prosperity in the age of decline - ahtds&p500 stock prices index data trends 0 400 800 1200 1600...
TRANSCRIPT
30th ANNIVERSARY YEAR!
Prosperity in the Age of Decline
Presented by:
Brian Beaulieu
CEO, ITR Economics
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$357.1 98.0%
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%
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
Sept 2013
Sept 2013
GDPCON 3MMA
4
World GDP, Trillions of US $, Current Prices
Percent of 2013 World GDP
Source: IMF
73.982 Trillion US$
5
Interest Rates for Long-Term Government Bonds
2.5%
0.4%0.6%
1.4%
0.4%0.5%
0.6%0.4%
9.7%
0.9%
1.4%
0.4%0.4%
3.3%
1.9%
1.3%0.7%
1.8%2.1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
Latest yield
0.0%
3/12 Rate-of-Change
=
100 100
=.
.100 100 10.4%
Raw
Aug-12 1.4
Sep-12 1.5
Oct-12 1.5
Nov-12 1.4
Dec-12 1.5
Jan-13 1.3
Feb-13 1.3
Mar-13 1.6
Apr-13 1.6
May-13 1.5
Jun-13 1.7
Jul-13 1.6
Aug-13 1.7
Sep-13 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%
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%6
Data Preparation
Consumer Prices
00
Soft Landing
A
B C
D
7
Trends 10
Housing
Production
MedicalNew Orders
Soft Landing
Financial RetailWholesale Trade
Foreign
NonresidentialConstruction
Hard Landing
8
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 - Monthly
US IP - 12/12
Reported in ITR Trends Report – ITR Advisor
9
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
10
Purchasing Managers Index
1/12 Rate-of-Change
Source: Institute for Supply Management
-2.6
-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
11
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 Management11
12
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
13
Existing Home Sales
Millions of Units
-1.5%-3.7%
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
14
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
Raw
12MMA
Source: Wall Street Journal
15
Nondefense Capital Goods New Orders w/o Aircraft
Billions of Dollars
1.7%5.2%
$851.4
500
750
1000
1250
1500
-60
-40
-20
0
20
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMTR-O-C
3/12
12/12
3MMT
12MMT
16
Europe Leading Indicators
1/12 Rates-of-Change
Source: Markit Economics
-64
-48
-32
-16
0
16
32
48
64
80
-64
-48
-32
-16
0
16
32
48
64
80
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
EZ Comp PMIEU Manufacturing PMIJP Morgan Global MFG PMI
-2.5% JP Morgan Global Mfg PMI-5.6% EU Manufacturing PMI
-0.6% Eurozone Composite PMI
Annual Average Data Trends
US to Europe Industrial Production 17
17
60
80
100
120
140
40
60
80
100
120
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
EuropeUS
US
Europe
Generating the Quantitative Forecast
18
ITR Long Term Business Cycle Theory News and Market Observations
Leading Economic IndicatorsInternal Trends
19
Crude Oil Futures Prices toNatural Gas Future Prices
Raw Data
0
3
6
9
12
15
-5
25
55
85
115
145
'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
GasOil
OilNatural Gas
20
Crude Oil Futures Prices to JP Morgan Global PMI
12/12 Rates-of-Change
-60
-30
0
30
60
90
-60
-30
0
30
60
90
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Global PMIOil Prices
Oil Prices
Global PMI
The JP Morgan Global PMI 12/12 has a 10 month lead time to the Crude Oil Futures Prices 12/12 through business cycle highs and lows.
Correlation: 0.42
21
US Consumption of Crude Oil & Petroleum Productsto Real Gross Domestic Product
Data Trends
Sources: EIA, BEA
6
10
14
18
0.4
0.5
0.6
0.7
1985 1990 1995 2000 2005 2010 2015 2020
GDPTrils C2009$
OilBils Barrels
Oil Consumption - Raw Data
GDP - 3MMA
22
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
GDP
US IP
• Demographics
• Inflation
• Health Care Costs / Entitlements
• US National Debt
23
Depression Drivers
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
Exp
end
itu
re P
erce
nta
ge
(%) 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 Administration
60.3% 59.8% 58.1% 56.8%51.3% 49.1%
44.9%40.2%
32.3%
0%
10%
20%
30%
40%
50%
60%
70%
2005 2006 2007 2008 2009 2010 2011 2012 2013
28
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
IKEA
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
Consumer Price Index
Rates-of-Change
-0.1%
1.5%
-3
0
3
5
8
10
-3
0
3
5
8
10
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
1/12
12/12
34
FOMC Member Interest Rate Projections
Source: Federal Reserve
Fed Open Market Committee
0
1
2
3
4
5
6
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
36
36
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
37
37
25.1%
9.5%
-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
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
Billions of Dollars, Annual Data Trend SAAR
39
Personal Savings
50
250
450
650
850
1050
1250
1450
50
250
450
650
850
1050
1250
1450
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
22.9%
9.3%
-45
-30
-15
0
15
30
45
60
-45
-30
-15
0
15
30
45
60
'10 '11 '12 '13 '14 '15 '16
12/12
3/12
Rate-of-Change
40
University of Michigan ConsumerExpectations Index
41
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
3/1212/12
3MMT
12MMT
42
US Light Vehicle Retail Sales
Millions of Units
Source: Ward’s Auto
9.8%7.4%
16.7
8
13
18
23
28
33
38
-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
3MMT12MMT
43
N. A. Big Three Passenger Car Production to N. A. Big Three Light Truck Production
12/12 Rates-of-Change
-10.2%
8.9%
-60
-40
-20
0
20
40
60
-60
-40
-20
0
20
40
60
'02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Car
Truck
44
N. A. Transplant Passenger Car Production to N. A. Transplant Light Truck Production
12/12 Rates-of-Change
6.5%
11.4%
-50
-25
0
25
50
75
-50
-25
0
25
50
75
'02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Car
Truck
45
Wholesale Trade Durable Goods
Trillions of Dollars
6.3%5.8%
2.50
1
2
3
4
5
6
7
-40
-30
-20
-10
0
10
20
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMTR-O-C
3/12
12/12
3MMT12MMT
46
Wholesale Trade of Professional andCommercial Equipment & Supplies
Billions of Dollars
5.7%4.7%
473.132
150
350
550
750
-40
-20
0
20
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMTR-O-C
3/12
12/12
3MMT
12MMT
47
Wholesale Trade of Machinery, Equipment & Supplies
Billions of Dollars
6.8%10.7%
470.7
100
260
420
580
740
-90
-60
-30
0
30
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
MMTR-O-C
3/12
12/12
3MMT
12MMT
48
Look for More Opportunities in These Sectors
► Energy Distribution ► Housing
► Water Distribution/Conservation
► Printed Electronics
► Infrastructure ► Robotics
► Vocational Education ► Security
► Health Care ► 3-D Printing
► Food ► Natural Resources(Harvesting/Conserving)
49
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?
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Brian Beaulieu One of the country’s most informed economists, Brian Beaulieu has served as CEO of ITR Economics™ since 1987 where he researches the use of business cycle analysis and economic forecasts to increase profitability. He co-authored Make Your Move, a book on increasing profits through business cycle changes. Brian has been providing workshops and economic analysis seminars in 7 countries to thousands of business owners and executives for the last 28 years.
"Brian was spectacular, charismatic and incredibly relevant." C. Homann, Royal Bank of Canada “Brian’s presentation was insightful, relevant and very entertaining. The presentation in Bend, Oregon was the best presentation on the economy in this region for many years. I found his message on investing in businesses especially enlightening, as well as the optimal timing of those investments in the business cycle.” Roger J. Lee, Director Economic Development for
Central Oregon “You WOWED our members at Nexstar’s Super Meeting in Atlanta! Everyone enjoyed your great sense of humor and how you were able to connect specifically to them during your presentation. You could have heard a pin drop in the room while you were speaking as everyone was captivated.”
Sandie Jacobson, Nexstar Network “I can safely say that, in my 13 years of putting together programs for the Marketing Council and other AGMA meetings, you are the most interesting, most informative, most enlightening and most enthusiastic speaker we have ever had!”
Kurt Medert, Vice President American Gear Manufacturers
Rave Reviews About Brian
In addition to his work as CEO of ITR Economics, Brian is Chief Economist for Vistage International, a global organization comprised of over 14,000 CEO’s. In 2008, he won the Vistage International’s Speaker Impact of the Year Award. He is also on the Board of Directors of the Ariens Company, a global leading manufacturer of outdoor power equipment. Pronouncements from ITR Economics and/or Brian have appeared in/on: the Wall Street Journal, New York Times, USA Today, Knight Ridder News Services, Business Week, Associated Press, The Washington Times, CBS Radio, CNN Radio, Sirius talk radio, KABC, NPR affiliate WLRN and numerous other outlets.
About Today’s Presentation
Brian’s presentations cover a wide variety of topics including short- and long-term global economic forecasts, regional economic updates, an outlook on inflation, and the relationship of political events and economic growth. He details what economic indicators executives should follow and provides proven strategies for leveraging economic forecasts at the company level.
About ITR Economics™
Founded in 1948, ITR Economics is the oldest, privately-held, continuously operating economic research and consulting firm in the United States. With a long-term 94.7% accuracy rating, ITR Economics has forecast major economic events, such as the 2008 recession, well in advance, and provides reliable industry and company forecasts tailored to the client’s needs. ITR Economics also offers economic webinars, subscription periodicals, consultative reports, and data collection services.
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