Yardeni's Voice

Bonsoir,

Sortant d'un bac ES et ayant récemment rangé mon stock de revues, je suis tombé sur un vieux "Alternativves Economiques" d'avril 2000. Tout à la fin de l'ouvrage, dans la section "Multimédia" j'ai trouvé cela:

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Les analyses d'un gourou Ed Yardeni est économiste à la Deutsche Bank Alex Brown, une filiale américaine de la Deutsche Bank. Il est à ce titre un des gourous de la Bourse américaine, dispensant ses conseils aux investisseurs et, naturellement, aux clients de la banque allemande. Mais pourquoi s'étendre sur le site qu'il gère, dans une rubrique qui ne s'adresse ni aux Américains ni aux boursicoteurs? C'est que Ed Yardeni a vu grand sur Internet. Il a décidé de rendre ses analyses accessibles à tous, passé délai d'un mois. En Bourse, un mois, c'est l'éternité: au bout de quelques heures déjà, une information ou une analyse n'a plus guère de valeur marchande, car elle ne procure plus avantage particulier à celui qui la détient. Ces documents sont néanmoins intéressants, car ils associent des analyses de fond dans un langage (en anglais, bien sûr) accessible, avec des données et des graphiques multiples et pertinents sur les sujets traités. Nouvelle économie, bulle Internet (avec une partie du site consacrée exclusivement à l'e-economy), politiques de la Réserve Fédérale..., ceux qui s'intéressent à la dynamique de l'économie américaine et mondiale y trouveront abondamment matière à enrichir leur réflexion et leur base de données. On pourra évidemment critiquer telle ou telle conclusion, mais les analyses de Ed Yardeni reposent manifestement sur une culture macroéconmique solide. Ed Yardeni ne s'est pas arrêté là: il met également à la disposition du public une base de données très complète sur les principales zones économiques du globe. Dans le monde actuel, il n'est guère étonnant que l'information économique de qualité soit rassemblée d'abord pour les spéculateurs, mais il n'y a pas de raison de s'en priver quand des gens la mettent également à disposition des autres acteurs, y compris de ceux qui critiquent les dérives du système!

Autre avantage du site, vous pouvez recevoir plusieurs fois par semaine les analyses de Ed Yardeni par courriel.

Malgré tout l'accès au site www.yardeni.com n'est pas libre. Il faut en effet faire une demande par e-mail et justifier de son statut d'étudiant...la démarche est assez simple et donc n'importe qui peut finalement accéder au site sans la fameuse carte étudiante


Je propose de poster les différents "Ed's Briefings" que je recevrai. Le tout est en anglais...donc peut s'avérer rebutant. Si certains le souhaitent je pourrais traduire ce qu'il faut (attention je ne suis pas bilingue...).

Je pense que ces informations peuvent présenter un bon complément à l'excellent travail de Whynot, Dupilon, Ekoban et tous les auteurs de la fameuse file "WATCH KRACH"!



Ben

Voilà le dernier "Ed's Morning Briefing" que j'ai reçu, aujourd'hui à 13h30...décalage horaire oblige



I) ECONOMICS: Will the housing recession push the overall economy into a recession? I don't think so, but some economists believe that this is the Big One that will in fact take the entire economy down with it. They say that this is really the first national bubble in real estate. That's not really so. There was a national bubble in 1979, when the median existing home price peaked at 15.0% y/y during the summer of that year, based on the 12-ma. When that bubble burst in the early 1980s, prices simply rose at low single-digit rates for about 10 years. This time, the peak appreciation rate was 13.2%. Why can't home prices still go up, but at low single-digit rates again for the next 10 years? Of course, while home prices held up in the early 1980s, there was a severe recession back then. In the 6/19 issue of Forbes, A. Gary Shilling wrote: "A house-price collapse will be far worse than the 2000-02 bear market on Wall Street and will bring a serious global recession. Half of households own stocks or mutual funds, but 69% own homes. The resulting unemployment will kill many subprime borrowers' ability to make payments." The housing data are undoubtedly grim:
(1) Housing starts fell to 1.85 mu in June, down 18.3% from the recent peak of 2.27 mu during January 2006. Single-family housing starts are down 18.1% from their record peak to 1.49 mu in June. This is the lowest pace of new construction since November 2004.
(2) New home sales are down 17.3% from their recent record high to 1.13 mu. The supply of new homes rose to 6.1 months in June, climbing back toward January's 10-year high of 6.4 months. It was as low as 3.9 months in late 2004.
(3) Existing home sales are down 8.9% from their record peak of 7.27 mu units during June 2005 to 6.62 mu this June. Existing homes for sale jumped to 6.6 months' supply, the highest since July 1997. It was as low as 3.7 months last year.

Again, the question is will this housing recession turn into a national, and then a global recession as my friend Gary Shilling predicts. Gary's forecasts tend to be too pessimistic, but on occasions that is the right point of view. In our Weekly Consumer Monitor below, you can see that so far most of our real-time indicators suggest that consumers are hanging in there. Most impressive is that mortgage applications to purchase a house have been remarkably stable over the past few weeks suggesting that there may not be much more downside in both new and existing home sales. Also worth noting is that gasoline usage rose to yet another new high in mid-July. Where are we all driving, if not to the malls?
* Home Sales: More downside for housing sales? Yes. Home sales have cooled from the record breaking pace of the past 5 years. Rising mortgage rates and high home prices have depressed demand. Both new and existing median home appreciation rates have peaked, so would-be buyers aren't racing to purchase homes because they fear that prices might move higher any time soon.
* Home Prices: Is the housing bubble popping? It's losing some air here and there. June's national median existing home price rose only 1.1% y/y. But it fell in the Midwest (-2.4%), while rising in the Northeast (+7.3%). It was little changed in the West and South. In June, median new home price was up only 2.3%. Regional data for new home sales show Q2 prices above a year ago in the Northeast (4.0%) and South (1.8%). They fell in the West (-1.1%) and in the Midwest (-5.4%).
* HEE & MEW: How much dough are consumers extracting from their homes? There are two different ways to calculate the number. Home Equity Extraction is derived by using the Fed's Flow of Funds data on the value of residential real estate and owners' equity in their homes. This shows extraction of $1.1 trillion during Q1 (saar) and a whopping $4.6 trillion since the start of the decade. Mortgage Equity Withdrawal totaled $1.0 trillion in Q1.
* Weekly Consumer Monitor: What's the Consumer Score? Our subjective rating was 70 (out of 100) last week, solidly above 50. We've added 3 indicators to our Weekly Monitor: gasoline consumption and S&P 500 Retailing and Restaurant Price Indexes. Jobless claims fell below 300,000, while continuing claims remained near 5½-year lows. Yearly growth rate in chain store sales slipped below 3% on 4-wa basis, while 4-wa in mortgage applications remained in flat trend. Personal loan growth slowing, while home equity borrowing falling. Weekly Consumer Comfort Index moved lower. Gasoline usage at record high.



II) STRATEGY: If you want to be safe, stay close to home. This hasn't been a good idea for US investors lately. Several overseas stock markets have rebounded nicely in July following the May/June global stock market plunge. Several are up at double-digit rates ytd including Brazil (10.1%), China (44.1%), Hong Kong (13.7%), India (14.2%), Indonesia (14.4%), Mexico (13.1%), Peru (83.8%), The Philippines (11.5%), Russia (38.6%), and Venezuela (67.6%). Most were up more earlier this year, but they are still up at solid rates. Of course, there are several that are down ytd including the Czech Republic, Egypt, Israel, South Korea, Taiwan, Thailand, and Turkey. (See Fig. 2 in our "Global Markets Briefing" linked below.) The winners include the fast growing BRIC countries--the "New World." The winners also include countries with plenty of natural resources, particularly oil. I conclude that global stock markets continue to reflect a global economic boom.

In the United States, stock prices seem to be reflecting something else. Both the S&P 500 LargeCap and S&P 600 Small Cap indexes are up only 1.1% ytd. The S&P 400 MidCap index is down 1.1% ytd. The MidCap and SmallCap stocks are down 10.8% and 12.4% from their peaks earlier this year. In other words, LargeCaps are finally outperforming by not underperforming as much as the other two cap-based indexes! If you are looking for double-digit gains in the S&P 1500 ytd, you'll find them in SC Consumer Staples (12.2%), LC&SC Energy (16.8% & 17.1%), LC&MC Telecom Services (15.8% & 14.3%), and SC Utilities (14.7%). Industrials and Materials had double-digit gains earlier this year, but gave them all back during the sell-off. There has clearly been a rotation away from cyclicals toward defensive stocks in recent weeks. Even LC Health Care, which was down as much as 4.0% before the sell-off is now up 0.4% ytd. (See Fig. 34 in our "Global Markets Briefing.")

As Joe and I demonstrated yesterday, forward earnings continued to rise in July for most of the S&P 500 industries, with many rising to record highs. And most of these great corporate achievements were rewarded with significant cuts of 1-2 percentage points in their P/Es since early May. That's why US markets haven't recovered from the May/June sell-off as well as many foreign ones. US investors seem to be valuing stocks as though a significant consumer-led slowdown is underway. There is no doubt that housing activity is slowing as discussed above. The Alert below shows that forward earnings of S&P 500 Homebuilding has been in a freefall since late last year. We downgraded the industry to market weight after overweighting it since 2002. We should have underweighted it, of course. Staying close to homes has also been bad news for Home Improvement Retail and Computer & Electronics Retail. These are not the only retailers taking a dive recently. The market clearly sees a higher risk of a consumer retrenchment, a US recession, and a global bust than I do at this time.
* Homebuilding: Is M-rated Homebuilding a house of cards? It has been since late last year. The industry looks cheap with a P/E of 6.4, but earnings are tumbling fast. With analysts expecting earnings to fall more than 15% in both 2006 and 2007, the 10-year growth party may be over. NERI at another record low in July and the profit margin fell to 8.8% in Q1. We lowered our rating last September on concerns about home affordability, and now it's the 3rd worst performer in 2006 with a 33% decline. We're not sure how much earnings will fall, but the worst of the sell-off is likely over.
* Home Improvement Retail: Why is M-rated Home Improvement Retail getting hit with a sledgehammer? Investors are beating down the industry's P/E, which fell to a record low of 11.4 in July. Forward earnings edged down for the first time in 42 months. Consensus annual forecasts are up so far, but fell in July. The stock price index is down 13% so far in 2006 despite relatively strong NERI and a record high profit margin. Although annual earnings growth rates have slowed from the 1990s, they remain in the double-digits. The y/y change in forward earnings has been mostly positive since 1996, but investors are still hammering it to a pulp.
* Computer & Electronics Retail: Is there any warranty on recently damaged O-rated Computer & Electronics Retail? It's down 17% so far in July. We think flat-panel TV sales will be huge later this year and that earnings will continue to make new highs. This Top 12 industry pick was on the verge of a new high before the recent market sell-off. Forward earnings at a record high in July, but consensus annual forecasts fell. Earnings growth expected to accelerate back into double-digits in 2006. NERI is positive again. The industry is cheaper now with the P/E at 16.2 in July.



Je sais ça a l'air indigeste comme ça...Pour ceux qui seraient intéressés, j'ai conservé tous les "Ed's Briefings" depuis le 25 mai...sait-on jamais...

Bonjour Bridges,

Merci pour l' initiative !
Le problème c 'est qu' effectivement, ca peut paraitre assez indigeste. Par contre, as tu accés à certains de ses graphiques.
Yardeni a un bataillon complet de graphiques sur les leading Indicators et leurs implications sur l' évolution des Indices à MT / LT, par exemple.
Ce genre de charts est interessant et plus " parlant" que la majorité des "morning briefings" en règle générale.

Si tu peux en disposer, je serai preneur.....

Dupilon

Merci Bridge , cela m'a permis de chercher des graph sur le thème de Yardeni (Google image Yardeni)

et me renvoie à plein de site US assez intéressant en macro-économie

comme http://www.nowandfutures.com/index.html
http://nodoodahs.com/predictive-modeling/predictive-model-output-jul-28-2006/

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as tu accés à certains de ses graphiques. Yardeni a un bataillon complet de graphiques sur les leading Indicators et leurs implications sur l' évolution des Indices à MT / LT, par exemple. Ce genre de charts est interessant et plus " parlant" que la majorité des "morning briefings" en règle générale. Si tu peux en disposer, je serai preneur.....

Pas de souci dupilon Mais pour le moment j'ai quelques problèmes avec mon ordi; virus&co
Je te conseille d'envoyer un courriel à cette adresse [url]yardeni_requests@oakassociates.com[/url] il te suffit de préciser que tu es étudiant >>> à la Sorbonne, Dauphine, HEC...ils ne vérifient pas et tu reçoit ton pass pour accéder intégralement au site

Ed's Morning Briefing du 31 juillet:

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I) GEOPOLITICS: The Big Chill. The 7/26 FT reported that the Bank of China froze North Korean bank accounts before Lil' Kim launched his lame rockets on July 4. This followed US moves to stop North Korean money laundering and counterfeiting of US dollars and possibly even Chinese renminbi. The FT states, "The decision is remarkable because Beijing, long concerned about the potential for catastrophe on its north-eastern border, has hitherto avoided taking any action that might cause instability..." in the rogue state. According to the report, this is a devastating blow which amounts to a virtual ban by China on dealing with North Korea. Even South Korea's "sunshine" policy toward their northern brethren is turning cloudy. The July 4 missile show was a big embarrassment for the appeasers in the south. A recent survey found that 37% of South Koreans now favor the US government's hard line approach, up from only 20% two years ago (NYP 7/30.) Could it be that the July 4 missile fizzle was a sign of desperation by the desperado? Could it be that the Chinese are finally working with the US instead of against the US to crush the nut? I think so. What about the desperados in Iran, Syria, and south Lebanon. They actually think they can defeat the US in a "clash of civilizations." According to a fascinating CNN documentary anchored by John Roberts this past weekend, they got this idea back in October 1983 when Iran and Syria worked with Hezbollah to blow up the US Marine Corps headquarters in Beirut. 241 American service men and women were killed. Publicly, President Reagan promised to retaliate. In fact, there was a huge internal debate in his administration. Defense Secretary Caspar Weinberger opposed doing so because it might offend our Arab allies. National Security Adviser Robert McFarland believed that not doing so would convince our enemies in the Middle East that the US is a paper tiger, leading them to bolder acts of terrorism. At the end of the debate, Reagan decided to authorize an attack on a key Hezbollah stronghold in Lebanon's Bekaa Valley. At the last minute, the plan was ditched when "Cap the Knife" unilaterally called it off. On the CNN program, McFarland seemed as enraged now as he must have been back then, maybe more so now that he has been proven so right. American forces were withdrawn and so were the other multinational peace-keeping forces in place there. The Marine Corps barracks bombing was the deadliest attack on Marines since the 1945 Battle of Iwo Jima during World War II. One political analyst observed that peace isn't kept, it is won. The wars in Iraq and in Lebanon have radically changed the political dynamics in the Middle East. It is hard to say if the situation is more or less unstable than it was before these events. With Iraq in turmoil, Iran is freer to pursue its goal of leading a radical Islamic confederation. The problem with this ambitious master plan is that Iranians are Persians, not Arabs, and their government is Shiite, not Sunni. So the Sunni Arabs who run Egypt, Saudi Arabia, Jordan, and the Emirates are not exactly embracing the concept, and are certainly dreading a nuclear Iran. On the news, it seems that Iran, Syria, and Hezbollah are gaining from the turmoil in Lebanon and in Iraq. An alternative plausible view is that like Lil' Kim they too are feeling cornered and are desperately lashing out. By doing so, they are increasing the likelihood that America and its allies will win the peace one way or another. II) ECONOMICS: Mid-cycle bungee? Real GDP growth was soft during Q2 rising only 2.5%. But that followed a jump of 5.6% during Q1, which followed a meager 1.8% increase during Q4. The hurricanes and the resulting spike in gasoline prices to $3 depressed Q4. The economy's bungee cord then whipped the growth rate up sharply as gasoline prices dropped back toward $2. Q1 was simply a hard act to follow with two of the most cyclical components of real GDP, i.e., durable goods consumption and producers' durable equipment outlays, up 20% and 16%, respectively. When the quarterly numbers are this volatile, it is best also to look at the y/y comparison. It shows real GDP up a solid 3.5% during Q2. So Debbie and I are sticking with our 3%-3.5% forecast for the second half of the year, and about the same for 2007. There are a few forecasters already talking about a recession next year. We think if a recession is in the cards, then it is more likely to happen over the next 6 months than 6-18 months from now. If the economy continues to grow over the rest of the year, then it should continue to do so all of next year. In other words, it's Showtime for the economy. If it has the resilience we believe it does, then the housing recession, flattening home prices, gasoline prices over $3, heightened geopolitical risks, and one more (and last?) hike in the federal funds rate shouldn't cause a significant slowdown or a recession. In the past, recessions were usually policy-engineered by the Fed to bring down inflation. We don't think that the Fed will do so this time because inflation remains subdued: (1) Granted, the core PCED was up 2.9% during Q2, up from 2.1% in Q1 and well above the Fed's comfort zone of 1%-2%. However, much of the pickup was attributable to the highly controversial (or at least debatable) owners' equivalent rent component. It is imputed from actual rents, has too high a weight, and tends to rise because the Fed is raising interest rates, thus making buying a home less affordable and putting upward pressure on actual rents. Furthermore, the y/y comparison for the core PCED was 2.3%. (2) The latest Employment Cost Index was another number that looks much better y/y than q/q. It was up 0.8% (3.2% annualized) for private industry during Q2, but only 2.8% from a year ago. There is also a huge and rather unusual divergence between wages as measured by average hourly earnings--up 3.9% y/y through the 3 months ending June--and ECI wages, which are up 2.8% y/y through Q2. The ECI is probably a more accurate measure of wages. If so, the good news is that inflationary pressures remain subdued in the labor market. The bad news is that wages are lagging consumer prices, which is depressing real incomes. In the Alert below, Debbie shows that ECI wages are up 3.1% in goods-producing industries, but only 2.7% in service-producing industries. Interestingly, ECI benefits are up only 0.8% in goods, but 3.6% in services. I believe that manufacturers like GM, with heavy benefits obligations are willing to pay their workers a bit more upfront to lighten their retirement obligations to their workers in the future. * GDP For Q2: Mid-cycle slowdown? That's what it was during Q2, with real GDP up only 2.5%. However, the y/y comparison showed a solid gain of 3.5%. The weakness was widespread during the quarter with real consumer spending and business capital spending up only 2.5% and 2.7%, respectively. Some of this slowdown represents tougher comparisons with Q1, when real GDP jumped 5.6%, with consumer spending up 4.8% and business outlays up 13.7%. * Employment Cost Index: Are labor costs heating up? No. While the ECI posted its largest quarterly gain in over a year during Q2, the y/y rate remained subdued. Compensation gains for private industry rose 2.8% y/y last quarter, near Q1's 10-year low of 2.6%. Wages recorded their biggest quarterly gain in 3 years, though the y/y rate remains below 3%. Meanwhile, benefits costs inflation is the lowest this decade, as companies passed more health care costs onto their employees. The yearly increase in benefits costs dropped to a 6½-year low of 2.7% last quarter, less than half mid-2004 peak of 7.2%.

