• The average recession has been 11.1 months
• The average expansion has been 58.4 months
Since 1945,there have been 11 economic cycles
Source: National Bureau of Economic Research
• The average recession has been 11.1 months
• The average expansion has been 58.4 months.
• In September, the current expansion is 87 months.
Since 1945there have been 11 economic cycles
Source: National Bureau of Economic Research
Average Annual GDP Growth RateDuring Previous Expansions
0 2 4 6 8
1949-53
1954-57
1958-60
1961-69
1970-73
1975-80
1980-81
1982-90
1991-01
2001-07
2009-16
Source: Commerce Department WSJ 7/31/2016
Nationally Still Bullish, but the Signals are Mixed
U.S. Leading Index of Economic Indicators
-3
-2
-1
0
1
2
3
4
1985 1990 1995 2000 2005 2010 2015
Pe
rce
nt
Source: Federal Reserve Bank of St. Louis - FRED
Lending Index for the U.S.
Monthly Increase in Nonfarm Workers
-300
-200
-100
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016
Ch
ange
, Th
ou
san
ds
of
Pe
rso
ns
Source: Federal Reserve Bank of St. Louis - FRED
All Employees: Total Nonfarm Payrolls
Average Hourly Earningsof All Employees
1.5
2.0
2.5
3.0
3.5
4.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pe
rce
nt
Ch
ange
fro
m Y
ear
Ago
Source: Federal Reserve Bank of St. Louis/US Bureau of Labor Statistics
Average Hourly Earnings of All Employees: Total Private
Source: The Conference Board
Consumer Confidence Index
30
40
50
60
70
80
90
100
110
120
130
140
150
Au
g-0
0Fe
b-0
1A
ug-
01
Feb
-02
Au
g-0
2Fe
b-0
3A
ug-
03
Feb
-04
Au
g-0
4Fe
b-0
5A
ug-
05
Feb
-06
Au
g-0
6Fe
b-0
7A
ug-
07
Feb
-08
Au
g-0
8Fe
b-0
9A
ug-
09
Feb
-10
Au
g-1
0Fe
b-1
1A
ug-
11
Feb
-12
Au
g-1
2Fe
b-1
3A
ug-
13
Feb
-14
Au
g-1
4Fe
b-1
5A
ug-
15
Feb
-16
Small Business Outlook“Planning To Hire People In The Next Three
Months”
-10
-5
0
5
10
15
20
25O
ct-9
8
Jul-
99
Ap
r-0
0
Jan
-01
Oct
-01
Jul-
02
Ap
r-0
3
Jan
-04
Oct
-04
Jul-
05
Ap
r-0
6
Jan
-07
Oct
-07
Jul-
08
Ap
r-0
9
Jan
-10
Oct
-10
Jul-
11
Ap
r-1
2
Jan
-13
Oct
-13
Jul-
14
Ap
r-1
5
Jan
-16
Net
% o
f R
esp
on
den
ts
Source: National Federation of Independent Business
Planning to Hire People in the Next Three Months
Corporate Profits(With Inventory Valuation Adjustment &
Capital Consumption Adjustment)
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jan
-90
Oct
-99
Jul-
09
Bill
ion
s o
f D
olla
rs
Source: U.S.Dept. of Commerce: Bureau of Economic Analysis
Corporate Profits After Tax with Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment
Job Openings in America
Source: Bureau of Labor Statistics BLS release on July 12, 2016
Total Job Openings 5,500,000
Construction 188,000
Manufacturing 353,000
Trade, Transportation, Utilities 944,000
Professional & Business Services 1,021,000
Education & Health Care 1,080,000
Leisure & Hospitality 760,000
Government 542,000
Decline from last month
Light Weight Vehicle Sales: Autos & Light Trucks
0
5
10
15
20
25Ja
n-7
6
Sep
-81
May
-87
Jan
-93
Sep
-98
May
-04
Jan
-10
Sep
-15
Mill
ion
s o
f U
nit
s
Light Weight Vehicle Sales: Autos & Light Trucks
Source: U.S. Dept. of Commerce: Bureau of Economic Analysis/FRED
Q2-16 Q1-16 Q4-15 Q3-15
More Jobs 29% 29% 35% 33%
Less Jobs 35% 38% 34% 32%
Corporate Hiring Plans:Next 6 Months
Source: Business Roundtable
U.S. Freight Movement SlowingAll Freight Modes, All Types of Products
Source: Cass Information Systems
Job Growth in the 21rst Century
2000 2015 Change
TX 9,929,387 12,494,350 2,564,963CA 16,033,179 17,798,614 1,765,435FL 7,565,981 9,153,264 1,587,283AZ 2,410,581 2,959,518 549,937VA 3,522,865 4,051,908 529,043NC 3,986,151 4,495,473 509,322GA 4,071,557 4,549,951 478,394WA 2,901,492 3,343,992 442,500CO 2,294,408 2,718,698 424,290
Texas Economy More DiversifiedPercentage Change in Employment
Total Texas Non-Farm Employment
Source: Federal Reserve Bank of Dallas
6,500
7,500
8,500
9,500
10,500
11,500
12,500
Jan
-90
Jan
-92
Jan
-94
Jan
-96
Jan
-98
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
Jan
-10
Jan
-12
Jan
-14
Jan
-16
Tho
usa
nd
s o
f W
ork
ers
Texas Index of Leading Indicators
Austin Business-Cycle Index
Dallas Business-Cycle Index
El Paso Business-Cycle Index
Fort Worth Business-Cycle Index
Houston Business-Cycle Index
San Antonio Business-Cycle Index
Mythical Chimera
• Something that exists only in the imagination and is not possible in reality.
Mark Dotzour’s Chimera:Winning the Masters with an 15 Handicap
Japan’s Chimera:Quantitative Easing in a “New Dimension”
On Apr 4, 2013 BOJ will buy 50 trillion in JGB and 10 trillion in Nikkei ETFs
Plan to double the monetary base from 135 trillion yen to 270 in two years.
Government Pension Investment Fund will cut holdings of government bonds from 60% to 35% to increase demand for stocks.
“This is taking monetary easing into an entirely new dimension.”H. Kuroda, Governor BOJ
Japan is Imploding (Now)
• The BOJ is now a top-ten stock holder in about 90% of the stocks on the Nikkei 225.
• The Nikkei is down 9% so far in 2016.
• Buying 3 trillion yen of stock every month.
• Goldman estimates by 2017, the BOJ will be the largest stockholder in 40 of the Nikkei companies.
• BOJ currently owns about 55% of the ETF market.
• Won’t sell ETF holdings until 2026.
Chinese Chimera:The Shanghai Stock Exchange
Plunged 30% in three weeks in June 2015.
• You can buy, but you can’t sell.
• Please borrow money to buy stocks.
• Half of all shares are suspended from trading.
• Declared war on “foreign puppet masters” and vicious short sellers.
European Chimera:
I can help countries that are heavily in debt by loaning them even more money.
“The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation. “
Draghi, November 3, 2015
Low Interest Rates Around the World
German 2-year -.67German 5-year -.58
German 10-year -.09%Swedish 10-year .18%Dutch 10-year .08%Swiss 10-year -.66%
Japanese 10-year -.29%
US 10-year 1.51%
Inflation Rate Remains Low
-20
-15
-10
-5
0
5
10
15
20
25
30
Jan-20 Jul-34 Jan-49 Jul-63 Jan-78 Jul-92 Jan-07
Per
cen
t C
hg.
Fro
m Y
ear
Ago
Source: U.S. Dept. of Labor: Bureau of Labor Statistics
Consumer Price Index for All Urban Consumers: All Items
University of Michigan Inflation Expectation
0
2
4
6
8
10
12
Jan-78 May-83 Sep-88 Jan-94 May-99 Sep-04 Jan-10 May-15
Per
cen
t
Source: Thomson Reuters/University of Michigan
University of Michigan Inflation Expectation©
The End of the Credit Super Cycle?Maybe Not
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Ap
r-7
1
Au
g-7
7
Dec
-83
Ap
r-9
0
Au
g-9
6
Dec
-02
Ap
r-0
9
Source: Board of Governors of the Federal Reserve System/FRED
Pe
rce
nt
30 year mortgage rate10 year treasury rate
The Energy War Escalates
Energy Wars$65 is a “Fair Price”
OPEC president Mohammed bin Saleh al-Sada said a minimum price of $65 a barrel is “badly needed at
the moment.” He cautioned that the security of future supplies is as risk because of the price slump
that has squeezed oil producers since 2014.
Source: Associated Press 5/24/16
Saudi Arabia has announced it will raise domestic petrol prices by more than 50 per cent for some products.
Prices will increase for electricity, water, diesel and kerosene, after the country posted a deficit of $135 billion in 2015.
The 2015 deficit is the highest in the history of Saudi Arabia, which relies on oil for 90 per cent of public revenues. Contemplating selling a portion of ARAMCO to raise money.
The IMF has warned Riyadh that failure to cut spending and implement reforms will eat up the country's fiscal reserves in just five years
Energy WarsSaudi Arabia Insolvency
The Saudi Binladin Group is the largest construction company in the Persian Gulf region. They have an estimated $30 billion in debt
They haven’t paid subcontractors and suppliers for months. The Saudi government is delaying payment for completed projects.
WSJ 3/26/16
Middle East Budget Strains
Energy Wars
Thousands of Indian workers in Saudi Araiahaven’t been paid for months, prompting India’s government to hand out food to hungry workers.
Assisting 10,000 Indian workers who New Delhi says are without a job, pay and food. Some workers for Saudi Oger report they haven’t been paid in seven months.
Source: WSJ August 1, 2016
Middle East Budget Strains
Qatar’s ruler on Tuesday warned citizens that the small Gulf state’s government can no longer “provide for everything” and called on individuals to take personal initiatives to build a strong nation, amid a year of tumbling oil prices likely to dent national budgets in the region.
Source: Al Arabiya 11/3/15
February 3, 2016
Energy WarsUS Oil Fields Profitable Below $40
Continental Resources says that its 2016 capital expenditures budget will be cash flow neutral at an average WTI price of $37.00.
Their 2016 budget will be $920 million, compared to $2.5 billion last year.
Energy WarsU.S. Private Equity Waiting in the Wings
Possibly $100 billion in private equity capital waiting to buy distressed energy assets.