One of these things is not like the others,
One of these things just doesn't belong,
Can you tell which thing is not like the others
By the time I finish my song?
Did you guess which thing was not like the others?
Did you guess which thing just doesn't belong?
If you guessed this one is not like the others,
Then you're absolutely...right!
Sesame Street Song Read more at http://www.songlyrics.com/sesame-street/one-of-these-things-is-not-like-the-others-lyrics/#KmMSSREttHLJLMjH.99
In 2013, Wells Capital contrasted the Velocity of Money (M2V) with a variety of indicators. At the time, they pondered if the money velocity would pick up in 2014 and what would be the results. They also commented:
In the current recovery, the velocity of money is not behaving oddly as many believe. Rather, as shown in Exhibit 1, falling velocity characterizing the contemporary recovery has also been commonplace in past recoveries. Moreover, and most importantly, should velocity continue to simulate past recovery cycles, it should soon begin rising. (source:http://www.wellscap.com/docs/emp/20131111.pdf)
We are now approaching the end of the 1st quarter 2015. What has happened to the velocity of money? It has continued its decline. Consider the following chart:
This relationship is worth reviewing regularly. The potential increase in interest rates, the reduction (or continuation) of QE and the impact on the stock market should show up in the above chart. If Wells believed money velocity should soon begin rising, we are that much closer. By the way, note how the M2V is at the lowest point in almost 45 years.
Jim Lindell
Thorsten Consulting Group, Inc.
The views expressed are those of the author at the time of writing and are subject to change. This material has been distributed for educational/informational purposes only, and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product. The material is based upon information considered reliable, but its accuracy and completeness cannot be guaranteed.
Cause and Effect - Note how the decrease of participation in the Civilian Labor Force could be related to the reduction in M2 and a corresponding decrease in Home Ownership. For the economy to move forward, we need quality jobs (not low end service jobs.) Without decent jobs and significant participation of the civilian labor force, it will be extremely difficult for the economy to change in a positive fashion.
©2015 - Thorsten Consulting Group, Inc. - Jim Lindell
US. Bureau of Economic Analysis, Federal Government: Current Expenditures [FGEXPND], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FGEXPND/, December 14, 2014.
The following chart depicts the overall unemployment picture from the BLS. Note that the U-3, known as the Official Unemployment Rate, has been decreasing and currently stands at 7.2. It appears as good news but unfortunately it is insignificant. It also does not represent the entire unemployment picture.
Now consider the Civilian Employment - Population Ratio, known as EMRATIO from the St. Louis Fed. The overall ratio has declined from over 63% to less than 59%. The effective number of people employed has decreased significantly. Since almost 70% of the population is responsible for driving the economy, the decrease in the EMRATIO impairs the ability of the consumer to keep influencing the GDP to the necessary extent to improve the economy. In essence, the government will continue to stimulate the economy to make up for the missing contributors.
Copyright 2013 - Jim Lindell, Thorsten Consulting Group, Inc.
The Nation Federation of Independent Business (NFIB) Index of Small Business Optimism came in at 94.4. A reading of 94.4 is historically low and consistent with the sub-par performance of GDP and employment growth ... In the last year, small-business optimism has limped along, and today the sector is no better off than it was just over a year ago,” said NFIB Chief Economist William Dunkelberg. “The lack of progress is discouraging, producing no signs that economic activity will pick up this year at all. 1.
With no certain sign that economic activity will pick up, how should a business position itself to be successful in this environment? Business owners should make specific plans to address the following areas: Vision, Customers and Efficiencies.
Vision -as a country we continue to grasp for green shoots that will foretell an economic turnaround. Unfortunately the continuing mediocre news discounts the possibility of any significant recovery. Owners must present a vision, primarily for the benefit of their employees, that is encouraging, directive, and supportive. In proverbs 29: 18 it states, "Where there is no vision, the people perish." The same is true with our employees. Owners must inspire courage that there is a successful future just over the horizon. In addition they must provide the direction for the company that employees can see, understand, and implement. Owners must also express their understanding for the employees’ economic well-being since it has been so significantly altered over the last several years.
Customers -owners must be sensitive to the needs of their customers. Lean concepts are built on two major tenants, one of which is "only provide products and services that your customer values." Owners must take the time to make sure that they are chatting with their customers and determining what the customers’ needs are.
Efficiencies -the second major tenant of lean concepts is a "relentless identification and elimination of waste." Since we have not turned the corner in this economic malaise, owners must train their employees on ways to identify and eliminate waste. They also must inculcate waste removal into the very fiber of the organization.
