Friday, October 28, 2016

M1 divided by Savings 10/17/16 - peaked end of QE3

This peaked right at the end of QE 3, October 2014.  No wonder there is a slow down in the economy.

1 year and Fed Funds spread 10/26/16 .26 T1YFF

Repos 10/19/16

Reserves and SOMA two year anniversary end of QE3

The Fed reduced reserves when they announced the rate hike in December 2015.  I think they did this so they could raise reserves in January after the hike to let everyone know how important they are.

Since the end of QE3, October 2014, reserves are down by $756 billion.

$319 billion from the US Treasury withdrawing some of its funds from commercial
          banks and depositing it to their own bank account at the Fed.  The Treasury
          General Account.

$181 billion from people with drawing currency from their bank accounts, no
          doubt to put under the mattress.

$164 billion from repos.  This is temporary.

$664 billion from the three above ways.

This is how the Fed has reduced reserves without reducing SOMA.

10/26/16   $4,200,534,019.5
10/29/14   $4,202,770,051.4  End of QE3

Thursday, October 27, 2016

Z.1 D3 Total

Year over year. No wonder the economy is slow.

Federal Negative Cash Flow by President

Debt in millions of dollars
Ending date
of previous
   Bill Clinton
9,095,692 reads 9 trillion, 95 billion, 692 million
What? Wait.  I thought Bill Clinton ran a surplus.      

Core Cap Ex September 2016

Year over year.

Wednesday, October 26, 2016

Core Cap Ex vs Savings August 2016

Theoretically, in my humble opinion, an increase in savings should show up in deferred expenditures on durables before spending on consumption declines.  Maybe. It just my personal experience of my personal behavior.

M1 divided by M2 yoy 10/10/16


New Home Sales September 2016

Keeps on truckin'.  We don't want it to get too hot do we?

Federal Negative Cash Flow September 2016

With three months left in the calendar year I don't think it will be hard to get back to the 2013 amount of negative cash flow.

Calendar year in billions of dollars.  2016 is January through September.

                                                         "fiscal stimulus"          neg. cash flow
              neg. cash         tax             neg. cash flow            plus tax receipts =
                  flow         receipts         as % of tax receipts    total gov't spending

2016         651,008      2,157,797          30.2%                         2,808,805
2015         780,444      2,803,236          27.8%                         3,583,680
2014         789,467      2,660,454          29.7%                         3,449,921
2013         919,238      2,456,383          37.4%                         3,375,621
2012      1,209,786      2,233,516          54.2%                         3,443,302
2011      1,197,721      2,082,137          57.5%                         3,279,858

Negative cash flow from the Treasury Department Debt to the Penny:

Tax receipts from the Treasury Department Daily Statements

I am using daily debt and daily tax receipts as a way to avoid dealing with the budgeting peculiarities and machinations of government financial statements.  My figures can be very different from the budget financial statements.  One really good thing is there is little lag time in reporting.

I am using a calendar year because I want to and it co-insides with presidential terms.

The Fiscal Doom Loop

As monetary policy is failing to achieve its goals the calls for increased deficit spending are getting frequent and loud.

With deficit spending, savings that is available for spending, investing, or lending, is now able to flee to the safety of Treasury bonds simply by the Treasuries being available.  This is just a transfer.  No new credit money is created and the concomitant creation of some real permanent money, profits, from it.  It is a transfer then a loop back.

The money is spent into the economy by the Federal government and ends up as profits, which are savings, less any household savings along the way.  So the money is back into savings.  Just other people’s savings.  And these other people will have to use their new savings, or income, to pay taxes to pay the off the debt that created their savings in the first place.  Along with interest.  So really, that is a negative to the people who ended up with the money from the original saver who lent it to the Federal government.

When the bond matures and the taxes paid, the money is returned to the original saver.  It has looped back to the original saver.

Of course it doesn’t actually work this way for the system as a whole.  When bonds mature, new bonds are issued and the system doesn’t on net pay anything back.  The system builds up the negatives though.  Can you imagine taxing the recipients, and the non-recipients of Federal money and pay back the Federal debt?  There goes their savings.  Poof, back to the original savers.

Thursday, October 20, 2016

M1 divided by M2 10/03/16

Year ago change of M1 divided by M2.

