The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

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The folks at the St. Louis Fed – about whom I can’t say enough good things — produce a proprietary Financial Stress Index, a full explanation of which can be found here [PDF].

A full deconstruction of the Index is, frankly, a bit above my pay grade.  What’s not, though, is exploring the correlation of the Index to the S&P500 and discovering that while it’s generally well-correlated, that correlation has increased dramatically since the recession began at the end of 2007, as can easily be seen in the chart above.  (I’ve inverted the S&P500 to better display the correlation.)

The question I need to explore, of course, is whether — or how — this information might be useful in the context of equity exposure.

Note that the Index can dip below zero, and that it is still well off its lows.  Should “financial stress” continue to ease — the Index is updated weekly — it would suggest to me more S&P upside.  The biggest caveat, of course, is that all correlations work — until they don’t.

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BR: I would add that peaks in economic activity precede recessions — they start with economic stress rather low. So if we extrapolate from the (very limited data) above, we still have 12-24 months before the real heavy stuff starts coming down.

That said, 2 is not a statistically significant sample

A chart made the rounds last week that purported to prove Nouriel Roubini and David Rosenberg are excellent contrary indicators as relates to the stock market.  The chart was simply the S&P500 annotated with alleged market commentary by the pair — bearish at the lows, bullish at the highs.  It eventually made its way over to the estimable Doug Kass, who posted it.  (Mr. Kass had no part in the chart’s creation, and this is not a quibble with his decision to post it. Further, I’m a big fan of his contrarian style.)

The truth — at least as it relates to Rosie — tells a bit of a different story.  In March of 2009 — on the 4th, to be precise — Dave was “looking for reasons to turn bullish” and “believe[d] the stage [was] being set for sentiment to become completely washed out, which is what it takes for contrarians to become constructive.”

Below is a page from his report that day (highlights were made by me three years ago and not for this post):

Read the rest of this entry »

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The graphic above, via Jon Bruner of Forbes, reflects the enormous American contribution to Arts & Sciences over the past century.

What is intriguing is not just that the US has won so many prizes, but that the a third of American Nobels have gone to immigrants to the US:

“The United States has won more Nobel prizes for physics, chemistry, physiology or medicine, and economics since World War II than any other country, by a wide margin (it has been less dominant in literature and peace, two awards that are much more broadly distributed among nations). At least one American has won a prize each year since 1935 (excluding the years 1940 through 1942, when no prizes were given out). And the United States became dominant after a very slow start: no American won a science prize in the first six years of the prize’s existence.”

This is important in many ways:

1. The US attracts many of the wold’s best & brightest students and future Technology and Scientific leaders;

2. Their work (eventually) leads to breakthroughs that generate tremendous economic value, creating jobs and new industries;

3. That success in turn attracts the next generation of intellectual stars, creating a virtuous circle.

4. Anything that puts this cycle at risk is a long term threat to the economic health of the US.

Which raises a few obvious questions: What is the biggest threat to this virtuous, self-reinforcing system? What is it that could derail this important component to the American engine of prosperity? And, what can we do to fix that?

Hat tip: Flowing Data

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Previously:

Is the balance of scientific power shifting? (January 16th, 2004)

Losing Our Intellectual Edge (December 22nd, 2004)

Herewith a potpourri of unrelated items I’ve found on my never-ending voyage through the internet. Grab a cup of coffee and pull up a chair.

Seen This Movie Before

First up, an excerpt from a speech given by Teddy Roosevelt in December 1906. I was taken by the opening line and the third paragraph. Indeed, his opening line could probably have been used countless times since he spoke it, most recently six or seven years ago:

As a nation we still continue to enjoy a literally unprecedented prosperity; and it is probable that only reckless speculation and disregard of legitimate business methods on the part of the business world can materially mar this prosperity.

But the third paragraph was really the jaw-dropper for me:

I again recommend a law prohibiting all corporations from contributing to the campaign expenses of any party. Such a bill has already past one House of Congress. Let individuals contribute as they desire; but let us prohibit in effective fashion all corporations from making contributions for any political purpose, directly or indirectly.

I’m always fascinated by how little we seem to learn and how likely we are to simply ignore history’s lessons. I wish I had more time to study our country’s history via the infinite documents and archives that have made their way on to the internet. So much to learn, so little time.

