Political Calculations
Unexpectedly Intriguing!
January 17, 2017

For the first time since September 2015, the year over year growth rate of the total value of the goods that the U.S. imports from China has turned positive (outside of seasonal anomalies related to the variable timing of China's week long Spring Festival holiday from year to year), which indicates that the U.S. economy's long dry spell of lackluster if not outright negative growth may finally be ending. At the same time, the growth rate of the value of goods that the U.S. exports to China spiked up to values not seen since the fourth quarter of 2013, which suggests that the U.S.' GDP for the fourth quarter of 2016 will get a boost from them.

Year Over Year Growth Rate of Exchange Rate Adjusted U.S.-China Trade in Goods and Services, January 1986 - November 2016

Focusing on the U.S.' surge in exports to China, we once again recognize the impact of 2016's bumper crop in soybeans, which has resulted in record volumes of the year's crop being purchased by Chinese interests. The following chart updates the previous version that we posted over a month ago with the most recent data (through November 2016).

Estimated Volume of Soybeans Exported from U.S. to China, Comparisons for Each Month from 2012 through November 2016

Like for 2016-Q3, 2016's continuing elevated volumes for soybean exports compared to previous years suggest that soybeans will be responsible for a significant, positive contribution to U.S. GDP in 2016-Q4.

Data Sources

Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 15 January 2017.

U.S. Census Bureau. Trade in Goods with China. Accessed 15 January 2017.

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January 16, 2017

The second week of January 2017 proved to be yet another disappointment for those focused on the Dow Jones Industrials (NYSE: DJI) and its now month-long quest to finally reach the magical 20,000 milestone, even as the Nasdaq index (Nasdaq: IXIC) hit a new record high.

Meanwhile, the S&P 500 in Week 2 of January 2017 kept bouncing along just below its week old all-time record high. Not that any of that was in any way unexpected....

Alternative Futures - S&P 500 - 2017Q1 - Standard Model with Connected Dots Between 29 December 2016 and 14 February 2017 - Snapshot on 13 January 2017

It was a week in which the news to which investors reacted had very little impact on the overall course of the S&P 500. The headlines below are what stood out to us as significant during the week that was.

Monday, 9 January 2017
Tuesday, 10 January 2017
Wednesday, 11 January 2017
Thursday, 12 January 2017
Friday, 13 January 2017

Barry Ritholtz summarized the positives and negatives reported for the U.S.' economy during Week 2 of January 2017.

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January 13, 2017

In our final post of 2016, in which we reviewed the biggest math-related stories of that year, and in particular, a story about the first statistically significant demonstration of Zipf's Law, we discussed why the story was important to the development of artificial intelligences (AIs):

While not much more than an interesting finding now, that Zipf's Law appears to hold across such a large body of human language will have applications in the development of artificial intelligence, particularly for machine understanding of human language. That next generation Amazon Echo, Google Home, or whatever mobile voice recognition app will be on your mobile devices in the future will get better at understanding and communicating with you as a result. More practically, because technology will be better able to replicate the patterns inherent in human writing, movie producers have moved one step closer to realizing their long-held dream of being able to replace all those annoying and costly human screenwriters with automated script writers, where audiences won't be able to tell the difference for most Hollywood productions.

That day is closer than you think, as an experiment between two AIs named Vladimir and Estragon, who happen to have been manufactured by Google, appear to have fallen in love. As you can see in the following video clip, the dialogue between the two Google Home units is approaching the emotional depth of what might pass muster as the script for a sequel to a recent blockbuster romance.

According to Core77, they have also discussed tacos, where with additional technological development, it wouldn't be hard to anticipate that dialogue worthy of Nora Ephron cannot be far behind.

At the very least, that's something to think about now that we're well into the entertainment industry's award season. The world of the future will be far stranger than most people alive today appreciate!

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January 12, 2017

Median new home sale prices in the United States are continuing their slow climb, at least according to data that the U.S. Census Bureau released in late December 2016, where since September 2015, median sale prices have generally risen by $5.32 for every $1 increase in median household income.

U.S. Median New Home Sale Prices vs Median Household Income, December 2000 - November 2016

We can see that slower growth trend more clearly by focusing on how median new home sale prices have evolved over time in recent years, which are shown in the following chart from July 2012 onward.

