Note to my readers…

Due to a busy schedule, I won’t be able to post anything until Sunday when I do my weekly stock market forecast. Fortunately, none of the indicators I usually analyze are being reported the rest of this week, with the exception of the weekly jobless claims figures on Thursday – and that is nice and low anyway.

Thanks for your continued support…

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Easynomics at the Movies (September 18, 2014)

If you’re like me, you love going to the movies! But your time is valuable, and it’s important that you avoid disappointments. Fortunately, there are great tools out there to identify movies that are high quality. From time to time, I plan to post here some movies (currently playing in theaters) that “make the cut” according to my preferred criteria. I hope it can help a few of you out there when you’re making the decision about what to see on a date night or night out with friends.

My goal with this feature is to identify movies of substance that you will have a high probability of enjoying (and those so bad they’re worth making fun of)

Here’s how I arrive at my list of recommended movies:

  • The universe of movies I consider come from the following lists of movies currently in theaters:
    • Latest Box Office Top 10
    • Top 50 Ranked Movies from IMDB rated by “Moviemeter” (i.e., movies with “buzz”)
    • Top 12 Movies from IMDB rated by users (i.e., how much the average person liked the movie)
    • Top 10 Movies from Metacritic (i.e., how much critics liked the movie)
      • Top 5 that are in wide release
      • Top 5 that are in limited release – this way I don’t miss independent films
  • I take the average of two ratings for each movie:
    • IMDB rating by users (i.e., how much the average person liked the movie)
    • Metacritic rating (i.e., how much critics liked the movie)
  • I recommend movies with an average rating of at least 7.5 and that have at least 7.0 for each of the two ratings I use
  • NOTE: I only consider movies for which IMDB has at least 1,000 ratings and Metacritic has at least 10 reviews

 

Guaranteed Classic

Criteria: Avg. at least 9.0 – Both ratings at least 8.5

  • Boyhood

    • I viewed this movie and found it absolutely brilliant, but I will say that it’s not for people who absolutely need an obvious plot.
    • Rotten Tomatoes consensus of what critics are saying: “Epic in technical scale but breathlessly intimate in narrative scope, Boyhood is a sprawling investigation of the human condition.”

Must See

Criteria: Avg. at least 8.25 – Both ratings at least 7.75

  • None for this edition

 

High Quality

Criteria: Avg. at least 7.5 – Both ratings at least 7.0

  • Guardians of the Galaxy
  • Dawn of the Planet of the Apes
  • How to Train Your Dragon 2
  • Starred Up
  • X-Men: Days of Future Past
  • Calvary
  • The Trip to Italy

 

Only Watch with Witty Friends, Junk Food or Alcohol (cuz they’re bad…get it?)

Criteria: Avg. 5.5 or worse – Both ratings 6.0 or worse

  • No Good Deed

 

Here’s the latest version of the full list I analyze:

 

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Consumer Index – Easy Pod (September 17, 2014)

We live in a world where the consumer is king (or queen), so we have to understand how he or she is doing by looking at a consumer index or two.  Below, we’ll tackle the issue in a more systematic way.  Let’s get started.

NOTE: There may be a more recent publication on this topic.  You may be interested in my latest Consumer Index analysis.

This first section is the same intro I have each time for this Easy Pod, so skip ahead to the indicators if you’ve already read it.

I’m continuing with a feature I’m calling “Easy Pod” – a collection of indicators that help portray the current status of something.  In this post, that something is a consumer index summary.  Let’s first review quickly what a consumer is and why we might care to follow a consumer index.

Quick ‘n Easy

Consumer spending makes up about 70% of our economy, so we care deeply about how they are doing.  Although intuitively it makes sense that a more confident consumer would spend more, it turns out that income is a bigger factor.  Still, consumer index data like the consumer’s confidence and sentiment are good coincident indicators of how the economy is doing.

From Merriam-Webster Dictionary:

Consumer = one that utilizes economic goods

We talk a lot about the GDP (Gross Domestic Product – Easy Intro to GDP) as the accepted measure of overall economic activity.  Well, guess what makes up about two-thirds of that economic activity?  That’s right, laundry detergent purchases.  Just kidding.  It’s consumer spending.  That’s me, you, your neighbor … every one of us is a consumer, and the more we spend, the better the economy is generally doing.

