Economy

Registration is Open! Please join me on December 28 for your Year-end CPE. Please visit https://thorstenconsulting.com/webcasts to Register. Year-end CPE for CPAs, Controllers, CFOs, Accountants, Accounting Professionals "Controller/CFO Strategic Outlook-2023," or "Data and Predictive Analytics / Business Intelligence." You can also register for both at the same time.

Many corporate teams have used SWOT analysis. There is another tool known as the PESTLE analysis. Pestle stands for Political, Economic, Social, Technological, Legal and Environmental. Please watch the following excerpt from a recent speech to delve further into the topic.
Strategic Trends - PESTLE Analysis - Jim Lindell CSP CPA

As you may know, the American Institute of CPAs (AICPA) announced an exciting proposal to create a new association with The Chartered Institute of Management Accountants (CIMA) that will represent and advocate for the entire accounting profession, while preserving the member bodies of both organizations. As a CPA in business for over 30 years, I am excited by this proposal because I believe it is the next logical step to meet the needs of our evolving profession. That’s why I will vote “yes” and I encourage you to do so as well.

CPAs are fast becoming thought leaders in the business world, and with our growing scope comes a need for broader skills and resources. This proposal would deliver that. While maintaining all the benefits we have as AICPA members, we would also receive automatic membership to this new association, providing access to more international research, tools and market insights to keep our skills sharp in rapidly changing business world. We would gain a ton and lose nothing. It’s as simple as that.

Also, the proposal has the support of the AICPA’s Board of Directors, governing Council, Business and Industry Executive Committee, Government Performance and Accountability Committee, and Women’s Initiatives Executive Committee; 52 state CPA societies; and employers and finance leaders in the U.S. and around the world.

Voting “yes” on this proposal is important to the CPA’s continued growth and success today and into the future.

Take action now
Voting is quick and easy, and I encourage you to join me in submitting your “yes” vote today. Personal and confidential ballot links were emailed out from the third-party vote administrator called, “AICPA Independent Tabulator.” If you missed it, you can visit www.directvote.net/aicpa to retrieve your voting credentials. But don’t wait — voting closes at 5pm ET on June 16. You can learn more about the proposal, by visiting www.aicpa.org/horizons.

The ability to accurately forecast the economy and the markets is similar to the search for the Holy Grail. This chart shows the previous two recessions as contrasted with the Industrial Production Statistics (G17) and the respective 3 and 12-month averages. Note that the crossover at the end of 2015 is very similar to the crossovers that occurred just before the onset of the last two recessions. I believe that this does not bode well for the rest of our economy. Six months from now, it will be easy to see in retrospect. The real challenge will be navigating through those six months.

I remember a story that was shared by a pastor. He said that "if giving a sermon and the argument is weak, pound loudly on the pulpit." When it comes to the economy, the stock market, the unemployment, the student loan debt, the extended automobile terms and interest rates - pundits are pounding loudly all around.

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.)