Ed's Morning Briefing du 02 août:

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ECONOMICS: Is Globalization dead? Last week's collapse of the Doha round of trade talks inspired The Economist to run a cover story titled "The future of globalisation" in the July 29 issue. On the front cover is a picture of a rusting and capsized ship. Coincidently, Transportation stock prices tumbled as investors were jolted by UPS's earnings miss, suggesting that both US and international business is slowing. Yesterday, logistics company Expeditors International reported great profits and revenues, but investors expected even more and the stock tumbled 12%. Globalization started when the Cold War ended. Wars are trade barriers. The end of the Cold War marked the beginning of a rapid increase in trade and global prosperity, especially in recent years. The forward earnings of Transportation companies soared to new highs through July along with the sum of US exports and imports, a useful measure of the pace of Globalization, which was up 13.5% y/y during May. Their stock prices also soared to record highs through early May of this year. Is the recent plunge foreshadowing a major slowdown in US trade, in global economic growth, and in the pace of Globalization? I don't think so, though the pace of Globalization would clearly have gotten a nice boost had Doha succeeded in reducing more trade barriers. The Economist correctly observes that the benefits of trade come more from imports than exports because cheaper imports boost consumers' standard of living and force domestic competitors to increase their productivity. Indeed, most economists believe that a strong case can be made for unilateral free trade because a country that is wide open to imports will benefit even if all its trading partners are protectionists. Of course, politically this concept is a tough sell. An editorial in the WSJ (7/26) observed that while a multilateral approach to trade liberalization may be on ice, the US and other nations are moving forward on several bilateral trade agreements that may be harmonized yielding a "plurilateral" round of free trade deals: "Call it Doha by the back door." The Bush administration has signed 9 of 12 free trade agreements. Another 6 are pending and 11 more are under negotiation. The administration is making this push before the President's trade promotion authority expires next summer when Congress can start to pick apart deals rather than vote up-or-down on them. Meanwhile, the latest manufacturing data for the US and EU are robust, suggesting that the global boom is still going strong. While purchasing managers on both sides of the Atlantic are reporting that their prices-paid are going up, I believe that global competition and productivity will keep a lid on prices-received. Despite the fact that commodity prices remain very high, US purchasing managers report that only three commodities are hard to get, namely nickel, steel, and particle board. * US Purchasing Managers: Are US factory purchasing managers reporting a slowdown? No they are not. Business remains strong. ISM composite index rose for the first time in 3 months from 53.8 in June to 54.7 in July, a strong reading this late in an economic expansion. According to ISM, July's 54.7 reading was consistent with real GDP growth of 4.4% in the past. Strong demand continues to put upward pressure on input prices, which remains a concern for purchasing managers. * EU Purchasing Managers: What are European purchasing managers reporting? Business is very good for their factories. PMI manufacturing index in France hit a fresh 6-year high last month, while German and Italian indexes edged down, but remained near highs for this decade. Price pressures picked up in Germany and France last month, and eased in Italy. UK manufacturing composite edged down from June's 2-year high. * Durable Goods Orders: Is capital spending durable? We think so. Nondefense capital goods orders (ex aircraft) is up 9% y/y. Machinery and electrical equipment orders are at record highs. Orders for computers and electronic products are still below 2000 peak, but climbing. Soaring forward earnings is great leading indicator of future orders, and capital spending.

Bonjour,

Ed's Morning Briefing du 3 août:

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I) ECONOMICS: Friday should be interesting. Yesterday's ADP employment report, which is based on actual paychecks, showed an increase of only 99,000 in private sector jobs in July, following a gain of 368,000 in June. The official June headcount conducted by the Bureau of Labor Statistics showed nonfarm payrolls rose 121,000 and 90,000 with and without government employment. June's household employment survey showed a very impressive gain of 387,000. The ADP series starts in December 2000 and has tracked the official numbers closely. That's why Debbie and I are sticking with 180,000 to 200,000 for Friday's payroll number, well above the consensus of 140,000. We figure the divergence with the ADP report should be narrowed, and that the economy is still creating plenty of jobs. In any event, the payroll numbers will most likely determine whether the Fed raises the federal funds rate one more time next week and then pauses, or pauses next week. While Friday's employment report may settle the debate over the short-term outlook for consumer spending and Fed policy, there is no debate about the outlook for housing. The industry is in a recession, which worsened last week as evidenced by the drop in mortgage applications to purchase a home to the lowest reading since November 2003. The good news is that both private nonresidential and public construction put in place are very strong: (1) Total construction spending has flattened out at a record $1.2 trillion (saar) in recent months as the residential market slumped, while the sum of private nonresidential and public construction is soaring. Over the past six months, the former is up only $22.8 billion, while the latter is up $46.7 billion. (2) Residential construction spending surpassed nonresidential plus public spending for the first time on record in 2003 as the housing market boomed. Earlier this decade, business and government spending on buildings were very weak. Now they are booming just as housing is in a bust. (3) The gap between the two narrowed to $66 billion in June from last July's peak of $152 billion. In other words, they are almost the same size markets again. While residential construction has dropped 3.6% over the past 6 months, the other categories of construction are up 8.9%. Over the past 12 months, the former is unchanged, while the latter is up a whopping 15.7%! (4) In June, at seasonally adjusted annual rates, nonresidential construction put in place was at record highs of $78.3 billion for commercial structures, $32.5 billion for health care, $20.6 billion for lodging, and $9.2 billion for transportation. At $39.4 billion, manufacturing was the highest since June 2001. Spending on power-related structures, which is volatile from month to month, totaled $33.4 billion. (See Alert below.) While the Alarmists have been sounding the alarms about the housing recession, they've completely ignored the boom in other construction activities in our country. They've also been very agitated about all the ARMs that are about to be reset at higher interest rates, and failed to note that personal interest income just rose to a record high of over $1 trillion. During Q1, we spent $589 billion on mortgage interest payments (which are tax deductible). That's about as much as we spend on energy goods and services. * Personal Income & Spending: Will consumers have the purchasing power to power their purchases over the remainder of the year? We think so. Real pay per worker (including benefits) continued to hit record highs in June. While it stalled late last year as energy costs soared, it has the same 3% trend growth rate as productivity for the past 10 years. Strong productivity growth should continue to drive purchasing power and spending higher. * Consumer Spending On Energy: How much energy is there in consumption? Not that much. The percent of disposable personal income (DPI) that US consumers spent on energy goods and services ticked down from 6.1% in May to 6.0% in June. The percentage is higher than January's 5.7%, but still below the 6.5% rate following October's price spike. It is also still below the 6.5%-8.5% readings from the mid-1970s to the mid-1980s. Gasoline accounts for more of consumers' DPI than natural gas, home heating oil, and electricity combined. Its percentage edged down from 3.6% in May to 3.5% in June. It's up from 3% at the end of last year, but still below the late 2005 peak of 3.8%. * Consumer Interest Income vs. Mortgage Interest Payments: How are higher interest rates impacting consumers? On the positive side, personal interest income rose to a record $1,039 billion (saar) in June, up $95 billion and $149 billion over the past 12 and 24 months. On the other hand, mortgage interest payments rose to a record $589 billion during Q1, up $81 billion and $139 billion from 1 and 2 years ago. Total rent, which is included in personal consumption expenditures (PCE) and includes imputed owner-occupied rent, is more than twice as large as mortgage interest payments, which are not included in PCE. * Consumer Spending On Fun: Have higher energy costs caused consumers to cut back on fun-related spending? Not really. They spent close to $1 trillion (saar) on fun-related services in June, a record 10% of their nominal disposable incomes. In June, this spending rose 6.4% y/y, with still solid growth rates in spending on hotels (8.4%), restaurants (7.6%), gambling (6.9%), and recreational services (5.0%). Spending on airfares continues to fluctuate in a 3%-4.5% y/y range. * Construction Spending: What's up with construction spending? Private nonresidential and public investment. They are both increasing at double digit rates y/y as residential spending has dropped to zero. Within nonresidential, spending on lodging, amusement & recreation, manufacturing, transportation, power, and health care facilities are all up 20% or more.

Bonjour,

Ed's Morning Briefing du lundi 7 août:

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ECONOMICS: Discount and they will come! Gasoline usage rose to yet another record high during the final week of July. Apparently, many consumers drove their autos to auto dealers to take advantage of incentives. Perhaps they traded in their gas guzzlers for new cars with better fuel economy. In any event, auto sales were up sharply in July from June's pace. This will boost retail sales as will all the gasoline they used in July. The question is: Did consumers cut back in other areas? If they did, then retailers will offer them lots of discounts during August's back-to-school shopping season and in the fall. That should boost real GDP and reduce inflation during the second half of the year. Of course, discounts won't work if employment continues to weaken as it seemed to do over the past four months based on the payroll employment data. We are still not convinced that the employment situation is as weak as suggested by these data: (1) The quality of the first-reported data is very poor, as evidenced by a long history of subsequent upward revisions. (2) Indeed, our hunch is that the ADP data are better because they are based on actual paychecks. Interestingly, as Debbie and I show in the Alert below, the average monthly increase in private industry payrolls, on a 12-month basis, was very close from 2003-2005 for the two measures. However, over the past 12 months through July, the official data show an increase of only 135,000 per month on average, while the ADP tally is up 183,000 per month. (3) The weekly jobless claims data also suggest a better labor market. They averaged 309,400 so far this year versus 330,000 for the comparable period last year. (4) July's adult unemployment rate remained extremely low at 4.2%, though that was up a tad from 4.0% in June. (5) While manufacturing employment fell 15,000 during July, the index of aggregate hours worked in manufacturing rose 0.4% during the month. The comparable index for all private nonfarm workers rose 0.1% to an all-time record high! (6) The housing recession has flattened employment in construction and finance in recent months. Employment in the booming manufacturing sector has been flat since 2003. While goods-producing industries aren't adding jobs, private service-producing businesses are doing so. Particularly impressive is professional & business services which added 1.4 million over the past 36 months to 17.3 million. By comparison, construction added 0.8 million workers to 7.5 million. The US continues to evolve toward a knowledge-based economy. That's where the job growth will be and the pay is very good. (7) Wages rose 3.8% y/y in July, near June's 5-year high of 3.9%. While goods-producing was up only 2.1%, private service-producing was up 4.2%, which was led by a 6.7% increase for professional & business services. ( The Bureau of Labor Statistics may be underestimating job gains in professional & business services since many people in this industry tend to be entrepreneurs. The BLS doesn't do a very good job of initially estimating how many jobs are created by startups and small businesses. Indeed, they use a "Net Business Birth/Death Adjustment" for small businesses rather than survey data. Their model reduced payroll employment by 57,000 (nsa) during July. (9) Tomorrow, the BLS will report on Productivity and Costs, which will reflect a big upward revision in labor compensation over the past year. While most economists have focused on the implications for inflation and Fed policy, we would also point out that this should relieve concerns that consumers don't have the purchasing power to continue shopping. * Employment: Are weak payroll employment gains the beginning of a mid-cycle economic slowdown? Could be, but we don't think so. There are three alternative explanations for the weakness in jobs lately: 1) Initial estimates are understating job gains, as they often did in the past. 2) Workers are harder to find as the labor market has tightened. Or, 3) fewer people are entering the labor force. Fed Chairman Bernanke alluded to the latter in recent testimony. * Employment By Industry: Which industries are expanding payrolls? Not manufacturing, which has been flat since 2003 just north of 14.0m. Not construction, which has been flat around 7.5m since the start of the year. Not finance, flat around 8.3m in recent months. Retail trade is down a bit recently to 15.2m. However, professional & business services at a record 17.3m, education & health at a record 17.7m. * Wages By Industry: Where did wages rise above and below average in July? At 3.8%, July wage rate remained near June's 5-year high of 3.9% y/y. Wages rose 2.1% y/y in goods-producing, with a rise of 1.5% in manufacturing and 2.6% in construction. Mining wages were up 6.1%. Services were mixed. Above average: professional & business services (6.7%), information services (5., leisure & hospitality (5.4), financials (4.7), and wholesale trade (4.1). Below average: education & health (3.5), transportation & warehousing (3.0), utilities (2.6), retail trade (1.9), and other services (1.4). * Auto Sales: Will another round of aggressive incentives boost auto sales? They did in July as total sales jumped to 17.2 mu (saar) from 16.3 mu in June. Car dealers are adding their own discounts on top of those already offered by auto manufacturers to lift slumping sales. However, sales should continue to be volatile from month to month. Total sales will likely average under 17.0 mu for 2006, as they have the past several years. Currently, sales are averaging 16.7 mu, through the first 7 months of the year. * Weekly Consumer Monitor: What's the Consumer Score? Our subjective rating remained at 70 (out of 100) last week, solidly above 50. Jobless claims rose to 315,000, a level consistent with solid jobs growth. Continuing claims remained near 5½-year lows. Yearly growth rate in chain store sales remained just south of 3% on 4-wa basis, while 4-wa in mortgage applications remained in flat trend. Personal loan growth has slowed, while home equity borrowing keeps falling. Weekly Consumer Comfort Index edged up a point. Gasoline usage hit another new high. * Weekly Train Spotting: Is the economy still chugging along? That's what the railcar loadings data continue to show. US railroads capped off a strong July, with a record-breaking week for intermodal traffic. This traffic reflects surging imports and exports, as well as solid retail sales. Total railcar loadings were up 3.0% y/y in the week ended July 29, led by a 6.6% y/y increase in intermodal loadings.

Et voilà le Ed's Morning Briefing du mardi août, jour de FED...

