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  • The S&P 500 Finds Its Ceiling [View article]
    Thank you for your comments - we appreciate your having posted them twice in response to this and our preceding post. Our readers should take care to note that the chart we've featured in both posts only extends back to 31 March 2015 and only covers approximately 2 1/2 months of the S&P 500's index value, and should not be mistaken for a chart that covers 15 years worth of stock price history.
    Jun 26, 2015. 10:20 AM | Likes Like |Link to Comment
  • Decoherent Expectations And The S&P 500 [View article]
    Thank you for your comments - we appreciate your having posted them twice in response to this and our subsequent post. Our readers should take care to note that the chart we've featured in both posts only extends back to 31 March 2015 and only covers approximately 2 1/2 months of the S&P 500's index value, and should not be mistaken for a chart that covers 15 years worth of stock price history.
    Jun 26, 2015. 10:19 AM | Likes Like |Link to Comment
  • Resolving Anomalies In U.S.-China Trade [View article]
    Ben Gee,

    No-one, other perhaps than yourself, believes the nation's official economic GDP figures. Even China's top leader does not believe them:

    Does this help clarify things?
    Jun 11, 2015. 08:43 AM | 1 Like Like |Link to Comment
  • The Improving State Of The U.S. Housing Market [View article]
    The relationship between the median new home sales price and median household income data is linear with the nominal data. With such a linear relationship, you would only succeed in "scrunching up" the visual presentation by changing to either a semi-log - or more properly in this case, a log-log chart presentation, which wouldn't add any real value.

    But you don't have to take our word for it. Since we've provided the links to our data sources, you can determine how valuable that exercise might be for yourself.

    As a good rule of thumb, you would only seek to change to a semi-log (or in this case, a log-log) graph if the relationship between the two things being charted was either exponential or involved a power law, where the relationship would then appear to be linear. Otherwise, it's pretty much a waste of time.
    Jun 1, 2015. 02:24 PM | Likes Like |Link to Comment
  • A Major Setback For The Apollo Group [View article]
    Not at all. Here's why:

    1. The technical problems that the Apollo Group described in the last two conference calls you mention did not identify the implementation of the Apollo Group/Carnegie Learning Adaptive Math Practice system as even a significant source of its problems - we've broken that story in the media. Just to confirm, here are links to the full transcripts of those last two calls:

    The first call only mentions adaptive learning near the end, with respect to its potential, and not with respect to providing instruction in mathematics.

    2. Apollo Group/Carnegie Learning Adaptive Math Practice (AMP) system was being developed to be a product that would compete with Pearson's MyMathLab system, which would open new revenue streams for the Apollo Group. The failure of the AMP system means that potential for future business growth has been pushed out by several years, at least, and perhaps indefinitely. It will be interesting to see if the company will address this situation in its next conference call with investors.

    Finally, please keep in mind that the Apollo Group has an established track record of employing unusual reporting techniques that have effectively concealed the extent to which its business situation has been deteriorating from investors in recent years (most notably in how it has reported its enrollment data in its SEC filings since 2012, which we've previously addressed). Perhaps that will change with their new CFO, who has only been on the job for almost a month now following the surprise dismissal of his predecessor. We'll see.
    May 24, 2015. 01:19 PM | Likes Like |Link to Comment
  • Hauser's Law In Greece? [View article]
    It's an interesting question. Total government revenues has the following major components:

    1. Income Tax Collections
    2. Payroll Tax Collections
    3. Corporate Income Tax Collections
    4. Excise Tax Collections
    5. Revenues from Originating Loans (this became significant after 2009).
    6. Fees and User Charges

    We've done the statistical math for the first three - together, these all fit with Hauser's Law with normal variation. (I should note that as corporate income tax collections have fallen dollar for dollar with the increases in the employer's portion of payroll tax collections that have occurred in the post-WW2 era, as might be expected by Hauser's Law. Meanwhile, personal income tax collections very much follows the Hauser's Law trendline with normal variation.)

    By comparison, the other three categories are minor contributors to the federal government's revenues (and in the case of student loans, very recent contributors), which is why we haven't focuses any statistical analysis on them outside of our look at total revenues.

    Apr 29, 2015. 12:49 PM | Likes Like |Link to Comment
  • Hauser's Law In Greece? [View article]
    Maybe a picture will help:

    In the chart linked above, the "Dot-Dash" lines represent the long term mean trend line. The horizontal orange-shaded bands are plus/minus one standard deviation from the mean trend line, where we expect 68% of all observations to fall. The dashed lines are plus/minus three standard deviations from the mean trend line, where we expect 99% of all observations to fall.