Naturally, there is a huge interest in knowing how consumers are feeling.  Are they confident about their financial health, which would mean they are more likely to make big purchases like cars, appliances, vacation packages, etc.?  Or are they extremely concerned about losing their jobs or having their homes decrease in value, which might make them put off those purchases and even spend less at the grocery store?

To assess these kinds of things, there are countless indicators of the health of the consumer.  In this “Easy Pod” I will take a look at the consumer index landscape.  Check back regularly for updates.

Consumer Index – Quick Summary

(Previous Consumer Index Easy Pod – June 27,  2014)

Consumer Index (Click for details – only works if full article is open) Current Rating (change since last publication)
Daily Consumer Leading Indicators NEGATIVE
Bloomberg US Weekly Consumer Comfort Index NEUTRAL
Consumer Confidence Index (The Conference Board) POSITIVE
Consumer Sentiment (University of Michigan) POSITIVE

continue reading…

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Industrial Production – Easy Trends (thru August 2014)

Let’s talk about industrial production, its importance and the current trends.  I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest industrial production trend analysis for more info.

Quick ‘n Easy

Industrial Production (IP) measures how much is being produced by factories, mines and utilities.  The changes in IP track very closely with changes in the overall economy.

First, a nice summary of what Industrial Production (IP) is from Econoday:

The index of industrial production shows how much factories, mines and utilities are producing.  The manufacturing sector accounts for less than 20 percent of the economy, but most of its cyclical variation.  Consequently, this report has a big influence on market behavior.  In any given month, one can see whether capital goods or consumer goods are growing more rapidly.  Are manufacturers still producing construction supplies and other materials?  This detailed report shows which sectors of the economy are growing and which are not.

Easy Translation: The first sentence is probably enough for an understanding – what’s being produced at factories, mines and utilities.  The second sentence is a key detail though.  Because it relates to manufacturing, and manufacturing is only about 20 percent of our economy, at first glance one might consider this indicator not important.  But the changes in the manufacturing sector track the changes in the economy extremely well.  In other words, the cycles of the two are well matched, making IP incredibly important to track.

Here’s a ten-year chart of the Industrial Production Index from the Federal Reserve Bank of St. Louis (a level of “100″ represents the level in 2007):

Industrial Production Index - August 2014 - FRED

Source: StLouisFed.org

Industrial Production Trends and Projections

Below, I will discuss whether industrial production is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I generally start my analysis from 3 years ago. continue reading…

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Economic Indicators Roundup (September 15, 2014)

Economic indicators are everywhere, so this is kind of like a dashboard that I like to follow.  For each indicator, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  For the economic indicators, I will denote in each one’s section how I decide which rating to give it.  At the end, I assign an overall rating, but this is just to guide me in my takeaway of where things stand.  It’s not scientifically rigorous or anything.

  • Positive - indicative of a healthy, growing economy.
  • Neutral - indicative of a slow or no growth economy but not a contracting (recession) economy.
  • Negative - indicative of a shrinking economy or recession.

(NOTE: For a “Quick ‘n Easy” read, just review the labeled white boxes, then skip to my “Easy Take” summary at the end.  You can review any charts/graphs afterward.  I want to make sure no one is intimidated by the length of my posts, even though I’m trying to making them easy …)


Quick Summary

Indicator (Click for details – only works if full article is open) Current Rating (change from previous roundup)
GDPNow (GDP Forecast from Atlanta Fed) Positive
ADS Business Conditions Index Neutral
Bloomberg Financial Conditions Index Positive
Daily Consumer Leading Indicators Negative
Citigroup Economic Surprise Index Positive
Employment Trends Index Positive
Chicago Fed National Activity Index Positive
Easynomics Real Estate Price Stability Index Neutral
Easy Trends Dashboard   (min/max -3 to +3) +2.56 = Definitely moving in a positive direction, with hardly any unconfirmed trends or off-trend readings

NOTE: You may be reading an outdated analysis.  Please visit my latest economic indicators roundup.