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ECONOMICS: During the fall, will recession talk be in fashion? It already is. In yesterday's NYT, Paul Krugman took a break from bashing President Bush to bash the economy instead in his column titled "Intimations of Recession." As I recently observed, if the economy is going to sink into a recession, now is the time. All the forces that boosted the economy are losing their edge. There are no new tax cuts to stimulate consumer and business spending. At 5.25% this morning--and probably this afternoon after the Fed meets--the federal funds rate is the highest since March 2001. As the prime rate soared to 8.25% currently, home equity borrowing has dropped to zero. Home prices are no longer soaring, and they are falling in some areas. Housing is in a national recession. Even though I don't trust the quality of the payroll employment data, they have convinced most economists that a mid-cycle slowdown is underway. Could all this lead to an economy-wide recession? Of course, it can, which is why Debbie and I upped the odds of a recession over the next 6-12 months from 20% to 30% on July 17. Yesterday, Nouriel Roubini, NYU's blogger and webster, upped the ante raising his probability from 50% to 70%. He wrote that "markets, investors and policy makers will soon wake up from the delusional dreams and the fairy tales they have been indulging into [sic] for too long." Then they will have to face the "five ugly realities" as follows: 1) The US will experience a sharp slowdown followed by a severe recession. 2) The Fed will pause and then ease in the fall, but such easing will not be able to prevent the US recession. 3) After a "suckers' rally" following the Fed pauses and easing, stock markets will enter into a bearish contraction phase, and other risk assets will also experience sharp drops. In 2006, cash is king. 4) The rest of the world will not decouple from the US recession and there will be no "rotation" in global growth as the rest of the world will sharply slow down--after a short lag--following the US recessionary lead. 5) The risk of a disorderly rebalancing of the growing global current account imbalances is increasing with serious consequences for the US dollar and with the growing risk of dangerous global trade and asset protectionism. Krugman goes a step further and suggests that the economic expansion has been phony. "The key point is that the forces that caused a recession five years ago never went away," he claims. It was all a housing bubble that was engineered by the Fed to replace the Tech bubble. Why can't the Alarmists come up with something new? I guess they won't have to if the economy now falls into a housing-led/consumer-led recession as they've been predicting for the past couple of years. Krugman is convinced that the optimists are about to eat crow: "Even optimists generally concede that the housing boom must eventually end, and that consumers will eventually have to start saving again. But the conventional wisdom was that housing would have a 'soft landing'--that the boom would taper off gradually, and that other sources of growth would take its place. You might say that the theory was that business investment and exports would stand up as housing stood down." To Krugman, "The latest numbers suggest, however, that this theory isn't working much better on the economic front than it is in Baghdad." (Of course, he can't help but link the bad outcome for the US economy to Iraq.) The implication is that because the economic expansion was phony, the recession could be very severe as the economy heads back to square one (2002) because nothing was real from 2003-2005. Krugman can't avoid a final dig at the President: "One last thing: the real wages of most workers fell during the 'Bush boom' of the last three years." It seems to me that the Alarmists are a bit too hysterical and ideological. They almost seem to be rooting for a recession. Some like Krugman seem to need a recession to prove that the Bush boom has been a fraud. As a result, they can't see (or admit) the facts that don't support their grim tale. First and foremost, nonfarm productivity has been increasing 3% per year on average since 1995. It is up 10.5% over the past 12 quarters. That's the real deal. That's why real pay per worker including wages, salaries, AND benefits is at a record high! That's why profits are so strong, and why inflation remains low. That's why tax receipts are soaring and the Federal deficit is shrinking. Krugman's ideological bias is clear and his credibility questionable when he states "the budget [is] still deep in deficit and the costs of the Iraq war [are] still spiraling upward." As for workers' incomes, Krugman ignores the fact that total compensation of employees rose 6.7% y/y during Q1, well ahead of the 4.1% increase in the personal consumption expenditures deflator INCLUDING food and energy. While it is true that real residential construction has soared 34% since the beginning of the decade, the growth rate of real GDP hardly changes if this component is excluded. The following Alerts show that capital goods orders, with the exception of Technology (computers and semiconductors), remain on a solid uptrends. Recently, Debbie and I noted that there is a capital spending boom in nonresidential structures underway. The knowledge economy is booming as employment in the professional and business services industry continues to rise to record highs. The global economy is booming as suggested by the strength in industrial commodity prices. Could it be the best, rather than the worst, is yet to come? I am open to this possibility. I would welcome it. Krugman and Roubini would not. * Factory Orders: A good year for capital goods manufacturers? No, a great year! Orders, shipments, and earnings remain on steep uptrends, and are at or near record highs, for industrial machinery, electrical equipment, construction equipment, aerospace, and mining/drilling machinery. Tech doesn't look as great by comparison. Strong corporate profits are driving demand for capital goods and strong revenues are boosting the profits of capital goods producers. Solid profits growth, along with robust exports, should continue to boost business for capital goods manufacturers over the remainder of the year. * US Capital Spending: Why should US capital spending remain strong? Because profits should continue to grow at a rapid pace. Record profits and cash flow have fueled strong capital spending growth the past few years, and should do so again this year. Spending on high-tech continues to grow at a double-digit rate, while spending on non-tech equipment is strengthening. Spending on nonresidential structures is rising at the strongest pace since the start of the decade. * German Ifo, Orders, & DAX: Is back-to-back decline in German factory orders worrisome? Not really. Orders can be volatile from month to month, and special factors likely depressed June data. Despite recent weakness, foreign orders are still 10.3% above a year ago, while domestic orders are 6.4% higher. German orders are highly correlated with both DAX forward earnings and business confidence, with the former at a new record high, and the latter near a 15-year high. The DAX tracks factory orders closely, and should resume its climb, along with orders. * Commodity Prices: What's the message from the commodity pits? The global economy continues to boom. Strong global demand has pushed the CRB raw industrials commodity spot price index back to a new record high, with the metals sub-index fluctuating in a flat trend around recent record high. Most metals prices have been volatile recently, though in record territory. Precious metals prices have remained relatively subdued despite geopolitical turmoil.

Cette analyse devrait te plaire Whynot

Ed's Morning Briefing du 14 août:

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I) GEOPOLITICS: Ceasefire! So who won? It is too early to say. However, both sides were clearly taken by surprise. Hezbollah probably never imagined that Israel would level their military installations, offices, banks, and neighborhoods so ferociously from the air. The Israelis didn't expect that Hezbollah would put up such a fight on the ground and launch so many barrages of missiles. If Hezbollah really abides by the ceasefire, then these terrorists may not be as committed to martyrdom as they claim. Apparently, neither Syria nor Iran perceive that Israel is "as weak as a spider's web," as claimed by Sheikh Hassan Nasrallah, Hezbollah's secretary-general. If they thought so, they would have pushed Nasrallah to keep fighting. The UN is a big winner since all sides found it to be the best diplomatic forum to end the latest round of hostilities. The question is will 15,000 UN troops combined with 15,000 Lebanese soldiers really create a "Hezbollah-free zone" from Israel's northern border to the Litani River, as the Israelis expect? For now, the big winner is Globalization. Frankly, I am relieved by this latest stalemate in the Clash of Civilizations. Yesterday, on "60 Minutes," Iran's President Mahmoud Ahmadinejad resisted Mike Wallace's attempts to get him to repeat some of his most provocative and outrageous statements about destroying Israel and welcoming a Clash of Civilizations. So what's next? August 31 is the deadline set by the UN for Iran to suspend uranium enrichment. The Iranians have already rejected the UN resolution, but say they are ready to talk as long as suspension isn't a precondition. II) ECONOMICS: Could it be that Godot (a.k.a., the long-awaited mid-cycle slowdown) is still a no-show? I think so. The tale end of the WSJ's story on July's much-better-than-expected retail sales report observed: "Economists generally expect the government's estimate of the nation's second-quarter economic growth to be revised upward to about 3% from the preliminary estimate of 2.5% released in late July." Could it be that July's 1.4% jump in retail sales was just a "temporary bounce" following a weak June, according to one economist quoted in the article? I don't think so. This fellow predicted that the loss of purchasing power to high energy prices, soft job growth, the "evaporating" boost from high home prices and depleted saving will keep spending "lackluster" for the rest of the year. I disagree. The retail sales data suggest that consumers have plenty of purchasing power. This was confirmed by several strong Q2 earnings reports from the department stores. While payroll employment looks weak, purchasing power remains strong. Let's do the math: (1) Employee compensation in the GDP accounts was up 6.1% during Q2 and 6.8% y/y. (2) Nonfarm business hourly compensation rose 5.4% during Q2 and 5.7% y/y. (3) Inflation-adjusted hourly compensation was 1.7% above a year ago during Q2. (4) Hours worked (reflecting the length of the workweek and employment) rose 1.5% y/y during Q2. (5) So total real employee compensation rose 1.7% + 1.5% = 3.2% y/y! That's a solid increase in consumers' purchasing power. It explains why real GDP was up 3.5% y/y during Q2--and even higher when the number is revised upwards. Nevertheless, the upward revision in real GDP during Q2 won't be because of consumer spending since June's retail sales was revised down from a decline of 0.1% to a drop of 0.4%. Rather it will be because of higher inventory accumulation and a narrower trade deficit than reflected in the preliminary estimate. However, economists may have to raise their Q3 estimate for real GDP given the solid gain in retail sales during the first month of the current quarter. This sure looks like the Goldilocks economic scenario to me. The trouble is there are lots of bears out to get her. Now they are starting to growl that if the economy isn't stagnating, then it must be inflating. I guess if they can't have a stagflation scenario now, they'll take an inflationary one, in which the Fed must continue to tighten until they can get stagflation, or better yet, a recession! I look at the hourly compensation numbers and I see plenty of purchasing power for consumers. The bears look at the same numbers and see inflation. I think that hourly compensation is a misleading inflation indicator. It includes bonuses, commissions, and realized stock options grants. None of these are likely to have much if any inflationary consequences. Also, in a growing economy, more workers are likely to be climbing up the income ladder than down and finding better employment opportunities in other occupations and industries. Nothing wrong with that, and why is that inflationary? It's not. That's why the Bureau of Labor Statistics devised the Employment Cost Index (ECI), a measure of the change in the cost of labor, free from the influence of employment shifts among occupations and industries. It includes wages and benefits, as does hourly compensation, but in the ECI "straight-time wage and salary rates are total earnings before payroll deductions, excluding premium pay for overtime and for work on weekends and holidays, shift differentials, and nonproduction bonuses such as lump-sum payments provided in lieu of wage increases." The ECI also excludes stock options. So while hourly compensation was up 5.7% y/y, the ECI was up only 2.8% during Q2. Unfortunately, unit labor costs are calculated using hourly compensation (HC) rather than the ECI. They are up 3.2% y/y based on the official measure, but only 0.4% using the ECI instead of HC. I am rooting for Goldi, rather than waiting for Godot. * Hourly Compensation vs. Employment Cost Index: Are inflationary pressures heating up in the labor market? We don't think so. Q2's hourly compensation was up 5.7% y/y, the highest since Q4 2000. This measure better measures purchasing power per worker than "cost-push" inflationary pressures. A better measure of those kinds of pressures is the ECI which is up only 2.8% y/y. The correlation coefficients between the core personal consumption expenditures deflator and HC and the ECI are 69.0% and 87.9% since 1980. * Retail Sales: Is consumer spending losing gas because of higher gas prices? Nope. Retail sales jumped 1.4% in July, and were strong across the board. The jump in pump prices may have depressed retail sales in May and June, but not in July. The y/y comparisons remain solid, with retail sales ex autos and ex autos & gasoline near recent cyclical peaks. Incomes are growing along with jobs and real pay per worker, which should keep the consumer spending. * Business Sales & Forward Earnings: Why are profits still growing so fast at this stage of the business cycle? The y/y comparisons usually settle down to high single-digits, not low double-digits once profits recover back to trend following a recession. However, revenue growth remains remarkably strong near 9%. Earnings tend to grow twice as fast as revenues. In early August, forward earnings was 15% above a year ago. Globalization is boosting sales for US exporters and for companies that are distributing record US imports.

Et celui d'aujourd'hui:

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ECONOMICS: Health Care stocks have been performing better in recent weeks as investors have turned more risk averse and more defensive as fears of a significant economic slowdown have spread. From a top-down perspective, the long-term prospects for this industry are mixed. We all know that the demographic fundamentals are very bullish for the industry. There will be plenty of aging Baby Boomers in need of stents as well as new knees and hips. We are living longer, which means we will consume more health care goods and services as we linger longer. Average life expectancy is up to 77.9 years now, up from 73.7 years in 1980. The problem is that Corporate America is making it quite clear that companies are no longer willing to provide open-ended health benefits to their retirees, who are living longer and longer. This means that there will be more political pressure on the government to pay the bills. While the industry can look forward to lots of patients, its biggest paying customer now will only get bigger and put more pressure on the industry's profits. On August 1, in his first major speech as Secretary of the Treasury, Hank Paulson stated, "The biggest economic issue facing our country is the growth in spending on the major entitlement programs: Medicare, Medicaid, and Social Security. The cost to the federal government of these three programs, without fundamental reform, is projected to more than double, from the current level, 8% of GDP, to nearly 17% by 2060. If left unchecked these programs would significantly impair our economic flexibility and erode our competitiveness." Public spending on health care in 2004 accounted for 5.2% of GDP, up from 3.3% during 1990. I estimate that it could rise to 10% of GDP by 2020. There is a political solution to this problem and that is means testing. The government must also devise ways to reduce excessive usage of the health care system by senior citizens who tend to "shop doctors," i.e., see several doctors and seek numerous treatments for the same ailments just to be sure they are getting the best care. Devising and implementing measures to reduce such abuses of the system is easier said than done. For the government, it is politically much easier to lean on the Health Care industry to cut prices and fees than to pressure our older citizens to accept more limitations on how much health care they may consume. * Health Care Indicators: How much are consumers spending on health care? Plenty. In June, they spent $1.9 trillion (saar), or a record 20% of their disposable personal income (DPI). Health care accounted for 14.3% of nominal GDP last quarter, double the percentage at the start of the 1980s. On a per capita basis, Americans are spending $6,353 a year. By 2010, the number of Americans 65 years or older is projected to rise by 3 million to 40 million. * Government Spending On Health Care: How much is the government spending on health care? More than triple what it spent in 1990. In 2004 (the latest data available), the federal and state & local governments spent $614.5 billion vs. $191 billion at the start of the 1990s. Public spending on health care has increased from 32% of all health care spending to 38% over that time span. The government has a bigger and bigger role in determining the cost of providing health care to all consumers.