. Laird Research - Economics 
November 11, 2014 
Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1 
Indic...
Indicators for US Economy 
Leading indicators are indicators that usually change before the 
economy as a whole changes. T...
Global Financial Markets 
Global Stock Market Returns 
Country Index Name Close Date Current 
Value 
Weekly 
Change 
Month...
S&P 500 Composite Index 
The S&P 500 Composite Index is widely regarded as the best single 
gauge of the large cap U.S. eq...
S&P 500 Composite Distributions 
This is a view of the price performance of the S&P 500 index com-panies. 
The area of eac...
US Equity Valuations 
A key valuation metric is Tobin’s q: the ratio between the market 
value of the entire US stock mark...
US Mutual Fund Flows 
Fund flows describe the net investments in equity and bond mutual 
funds in the US market, as descri...
US Key Interest Rates 
Interest rates are often leading indicators of stress in the financial 
system. The yield curve sho...
US In
ation 
Generally, the US Fed tries to anchor long run inflation expectations 
to approximately 2%. Inflation can be ...
QE Taper Tracker 
The US has been using the program of Quantitative Easing to pro-vide 
monetary stimulous to its economy....
Exchange Rates 
10 Week Moving Average CAD Exchange Rates 
96 
97 
98 
99 
00 
01 
02 
03 
04 
05 
06 
07 
08 
09 
10 
11 ...
US Banking Indicators 
The banking and finance industry is a key indicator of the health 
of the US economy. It provides c...
US Employment Indicators 
Unemployment rates are considered the “single best indicator of 
current labour conditions” by t...
There are a number of other ways to measure the health of employ-ment. 
The U6 Rate includes people who are part time that...
US Business Activity Indicators 
Business activity is split between manufacturing activity and non-manufacturing 
activity...
US Consumption Indicators 
Variations in consumer activity are a leading indicator of the 
strength of the economy. We tra...
US Housing 
Housing construction is only about 5-8% of the US economy, how-ever 
a house is typically the largest asset ow...
US Housing - FHFA Quarterly Index 
The Federal Housing Finance Agency provides a quarterly survey 
on house prices, based ...
Global Business Indicators 
Global Manufacturing PMI Reports 
The Purchasing Managers’ Index (PMI) is an indicator reflect...
Global Manufacturing PMI Chart 
This is an alternate view of the global PMI reports. Here, we look 
at all the various PMI...
OECD International Trade Data 
The OECD calculates import and export values for member coun-tries. 
Figures are seasonally...
Canadian Indicators 
Retail Trade (SA) 
YoY Percent Change 
−5 0 5 10 
median: 4.76 
Aug 2014: 4.39 
Total Manufacturing S...
6.9 7.0 7.1 7.2 7.3 7.4 7.5 7.6 
1.3 1.4 1.5 1.6 1.7 1.8 1.9 
Beveridge Curve (Mar 2011 − Jul 2014) 
Unemployment Rate 
Va...
European Indicators 
Unemployment Rates 
Percentage 
96 
97 
98 
99 
00 
01 
02 
03 
04 
05 
06 
07 
08 
09 
10 
11 
12 
1...
Government Bond Yields 
Long Term Yields % 
96 
97 
98 
99 
00 
01 
02 
03 
04 
05 
06 
07 
08 
09 
10 
11 
12 
13 
14 
15...
Chinese Indicators 
Tracking the Chinese economy is a tricky. As reported in the Fi-nancial 
Times, Premier Li Keqiang con...
Global Climate Change 
Temperature and precipitation data are taken from the US National 
Climatic Data Center and present...
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Global Economics Update - November 2014

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A monthly summary of global economic performance including employment, trade, business conditions, leading indicators and regional data.

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Global Economics Update - November 2014

  1. 1. . Laird Research - Economics November 11, 2014 Where we are now . . . . . . . . . . . . . . . . . . . . . . . . 1 Indicators for US Economy . . . . . . . . . . . . . . . . . . . 2 Global Financial Markets . . . . . . . . . . . . . . . . . . . . 3 US Key Interest Rates . . . . . . . . . . . . . . . . . . . . . . 8 US In ation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 QE Taper Tracker . . . . . . . . . . . . . . . . . . . . . . . . . 10 Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 11 US Banking Indicators . . . . . . . . . . . . . . . . . . . . . . 12 US Employment Indicators . . . . . . . . . . . . . . . . . . . 13 US Business Activity Indicators . . . . . . . . . . . . . . . . 15 US Consumption Indicators . . . . . . . . . . . . . . . . . . 16 US Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Global Business Indicators . . . . . . . . . . . . . . . . . . . 19 Canadian Indicators . . . . . . . . . . . . . . . . . . . . . . . 22 European Indicators . . . . . . . . . . . . . . . . . . . . . . . 24 Chinese Indicators . . . . . . . . . . . . . . . . . . . . . . . . 26 Global Climate Change . . . . . . . . . . . . . . . . . . . . . 27 Where we are now Welcome to the Laird Report. It’s job is to stick a the pin on the global economy’s map that says ”You are here”. We present economic data from around the world to help figure this out. The full blown panic attack we saw in September/October seems to have abated in North America. We can see that corporate profits for the S&P 500 remain strong (especially profit margins) and all the usual indicators are pointing in the right direction. Europe and China aren’t getting better and deflation is still a (bad) thing in Europe. Possibly the biggest local news is the official end of Quan-titative Easing in the US. Relative to previous nervousness over the announcement-of-the-maybe-end-of-QE-sometime-in-the-future-please- don’t-hurt-me, the actual “thing” doesn’t seem so bad after all. The thing I puzzle over these days is what is going on with Oil? The conspiracy theorist in me thinks that there are good geopolitical rea-sons for lower oil (i.e. it disproportionately hurts ISIS, Iran and Russia) by the powers that be (US government, the Illuminati, etc). However, cooling global demand is also a good reason not to have $100+ oil. I’m not sure the net impact of sub-$80 oil overall, but its clearly good for consumers and perhaps is a nice replacement stimulus program now that QE is over. Formatting Notes The grey bars on the various charts are OECD recession indicators for the respective countries. In many cases, the last available value is listed, along with the median value (measured from as much of the data series as is available). Subscription Info For a FREE subscription to this monthly re-port, please visit sign up at our website: www.lairdresearch.com Laird Research, November 11, 2014
  2. 2. Indicators for US Economy Leading indicators are indicators that usually change before the economy as a whole changes. They are useful as short-term predictors of the economy. Our list includes the Philly Fed’s Leading Index which summarizes multiple indicators; initial jobless claims and hours worked (both decrease quickly when demand for employee services drops and vice versa); purchasing manager indicies; new order and housing per-mit indicies; delivery timings (longer timings imply more demand in the system) and consumer sentiment (how consumers are feeling about their own financial situation and the economy in general). Leading Index for the US Index: Est. 6 month growth −3 −1 1 2 3 Growth Contraction median: 1.40 Sep 2014: 1.68 Initial Unemployment Claims 1000's of Claims per Week 200 400 600 median: 351.75 Nov 2014: 279.00 Manufacturing Ave. Weekly Hours Worked Hours 39 40 41 42 43 44 median: 40.60 Oct 2014: 42.10 ISM Manfacturing − PMI Index: Steady State = 50 30 40 50 60 70 median: 53.30 Oct 2014: 59.00 expanding economy contracting economy Manufacturers' New Orders: Durable Goods Billions of Dollars 150 200 250 300 median: 182.74 Sep 2014: 242.18 ISM Manufacturing: Supplier Deliveries Index 40 50 60 70 median: 51.60 Slower Deliveries Oct 2014: 56.20 Faster Deliveries Capex (ex. Defense & Planes) Percent change (3 months) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −10 −5 0 5 median: 0.86 Sep 2014: 0.87 Chicago Fed National Activity Index Index Value 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −4 −2 0 2 median: 0.08 Sep 2014: 0.47 U. Michigan: Consumer Sentiment Index 1966 Q1 = 100 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 50 70 90 110 median: 88.25 Oct 2014: 86.90 www.lairdresearch.com November 11, 2014 Page 2
  3. 3. Global Financial Markets Global Stock Market Returns Country Index Name Close Date Current Value Weekly Change Monthly Change 3 month Change Yearly Change Corr to S&P500 Corr to TSX North America USA S&P 500 Nov 10 2,038.3 1.0% s 6.9% s 5.2% s 15.0% s 1.00 0.73 USA NASDAQ Composite Nov 10 4,651.6 0.3% s 8.8% s 5.7% s 18.7% s 0.94 0.70 USA Wilshire 5000 Total Market Nov 10 21,447.2 0.9% s 7.4% s 4.5% s 14.0% s 0.99 0.74 Canada S&P TSX Nov 10 14,709.8 1.2% s 3.4% s -3.6% t 10.1% s 0.73 1.00 Europe and Russia France CAC 40 Nov 10 4,222.8 0.7% s 3.7% s 0.6% s -1.6% t 0.55 0.47 Germany DAX Nov 10 9,351.9 1.1% s 6.4% s 1.9% s 2.7% s 0.52 0.50 United Kingdom FTSE Nov 10 6,611.3 1.9% s 4.3% s -0.3% t -1.7% t 0.55 0.52 Russia Market Vectors Russia ETF Nov 10 21.1 -2.2% t -0.7% t -12.5% t -23.6% t 0.48 0.31 Asia Taiwan TSEC weighted index Nov 10 9,050.0 0.5% s 3.9% s -1.3% t 10.6% s 0.29 0.10 China Shanghai Composite Index Nov 05 2,419.2 1.9% s 1.5% s 9.0% s 12.1% s 0.06 0.03 Japan NIKKEI 225 Nov 10 16,780.5 -0.5% t 9.7% s 10.9% s 17.6% s -0.01 -0.05 Hong Kong Hang Seng Nov 10 23,744.7 -0.7% t 2.8% s -3.7% t 2.9% s 0.03 0.13 Korea Kospi Nov 10 1,958.2 0.3% s 0.9% s -4.0% t -1.0% t -0.00 -0.02 South Asia and Austrailia India Bombay Stock Exchange Nov 10 27,874.7 0.1% s 6.0% s 9.2% s 36.0% s 0.18 0.14 Indonesia Jakarta Nov 10 4,965.4 -2.4% t 0.0% s -2.9% t 11.8% s -0.13 -0.16 Malaysia FTSE Bursa Malaysia KLCI Nov 10 1,827.9 -1.4% t 1.1% s -1.2% t 1.3% s 0.17 0.11 Australia All Ordinaries Nov 10 5,501.4 0.3% s 6.1% s 1.0% s 2.2% s -0.04 0.07 New Zealand NZX 50 Index Gross Nov 10 5,470.3 1.0% s 4.7% s 8.3% s 11.1% s 0.08 0.01 South America Brasil IBOVESPA Nov 10 52,725.0 -2.3% t -4.7% t -6.9% t 0.2% s 0.20 0.21 Argentina MERVAL Buenos Aires Nov 10 10,393.4 -8.6% t 3.5% s 26.6% s 92.4% s 0.36 0.29 Mexico Bolsa index Nov 10 44,523.0 -1.5% t 2.5% s -0.3% t 12.2% s 0.65 0.51 MENA and Africa Egypt Market Vectors Egypt ETF Nov 10 69.4 -0.6% t -1.3% t -3.9% t 32.1% s 0.26 0.23 (Gulf States) Market Vectors Gulf States ETF Nov 10 31.8 -1.5% t -4.8% t -3.6% t 25.5% s 0.22 0.11 South Africa iShares MSCI South Africa Index Nov 10 67.2 -2.1% t 7.6% s -6.3% t 10.1% s 0.66 0.49 (Africa) Market Vectors Africa ETF Nov 10 29.3 -1.0% t -1.8% t -13.1% t -2.8% t 0.65 0.61 Commodities USD Spot Oil West Texas Int. Nov 03 $78.8 -3.2% t -12.2% t -19.8% t -16.7% t 0.20 0.36 USD Gold LME Spot Nov 10 $1,172.0 0.1% s -4.1% t -10.4% t -8.7% t -0.04 -0.04 Note: Correlations are based on daily arithmetic returns for the most recent 100 trading days. www.lairdresearch.com November 11, 2014 Page 3
  4. 4. S&P 500 Composite Index The S&P 500 Composite Index is widely regarded as the best single gauge of the large cap U.S. equities market. A key figure is the valua-tion level of the S&P500 as measured by the Price/Earnings ratio. We present two versions: (1) a 12-month trailing earnings version which reflects current earnings but is skewed by short term variances and (2) a cyclically adjusted version which looks at the inflation adjusted earn-ings over a 10 year period (i.e. at least one business cycle). Forecasted earnings numbers are estimates provided by S&P. S&P 500 Profit Margins and Overall Corporate Profit Margins (Trailing 12 months) Percent 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 14 12 10 8 6 4 2 0 14 12 10 8 6 4 2 0 Percent Total Corporate Profits (% of GDP) − median: 6.2%, Q2/14: 10.6% Net Profit Margin (S&P 500 Earnings / Revenue) − median: 6.6%, Q3/14: 9.2% S&P Quarterly Earnings (USD$ Inflation Adjusted to current prices) US Financial Crisis Savings and Loans Crisis Reported Earnings Operating Earnings 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 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 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 −5.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 −5.00 Tech Bubble Japanese Asset Bubble Asian Financial Crisis House Bubble Eurozone crisis Oil Crisis I Oil Crisis II Gulf War High Inflation Period Vietnam War Afganistan/Iraq War Trailing P/E Ratios for S&P500 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 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 50 40 30 20 10 0 50 40 30 20 10 0 Multiple Multiple 12−month P/E ( median = 17.4, Nov = 18.5) 10−year CAPE ( median = 19.4, Nov = 25.0) www.lairdresearch.com November 11, 2014 Page 4
  5. 5. S&P 500 Composite Distributions This is a view of the price performance of the S&P 500 index com-panies. The area of each box is proportional to the company’s market cap, while the colour is determined by the percentage change in price over the past month. In addition, companies are sorted according to their industry group. MSFT 6.5% AAPL 9.7% BMY 16% CRM YHOO Health Care GOOG −3.7% FB −2% ORCL 6.2% TEL IBM −13% HPQ V 19% INTC −2.1% TXN QCOM CSCO 0.48% MA EMC ACN MU STX CA ESRX ALXN JPM 4.3% WFC 5% ACT AFL BBT CME BRK−A 6.2% ZMH BSX ABC SYK AET BAX HST HIG IVZ RF GGP WY USB BAC 3.3% MS C 5.5% AXP GS AIG LLY BEN SPG MET BLK PRU BK ACE DFS CB ICE L JNJ 4.3% PFE 3.6% MRK GILD 1.4% UNH CELG BIIB ABT AGN REGN CAH CI MYL ZTS STJ A SLB −0.57% CVX 0.23% DG VFC CCL YUM CMCSA DIS 2.6% AMZN HD 7.8% MCD Telecommunications Energy Materials Utilities LOW SBUX TWX NKE SE HES APC HAL GM F TJX JCI LB M RL UA WMB KMB ADM KRFT MDLZ CL WMT 4.4% PPG LYB PX SYY KR PG 7.6% FCX KO PEP 4.7% PM 5.9% CVS 13% MO 9% WAG COST RAI GIS EL K NU FE NEE ITW BA GE 5.2% CTL T 0.46% Services CMI RTN DHR UPS 13% MMM 13% UTX ETN CAT LMT GD NSC PCP DE GLW PH TYC WM IR XOM 3.7% COP OXY PSX MPC DVN DD ECL APD IP AA DUK SO D EIX ED VZ 2.6% Information Technology Financials Consumer Discretionary Consumer Staples Industrials <−25.0% −20.0% −15.0% −10.0% −5.0% 0.0% 5.0% 10.0% 15.0% 20.0% >25.0% % Change in Price from Oct 1, 2014 to Nov 10, 2014 Average Median Median Median Sector Change P/Sales P/Book P/E Utilities 9.7% s 1.6 1.7 18.5 Industrials 7.7% s 1.7 3.4 20.2 Health Care 7.1% s 3.0 4.0 25.5 Consumer Staples 6.6% s 1.9 5.3 21.7 Financials 6.0% s 3.1 1.6 17.9 Average Median Median Median Sector Change P/Sales P/Book P/E Information Technology 4.7% s 3.4 3.8 21.9 Consumer Discretionary 3.6% s 1.6 4.3 20.1 Telecommunications Services 1.4% s 1.4 4.2 32.5 Materials 0.9% s 1.5 3.3 22.8 Energy -1.3% t 1.8 1.8 16.2 www.lairdresearch.com November 11, 2014 Page 5
  6. 6. US Equity Valuations A key valuation metric is Tobin’s q: the ratio between the market value of the entire US stock market versus US net assets at replacement cost (ie. what you pay versus what you get). Warren Buffet famously follows stock market value as a percentage of GNP, which is highly (93%) correlated to Tobin’s q. We can also take the reverse approach: assume the market has valuations correct, we can determine the required returns of future es-timated earnings. These are quoted for both debt (using BAA rated securities as a proxy) and equity premiums above the risk free rate (10 year US Treasuries). These figures are alternate approaches to under-standing the current market sentiment - higher premiums indicate a demand for greater returns for the same price and show the level of risk-aversion in the market. Tobin's q (Market Equity / Market Net Worth) and S&P500 Price/Sales Tobin Q (median = 0.75, Jun = 1.12) S&P 500 Price/Sales (median = 1.32, Sep = 1.72) Paying up for growth 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 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 1.75 1.50 1.25 1.00 0.75 0.50 0.25 1.75 1.50 1.25 1.00 0.75 0.50 0.25 Buying assets at a discount Equity and Debt Risk Premiums: Spread vs. Risk Free Rate (10−year US Treasury) 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 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 10% 8% 6% 4% 2% 0% 10% 8% 6% 4% 2% 0% Implied Equity Premium (median = 4.2%, Oct = 5.1%) Debt (BAA) Premium (median = 2.0%, Oct = 2.3%) www.lairdresearch.com November 11, 2014 Page 6
  7. 7. US Mutual Fund Flows Fund flows describe the net investments in equity and bond mutual funds in the US market, as described in ICI’s “Trends in Mutual Fund Investing” report. Note however that this is only part of the story as it does not include ETF fund flows - part of the changes are investors entering or leaving the market, and part is investors shifting to ETF’s from mutual funds. US Net New Investment Cash Flow to Mutual Funds US$ billions (monthly) 2007 2008 2009 2010 2011 2012 2013 2014 −40 −20 0 20 40 Domestic Equity World Equity Taxable Bonds Municipal Bonds US Net New Investment Cash Flow to Mutual Funds US$ billions (Monthly) 2007 2008 2009 2010 2011 2012 2013 2014 −60 −40 −20 0 20 40 60 Flows to Equity Flows to Bonds Net Market Flows www.lairdresearch.com November 11, 2014 Page 7
  8. 8. US Key Interest Rates Interest rates are often leading indicators of stress in the financial system. The yield curve show the time structure of interest rates on government bonds - Usually the longer the time the loan is outstanding, the higher the rate charged. However if a recession is expected, then the fed cuts rates and this relationship is inverted - leading to negative spreads where short term rates are higher than long term rates. Almost every recession in the past century has been preceeded by an inversion - though not every inversion preceeds a recession (just most of the time). For corporate bonds, the key issue is the spread between bond rates (i.e. AAA vs BAA bonds) or between government loans (LIBOR vs Fedfunds - the infamous “TED Spread”). Here a spike correlates to an aversion to risk, which is an indication that something bad is happen-ing. US Treasury Yield Curves Forward Instantaneous Rates (%) 13 14 15 16 17 18 19 20 21 22 23 24 2.5 2.0 1.5 1.0 0.5 0.0 2.5 2.0 1.5 1.0 0.5 0.0 Nov 7, 2014 (Today) Oct 7, 2014 (1 mo ago) Aug 7, 2014 (3 mo ago) 07 Nov 2013 (1 yr ago) 3 Month & 10 Yr Treasury Yields 96 10 Yr Treasury 7% 3 Mo Treasury Spread 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 7% 6% 5% 4% 3% 2% 1% 0% 6% 5% 4% 3% 2% 1% 0% AAA vs. BAA Bond Spreads 9% 8% 7% 6% 5% 4% 9% 8% 7% 6% 5% 4% Percent AAA BAA median: 91.00 Nov 2014: 86.00 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 300 200 100 0 300 200 100 0 Spread (bps) LIBOR vs. Fedfunds Rate 7% 6% 5% 4% 3% 2% 1% 0% 7% 6% 5% 4% 3% 2% 1% 0% Percent 3 mos t−bill LIBOR median: 37.00 Nov 2014: 20.23 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 300 200 100 0 300 200 100 0 Spread (bps) www.lairdresearch.com November 11, 2014 Page 8
  9. 9. US In ation Generally, the US Fed tries to anchor long run inflation expectations to approximately 2%. Inflation can be measured with the Consumer Price Index (CPI) or the Personal Consumption Expenditures (PCE) index. In both cases, it makes sense to exclude items that vary quickly like Food and Energy to get a clearer picture of inflation (usually called Core Inflation). The Fed seems to think PCI more accurately reflects the entire basket of goods and services that households purchase. Finally, we can make a reasonable estimate of future inflation ex-pectations by comparing real return and normal bonds to construct an imputed forward inflation expectation. The 5y5y chart shows expected 5 year inflation rates at a point 5 years in the future. Neat trick that. Consumer Price Index Percent 84 85 86 87 88 89 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 6% 5% 4% 3% 2% 1% 0% −1% 6% 5% 4% 3% 2% 1% 0% −1% US Inflation Rate YoY% (Sep = 1.7%) US Inflation ex Food & Energy YoY% (Sep = 1.7%) Personal Consumption Expenditures Percent (Year over Year) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −1 0 1 2 3 4 5 6 PCE Inflation Rate YoY% (Sep = 1.4%) PCE Core Inflation YoY% (Sep = 1.5%) 5−Year, 5−Year Forward Inflation Expectation Rate Percent 08 09 10 11 12 13 14 15 16 17 18 19 −1 0 1 2 3 4 5 6 5 year forward Inflation Expectation Actual 5yr Inflation (CPI measure) Actual 5yr Inflation (PCE Measure) www.lairdresearch.com November 11, 2014 Page 9
  10. 10. QE Taper Tracker The US has been using the program of Quantitative Easing to pro-vide monetary stimulous to its economy. The Fed has engaged in a series of programs (QE1, QE2 & QE3) designed to drive down long term rates and improve liquidity though purchases of treasuries, mor-gage backed securites and other debt from banks. The higher demand for long maturity securities would drive up their price, but as these securities have a fixed coupon, their yield would be decreased (yield coupon / price) thus driving down long term rates. In 2011-2012, “Operation Twist” attempted to reduce rates without increasing liquidity. They went back to QE in 2013. The Fed chairman suggested in June 2013 the economy was recover-ing enough that they could start slowing down purchases (“tapering”). The Fed backed off after a brief market panic. The Fed announced in Dec 2013 that it was starting the taper, a decision partly driven by seeing key targets of inflation around 2% and unemployment being less than 6.5%. In Oct 2014, they announced the end of purchases. QE Asset Purchases to Date (Treasury Mortgage Backed Securities) Trillions 2.5 2.0 1.5 1.0 0.5 0.0 2.5 2.0 1.5 1.0 0.5 0.0 Treasuries QE1 QE2 Operation Twist QE3 Taper Mortgage Backed Securities Total Monthly Asset Purchases (Treasury + Mortgage Backed Securities) 200 150 100 Billions 50 0 −50 −100 200 150 100 50 0 −50 −100 Month to date Nov 05: $0.009 Inflation and Unemployment − Relative to Targets Percent 10 8 6 4 2 0 10 8 6 4 2 0 Target Unemployment 6.5% Target Inflation 2% U.S. 10 Year and 3 Month Treasury Constant Maturity Yields Percent 5 4 3 2 1 0 5 4 3 2 1 0 Short Term Rates: Once at zero, Fed moved to QE Long Term Rates: Moving up in anticipation of Taper? 2008 2009 2010 2011 2012 2013 2014 www.lairdresearch.com November 11, 2014 Page 10
  11. 11. Exchange Rates 10 Week Moving Average CAD Exchange Rates 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0.62 0.71 0.81 0.90 1.00 1.09 USA / CAD 0.55 0.61 0.66 0.72 0.77 0.82 Euro / CAD 59.16 74.71 90.26 105.81 121.36 136.91 Japan / CAD 0.38 0.44 0.49 0.55 0.61 0.67 U.K. / CAD 0.59 0.98 1.36 1.74 2.12 2.51 Brazil / CAD CAD Appreciating CAD Depreciating Change in F/X: Oct 1 2014 to Nov 7 2014 (Trade Weighted Currency Index of USD Trading Partners) 3.0% 1.5% −1.5% −3.0% Euro 0.1% UK 0.8% Japan 3.4% South Korea 0.7% China −1.7% India −1.8% Brazil 2.3% Mexico −0.7% USA 1.5% Canada 0.2% Country vs. Average Appreciating Depreciating % Change over 3 months vs. Canada BRA −7.7% ARG 0.8% KRW −1.2% JPY −7.9% AUS −3.7% RUS −17.7% CHN 3.5% IND 2.7% USA 3.2% EUR −4.1% MXN 1.0% ZAR −2.1% −10.0% −8.0% −6.0% −4.0% −2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% CAD appreciating CAD depreciating www.lairdresearch.com November 11, 2014 Page 11
  12. 12. US Banking Indicators The banking and finance industry is a key indicator of the health of the US economy. It provides crucial liquidity to the economy in the form of credit, and the breakdown of that system is one of the exac-erbating factors of the 2008 recession. Key figures to track are the Net Interest Margins which determine profitability (ie. the difference between what a bank pays to depositors versus what the bank is paid by creditors), along with levels of non-performing loans (i.e. loan loss reserves and actual deliquency rates). US Banks Net Interest Margin Percent 3.5 4.0 4.5 median: 3.95 2014 Q2: 3.10 Repos Outstanding with Fed. Reserve Billions of Dollars 50 150 250 median: 53.48 Nov 2014: 224.59 Bank ROE − Assets between $300M−$1B Percent 0 5 10 15 median: 12.84 2014 Q2: 9.42 Consumer Credit Outstanding % Yearly Change −5 0 5 10 15 20 median: 7.70 Sep 2014: 6.88 Total Business Loans % Yearly Change −20 0 10 20 median: 8.50 Sep 2014: 12.27 US Nonperforming Loans Percent 1 2 3 4 5 median: 2.34 2014 Q2: 2.26 St. Louis Financial Stress Index Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0 2 4 6 median: 0.011 Oct 2014: −1.10 Commercial Paper Outstanding Trillions of Dollars 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1.0 1.4 1.8 2.2 median: 1.36 Nov 2014: 1.07 Residential Morgage Delinquency Rate Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 2 4 6 8 10 median: 2.30 2014 Q2: 7.39 www.lairdresearch.com November 11, 2014 Page 12
  13. 13. US Employment Indicators Unemployment rates are considered the “single best indicator of current labour conditions” by the Fed. The pace of payroll growth is highly correlated with a number of economic indicators.Payroll changes are another way to track the change in unemployment rate. Unemployment only captures the percentage of people who are in the labour market who don’t currently have a job - another measure is what percentage of the whole population wants a job (employed or not) - this is the Participation Rate. The Beveridge Curve measures labour market efficiency by looking at the relationship between job openings and the unemployment rate. The curve slopes downward reflecting that higher rates of unemploy-ment occur coincidentally with lower levels of job vacancies. Unemployment Rate Percent median: 6.20 11 10 9 8 7 6 4 Oct 2014: 5.80 79 80 81 82 83 84 85 86 87 88 89 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 5 11 10 9 8 7 6 5 4 Percent 4 5 6 7 8 9 10 2.0 2.5 3.0 3.5 4.0 Beveridge Curve (Unemployment vs. Job Openings) Unemployment Rate (%) Job Openings (% total Employment) Dec 2000 − Dec 2008 Jan 2009 − Jul 2014 Aug 2014 Participation Rate Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 63 64 65 66 67 median: 66.10 Oct 2014: 62.80 Total Nonfarm Payroll Change Monthly Change (000s) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −500 0 500 median: 162.00 Oct 2014: 214.00 www.lairdresearch.com November 11, 2014 Page 13
  14. 14. There are a number of other ways to measure the health of employ-ment. The U6 Rate includes people who are part time that want a full-time job - they are employed but under-utilitized. Temporary help demand is another indicator of labour market tightness or slack. The large chart shows changes in private industry employment lev-els over the past year, versus how well those job segments typically pay. Lots of hiring in low paying jobs at the expense of higher paying jobs is generally bad, though perhaps not unsurprising in a recovery. Median Duration of Unemployment Weeks 5 10 15 20 25 median: 8.60 Oct 2014: 13.70 (U6) Unemployed + PT + Marginally Attached Percent 8 10 12 14 16 median: 9.70 Oct 2014: 11.50 4−week moving average of Initial Claims Jan 1995 = 100 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 50 100 150 200 median: 108.15 Nov 2014: 85.78 Financial Activities 0 100 200 300 400 500 600 Unemployed over 27 weeks Millions of Persons 35 30 25 20 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0 1 2 3 4 5 6 7 median: 0.78 Oct 2014: 2.84 Services: Temp Help Millions of Persons 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1.5 2.0 2.5 3.0 median: 2.24 Oct 2014: 2.94 15 Annual Change in Employment Levels (000s of Workers) Average wages ($/hour) Private Industry Employment Change (1 year) Construction Durable Goods Education Health Services Information Leisure and Hospitality Manufacturing Mining and Logging Nondurable Goods Other Services Professional Business Services Retail Trade Transportation Utilities Wholesale Trade Circle size relative to total employees in industry www.lairdresearch.com November 11, 2014 Page 14
  15. 15. US Business Activity Indicators Business activity is split between manufacturing activity and non-manufacturing activity. We are focusing on forward looking business indicators like new order and inventory levels to give a sense of the current business environment. Manufacturing Sector: Real Output YoY Percent Change −10 0 10 20 median: 6.14 2014 Q3: 10.43 ISM Manufacturing − PMI Index 30 40 50 60 70 Oct 2014: 59.00 manufac. expanding manufac. contracting ISM Manufacturing: New Orders Index Index 30 40 50 60 70 80 Oct 2014: 65.80 Increase in new orders Decrease in new orders Non−Manufac. New Orders: Capital Goods Billions of Dollars 40 50 60 70 median: 57.31 Sep 2014: 71.96 Average Weekly Hours: Manufacturing Hours 39 40 41 42 43 median: 41.10 Oct 2014: 42.10 Industrial Production: Manufacturing YoY Percent Change −15 −5 0 5 10 median: 3.31 Sep 2014: 4.11 Total Business: Inventories to Sales Ratio Ratio 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1.1 1.2 1.3 1.4 1.5 1.6 median: 1.37 Aug 2014: 1.29 Chicago Fed: Sales, Orders Inventory Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −0.5 0.0 0.5 Above ave growth Sep 2014: 0.08 Below ave growth ISM Non−Manufacturing Bus. Activity Index Index Growth Contraction 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 35 45 55 65 Oct 2014: 60.00 www.lairdresearch.com November 11, 2014 Page 15
  16. 16. US Consumption Indicators Variations in consumer activity are a leading indicator of the strength of the economy. We track consumer sentiment (their expec-tations about the future), consumer loan activity (indicator of new purchase activity), and new orders and sales of consumer goods. U. Michigan: Consumer Sentiment Index 1966 Q1 = 100 50 60 70 80 90 110 median: 88.25 Oct 2014: 86.90 Consumer Loans (All banks) YoY % Change −10 0 10 20 30 40 median: 7.83 Sep 2014: 3.89 Accounting Change Deliquency Rate on Consumer Loans Percent 2.5 3.0 3.5 4.0 4.5 median: 3.48 2014 Q2: 2.26 New Orders: Durable Consumer Goods YoY % Change −20 0 20 median: 4.60 Sep 2014: 0.62 New Orders: Non−durable Consumer Goods YoY % Change −20 0 10 20 median: 4.32 Sep 2014: −0.35 Personal Consumption Housing Index Index −0.4 0.0 0.2 0.4 median: 0.02 above ave growth Sep 2014: −0.13 below ave growth Light Cars and Trucks Sales Millions of Units 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 10 12 14 16 18 20 22 median: 14.77 Oct 2014: 16.35 Personal Saving Rate Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 2 4 6 8 10 median: 5.60 Sep 2014: 5.60 Real Retail and Food Services Sales YoY % Change 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −10 −5 0 5 median: 2.54 Sep 2014: 2.61 www.lairdresearch.com November 11, 2014 Page 16
  17. 17. US Housing Housing construction is only about 5-8% of the US economy, how-ever a house is typically the largest asset owned by a household. Since personal consumption is about 70% of the US economy and house val-ues directly impact household wealth, housing is an important indicator in the health of the overall economy. In particular, housing investment was an important driver of the economy getting out of the last few recessions (though not this one so far). Here we track housing prices and especially indicators which show the current state of the housing market. 15 20 25 30 35 150 200 250 300 Personal Income vs. Housing Prices (Inflation adjusted values) New Home Price (000's) Disposable Income Per Capita (000's) Sep 2014 r2 : 89.2% Range: Jan 1959 − Sep 2014 Blue dots +5% change in next year Red dots −5% change in next year New Housing Units Permits Authorized Millions of Units 0.5 1.0 1.5 2.0 2.5 median: 1.36 Sep 2014: 1.03 New Home Median Sale Price Sale Price $000's 100 150 200 250 Sep 2014: 259.00 Homeowner's Equity Level Percent 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 40 50 60 70 80 median: 66.52 2014 Q2: 53.63 New Homes: Median Months on the Market Months 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 4 6 8 10 12 14 median: 5.00 Sep 2014: 3.10 US Monthly Supply of Homes Months Supply 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 4 6 8 10 12 median: 5.90 Sep 2014: 5.30 www.lairdresearch.com November 11, 2014 Page 17
  18. 18. US Housing - FHFA Quarterly Index The Federal Housing Finance Agency provides a quarterly survey on house prices, based on sales prices and appraisal data. This gener-ates a housing index for 355 municipal areas in the US from 1979 to present. We have provided an alternative view of this data looking at the change in prices from the peak in the 2007 time frame. The goal is to provide a sense of where the housing markets are weak versus strong.The colours represent gain or losses since the start of the housing crisis (defined as the maximum price between 2007-2009 for each city). The circled dots are the cities in the survey, while the background colours are interpolated from these points using a loess smoother. Change from 2007 Peak − Q2 2014 50% 40% 30% 20% 10% 0% −10% −20% −30% −40% −50% Today's Home Prices Percentage Change from 2007−2009 Peak Frequency −75% −50% −25% 0% 25% 50% 75% Year over Year Change − Q2 2014 10% 8% 6% 4% 2% 0% −2% −4% −6% −8% −10% YoY Change in this quarter YoY Percent Change Frequency −15% −10% −5% 0% 5% 10% 15% www.lairdresearch.com November 11, 2014 Page 18
  19. 19. Global Business Indicators Global Manufacturing PMI Reports The Purchasing Managers’ Index (PMI) is an indicator reflecting purchasing managers’ acquisition of goods and services. An index read-ing of 50.0 means that business conditions are unchanged, a number over 50.0 indicates an improvement while anything below 50.0 suggests a decline. The further away from 50.0 the index is, the stronger the change over the month. The chart at the bottom shows a moving av-erage of a number of PMI’s, along with standard deviation bands to show a global average. Global M−PMI − October 2014 Eurozone 50.6 MEX 52.0 53.3 Global PMI 52.2 TWN 40.0 42.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 60.0 Contracting Steady Expanding KOR 48.7 JPN 52.4 VNM 51.0 IDN 49.2 ZAF 51.8 AUS 49.4 BRA 49.1 CAN 55.3 CHN 50.4 IND 51.6 RUS 50.3 SAU 59.1 USA 55.9 Global M−PMI Monthly Change Eurozone 0.3 MEX −1.3 0.7 Global PMI 0.0 TWN −5.0 −4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 5.0 Deteriorating PMI Change Improving KOR −0.1 JPN 0.7 VNM −0.7 IDN −1.5 ZAF 1.1 AUS 2.9 BRA −0.2 CAN 1.8 CHN 0.2 IND 0.6 RUS −0.1 SAU −2.7 USA −1.6 Purchase Managers Index (Manufacturing) − China, Japan, USA, Canada, France, Germany, Italy, UK, Australia Business Conditions Expanding 04 05 06 07 08 09 10 11 12 13 14 30 40 50 60 70 30 40 50 60 70 Business Conditions Contracting www.lairdresearch.com November 11, 2014 Page 19
  20. 20. Global Manufacturing PMI Chart This is an alternate view of the global PMI reports. Here, we look at all the various PMI data series in a single chart and watch their evolution over time. Red numbers indicate contraction (as estimated by PMI) while green numbers indicate expansion. Global PMI 48.9 49.6 50.0 51.5 50.9 51.2 50.4 50.6 50.6 50.8 51.6 51.8 52.1 53.1 53.3 53.0 53.2 52.4 51.9 52.2 52.6 52.4 52.6 52.2 52.2 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 United States Canada Mexico Brazil Eurozone Netherlands Ireland Poland Spain Czech Republic Italy France Germany Greece United Kingdom Russia Turkey Saudi Arabia South Africa Japan Korea China Taiwan Vietnam Indonesia India Australia 51.0 52.8 56.1 55.8 54.3 54.6 52.1 52.3 52.0 53.7 53.1 52.8 51.8 54.7 55.0 53.7 57.1 55.5 55.4 56.4 57.3 55.8 57.9 57.5 55.9 51.4 50.4 50.4 50.5 51.7 49.3 50.1 53.2 52.4 52.0 52.1 54.2 55.6 55.3 53.5 51.7 52.9 53.3 52.9 52.2 53.5 54.3 54.8 53.5 55.3 55.5 55.6 57.1 55.0 53.4 52.2 51.7 51.7 51.3 49.7 50.8 50.0 50.2 51.9 52.6 54.0 52.0 51.7 51.8 51.9 51.8 51.5 52.1 52.6 53.3 50.2 52.2 51.1 53.2 52.5 51.8 50.8 50.4 50.4 48.5 49.4 49.9 50.2 49.7 50.5 50.8 50.4 50.6 49.3 48.8 48.7 49.1 50.2 49.3 49.1 45.4 46.8 46.1 47.9 47.9 46.8 46.7 48.3 48.8 50.3 51.4 51.1 51.3 51.6 52.7 54.0 53.2 53.0 53.4 52.2 51.8 51.8 50.7 50.3 50.6 48.9 48.2 49.6 50.2 49.0 48.0 48.2 48.7 48.8 50.8 53.5 55.8 54.4 56.8 57.0 54.8 55.2 53.7 53.4 53.6 52.3 53.5 51.7 52.2 53.0 52.1 52.4 51.4 50.3 51.5 48.6 48.0 49.7 50.3 51.0 52.0 52.7 54.9 52.4 53.5 52.8 52.9 55.5 56.1 55.0 55.3 55.4 57.3 55.7 56.6 47.3 48.2 48.5 48.6 48.9 48.0 46.9 48.0 49.3 51.1 52.6 53.1 53.4 54.4 53.2 55.4 55.9 54.0 52.0 50.8 50.3 49.4 49.0 49.5 51.2 43.5 45.3 44.6 46.1 46.8 44.2 44.7 48.1 50.0 49.8 51.1 50.7 50.9 48.6 50.8 52.2 52.5 52.8 52.7 52.9 54.6 53.9 52.8 52.6 52.6 47.2 48.2 46.0 48.3 49.9 49.1 49.5 50.1 51.0 52.0 53.9 53.4 54.5 55.4 54.7 55.9 56.5 55.5 56.5 57.3 54.7 56.5 54.3 55.6 54.4 45.5 45.1 46.7 47.8 45.8 44.5 45.5 47.3 49.1 50.4 51.3 50.8 50.7 51.4 53.3 53.1 52.3 52.4 54.0 53.2 52.6 51.9 49.8 50.7 49.0 43.7 44.5 44.6 42.9 43.9 44.0 44.4 46.4 48.4 49.7 49.7 49.8 49.1 48.4 47.0 49.3 49.7 52.1 51.2 49.6 48.2 47.8 46.9 48.8 48.5 46.0 46.8 46.0 49.8 50.3 49.0 48.1 49.4 48.6 50.7 51.8 51.1 51.7 52.7 54.3 56.5 54.8 53.7 54.1 52.3 52.0 52.4 51.4 49.9 51.4 41.0 41.8 41.4 41.7 43.0 42.1 45.0 45.3 45.4 47.0 48.7 47.5 47.3 49.2 49.6 51.2 51.3 49.7 51.1 51.0 49.4 48.7 50.1 48.4 48.8 47.3 49.2 51.2 50.5 47.9 48.6 50.2 51.3 52.9 54.8 57.2 56.3 56.5 58.4 57.3 56.7 56.2 55.3 57.3 57.0 57.5 55.4 52.5 51.6 53.2 52.9 52.3 50.0 52.0 52.0 50.8 50.6 50.4 51.7 49.2 49.4 49.4 51.8 49.4 48.8 48.0 48.5 48.3 48.5 48.9 49.1 51.0 51.0 50.4 50.3 52.5 51.6 53.1 54.0 53.5 52.3 51.3 51.1 51.2 49.8 50.9 54.0 53.3 55.0 53.5 52.7 53.4 51.7 51.1 50.1 48.8 48.5 50.3 50.4 51.5 59.8 57.0 58.9 58.1 58.5 58.9 58.0 57.3 56.6 56.6 57.5 58.7 56.7 57.1 58.7 59.7 58.6 57.0 58.5 57.0 59.2 60.1 60.7 61.8 59.1 47.1 49.5 47.4 49.1 53.6 49.3 50.5 50.4 51.6 52.2 56.5 49.1 51.5 51.6 50.5 50.3 51.5 50.3 47.4 44.3 46.6 45.9 49.0 50.7 51.8 46.9 46.5 45.0 47.7 48.5 50.4 51.1 51.5 52.3 50.7 52.2 52.5 54.2 55.1 55.2 56.6 55.5 53.9 49.4 49.9 51.5 50.5 52.5 51.7 52.4 47.4 48.2 50.1 49.9 50.9 52.0 52.6 51.1 49.4 47.2 47.5 49.7 50.2 50.4 50.8 50.9 49.8 50.4 50.2 49.5 48.4 49.3 50.3 48.8 48.7 50.2 50.6 51.5 50.4 50.4 51.6 50.4 49.2 48.2 47.7 50.1 50.2 50.9 50.8 50.5 49.5 48.5 48.0 48.1 49.4 50.7 51.7 50.2 50.2 50.4 47.8 47.4 50.6 51.5 50.2 51.2 50.7 47.1 49.5 48.6 50.0 52.0 53.0 53.4 55.2 55.5 54.7 52.7 52.3 52.4 54.0 55.8 56.1 53.3 52.0 48.7 50.5 49.3 50.1 48.3 50.8 51.0 48.8 46.4 48.5 49.4 51.5 51.5 50.3 51.8 52.1 51.0 51.3 53.1 52.5 52.3 51.7 50.3 51.7 51.0 51.9 51.5 50.7 49.7 50.5 51.3 51.7 51.6 51.0 50.7 48.5 50.2 50.9 50.3 50.9 51.0 50.5 50.1 51.1 52.4 52.7 52.7 49.5 50.7 49.2 52.9 53.7 54.7 53.2 54.2 52.0 51.0 50.1 50.3 50.1 48.5 49.6 49.6 51.3 50.7 51.4 52.5 51.3 51.3 51.4 51.5 53.0 52.4 51.0 51.6 45.2 44.3 44.3 40.2 45.6 44.4 36.7 43.8 49.6 42.0 46.4 51.7 53.2 47.7 47.6 46.7 48.6 47.9 44.8 49.2 48.9 50.7 47.3 46.5 49.4 www.lairdresearch.com November 11, 2014 Page 20
  21. 21. OECD International Trade Data The OECD calculates import and export values for member coun-tries. Figures are seasonally adjusted and measured in billions of US dollars. Red lines indicate exports, while blue lines indicate imports. Green lines indicate the zero level. The top part of the graph shows the changes in exports and imports on a year-over-year basis, while the bottom part shows the difference between exports and imports for that given month (i.e. the trade bal-ance) China YoY Change 40 20 0 −20 −40 Balance 08 09 10 11 12 13 14 40 30 20 10 0 −10 US YoY Change 40 20 0 −20 −40 −60 Balance 08 09 10 11 12 13 14 0 −20 −40 −60 −80 Canada YoY Change 10 5 0 −5 −10 −15 Balance 08 09 10 11 12 13 14 0 2 4 6 −2 Germany YoY Change 20 0 −20 −40 Balance 08 09 10 11 12 13 14 30 25 20 15 10 0 5 Japan YoY Change 20 10 0 −10 −20 −30 Balance 08 09 10 11 12 13 14 10 0 5 −5 −10 −15 South Korea YoY Change 15 10 0 5 −5 −10 −15 Balance 08 09 10 11 12 13 14 0 2 4 6 −2 −4 India YoY Change 15 10 5 0 −5 −10 Balance 08 09 10 11 12 13 14 0 −5 −10 −15 Australia YoY Change 0 2 4 6 −2 −4 −6 Balance 08 09 10 11 12 13 14 0 1 2 3 4 −1 −2 Eurozone YoY Change 40 20 0 −20 −40 −60 −80 Balance 08 09 10 11 12 13 14 20 10 0 −10 www.lairdresearch.com November 11, 2014 Page 21
  22. 22. Canadian Indicators Retail Trade (SA) YoY Percent Change −5 0 5 10 median: 4.76 Aug 2014: 4.39 Total Manufacturing Sales Growth YoY Percent Growth −20 0 10 20 median: 4.18 Aug 2014: 6.08 Manufacturing New Orders Growth YoY Percent Growth −30 −10 0 10 20 30 median: 4.59 Aug 2014: 5.30 10yr Government Bond Yields 0 2 4 6 8 10 median: 5.79 Oct 2014: 2.05 Manufacturing PMI 50 51 52 53 54 55 Oct 2014: 55.30 Sales and New Orders (SA) YoY Percent Change −20 0 10 20 Sales New Orders (smoothed) Tbill Yield Spread (10 yr − 3mo) Spread (Percent) 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −1 0 1 2 3 4 median: 1.36 Oct 2014: 1.17 Inflation (total and core) YoY Percent Change 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −1 0 1 2 3 4 median: 1.97 Sep 2014: 2.03 Total Core Inventory to Sales Ratio (SA) Ratio 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 1.3 1.4 1.5 1.6 median: 1.35 Aug 2014: 1.37 www.lairdresearch.com November 11, 2014 Page 22
  23. 23. 6.9 7.0 7.1 7.2 7.3 7.4 7.5 7.6 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Beveridge Curve (Mar 2011 − Jul 2014) Unemployment Rate Vacancy rate (Industrial) Mar 2011 − Dec 2012 Jan 2013 − Jun 2014 Jul 2014 Ownership/Rental Price Ratio Ratio of Accomodation Ownership/Rent Ratio 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 90 100 110 120 130 140 150 Calgary Montreal Vancouver Toronto Note: Using prices relative to 2002 as base year Ownership relatively more expensive vs 2002 Rent relatively more expensive vs 2002 Unemployment Rate (SA) Percent 3 4 5 6 7 8 9 10 Canada 6.5% Alberta 4.5% Ontario 6.5% Debt Service Ratios (SA) Percent 4 6 8 10 Total Debt: 7.0% Mortgage: 3.6% Consumer Debt: 6.6% Housing Starts and Building Permits (smoothed) YoY Percent Change 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −40 −20 0 20 40 Permits Starts www.lairdresearch.com November 11, 2014 Page 23
  24. 24. European Indicators Unemployment Rates Percentage 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0 5 10 15 20 25 30 Business Employment Expectations Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −40 −20 0 10 Industrial Orderbook Levels Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −60 −40 −20 0 20 Country Employment Expect. Unempl. (%) Bond Yields (%) Retail Turnover Manufacturing Turnover In ation (YoY %) Industry Orderbook PMI Series Dates Oct 2014 Sep 2014 Sep 2014 Sep 2014 Sep 2014 Sep 2014 Oct 2014 Oct 2014 France -13.1 t 10.5 u 1.35 t 105.1 t 108.8 s 0.4 t -20.3 s 48.5 t Germany -6.1 t 5.0 u 0.92 t NA 112.0 t 0.8 u -11.3 t 51.4 s United Kingdom 10.7 s 6.0 t 2.08 t 111.2 t NA 1.2 t 2.4 s 53.2 s Italy -7.9 s 12.6 s 2.40 t NA NA -0.1 s -22.5 s 49.0 t Greece -3.8 t 26.4 t 5.89 t NA NA -1.1 t -20.6 s 48.8 s Spain -0.8 s 24.0 t 2.20 t NA NA -0.3 s -14.0 t 52.6 u Eurozone (EU28) -3.3 t 10.1 u 1.88 t 104.3 t 109.6 s 0.5 u -14.0 s NA www.lairdresearch.com November 11, 2014 Page 24
  25. 25. Government Bond Yields Long Term Yields % 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0 2 4 6 8 10 Economic Sentiment Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 60 70 80 90 110 130 Consumer Confidence Index 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 −100 −60 −20 0 20 Inflation (Harmonized Prices) median: 2.00 7 Euro Area 6 5 4 3 2 1 −1 Aug 2014: 0.40 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 0 US Harmonized Inflation: Aug 2014 AUT 1.5% BGR −1.4% NOR 2.1% DEU 0.8% GBR 1.2% ESP −0.3% FIN 1.5% FRA 0.4% HUN −0.5% GRC −1.1% IRL 0.5% ISL 0.4% ITA −0.1% POL −0.2% ROU 1.8% SWE 0.0% −1.0%0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% YoY % Change in Prices PMI: October 2014 40.042.0 44.0 46.0 48.0 50.0 52.0 54.0 56.0 58.060.0 Contracting Steady Expanding BRA 49.1 CAN 55.3 DEU 51.4 ESP 52.6 FRA 48.5 GBR 53.2 GRC 48.8 IRL 56.6 ITA 49.0 MEX 53.3 POL 51.2 SAU 59.1 TUR 51.5 USA 55.9 RUS 50.3 PMI Change: Sep − Oct −5.0−4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 5.0 Deteriorating PMI Change Improving CAN 1.8 DEU 1.5 ESP 0.0 FRA −0.3 GBR 1.6 GRC 0.4 IRL 0.9 ITA −1.7 POL 1.7 TUR 1.1 USA −1.6 RUS −0.1 www.lairdresearch.com November 11, 2014 Page 25
  26. 26. Chinese Indicators Tracking the Chinese economy is a tricky. As reported in the Fi-nancial Times, Premier Li Keqiang confided to US officials in 2007 that gross domestic product was “man made” and “for reference only”. In-stead, he suggested that it was much more useful to focus on three alter-native indicators: electricity consumption, rail cargo volumes and bank lending (still tracking down that last one). We also include the PMI - which is an official version put out by the Chinese government and differs slightly from an HSBC version. Finally we include the Shanghai Composite Index as a measure of stock performance. Manufacturing PMI 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 40 45 50 55 60 Oct 2014: 50.40 Shanghai Composite Index Index Value (Monthly High/Low) 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 0 1000 3000 5000 Nov 2014: 2418.17 Electricity Generated 100 Million KWH (log scale) 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1000 2000 3000 5000 Sep 2014: 4542.00 Electricity Generated Long Term Trend Short Term Average Consumer Confidence Index Index 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 98 100 102 104 106 108 median: 103.10 Sep 2014: 105.40 Exports YoY Percent Change 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 −20 0 20 40 60 80 median: 19.20 Sep 2014: 15.30 Retail Sales Growth YoY Percent Change 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 10 15 20 median: 13.10 Sep 2014: 11.60 www.lairdresearch.com November 11, 2014 Page 26
  27. 27. Global Climate Change Temperature and precipitation data are taken from the US National Climatic Data Center and presented as the average monthly anomaly from the previous 6 months. Anomalies are defined as the difference from the average value over the period from 1961-1990 for precipitation and 1971-2000 for temperature. Average Temperature Anomalies from Apr 2014 - Sep 2014 −4.0 −3.0 −2.0 −1.0 0.0 1.0 2.0 3.0 4.0 −4 −2 0 2 4 Cooler Anomalies in Celcius Warmer Anomalies in Celcius Average 6 month Precipitation Anomalies from Apr 2014 - Sep 2014 −40.0 −30.0 −20.0 −10.0 0.0 10.0 20.0 30.0 40.0 −40 −20 0 20 40 Drier Anomalies in millimeters Wetter Anomalies in millimeters www.lairdresearch.com November 11, 2014 Page 27

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