When all is said and done, this is the time for owners to step up and provide the leadership to help their company and employees be successful in uncertain times.
©2012 Jim Lindell - Thorsten Consulting Group, Inc.
1. “Small-Business Optimism Index Stagnates: No Progress Made for Small-Business Sector in May | NFIB”, n.d. http://www.nfib.com/press-media/press-media-item?cmsid=60346.
Interesting Video - Who really controls our government?
Encore Broadcast: On Crony Capitalism from BillMoyers.com on Vimeo.
In March of 2011, I wrote about the decline of the newspaper industry. The following chart (from The Atlantic Mobile) shows the historic collapse: This is a picture that only a downhill skier can love! On second thought - not a downhill skier but a base jumper!
From the American Institute of Economic Research:
In the shorter and intermediate terms, when people are faced with a higher price for an item, they simply buy less of it. Eventually, they may substitute cheaper goods. These effects are fairly small, but can add up over time.
To address this, we have revised the Everyday Price Index to allow for constantly adjusting weights. Weights are simply the proportion of your total expenditure that you spend on each good or service you purchase each month. Dynamic weights allow for day-to-day changes in consumer behavior related to price changes.
This weighting results in a 2011 average annual inflation rate of 8 percent as measured by the Everyday Price Index, compared to a mere 3.1 percent from the CPI. (The unweighted EPI inflation rate for 2011 was 7.2 percent, as reported in the last issue of the Economic Bulletin.)
ATA Truck Tonnage Retreated 4% in January
February 28, 2012 12:00 PM
Sean McNally 703-838-1995
ARLINGTON, VA — The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 4.0% in January after surging 6.4% in December 2011. The latest contraction put the SA index at 119.4 (2000=100), down from December’s record level of 124.4. ATA Truck Tonnage Release
January Container Volume Down 3.9 Percent
Imports declined 5.5 percent, exports dropped 8.2 percent
Container trade volume at the Port of Long Beach dropped 3.9 percent overall in January compared to the same period a year ago. Imports were down 5.5 percent, and exports dipped 8.2 percent.
Port terminals handled 456,424 twenty-foot equivalent container units last month, compared to 474,960 TEUs in January 2011.
Port of Long Beach Volume Down
At the end of 2008, our economy fell off the cliff. Debt levels were too high, housing prices were overvalued and the economy had just begun to unwind. The most recent G-19 release on Consumer Credit shows that we have returned to the same debt level that we were at in 2008. It does not bode well for the financial health of the consumer. Our solutions to the economic malaise does not reside in more debt - but reduced debt.
Copyright 2011 - Jim Lindell
This chart shows an alarming trend where the overall participation of the civilian workforce is declining. Fewer people employed yields lower income, lower consumer spending, lower payroll and income tax generation. In short, this graph depicts that the consumer's power to spend is dampened. To successfully move out of the recession (I have never accepted the premise that we have been in a recovery), we need job growth / increased workforce participation.
Copyright 2011 - Jim Lindell
As Einstein stated, "Insanity: doing the same thing over and over again and expecting different results." Our current budget deficits malaise continues with similar types of solutions:
1) Philadelphia Mayor Michael Nutter is proposing a tax on soda and other sugary drinks as he and City Council continue trying to help bail out the cash-starved Philadelphia school district. (source:http://philadelphia.cbslocal.com/2011/06/02/philadelphia-residents-split-on-issue-of-soda-tax/)
2) O’Hare May Get Slot Machines as Illinois Lawmakers Allows Chicago Gambling (source:http://www.bloomberg.com/news/2011-06-01/o-hare-may-get-slot-machines-as-illinois-lawmakers-allows-chicago-gambling.html)
3) Obama administration floats draft plan to tax cars by the mile (source:http://thehill.com/blogs/floor-action/house/159397-obama-floats-plan-to-tax-cars-by-the-mile)
The process of raising new tax revenue will not end well. We will see increased taxation on any item that is consumed. In addition we will legalize practices that have been scorned in the past just to tax other sources of revenue.
Our deficit problems are not a revenue issue. Find the individuals or corporations that are not paying their required taxes and deal with them. Attempting to raise revenue by creating new taxes is the wrong direction. CUT GOVERNMENT COSTS. Adopt lean infrastructures. Make all government employees subject to the same health care, pension and benefits that the taxpayer has. Eliminate the special treatment for elected congressional leaders.
Copyright 2011 - Jim Lindell
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