Consumer Confidence on Plateau

The Lehmann Letter (SM) Consumer Confidence on Plateau This morning the Conference Board reported that Consumer Confidence edged up slightly in January to 98.1: https://www.conference-board.org/press/pressdetail.cfm?pressid=6668 As you can see from the table, it’s been on a plateau for a year. Consumer Confidence (Recessions shaded) Here’s the record since the beginning of 2013 (1985 = 100.0): 2013 January        58.4 February       68.0 March           61.9 April              69.0 May              74.3 June             82.1 July              81.0 August          81.8 September    80.2 October        72.4 November     72.0 December     77.5 2014 January        79.4 February       78.3 March           83.9 April              81.7 May              82.2 June             86.4 July              90.3 August          93.4 September    89.0 October        Continue reading

Contrasting Views

The Lehmann Letter (SM) Stock-market meltdowns preceded the last two recessions. How about now? There are contrasting views. See, for instance, this morning’s Wall Street Journal for these contrasting views in articles posted respectively by Ben Eisen and Dan Strumpf and then Josh Zumbrun. “Time to Say Goodbye to Long Bull Market?” http://www.wsj.com/articles/time-to-say-goodbye-to-long-bull-market-1453665287 “Recession Warnings May Not Come to Pass” http://www.wsj.com/articles/recession-signs-are-flashing-red-1453661989  Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu. (To be fully informed visit http://www.beyourowneconomist.com/) © 2016 Michael B. Lehmann    

The Fed and Interest Rates

The Lehmann Letter (SM) The Federal Reserve raised interest rates recently and indicated – all things being equal – that it would continue to raise rates. But that was before the recent stock-market drop and global fears of recession. The European Central Bank, for instance, yesterday vowed to reduce rates in March should recessionary forces continue. Those concerns led to this posting yesterday by Tom Fairless and Jon Hilsenrath on The Wall Street Journal’s web site: “Economic Unease Puts Top Central Bankers Under Renewed Pressure” http://www.wsj.com/articles/economic-unease-puts-top-central-bankers-under-renewed-pressure-1453415366 The story began: “Central banks in the U.S., Europe and Japan face renewed pressure Continue reading

Domestic Earnings and the U.S. Stock Market

The Lehmann Letter (SM) With so much focus on the international scene, it may be useful to turn our attention – once again – to domestic earnings. Note the peak – 100.85 – in 2014’s first quarter. It’s unreasonable to assume the stock market can continue to climb as earnings fall. Annually                  S&P              EPS              P/E Jan. 1, 2010            1169.43        60.93            19.19 Jan. 1, 2011            1325.83        81.31            16.31 Jan. 1, 2012            1408.47        88.54            15.91 Jan. 1, 2013            1569.19        87.70            17.89 Jan. 1, 2014            1872.34        100.85          18.57 Jan. 1, 2015            2067.89        99.25  Continue reading

Housing Starts Struggle Upward

The Lehmann Letter (SM) This morning the Census Bureau reported 1.1 million housing starts in December: http://www.census.gov/construction/nrc/pdf/newresconst.pdf You can see that starts have struggled upward since the recession’s trough. You can also see that starts are now barely higher than they’ve been during the depths of other recessions. Residential construction remains depressed. At this stage of the cycle starts should be 50% higher than they are now. Housing Starts (Recessions shaded) These figures are presented in thousands of homes started, so that 0.9 is shown in its raw form of 896 for 896,000: 2013 January        888 February       970 March           994 Continue reading

Bad Omen?

The Lehmann Letter (SM) On January 11 the Commerce Department released its latest monthly report on business sales and inventories: http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf The data show an ominous climb in the inventory/sales ratio. Inventory/Sales Ratio (Recessions shaded) You can see the ratio spike with each recession. When sales fall, businesses accumulate stocks (inventories) of unsold goods. Inventories rise as sales fall, driving the inventory/sales ratio swiftly north. Business sales peaked in the summer of 2014 and have fallen ever since. Inventories continued to grow and the ratio climbed. Now business has begun reducing inventories, too, in response to dwindling sales. The ratio’s Continue reading

Stock Market Woes

The Lehmann Letter (SM) The table illustrates the stock market’s problem. The stock market has climbed more rapidly than earnings per share (EPS). Consequently the price/earnings (P/E) ratio has risen. (S&P/EPS = P/E) Moreover, EPS has fallen from its $100 high. If earnings growth has stalled and earnings have begun to decline, stocks will eventually follow earnings south. *************************S&P            EPS              P/E Jan. 1, 2013            1569.19        87.70            17.89 Jan. 1, 2014            1872.34        100.85          18.57 Jan. 1, 2015            2067.89        99.25            20.84 April 1, 2015           2063.11        94.91            21.74  Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu. (To Continue reading