Graphs of Interest: Part II

With the second part, I would like to focus on the housing market - using housing starts, household real estate assets to disposable income, and mortgage debt, as common indicators of activity.

 

Housing Starts

Debt, both total and household, and housing starts.

Total debt (blue), household debt (green) and housing starts (red).

Household debt service payments.

Household debt service (blue) and new housing starts (red).

Residential investment as percent GDP and housing starts.

Private residential investment divided by GDP (blue) and new housing starts (red).

Construction employment and housing starts.

Construction employment as percent labor force (blue) and housing starts (red).

Household Real Estate Assets:Disposable Income
Real estate value to disposable income, and residential investment.

Household real estate assets divided by disposable income (blue) and residential investment (red).

Household real estate to disposable income, and household real estate to personal saving.

Household real estate assets divided by disposable income (blue) and household real estate assets divided by personal saving (red).

I think low inventory is sustaining current price levels.  This would make sense when looking at investment and debt service payments.  There are two other reasons why I think a true speculative bubble may be difficult to form.

 

Relatively high, sustained mortgage delinquency (at commercial banks).

Mortgage delinquency booked at commercial banks.

Falling mortgage debt to disposable income.

Mortgage debt to disposable income.



Graph Collection: Part I

These are some graphs I made at FRED that I've been looking at for a while.

Sales and Profits
Slowdown in retail sales growth.

Year-over-year change in retail sales (excluding food services).

Corporate Profits
Debt and corporate profits.

Corporate profits divided by nonfinancial corporate business debt (blue) and the year-over-year change in corporate debt (red).

Corporate profits as percent GDP and corporate profits as a percent corporate profits plus personal income, and market value of corporate business as percent GDP/10.

Corporate profits divided by GDP (blue), market value of corporate businesses divided by GDP/10 (red), and corporate profits divided by corporate profits plus personal income (green).

Investment
The no longer existent gap between GPDI (gross private investment) and corporate profits as percent of GDP (though it seems to have grown).


GPDI (gross private domestic investment) divided by GDP (blue), corporate profits divided by GDP (red), the difference between GPDI and corporate profits as a percent GDP (green).



Market value and the S&P 500 related by private investment and the CPI respectively.

Market value of corporate businesses divided by private investment (blue) and the S&P 500 divided by the CPI (red).

The breakdown of private investment.

Nonresidential investment (blue) and residential investment (red).

 

I found the  GPDI and corporate profit spread the most interesting; the spread at least is growing.  The change in corporate profits to debt ratio from the mid-1960s to the late 1970s is also of interest.  I would suppose inflation played some sort of role, both monetary and oil based.

The S&P 500: Three Peaks

2000, 2008, 201?.  The past three times when real S&P 500 composite earnings significantly declined the S&P 500 index crashed (2008), crashed (2000), and had a historic rise (1997).

The real S&P 500 index (blue) and composite earnings (green).

The following are peak-to-trough and peak-to-peak charts of the non-real S&P 500.

S&P 500 index: from the lowest depths after the stock bubble to the highest point of the housing bubble (blue) and from the lowest depths after the housing bubble to present (blue).

S&P 500 P/E: from the lowest depths after the stock bubble to the highest point of the housing bubble (blue) and from the lowest depths after the housing bubble to present (blue).

S&P 500 index: from the highest point of the stock bubble tot he highest point of the housing bubble (blue) and then from the highest point of the housing bubble to the present (red)

S&P 500 P/E: from the highest point of the stock bubble tot he highest point of the housing bubble (blue) and then from the highest point of the housing bubble to the present (red)

How much longer can Ben Bernanke keep up his John Law routine: using the Federal Reserve (Banque Generale) to subsidize the US stock and housing markets (Mississippi Company)?

Robert Shiller's data: http://www.econ.yale.edu/~shiller/data.htm

How to Make Money In Real Estate

Make as much money in real estate as you want.  All you have to do is want it, see yourself doing it, and go out and do it.  No money, no cash, no credit, no experience?  No problem.  Spend more time enjoying life with your family and loved ones, go on those vacations you always wanted to go on, and most of all, retire early on your terms.

 

That, at least, is how many of these get rich off real estate read from the title, reviews and back cover.  I frequent the local used book store, which you will see is Half Price Books, and see these books in the economics section every time.  I usually mosey my eyes past, ignoring their presence, but this time, unlike others, I could not resist.

For $6 you too can make millions in 3 years with no cash- less time
(and debt) than it takes graduate from college.



Make money where others fail.

This is what you need: a scheme to become  a millionaire that works
so well that it is automatic. Automatic.  Heavily discounted at $4,
you won't find it again at this bargain basement price.

You couldn't strike paydirt so easily.  This guy just gives
away his secret: flip the house and grow rich.  Money? 
You don't need money (see below).

Don't worry about money.

Admittedly, I've always been curious about these books, and I will, I promise, get around to reading one or two of these books.  Of all the books, Flip and Grow Rich had the cheapest feel to it - a poor page lay out, numerical and alphabetical chapters, and coloringbook-quality paper.  I'll hold out for a better book.