Maybe We’re Not So Lazy After All

I took Senator Jon Kyl to task here (March 2010) for an offensive comments about lazy Americans who would prefer to remain on unemployment benefits than be gainfully employed (“In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”). It’s worth re-running the chart I used at the time:

We now see, in a newly issued report, via the Wall St. Journal that:

“Any negative effects of the recent unemployment insurance extensions on job search are clearly quite small, too small to outweigh the benefits of transfers to people who have been out of work for over a year in conditions where job-finding prospects are bleak,” according to the report. [...]

There’s a chance extended benefits actually increase the number of Americans who find new jobs, according to the study. By one calculation, unemployment insurance extensions increased the share of workers who became reemployed by about 1.3 percentage points in January 2011 by reducing the fraction who excited [sic] the labor force.

Industrial Production and Private Sector Jobs

The change in year-over-year Industrial Production (INDPRO) and Private Sector Jobs (USPRIV) have a correlation of 0.83 over the past 50 years. Industrial Production seems to have put in a peak and, if my eyes don’t deceive me, I see payrolls just starting to rollover:

Buy-Side: Not Much Better Than Sell-Side

I posted here back in early August about Street-wide year-end S&P500 forecasts. I will say that I’ve breathed a sigh of relief as it’s become clear over the last six weeks that those forecasts were too optimistic and have been chopped across the board. I then posted here about one month ago when the first batch of 2012 S&P earnings estimates were published (Median: $104). I suspect it’s only a matter of time before those start getting pared, if they haven’t already.

I decided to take a look through the Barron’s archives to see what the seers were saying year-end 2010, and found the following graphic. What really jumped out at was the extent to which the consensus was looking for the 10-year in the range (generally) of 3.50 – 4.00% at YE 2011. Of course, it is only September, but I’d say that call’s as shaky as S&P1400. I also noted that the buy-side doesn’t look much better than the oft-maligned sell-side.

Fed Flow of Funds

The Fed released its Z.1 Flow of Funds report which, although always a bit stale, is a treasure trove of data. I never tire of finding ways to look at the data presented in the report.

Here, from Table B.100, are Household Real Estate (Line 4) and Corporate Equities (Line 24) as a percent of Total Household Assets (Line 1)

Here are Treasury Securities as a still-insignificant part of the American household’s financial assets (not total assets, just financial assets):

In terms of dollar holdings, Treasuries are now $835 billion on the household balance sheet versus financial assets of $49 trillion and total assets of $72.3 trillion. Liabilities stand at $13.9 trillion. Household real estate stands at $16.2 trillion, down some $6.6 trillion from the 2006Q4 high of $22.8 trillion.

Here’s Owners’ Equity as a Percentage of Household Real Estate:

On the chart above, we have made no progress since since the fourth quarter of 2008, when we sat at 40.1 (we’re now at 38.6 for two quarters running).  This decline in homeowners’ equity speaks to the credit expansions that allowed Americans to live beyond their means while incomes — as we saw when the Census released its report last week — have been stagnating.

Last but not least, here’s Liabilities as a Pct of Disposable Income:

Though we’re below the upward sloping trendline on this file, the average over the period shown is 102%, which is a further shedding of about $2.25 trillion in liabilities (or similar gain in income, which we plainly know is simply not happening).

Are We Beyond Civil Discourse?

As has been noted in several places, it appears we have moved as a country toward something that I find unrecognizable:

1. Rick Perry’s inappropriate claim that Ben Bernanke’s actions as Fed chair could be “treasonous” and that he’d be treated “pretty ugly” in Texas drew approvals.
2. The mention that Perry has presided over more state-run executions than any other governor in modern times drew rousing (and to me, shocking) applause.
3. Wolf Blitzer’s question to Ron Paul as to whether a hypothetical comatose citizen without insurance should be left to die were met with audience hoots of “Yeah!”
4. Noise was made about offsetting the cost of emergency relief in the wake of Hurricane Irene.

Via Mediaite:

Jon Seidl at The Blaze tries to get the Tea Party audience some room to wiggle out of this ghoulish display, theorizing, alternately, that it was a delayed reaction to something Paul said earlier (not unless those folks were watching on their portable DVRs), or that the hoots were from liberals, cheering on Blitzer’s “Gotcha!” (which would make them the quietest bunch of liberals in the world for the rest of the debate)

The reactions of three or four audience members at a debate isn’t all that meaningful on its own, but this outburst follows last week’s Death Penalty Ovation at the Reagan Library debate, and another ugly moment at the Tea Party debate in which the crowd cheered for fed chairman Ben Bernanke to be tried for treason, a capital crime.

I’m still trying to figure out exactly what’s going on here. While Perry’s presiding over 234 state-run executions during his terms as governor may speak to our adherence to the rule of law (much as I may wish we had no such law), should we really be applauding the fact that our government puts people to death? Similarly, should the uninsured — specifically those who can afford but choose not to buy insurance — be left to die should something happen to them? And how far have we drifted from our moral moorings that we have a president (Obama, not Bush) who unilaterally orders the extra-judicial execution of American citizens? These developments are all deeply troubling, and speak to a society that has lost its way.  It’s almost as though we can no longer distinguish between “reality TV” and reality.

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I found myself in complete agreement with Phil Angelides in this interview with Bloomberg’s Lisa Murphy.

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Catch up with me on Twitter: @TBPInvictus

The Census Bureau released its annual report on Income, Poverty, and Health Insurance Coverage: 2010 (full PDF)  this morning.  Barry has posted the slide presentation that staff went through during the conference call over in the Think Tank (please have a look).  The (very ugly) bullet points from the release can be found here, and the centerpiece graph is below.

As time allows, I intend to do some work on the numbers in the updated report, but here are a few things that jumped out at me (straight from the summary):

1. Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.
2. Since 2007, the year before the most recent recession, real median household income has declined 6.4 percent and is 7.1 percent below the median household income peak that occurred prior to the 2001 recession in 1999.
3. In spring 2011, 5.9 million young adults age 25-34 (14.2 percent) resided in their parents’ household, compared with 4.7 million (11.8 percent) before the recession, an increase of 2.4 percentage points.
4. It is difficult to precisely assess the impact of doubling up on overall poverty rates. Young adults age 25-34, living with their parents, had an official poverty rate of 8.4 percent, but if their poverty status were determined using their own income, 45.3 percent had an income below the poverty threshold for a single person under age 65.
5. Based on the Gini Index, the change in income inequality between 2009 and 2010 was not statistically significant, while the changes in shares of aggregate household income by quintiles showed a slight shift to more inequality. The Gini index was 0.469 in 2010. (The Gini index is a measure of household income inequality; zero represents perfect income equality and 1 perfect inequality.)

More to come.

Via Paul Krugman, I’m led to this WaPo piece about the imminent demise of the Statistical Abstract of the United States, which is an invaluable resource for all manner of at-a-glance data.  Regardless of one’s ideology or political leanings, I think we can all agree that more information is better, less information not as good, and the Abstract is a veritable treasure trove.  This decision should not stand.  A grassroots effort is needed here to petition the powers that be.  Also, let them hear from you at the Census Bureau:  ACSD.US.Data(AT)census.gov.  Thanks.

Forecasting is a rough gig that often confounds even those who do it for a living and generally do it well.

Situational awareness (see e.g., this and this), on the other hand, is all about knowing “what you need to know not to be surprised,” and having “the ability to maintain a constant, clear mental picture of relevant information and the tactical situation…” It’s making sense of the world around us in real-time, whereas forecasting is an attempt to extrapolate those current events to figure out some future outcome.

In the real world, the latter (situational awareness) is an easier task than the former (forecasting). It’s hard to imagine a decent forecaster not having good situational awareness; those folks with bad situational awareness make for awful forecasters.

Of course, we’ve all been wrong in both assessing situations and in forecasting. There are times when situations are so obvious, I’ve often wondered what might be at play beyond incompetence for those who get it so wrong. Is it Upton Sinclair-ism: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” Is it a variant thereof in which we substitute “ideology” for “salary,” as I believe is very often the case (Kudlow, Luskin, Bowyer, Laffer)?

Among the reasons I’ve always had a great deal of respect for two commentators in particular — Paul Krugman and David Rosenberg — is because they have consistently exhibited superior situational awareness and forecasting skills, a rare combination to be sure. Their records speak for themselves. The knock on Krugman — that he’s an ideologue — in no way diminishes or tarnishes the fact that he’s been spot-on in his situational awareness and forecasting since well before the crisis began to unfold in 2007. If anything, his accuracy and astuteness support his ideology in the same way the ideologies of the likes of Kudlow, Bowyer, Luskin and Laffer have been discredited as a result of their being woefully, painfully wrong. [BR: Though Laffer did get the Recession call correct circa February 2008]

Below are several examples of situational awareness, both good and bad. Some of it is striking for its insight, some of it for its total lack thereof. Consider it an object lesson in the ever-present need to consider the source, and the source’s motivations and incentives.

[NOTE: Über-hacks like David Lereah and Lawrence Yun were simply not worth researching. They're in a class by themselves.]

A Decade of Punditocracy, Pathetic Edition

George W. Bush, June 17, 2002

“Now, we’ve got a problem here in America that we have to address. Too many American families, too many minorities do not own a home. [...] Freddie Mac will launch 25 initiatives to eliminate homeownership barriers.”

David Rosenberg, August 6, 2004

“We assess the likelihood that the housing sector has entered into a“bubble” phase. There are numerous shades of gray, but when we examine the classic characteristics of a“bubble,” it seems to fit the bill.”

Ben Bernanke, August 9, 2005

“There’s a lot of good news on housing. The rate of homeownership is at a record level, affordability still pretty good. [Ed Note: The first part of that statement was true, the second part demonstrably false.] The issue of the housing bubble is one that people have — whether there is a housing bubble is one that people have raised. Housing prices certainly have come up quite a bit. But I think it’s important to point out that house prices are being supported in very large part by very strong fundamentals.” [Ed Note: In fact, it was exactly at this time that we were beginning to see cracks in the housing market as prices peaked in Boston, Detroit, Atlanta and Charlotte.]

Paul Krugman, August 12, 2005

“How does the country [U.S.] earn its money? The answer, these days, is that we make a living by selling each other houses. [...] Over the past five years housing prices have grown much faster than the overall cost of living, adding about $5 trillion to the public’s wealth.”

Alan Greenspan, September 26, 2005

“In summary, it is encouraging to find that, despite the rapid growth of mortgage debt, only a small fraction of households across the country have loan-to-value ratios greater than 90 percent. Thus, the vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices.”

Ben Bernanke, March 28, 2007

“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”

Tim Geithner, May 15, 2007

“Financial innovation has improved the capacity to measure and manage risk. Risk is spread more broadly across countries and institutions.”

Henry Paulson, July23, 2007

“There has been a very significant housing correction. I think we’re at or near a bottom there,” Paulson said on CNBC television. “I don’t deny there’s a problem with subprime mortgages but…it’s quite containable.”

Brian Wesbury, July 26, 2007

“The current financial environment does not reflect conditions normally associated with a credit crunch. The bottom line is that fears about the underlying health of the economy and financial markets are more about hypochondria than reality.”

Martin Feldstein, August 31, 2007

“Martin Feldstein, president of the National Bureau of Economic Research, said that there’s a “significant” chance the U.S. economy will sink into recession.”

Joseph Stiglitz, November 16, 2007

Joseph Stiglitz, a Nobel-prize winning economist, said the U.S. economy risks tumbling into recession because of the “mess” left by former Federal Reserve Chairman Alan Greenspan. “I’m very pessimistic,” Stiglitz said in an interview in London today. “Alan Greenspan really made a mess of all this. He pushed out too much liquidity at the wrong time. He supported the tax cut in 2001, which is the beginning of these problems. He encouraged people to take out variable-rate mortgages.”

Larry Kudlow, November 2007

Three More Years of Goldilocks? (“Too much is being made of both the sub-prime credit problem and the housing downturn.”)

Paul Krugman, December 3, 2007

“But the [financial] innovations of recent years — the alphabet soup of C.D.O.’s and S.I.V.’s, R.M.B.S. and A.B.C.P. — were sold on false pretenses. They were promoted as ways to spread risk, making investment safer. What they did instead — aside from making their creators a lot of money, which they didn’t have to repay when it all went bust — was to spread confusion, luring investors into taking on more risk than they realized.”

George W. Bush, March 12, 2008

“I think when people take a look back at this moment in our economic history, they’ll recognize tax cuts work.” [Ed. Note: I'm thinking not so much.]

Jerry Bowyer, May 16, 2008

Recession? Not so fast, I say (“But as a member of the “some say no recession” camp, I’m here to say the economy still looks pretty good.”)

Ben Stein, July 8, 2008

Don’t Panic – Buy Index Funds and Real Estate (“The truth is that while the economy is clearly slowing down we are not yet in a recession.”) [Ed. Note: S&P500 closed that day at 1,273.70, on its way to a 676 close in March 2009.]