    What you're describing is not anything more than the typical kind of variation that might be found in any normal distribution with an established trend. To claim otherwise is mindless cherrypicking of the data.

    Hope this helps!
    Apr 27, 2015. 06:10 PM | Likes Like |Link to Comment
  • Hauser's Law In Greece? [View article]

    Thanks for your comments - it's always nice to get insights that are backed by solid data!

    Picking up on your first point, we've been able to expand the basic definition of Hauser's law based on a wider sample of data - as such, we've been able to both generalize and to extend it.

    Picking up on your second point, it's a bit misleading to include pre-World War 2 tax data - the structure of the U.S. income tax code before the war was not oriented for revenue maximization, which changed considerably during the war - that's the major reason why the number of pages needed to explain the U.S. tax code to tax professionals went from being 504 pages before the war to 8,200 pages by its end in 1945:

    That aside, working with the post-war data, we've applied statistical methods to the basic premise to validate that it still applies, and have demonstrated that the data is such that the variation can be described by a Gaussian (normal) distribution:

    As a quick observation, since the definition of GDP for the U.S. was revised in 2013, it continues to hold, however the percentages of GDP are lower than what Hauser had referenced based on the pre-revision data.

    Second, others, including ourselves, have found evidence of it applying outside of just the United States. Here's an example for Canada from one of the economists at Worthwhile Canadian Initiative:

    Meanwhile, here's what we found for Spain:

    And obviously, the analysis above would apply for Greece, and the indications are that it did in France with its recent failed experiment with elevated income tax rates.

    Hope this helps!
    Apr 27, 2015. 03:43 PM | Likes Like |Link to Comment
  • Q2 2015 Dividends To Date Signal Continuing Contraction [View article]
    SRAYDJ writes:

    "Did I miss something?"

    Yes. Many things actually, starting with a number of key insights from the field of statistics that allow meaningful inferences to be drawn from, say, over a decade's worth of samples.

    "It would be enlightening to know how this concentration of cuts to one sector compares to past periods."

    It sure would, wouldn't it? And the good news for you is that we've provided you with the links to the historic data that you will need to get started with that effort. [If it helps, you'll want to pay attention to banking beginning around April 2008 and then manufacturing in late 2008-09].

    Hope this helps!
    Apr 23, 2015. 10:11 AM | Likes Like |Link to Comment
  • Q2 2015 Dividends To Date Signal Continuing Contraction [View article]
    Looking at the individual dividend declarations, we're seeing about half of the cuts being made in the oil/gas/mining industries, with REITs and similar financial interests accounting for a significant portion as well. There are also a smattering of cuts in other industries, such as manufacturing. Clearly, the oil/gas/mining industry is where the most distress is to be found, but it's not limited to just that sector.

    This is where the concept of a microrecession becomes important - a microrecession might be described as being the situation where there is some degree of distress within an economy, and even outright contraction, which is perhaps too limited in scope, severity or duration to qualify as a full-fledged national recession as might be determined by the National Bureau of Economic Research.

    From what we've seen, the negative impact is being felt especially hard in 8 states, where new jobless claims have been rising since mid-November 2014 and which are now seeing falling nonfarm employment levels. If you've seen what we've written about new jobless claims in recent weeks, you know which states we mean.

    On a national level though, it would however account for why economic growth rates for the nation are now likely to be much lower than they would otherwise be if the economy was fully healthy and firing on all cylinders.
    Apr 23, 2015. 01:41 AM | 1 Like Like |Link to Comment
  • Q2 2015 Dividends To Date Signal Continuing Contraction [View article]
    freshlegacy, bixbubba,

    The case of Alamos Gold (AGI) is an interesting one because the decision of whether to count it or not came down to the fact that it trades on the NYSE exchange, despite the fact that the company is really based in Canada and operates a number of mines around the world (it does however operate some mines in the U.S., which accounts for why it trades on the NYSE, which is what tipped our decision.)

    That said, the answer is absolutely yes. Cutting dividends is typically only done when firms lack both the positive earnings and cash flow needed to sustain cash dividend payments at the levels they've previously promised. With that being the case, when a company cuts its dividends, it is confirming that its business prospects have definitively turned for the worse without the potential for a rapid recovery in the near term.

    That distress may be concentrated within a number of industries, whether REITS, oil companies, mining trusts, et cetera, so what the dividend cut indicator is really communicating then is that there is a significant level of distress in at least part of the economy.

    For investors, the good news so far is that these dividend cuts have been concentrated in small firms with low market caps, so they haven't negatively impacted the major indices, which is why stock prices haven't crashed as they did back in 2008-09. The bad news is that the distress is large enough where stock prices aren't meaningfully rising either - they've basically gone sideways within a fairly narrow range since the beginning of the year.

    For regular people though, it would explain why something like the GDP growth rate for the first quarter of 2015 is likely to be reported to be negative after all the revisions that bit of data will go through over the next several months.
    Apr 23, 2015. 01:25 AM | 1 Like Like |Link to Comment
  • Q2 2015 Dividends To Date Signal Continuing Contraction [View article]

    1) Those words that appear in blue in the article are actually hypertext links that will connect you to more information, such as historical data - you might actually consider clicking them. Think of them as your friends - they can help save you from making unsupported claims.

    2) Thank you for confirming that you're completely unfamiliar with any of our previous posts and analysis of the topic. We try to avoid repeating ourselves because we assume our regular readers are smart enough to remember the major points we've explained previously, such as within the last four months for a topic we usually only cover once a month. But then, that might involve clicking on those link thingies....

    SA Commenters,

    xpan's comments are representative of what we consider to be "typical" of the quality of insights made by far too many people who apparently substitute their judgment for good judgment in writing comments here at SA. That's why we made such a big deal of pointing out the "atypical" high quality observations we were surprised to receive in a previous article - that's the mark you need to aim for in making it worthwhile for us to consider participating in these discussions.
    Apr 23, 2015. 01:09 AM | Likes Like |Link to Comment
  • New Jobless Claims In And Out Of The Oil Patch [View article]
    It already is. Primarily that's happening through the downturn in the U.S. energy extraction industry's orders for equipment used in oil and gas extraction, but the effects so far are relatively small where they have been more than offset by the benefit of falling oil and fuel prices.

    A good example of this is Illinois, home to equipment maker Caterpillar, where we see employment in industries like manufacturing begin to stall out and begin dropping between October 2014 through the preliminary data for February 2015, while other industries have grown during that same time, such as leisure and hospitality:

    So maybe a good way to describe this is that growth in other states is now slower than it would otherwise be if not for the distress in the U.S. oil patch.
    Apr 17, 2015. 07:21 PM | 1 Like Like |Link to Comment
  • Corrections, Omissions And The Hidden Recession [View article]
    Both things are true. Here's how:

    1. When oil prices first started falling, there was an immediate benefit for U.S. consumers, who could now buy both the same quantity of oil-based products as they did before and additional things, such as dine-out meals. So falling oil prices prompted revenues to grow in other sectors of the U.S. economy.

    2. When oil prices first started falling, instead of cutting their production and investment right away, domestic U.S. oil producers (particularly those in the high-cost-of-production "shale play" states), continued business as usual - in effect, they did the equivalent of tapping their savings to continue operations as they waited to see if the price drop would be short or if it would deepen.

    These two factors combined to produce an outsized surge in GDP growth in 2014-Q3. But not a sustainable one in the face of oil prices that continued to fall and stay down....

    The shakeout then began after oil prices dropped below $80 per barrel in early November 2014 (remember, because of the way payroll cycles work, new jobless claims typically lags by 2-3 weeks behind the actual events that prompt changes in the employee retention decisions of businesses, which is why it job losses in the energy sector began showing up in the data after mid-November). Looking at more recent data, that shakeout has continued at least through the end of March 2015.

    This is why GDP dropped so much below the previous quarter in 2014-Q4 and threatens to be outright negative in 2015-Q1.

    So what we have is two things happening simultaneously - we have a lot of people benefitting from falling oil prices at the same time they are clearly hurting people in the energy industry.

    And if we look at the other 42 states that don't have the same high-cost oil production industries that we focused on in the eight states in this article, we can confirm that's exactly the case - new jobless claims in these states have generally fallen since oil prices began falling after June 2014, a trend that has continued at least through the end of March 2015.

    Nationally, the trend appears flat because these two trends are generally offsetting each other.

    We'll follow up with a post covering this exact dynamic on our site later this week:

    We can't say if it will appear here at Seeking Alpha - that will be up to SA's editors.
    Apr 13, 2015. 04:18 PM | 1 Like Like |Link to Comment
  • China Recession Deepens In February 2015 [View article]
    Actually, yes, negative trade growth between 2 countries does signify a recession.

    Hope this helps clear up that misperception!
    Apr 9, 2015. 03:27 PM | Likes Like |Link to Comment