Household Asset Bubbles: A Mirror, A Trend


Here's a chart showing real estate and corporate equities each as a share of total household assets.   Did one bubble just replace another, and why is it not doing it now?



Real estate (blue) and corporate equities (green) as a share of total household assets. I see two faint forms of symmetry.

So here's another chart: pension reserves, deposits, mutual fund shares and life insurance reserves each as a share of total household assets.

Pensions (red), deposits (maroon), mutual fund shares (black) and life insurance (gray) as a share of total household assets.

GPDI: Addendum

There are a couple of correlations between nonresidential and residential investment and the stock markets and housing starts, respectively.  Also, changes in inventory have their own correlation with change in GDP.

Private nonresidential investment (blue) and the Dow Jones Industrial Average (red).

A second look at nonresidential investment with a different stock index.  Private nonresidential investment (blue) and the S&P 500 index (red).

Year-over-year change in both private residential investment (blue) and housing starts (red).

I found a discussion about the second relationship, between residential investment and housing starts (and GDP), at the Model Behavior blog.

Change in private inventory (blue) and year-over-year change in GDP (red).

If you wish to read more on inventory and GDP correlation, the following is available at Nouriel Roubini's webpage:

Changes in inventories are the smallest component of the GDP, usually less than 1% of GDP but they are much more important than their absolute size. In fact, large changes in inventories signal changes in aggregate demand and, thus, are indicators of future economic activity. As the change in inventories is a flow equal to the change in the stock of unsold goods, they are a form of investment, often referred to as involuntary investment.

GDP Breakdown: Gross Private Domestic Investment

GPDI

The third largest component of GDP is gross private domestic investment (GPDI) which is defined as follow:

Gross private domestic investment (1–19) consists of fixed investment (1–20) and the change in private inventories (1–25). Fixed investment consists of both nonresidential (1–21) fixed investment and residential (1–24) fixed investment.

 

Change in private inventory (CBI) looks like an interesting recession indicator, though maybe a bit of a laggard.  Investment has been hard hit by the Great Recession, especially residential investment.  During the Great Recession, investment dropped to its lowest total of GDP (13%) since 1960.

 

 

 

GDP by component percent share.  Gross private domestic investment (red).

Gross private domestic investment (GPDI) total value breakdown: fixed private investment (FPI) and change in private inventories (CBI).

GPDI by percent share of each component. CBI tends to go negative before or during recessions.

Non-residential investment (PNFI) and residential investment (PRFI).  Fixed private investment as a percent of gross investment (FPI/GPDI).

Non-residential and residential investment as percent of fixed investment.

Change in private inventory.

New Series Added to FRED: Leverage Index

FRED has added to its data catalogue the Chicago Fed National Financial Conditions Index.  This series is said to be an examination of  "how leverage can serve as an early warning signal for financial stress and its potential impact on economic growth".


Leverage is a powerful means of creating wealth and poverty.

 

Stress Indices

The first chart is the St. Louis Fed Stress Index and the three-month S&P 500 volatility. 

St. Louis Stress Index (blue) and VIX (red).

The second chart is a new one I am not too familiar with: the CredAbility Consumer Distress Index for Household Budget.  It has a graded scale, much like grade-school grading scales: 90+ A, 89-80 B, 79-70 C, 69-60 D, and below a 60 is an F.  Currently, we're somewhere between needing to pull an all nighter to "don't worry about it, you can still get two D's and graduate"


Household budget stress index.

I set the timeline for the two charts from 5-years ago to present simply because I can't get over that it's been 5-years since the Great Recession began (though you'll see the second chart is based on quarterly data).

PIIGS Unemployment

The latest unemployment data for Greece is in, and, as suspected, the September unemployment rate exceeded that of Spain in the same month.  Also, on Eurostat's front page was an interesting article about the 1.7% month-over-month decline in non-construction industrial production in the Euro Area countries.  I suspect that if construction were counted then the overall production index would be lower.  Spain has been particularly hard hit by construction unemployment, and so have other countries dealing with the effects of a deflated real-estate bubble.

Unemployment continues its near exponential run in Greece (data for Greece runs through September, October for all others).  Italy's unemployment rate has increased slightlyt while Spain continues past 26%.

Industrial production continues to fall since the summer of 2011.  Of the PIIGS, only Italy saw a month-over-month reduction in industrial production; positive month-over-month change for the rest.  Though, of the PIIGS, only Greece saw a positive year-over-year change.

 

All-Transactions House Price Index: Part I

Far be it from me to be political but I had a political thought the other day.  During the most recent presidential election, did the housing bubble in an individual state have correlation with which presidential candidate that state casted electoral votes for?  It might surprise you to see some of the data on all 50 states, plus DC.I took the time to color code the following charts (All-Transactions House Price Index for each state) - don't worry, the color code wasn't too difficult: red=Republican, blue=Democrat.

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming