brian’s prosperity in the age of decline...s&p500 stock prices index data trends 0 400 800...
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Brian’s Prosperity in the Age of Decline
Brian BeaulieuCEO
Prosperity in the Age of Decline
OPEESA
ITR Economics provides the best economic intelligence to reducerisk and drive practical and profitable business decisions.
Duration Forecast Result Accuracy
US GDP 15 $16.098 Trillion $16.317 Trillion 98.7%
US Ind. Prod. 13 101.5 (12MMA) 104.1 97.4%
EU Ind. Prod. 14 100.6 (12MMA) 101.5 99.1%
Canada Ind Prod 9 350.1 (12MMA) C$356.7* 98.1%
China Ind Prod 21 564.9 (12MMA) 563.6 99.8%
US Housing 12 955 Ths. Units 1.0 mils. Units 94.7%
US Retail Sales 16 $2.751 Trillion $2.808 Trillion 98.0%
US Employment 13 144.9 Million 146.3 Million 99.0%
2014 Forecast Results2
*Denotes year-end estimate based on most recent data available
3
Real Gross Domestic Product
3MMA
10
12
14
16
18
20
10
12
14
16
18
20
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
June 2013Sept 2013
Sept 2013
GDPCON 3MMA
4
US to Arizona Unemployment Rates
2
3
4
5
6
7
8
9
10
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14U.S. Arizona
Dec 2014
US 5.8
AZ 6.7
5
US to Georgia Unemployment Rates
2
3
4
5
6
7
8
9
10
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14US Georgia
Dec 2014
US 5.8
GA 6.9
US to Michigan Unemployment Rates
2
4
6
8
10
12
14
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14U.S. Michigan
Dec 2014
US 5.8
MI 6.3
6
7
Dec 2014
US 5.8
MO 5.4
2
3
4
5
6
7
8
9
10
'00 '02 '04 '06 '08 '10 '12 '14US Missouri
US to Missouri Unemployment Rates
8
2
3
4
5
6
7
8
9
10
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14U.S. Oregon
DEC 2014
5.8 US6.7 OR
US to Oregon Unemployment Rates
9
US Total Industrial ProductionForecast Through December 2017 Annual Average Index
2007 = 100
30
40
50
60
70
80
90
100
110
120
30
40
50
60
70
80
90
100
110
120
10
World GDP, Trillions of US $, Current Prices
Percent of 2013 World GDP
Source: IMF
73.982 Trillion US$
11
Interest Rates for Long-Term Government Bonds
2.4%
0.4%0.6%
1.3%
0.3%0.5%
0.5%0.3%
9.0%
1.0%1.5%
0.3%0.4%
3.3%2.0%
1.4%0.6%
0.1%
1.7%2.0%
0%
2%
4%
6%
8%
10%
12%
Latest yield
3/12 Rate-of-Change
=
100 100
= ..
100 100 10.4%
RawAug-12 1.4Sep-12 1.5Oct-12 1.5Nov-12 1.4Dec-12 1.5Jan-13 1.3Feb-13 1.3Mar-13 1.6Apr-13 1.6
May-13 1.5Jun-13 1.7Jul-13 1.6
Aug-13 1.7Sep-13 1.7Oct-13 1.7Nov-13 1.6Dec-13 1.7Jan-14 1.5Feb-14 1.5Mar-14 1.9Apr-14 1.7
May-14 1.7Jun-14 1.9Jul-14 1.7
3MMT
4.44.44.44.24.14.24.54.74.84.85.05.05.15.05.04.84.74.95.15.35.35.3
12MMT
18.018.218.418.618.819.019.219.419.719.820.020.220.3
12/12
26.7%25.5%25.2%22.4%20.0%18.3%15.4%12.7%
12/12 Rate-of-Change
=
100 100
= ..
100 100 12.7%
3/12
15.9%13.6%13.6%14.3%14.6%16.7%13.3%12.8%10.4%10.4%
12
Data Preparation
13
US Industrial Production to Lawn & Garden Equipment Production
2007=100
13.1%
-30
-20
-10
0
10
20
30
-15
-10
-5
0
5
10
15
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
EquipmentUS IP
US IPLawn & Garden Equipment
Consumer Prices
00
Soft Landing
A
B C
D
14
Trends 10
Housing
Production
MedicalNew Orders
Soft Landing
Financial RetailWholesale Trade
ForeignNonresidentialConstruction
Hard Landing
15
US Industrial Production to ITR Leading Indicator™
USIP – 12/12 Indicator - Monthly
-15
-10
-5
0
5
10
15
-15
-10
-5
0
5
10
15
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
IndicatorUS IP
Indicator - MonthlyUS IP - 12/12
Reported in ITR Trends Report – ITR Advisor
16
US Leading Indicator
Source: The Conference Board
6.5%
-25
-20
-15
-10
-5
0
5
10
15
-25
-20
-15
-10
-5
0
5
10
15
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
1/12
2010 = 100
17
Purchasing Managers Index
1/12 Rate-of-Change
Source: Institute for Supply Management
3.3%
-50
-25
0
25
50
75
-50
-25
0
25
50
75
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
1/12
Non-Manufacturing Purchasing Managers Index
Above 50 Indicates expansion
18
56.558
45
50
55
60
45
50
55
60
'10 '11 '12 '13 '14 '15 '16
MMAR-O-C
3MMA 12MMA
Institute for Supply Management18
19
S&P500 Stock Prices Index
Data Trends
0
400
800
1200
1600
2000
2400
0
400
800
1200
1600
2000
2400
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Raw12MMA
Source: Wall Street Journal
Generating the Quantitative Forecast
20
ITR Long Term Business Cycle Theory News and Market Observations
Leading Economic IndicatorsInternal Trends
21
Crude Oil Futures Prices toNatural Gas Future Prices
Raw Data
0
3
6
9
12
15
-5
25
55
85
115
145
'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
GasOil
OilNatural Gas
22
Crude Oil Futures Prices to JP Morgan Global PMI
12/12 Rates-of-Change
-60
-30
0
30
60
90
-60
-30
0
30
60
90
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Global PMIOil Prices
Oil Prices
Global PMI
The JP Morgan Global PMI 12/12 has a 10 month lead time to the Crude Oil Futures Prices 12/12 through business cycle highs and lows.
Correlation: 0.42
23
US Industrial Production to Gross Domestic Product
Year-over-year, Quarter to Quarter (3/12)
-6.8%
-2.9%
-5.8%
-15.1%
4.6%
-16
-12
-8
-4
0
4
8
12
-16
-12
-8
-4
0
4
8
12
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
GDPUS IP
GDPUS IP
24
Total U.S. Public Debt
(% of GDP)
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
117.5%The Long View…
25
Total Expenditure on Health as a Percent of GDP(1990-2013)
0
2
4
6
8
10
12
14
16
18
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Hea
lth E
xpen
ditu
re P
erce
ntag
e (%
) US FR SWIZ GER CAN NETH NZ DEN SWE UK NOR AUS
Age Group US China India Ger Mex Braz Japan Can
65 & older 19.6 17.2 8.9 27.9 11.5 12.2 32.2 24.8
40-64 29.0 37.9 28.9 32.9 29.7 32.7 32.8 30.8
20-39 25.4 24.0 31.0 21.5 28.9 29.1 19.5 23.7
less than 20 25.9 21.0 31.4 17.6 29.9 25.9 15.6 20.6
Estimated Percent of Total Population in 2030
27
Share of Population Age 65 and Over
U.S. Dependence on Foreign Oil DecliningNet imports as a share of domestic consumption
Source: Energy Information Administration28
60.4% 59.9% 58.2% 57.0%51.5% 49.2% 44.7% 40.0%
32.9%26.9%
0%
10%
20%
30%
40%
50%
60%
70%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
The Tip of the Iceberg for ManufacturingFinding a Home in the USA
Apple Rolls Royce
Yamaha Honda
Michelin Lenovo
Wham-O Airbus
Bayer Chemical Toshiba
Caterpillar Toyota
GE Flextronics
NCR Siemens
29
29
US Annual Auto Exports
30
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32
Employment – Private Sector
Annual Data Trend
85
90
95
100
105
110
115
120
85
90
95
100
105
110
115
120
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Employment Mils of Jobs
Private Sector Employment GrowthJob OpeningsInvoluntary Part Time EmploymentU6
April 2010 17.2%Quit Rate – Rising
16.1% B2.3% B
-8.8% A12.0%
33
Private Sector Employment to Landscaping Employment
12MMA, Millions of Workers
117.4
0.676
0.3
0.4
0.5
0.6
0.7
0.8
0.9
90
95
100
105
110
115
120
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
LandscapingPrivate Sector
Private Sector EmploymentLandscaping Employment
0
2
4
6
8
10
12
14
16
1982 1986 1990 1994 1998 2002 2006 2010 2014
%
Yield on 10 Year Treasury NoteSource: Factset
Corporate AAA Bond Yields Inverted for Prices
Raw Data
35
35
0
3
6
9
12
15
18
0
3
6
9
12
15
18
Raw
Source: Federal Reserve Board
Corporate Bond Prices
Rates-of-Change
36
36
25.6%
6.9%
-30
-20
-10
0
10
20
30
40
-30
-20
-10
0
10
20
30
40
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
3/12 12/12
Aug '11
Sep '12
Source: Federal Reserve Board
37
Commercial & Industrial Loans at Commercial Banks
Rates-of-Change
13.2%11.5%
-22
-11
0
11
22
-22
-11
0
11
22
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
12/123/12
38
Real Disposable Income Less Transfer ReceiptsAverage per Person Age 18 to 65
12MMA Data Trend
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
Sources: Federal Reserve Bank of St. LouisU.S. Bureau of Labor Statistics
Source: Reuters/University of Michigan39
Consumer Expectations and Retail Sales
Index of Expectations
1.2
1.6
2.1
2.5
2.9
45
61
78
94
110
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
SalesExpectations
Expectations - ActualRetail Sales - 12MMT
40
Total Retail Sales (deflated)
Trillions of Dollars
5.9%4.3%
$2.82
1.65
2.15
2.65
3.15
3.65
4.15
4.65
-18
-14
-9
-5
0
5
9
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMTR-O-C
3/12 12/12
3MMT
12MMT
41
Home Outdoor Equipment & Supplies Expenditures
Rates-of-Change
4.6%3.5%
-15
-10
-5
0
5
10
15
-15
-10
-5
0
5
10
15
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
3/12
12/12
3/12
12/12
42
Housing Starts
Millions of Units
Mar ‘13
May ‘11
Dec ‘09
4.0%9.4%
1.014
0.2
1.0
1.9
2.7
3.5
4.4
5.2
-80
-60
-40
-20
0
20
40
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMTR-O-C
3/12
12/12
3MMT 12MMT
43
Housing Starts to Housing Affordability Index
12/12 Rate-of-Change
-30
-20
-10
0
10
20
30
-60
-40
-20
0
20
40
60
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
HAIHS2
HS2
HAI
Sources: US Census BureauNational Association of Realtors
44
Existing Home Sales
Millions of Units
3.6%-2.3%
4.9
4
5
7
8
10
11
13
-48
-36
-24
-12
0
12
24
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMAR-O-C3/12
12/12
3MMA12MMA
45
Home Outdoor Equipment & Supplies Expenditures to Existing Home Sales
12/12 Rates-of-Change
3.5%
-2.4%
-40
-30
-20
-10
0
10
20
30
-20
-15
-10
-5
0
5
10
15
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Home SalesEquipment
Outdoor EquipmentExisting Home Sales
46
Remodeling Market Index
3MMASource: National Association of Home Builders
62.9 Northeast66.3 West
56.3 South59.0 Midwest
15
30
45
60
75
15
30
45
60
75
'02 '04 '06 '08 '10 '12 '14 '16 '18 '20
NortheastMidwestSouthWest
47
US to California Building Permits
12/12 Rates-of-Change
-60
-45
-30
-15
0
15
30
45
-60
-45
-30
-15
0
15
30
45
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18U.S. California
48
US to Florida Building Permits
12/12 Rates-of-Change
-60
-45
-30
-15
0
15
30
45
60
-60
-45
-30
-15
0
15
30
45
60
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18U.S. Florida
49
US to Ohio Building Permits
12/12 Rates-of-Change
-50
-40
-30
-20
-10
0
10
20
30
40
-50
-40
-30
-20
-10
0
10
20
30
40
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18U.S. Ohio
50
US to Pennsylvania Building Permits
12/12 Rates-of-Change
-50
-40
-30
-20
-10
0
10
20
30
40
-50
-40
-30
-20
-10
0
10
20
30
40
'98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18U.S. PA
51
US Industrial Production to Non-Residential Construction
Data Trends
50
150
250
350
450
35
65
95
125
155
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
ConstructionIndex
Index
Construction
52
ITR Management Objectives™Preparing for the Rise Ahead
1. Budget for the rise…do you have enough….
2. Invest in customer market research to reduce price sensitivity
3. Make sure your training and retention programs are top notch
4. Marketing and advertising spending increasingly effective
5. Drive efficiencies with technology
6. Hire sales people and leaders
7. Lock in costs toward the end of 2015
8. Expand credit offerings to garner market share
9. What are you going to do to avoid 2019?
Source: Census Bureau
Income by Household % in 1967 % in 2013Less than $35,000 39.3% 34.4%$35,000 to $200,000 59.8% 60.8%Over $200,000 0.9% 4.8%
Household Distribution by Income Level
Source: Census Bureau
39.3% 34.4%
59.8% 60.8%
0.9% 4.8%0
10
20
30
40
50
60
70Percentage
$ 0 - 35k$ 35k - 200k$ 200k +
54
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