Trends in Trailing Twelve Month Average of Median U.S. New Home Sale Prices, July 2012 through November 2016

As a quick recap of what has been happening in the more recent trends, since September 2015, median new home sale prices in the U.S. have been escalating at an average rate of $938 per month, which is about 38% of their rate of inflation of $2,476 per month during the year from July 2012 through July 2013, when a number of Wall Street investment firms were snapping up thousands of homes out of foreclosure each month, which worked to constrain the available supply for home buyers, who were shunted into the new home market.

From July 2013 through September 2015, median new home sale prices rose at an average clip of $1,511 per month, as the pace of investor activity slacked off, before largely dissipating after September 2015, which allowed the relative supply of new homes to increase, as regular home buyers could once again purchase existing homes without being outbid.

And that's where we find ourselves now, as the new home sale price data has yet to take the effect of rapidly rising mortgage rates in November and December 2016 into full account. The next several months will be interesting to see how that factor plays into the prices of new homes sold.

References

Sentier Research. Household Income Trends: November 2016. [PDF Document]. 29 December 2016. [Note: We have converted all the older inflation-adjusted values presented in this source to be in terms of their original, nominal values (a.k.a. "current U.S. dollars") for use in our charts, which means that we have a true apples-to-apples basis for pairing this data with the median new home sale price data reported by the U.S. Census Bureau.]

U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in the United States. [Excel Spreadsheet]. Accessed 29 December 2016.

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January 11, 2017

According to SlickCharts, as of 6 January 2017, there are 506 companies whose stocks make up the S&P 500 stock market index. According to Standard and Poor, 418 of those companies pay dividends. And according to Google Finance, which provided the raw data for each of those companies, the following chart shows the approximate stock prices with respect to the indicated annual dividends for each those 418 firms as of 6 January 2017.

Price per Share vs Annual Dividends per Share, 418 S&P 500 Dividend Paying Stocks (6 January 2017)

After making this chart, we couldn't help but notice the four companies that appear in the upper left corner of the chart, whose very high stock prices and very low projected annual dividends per share make them outliers when compared to nearly all the other data points in the chart. So we went the extra mile and recalculated the power law relationship we found between annual dividends per share and the stock prices for the 414 other companies of the S&P 500 that pay dividends to their shareholders.

Price per Share vs Annual Dividends per Share, 414 of 418 S&P 500 Dividend Paying Stocks (6 January 2017)

The four dividend paying firms whose stocks and dividends per share that we excluded from this second chart are: Cigna Corporation (NYSE: CI), Pioneer Natural Resources Company (NYSE: PXD), Global Payments Inc. (NYSE: GPN), and Cooper Companies Inc. (NYSE: COO).

Having established a considerably stronger correlation by excluding the share prices and annual dividends per share of these four S&P 500 companies, we now have a way to assess how a given company's share price compares to its dividend paying peers, where you can use the tool below to see what share price might be considered to be typical for a S&P 500 that pays the amount of annual dividends per share that you enter. If you're accessing this article that republishes our RSS news feed, please click here to access a working version of the following tool.

Dividends per Share Data
Input Data Values
Annual Cash Dividends per Share

Estimated Share Price Results
Calculated Results Values
Estimated "Typical" Share Price for S&P 500 Company

There's a lot that goes into whether or not a given firm's stock price might be considered to be high or low with respect to the "typical" share price that our tool above calculates. A growth stock may have a small dividend, where the company's owners are choosing to direct its earnings and available free cash flow toward investments that promise to rapidly boost the firm's revenues or increase its share of the markets in which it operates, which therefore tend to have high share prices with respect to whatever dividends they might pay.

Regardless of its share price, if a company doesn't pay dividends, it's technically a growth stock, even if it was a firm that previously paid dividends but stopped because of some form of economic distress, where you can identify the firms that fall into the latter category their very low prices per share. In January 2017, there were 88 non-dividend paying firms in the S&P 500 that collectively account for 15% of the S&P 500's total market capitalization.

Value stocks and income stocks, on the other hand, are often firms whose growth prospects are more limited, where the owners of the company have chosen to draw a regular income through cash dividend payments that are supported by the firm's earnings and cash flow. Compared to growth firms, the stocks of value and income firms tend to have considerably lower stock prices with respect to their dividends per share - mainly because of their slower growth prospects, but also in part because they are actively pulling market value out of the company whenever they make dividend payments to their shareholders.

Telling which kind of company is which can be challenging, but that's where a tool like the one we just created above might be useful. At the very least, it can give you something a bit more tangible to go on than you can usually find in mainstream media reporting on the topic!




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