Posted By Jeb on May 6, 2012
Credit demand is critical to economic expansion and is the best expression of consumer and business confidence and credit demand is rising for consumer, mortgage and business loans. The percentage of banks reporting increasing loan demand is the strongest in over 10 years. These charts are courtesy of Capital Economics. Jeb Terry, Sr. May 6, 2012
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Posted By Jeb on May 6, 2012
My update of monetary aggregates shows money is still flowing into insured checking accounts at an elevated rate. M1 has grown by 18.7% in the last 12 months. The average 12 month growth rate since 1970 is 5.4%! Consider M1 as the raw material for bank loans and consumer spending. High M1 growth is consistent with economic recovery periods coming out of troughs. Low or negative M1 growth is consistent with economic tops. We have now seen 16 consecutive months of double digit percentage LTM M1 growth – the longest period since the economic recovery of the early 90’s where there was 24 months of double digit growth. M1 is ~15% of nominal GDP. In a full recovery and nearing a cyclical top it would be 10% or less. M1 is the lubricant for the economy that can be multiplied in the form of bank loans once confidence recovers – which is showing signs of improvement. Jeb Terry, Sr. May 6, 2012
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Posted By Jeb on May 6, 2012
The ISM surveys still indicate an expanding economy. A score above 50 means business expansion. A score below means contraction. These are surveys, not hard production data and hence can be bumpy. My take is the economy is still sorting through the lagged tightening impact of the panic into cash in Q3 last year. Jeb Terry, Sr. May 6, 2012
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Posted By Jeb on April 25, 2012
The Housing Affordability Index published by the National Association of Realtors is literally headed off the chart. (see their latest report here) It has never been as high nor risen as fast as it has in the recent past. The index is a derivative of mortgage interest rates and personal income. Rates are obviously low and personal income is rising. Combine those facts with still very low home prices and -voila – more people can afford to buy more homes. More home buying causes home prices to firm which helps consumer confidence which helps stimulate stock market investment – and that’s a good thing –eh?. . . Jeb Terry, Sr. April 25, 2012
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Posted By Jeb on April 23, 2012
Home prices are showing improvement, Residential building metrics are showing increased construction. Starts and permits are curving upwards. Heck – it looks good to me. Here is a series of charts extracted from a stack prepared by Capital Economics, an international macroeconomic research firm I commend. Jeb Terry, Sr. April 23, 2012
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Posted By Jeb on April 23, 2012
Bankrate’s Financial Security Index (here) is the strongest since the index was started in 2010. The index is up 5 months in a row. It comports with other measures of consumer confidence. Rising confidence can lead to rising housing activity, rising retail activity and rising stock market investment activity – it’s all good . . . and all early. The index is at a “tipping point” according to Bankrate. They indicated it is at 99.9 but needs to break above 100 to show that Americans feel on the whole that their financial security is indeed growing stronger. So while index is improving i.e. Americans are feeling LESS financially insecure, it does not yet mean we are anywhere near a peak in sentiment or in economic activity – this too is “all good”. Much more to come. Jeb Terry, Sr. April 23, 2012
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Posted By Jeb on April 22, 2012
While only 245 companies have reported earnings so far, 72% of those that have reported have beaten earnings estimates. That is an outstanding beat rate. 70% of them have beaten the revenue estimates. The earnings beat rate at a similar point in time following Q4 was only 58.5%. The charts below come courtesy of Bespoke Investment Group (here). The beat rate is of course a function of rising revenue and earnings and analyst estimates that were too conservative. Either way- the most powerful three words in the investment world is “better than expected”. Next week is jammed with earnings reports. Over half of the S&P 500 companies will have reported. If the beat rates continue we should expect more market upside ahead. That said, the strong market performance in Q1 still supports the fast money habit of “sell in May and go away”. Jeb Terry, Sr. April 22, 2012
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Posted By Jeb on April 19, 2012
It’s logical to wonder what has been the tendency for the equity market performance in Presidential election years. I have prepared the following table on the S&P 500 annual price performance going back to 1948. As you can see, the market has been up in 75% of the years an average of 11.9%. I think it is instructive that the best year was 1980 when Reagan defeated Carter. Jeb Terry, Sr. April 19, 2012
CXO Advisory Group, LLC (here) was kind enough to post the following chart on the monthly returns for the Dow Jones Industrial Avg. in election years compared to non-election years. It is visually clear that Presidential election years tend to have better than normal returns in July, much better returns than non-election years in August, better in September and better than years where there are no elections in Nov. and Dec. April, May and October look to be usually down months.
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Posted By Jeb on April 19, 2012
As we have said in the past, we concentrate on markets where there is a rising tide, where there is measureable new customer adoption with superior double digit growth. These markets allow multiple adolescent companies to monetize their technology, establish a successful revenue model and hopefully reach scale. The advent of smartphones and tablets has enabled an explosion in the amount of video viewed in a mobile context. Mobile video viewership represents the biggest and fastest growing opportunity for new ad revenue for content owners, more effective ads for advertisers and market share and revenue growth for ad agency ecosystem. Jeb Terry, Sr. April 19, 2012
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Posted By Jeb on April 19, 2012
ALL CLEAR?
- In the long run . . . it’s remarkably good
- People . . . Employment picking up. We remain in a sweet spot
- Productivity . . . Profits are strong and will get even stronger
- Capital . . . We are awash in liquidity, under loaned & under invested
- Consumers have the capacity to spend and invest
- Stocks are cheap
- Interest rates and high frequency data signal a sustainable recovery
- Housing will be a wind at our backs
- There is a Mobile Revolution going on
- Big government is the biggest risk
If you look past the ongoing political theatre and the soft patch we are experiencing due to last year’s panic to cash in Q3 (triggered a “tightening” impact) equities and the economy look more than “just fine”. See full report here http://bit.ly/HVT5lX
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