addition.

If a position is less than 2% from a signal, it is highlighted in yellow.

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Two Measures of Inflation and Fed Policy Click to view

September 29th, 2014 Doug Short

Note from dshort: I've updated the accompanying charts with the latest Personal Consumption Expenditures price index from the Bureau of Economic Analysis. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison with the Consumer Price Index.

The BEA's Personal Consumption Expenditures Chain-type Price Index for August shows core inflation below the Federal Reserve's 2% long-term target at 1.47%, but for the past five months this indicator has hovered above its narrow range of the previous 12 months.

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The Latest on Real Disposable Income Per Capita Click to view

September 29th, 2014 Doug Short

With this morning's release of the August Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita.

The August nominal 0.20% month-over-month change increases to 0.25% when we adjust for inflation, thanks to a fractional drop in the PCE price index. The year-over-year metrics are 3.43% nominal and 1.94% real.

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PCE Price Index: Headline and Core Little Changed, Remain Below Target Click to view

September 29th, 2014 Doug Short

The latest Headline PCE price index year-over-year (YoY) rate of 1.46%, down from the previous month's 1.58%. The Core PCE index of 1.47% is fractionally lower the previous month's 1.49% YoY.

The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. I've highlighted the 12 months when Core PCE hovered in a narrow range around its interim low.

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Q2 GDP Rises to 4.6% in the Third Estimate, Matching Expectations Click to view

September 26th, 2014 Doug Short

The Third Estimate for Q2 GDP, to one decimal, came in at 4.6 percent, an upward revision from the Second Estimate of 4.2 percent. The GDP deflator used to calculate real (inflation-adjusted) GDP slipped to 2.1 percent, an downward revision from the Second Estimate of 2.2 percent. Investing.com correctly forecast both numbers.

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Happiness Revisited: A Household Income of $75K? Click to view

September 25th, 2014 Doug Short

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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The "Real" Goods on the Today's Durable Goods Data Click to view

September 25th, 2014 Doug Short

Earlier today I posted an update on the September Advance Report on August Durable Goods New Orders. This Census Bureau 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 red line shows the goods orders divided by the Census Bureau's monthly population data, giving us durable goods orders per capita.

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Durable Goods Report: Up 0.7% Excluding Volatile Transportation Orders Click to view

September 25th, 2014 Doug Short

The September Advance Report on August Durable Goods was released this morning by the Census Bureau. Here is the Bureau's summary on new orders:

New orders for manufactured durable goods in August decreased $54.5 billion or 18.2 percent to $245.4 billion, the U.S. Census Bureau announced today. This decrease, down following two consecutive monthly increases, followed a 22.5 percent July increase. Excluding transportation, new orders increased 0.7 percent. Excluding defense, new orders decreased 19.0 percent.

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NYSE Margin Debt Drifts Higher in August Click to view

September 24th, 2014 Doug Short

Unfortunately, the NYSE margin debt data is about a month old when it is published. Following its February peak, real margin declined sharply for two months, -3.9% in March -3.2% in April and was flat in May. It then jumped 5.7% in June, its largest gain in 17 months. June saw a 0.9% decline, but the August number has drifted higher, up 0.6%, and is now only is 1.9% below the February peak.

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Gasoline Volume Sales, Demographics and our Changing Culture Click to view

September 23rd, 2014 Doug Short

The Department of Energy's Energy Information Administration (EIA) data on volume sales is over two months old when it released. The latest numbers, through mid-July, 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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Richmond Fed Manufacturing Composite: "Continued to Grow at a Moderate Pace in September" Click to view

September 23rd, 2014 Doug Short

The September update shows the manufacturing composite at 14, up from 12 last month. Numbers above zero indicate expanding activity. Today's composite number was above the Investing.com forecast of 10.

Because of the highly volatile nature of this index, I like to include a 3-month moving average, now at 11.0, to facilitate the identification of trends.

Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

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Understanding the CFNAI Components Click to view

September 22nd, 2014 Doug Short

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

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

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Chicago Fed: Economic Growth Decelerated in August Click to view

September 22nd, 2014 Doug Short

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

"Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.21 in August from +0.26 in July. Two of the four broad categories of indicators that make up the index decreased from July, and two of the four categories made negative contributions to the index in August."

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

September 19th, 2014 Doug Short

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 Click to view

September 17th, 2014 Doug Short

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 Click to view

September 17th, 2014 Doug Short

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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A Long-Term Look at Inflation Click to view

September 17th, 2014 Doug Short

The August Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the August year-over-year inflation rate at 1.70%, off the May 19-month high of 2.13%. It is well below the 3.87% average since the end of the Second World War and 28 percent below its 10-year moving average.

Let’s take a step back and look at the history of inflation over the past 140 plus years.

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Inflation: A Six-Month X-Ray View Click to view

September 17th, 2014 Doug Short

Here is a table showing the annualized change in Headline and Core CPI for each of the past six months. I’ve also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation.

We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

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Median Household Income Growth: Deflating the American Dream Click to view

September 16th, 2014 Doug Short

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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