Definition of Liquidity

Liquidity consists of all cash and credit available to financial markets, once the immediate transactions needs of the real economy have been fulfilled
It is a sources and not a uses of funds definition. Money supply, a rival concept, is a uses of funds measure because it comprises bank deposits. Banks are no longer the dominant conduit for liquidity, and credit is a more powerful guide to purchasing power than deposit money.
Moreover, liquidity cannot be measured by interest rates, as the 2007/08 financial crisis has shown. For example, low base interest rates and tight liquidity mean wide spreads and a high effective cost of funds.
Liquidity transmits its influence to the real economy and financial markets through duration. Duration is a hybrid between liquidity preference and time preference, i.e. it measures the effect of liquidity over time. Investors and businesses target a desired duration and change their asset mix to attain these targets. Liquidity hastens and smooths this adjustment; illiquidity forces it to become abrupt and often disruptive. Changes in duration affect the composition of the capital structure and the mix of investments. Modern business cycles have become more cycles of duration than growth.

Light Vehicle Sales September 2016

Real Gross Domestic Income Q2'16

Leading Indicators August 2016

2 Year Swap Rate 10/18/16 1.04

10 - 2 yield curve 10/18/16 .93

Thursday, October 13, 2016

QE really helped corporate profits

The money created by QE went to the banks (their prime dealers) and because it was used to buy more Treasuries, the money was spent into the economy by the federal government.  The newly created money ends up as profits less any household savings along the way.  Profits are savings.

Now that QE is ended, corporate profits suffer.

See FRED chart: {click to enlarge}

QE 3 was implemented because earnings per share stopped growing, buy-backs and all the other advantages notwithstanding.   The chart above takes into consideration corporate income taxes.

S&P 500 earnings per share:

                 quarter            quarter         last 4 quarters
                 ending            earnings

06/30/16 23.28 86.92
03/31/16 21.72 86.44
12/31/15 18.70 86.53
09/30/15 23.22 90.66
06/30/15 22.80 94.91
03/31/15 21.81 99.25
12/31/14 22.83 102.31
09/30/14 27.47 105.96
06/30/14 27.14 103.12
03/31/14 24.87 100.85
12/31/13 26.48 100.20
09/30/13 24.63 94.37
06/30/13 24.87 90.95
03/31/13 24.22 87.70
12/31/12 20.65 86.51
QE3 09/30/12 21.21 86.50
06/30/12 21.62 87.92
03/31/12 23.03 88.54
12/31/11 20.64 86.95
09/30/11 22.63 86.98
06/30/11 22.24 83.87
03/31/11 21.44 81.31
12/31/10 20.67 77.35
09/30/10 19.52 71.86
06/30/10 19.68 67.10
03/31/10 17.48 60.93

I think this is really bad.

Wednesday, October 12, 2016

Conference Board job ads Sept 2016

{click to enlarge}

Above: A decline in online job ads lead unemployment rising before the GR.  And lead after the GR.

Below: A decline in online job ads lead the decline in employment before the GR.  And lead after the GR.

{click to enlarge}

LMCI September 2016

{click to enlarge)

Saturday, October 8, 2016

My Jobs Report September 2016

Here is the headline jobs growth figure for September which was 156,000 new jobs.  In an attempt to create a one figure each month they have to seasonally adjust it.  Here is what that looks like.  If this chart is meaningful to you then job stop reading here and go on to something else.

{click to enlarge}

Jobs peak in November and drastically drop of in January.  Then they start climbing back to the next November peak with an intra-cycle peak in June followed by an intra-cycle trough in July.  Then resume climbing back up to a new peak in November.

My jobs report records year to date, rather, cycle to date accumulated jobs and compares them to previous years.  I take the accumulated new jobs each month and divide by the number of months in the cycle.  This gives a figure that is easily comparable to other figures in previous years.  And since the population is estimated to be growing at a rate of 201,000 people each month, the monthly average of job growth is easily compared to the population growth.

For the sake of simplicity, I start at June, the intra-cycle peak.  Each horizontal line is a month.  Each data point is a year of that month.  In this chart, the top two lines are October and November because they are the highest monthly average of growth.  The June peak is the next line down.  July is the bottom line because that is the intra-cycle trough.  (Yes, in July of 2016 the number of new jobs created in this current cycle year is an average of 8,000 new jobs per month.  It was 55,000 last year).

{click to enlarge}

Note that September peaked in 2014 at an average monthly growth - cycle to date -  in 2014 of 127,000 more jobs.  This September which was a headline number of 156,000 more jobs shows 82,000 more jobs in my report.  That is down 35% from the 127,000 two years ago.  To me, that is really big.  Note also the steepness of the down slopes.

Now it is up to a robust October and November to pull the year back up to get to new highs.  I don’t think it is going to happen.  I think it will be hard to get 2 million new jobs this current cycle.

Previous annual job growth and the monthly average for the cycle:

Nov 2015   2,791,000      233,000
Nov 2014   2,788,000      232,000
Nov 2013   2,505,000      209,000
Nov 2012   2,145,000      179,000
Nov 2011   1,946,000      162,000
Nov 2010      712,000        59,000

My conclusion.  2016 is a bad year for job growth.