Economic Indicator: GDPNow   |   POSITIVE
Easy Intro: None yet   |   Link to Source   |   Latest Date This Info Represents: 3rd Quarter 2014 (i.e., end of September 2014)

Quick ‘n Easy

The current forecast for real GDP growth in the 3rd quarter of 2014 is 3.4 percent – just above average growth by historical standards. The Federal Reserve Board of Atlanta combines a whole bunch of public data to mimic what the government does when reporting Gross Domestic Product (GDP), which is the broadest and most comprehensive measure of the economy that is widely accepted. It basically measures the value of all goods and services produced in the country, regardless of industry.  In a sense, that’s what economics is all about, the value of things. The rate at which GDP is growing tells us whether our economy is strong or not. Historically, the average has been about 3.3 percent per year. It would be great to see at least that rate of growth.

Economic Indicators - GDPNow from Atlanta Fed - Sep 12 2014

Source: FRBAtlanta.org

Easy Description: GDPNow is a frequently updated estimate of the growth rate of the economy (GDP growth) as opposed to having to wait for quarterly estimates from the Bureau of Economic Analysis for “official” figures.

Latest Readings:

3rd Quarter of 2014: On Sep 12, GDPNow is positive (+) 3.4 percent annualized growth rate (versus a reading of +3.6 percent on Sep 4)

NOTE: “Annualized growth rate” is how much growth we would see over a full year if economic growth continued at the same pace as it did in the latest quarter being forecast

Implications: The 1st quarter of 2014 saw a contraction (i.e., negative GDP growth) followed by a nice bounce back in the 2nd quarter, but not enough to put us on track for an overall solid 2014. The current forecast for 3rd quarter growth is a healthy 3.4 percent, which suggests that the final two-thirds of 2014 may show healthy growth.

Additional Info: This is a new indicator, so my use of it here may evolve over time. I like it because it provides a very comprehensive and more timely update for overall economic growth.

Easynomics Rating Methodology: For this index, I will use data on the most recent quarter available. If the latest GDPNow estimate refers to a quarter for which there is already an official BEA reading, then I will go with the BEA reading. I will rate anything between zero and (+) 3.3 as “neutral” – anything above or below that will be rated “positive” or “negative” respectively.

continue reading…

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Stock Market Forecast Update

I have updated my Stock Market Forecast page with the latest systems I’m testing.  You can read the explanation there in detail.  The quick summary is that I’m doing two primary models (4-week and 13-week), both using a linear regression model (a statistical way of finding a straight-line relationship between a set of variables and a calculated outcome) that involves four different technical analysis data points.

I graph the stock market forecast for each model over the coming 4-week or 13-week period.

Lastly, I will issue two weighted combination forecasts each week in my update post, each of which makes only one “official” forecast for the record book.  One represents a weighted average between where the two models think the S&P 500 will close this upcoming week.  The weights are based on how well each model explains the ups and downs of the S&P 500 – that is, using the “r-squared” for the regression analysis.  The other is a “Headline Adjusted” model, which tries to account for the fact that extreme and unforeseen events can throw off the models.  So, I remove data that seems affected by such effects and keep the more pure data.  This model will also make only one forecast, one week in advance.

Performance of Last Week’s Forecast

Weekly Direction of the S&P 500

Correct:   4-week   /   Weight-Adjusted Combo

Incorrect:   13-week   /   Headline-Adjusted

 

Accuracy of the Weight-Adjusted Combination Models

Regular Weight-Adjusted Combination: 0.99 percent too optimistic

Headline-Adjusted Combination: 1.13 percent too optimistic

 

Accuracy of Individual Models

4-week Model:  0.33 percent too optimistic

Correct Prediction of S&P 500 Direction thru Last Week’s Close:  3 out of 4 predictions

******************

13-week Model:  1.16 percent too optimistic

Correct Prediction of S&P 500 Direction thru Last Week’s Close:  10 out of 13 predictions

 

Estimated Effect of Headlines on Current Market Value

NOTE: This is based on a calculation I do after running the current week’s headline-adjusted forecasts.

4-week Model: Negative effect of 0.7 percent   (down 1.9 percent from last week)

13-week Model: Negative effect of 1.3 percent   (down 1.2 percent from last week)

Notes: The headline effect went down an average of 1.6 percent from last week, so headlines are artificially holding down the markets by about 1.0 percent right now.

 

Stock Market Forecast Summary for Upcoming Week

Here’s the breakdown:

continue reading…

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