Phil Gramm, July 9, 2008

“You’ve heard of mental depression; this is a mental recession. We may have a recession; we haven’t had one yet. We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline…”

Amity Shlaes, July 12, 2008

“Phil Gramm was right…”

Jerry Bowyer, Sept. 2, 2008

The Recessionistas Were Decisively Wrong (“I’ve spent much of the past year both on Kudlow & Co. and in columns arguing with Jared Bernstein, Robert Reich, Barry Ritholz, Jonathan Chait, and others about whether or not we’re in a recession. These folks were certain we were, while I, along with Larry and other supply-siders, thought we were not.”) [Ed Note: We were.]

Don Luskin, Sept. 14, 2008

Quit Doling Out That Bad-Economy Line (“Things today just aren’t that bad.”)

Christopher Cox, Chairman, Securities and Exchange Commission, October 2008

“There is no question that, somewhere in this terrible mess, many laws were broken. Right now, the criminal authorities and the civil authorities, not only in the federal government and the state governments, but in other countries, because this is now, as you know, a matter of intense international focus, are working to make sure that lawbreakers are held accountable and people are brought to justice.” [Ed. Note: It's now almost three years later. How are those investigations progressing? Seems the list of folks "brought to justice" could fit on an M&M.]

Alan Greenspan, October 2008

“And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact. [A] flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak. That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.”"

David Rosenberg, December 16, 2008 (The Frugal Future, no link)

“The macro themes we are developing now are much more secular in nature. We are witnessing epic changes in the ways in which people approach how they move around and how they allocate their budgets, especially with respect to discretionary spending and their attitudes toward debt. Whether or not this turns into a Japanese-style “kyoukou” remains to be seen, but we are convinced that historians will label the environment we are in today as something different from a garden-variety recession.”

WSJ Editorial Page, May 29, 2009

The Bond Vigilantes (“They’re back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. [...] It’s not going too far to say we are watching a showdown between Fed Chairman Ben Bernanke and bond investors, otherwise known as the financial markets. When in doubt, bet on the markets.”) [Ed. note: What would the WSJ tell us the markets are saying now as that is, after all, what we should "bet on"? The 10-yr was around a 3.70% then vs. about 2.25% now; place your bets.]

Arthur Laffer, June 11, 2009

Get Ready for Inflation and Higher Interest Rates

Paul Krugman, July 2, 2009

“Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren’t aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.”

Jerry Bowyer, July 21, 2009

We’re All Inflation Hawks Now

Andrew Bary, Barron’s Cover Story, October 19, 2009

We make our case for the Fed to increase short-term interest rates to a more normal 2% — or risk fostering another financial bubble.

Nassim Taleb, February 4, 2010

Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”

Christina Romer, August 2011

“The basic idea that if you increase government spending or you cut people’s taxes that stimulates the economy and lowers the unemployment rate, is a very widely accepted idea. It’s in every economics textbook, that’s what we teach our undergraduates, and I certainly try to teach them the truth. It is a very known and accepted idea and fact and the empirical evidence is definitely there, and people just want to say the sky is green.”

Did I miss anyone . . . ?

The St. Louis Fed’s huge data repository, FRED, now has an incredible new feature:  an Excel Add-in, which is available here.  I’ve been test-driving the add-in for a month or so, and am very impressed with its capabilities.  If you’re a user of the FRED database, you may want to check it out for yourself.

This has been a Public Service Announcement.  Now back to your regularly scheduled market carnage.

I think it’s likely that I introduced Bob Farrell’s Market Rules to Remember to the blogosphere (albeit to a smaller audience), as they’d been an integral part of my upbringing in the business and I was eager to share them when I started blogging.  (BR posted them here in August 2008.)

That said, let’s have a look at Farrell’s Rule #9 which states:

9. When all the experts and forecasts agree – something else is going to happen.

With the understanding that it’s early August, that there are almost five months left in the year, that the Trading Gods will frown upon what I’m about to do and that I’ll wind up with copious amounts of egg on my face, I offer up the following look at what the consensus was saying with regard to year-end S&P500 levels just a very short time ago (originally via a Bloomberg terminal and circulated liberally).  I simply do not have it in me to list any individuals’ names; I’ll leave it to the reader to figure out the who’s who.  Caveat:  There may have been updates to these forecasts since the time I first received them, but these were, in fact, the forecasts not all too long ago.  And I recently attended a meeting at which one strategist who’s officially in spitting distance of the mean provided attendees a “whisper” number closer to the high.  Oh well.

(We closed last year at 1257.)

So, the one thing that we could easily have inferred from this data when it was published was that the S&P would not close at (or near) 1400, which is now a cool 17% move from yesterday’s close in the context of an economy that is losing steam by the day.  1600 or 1200, yeah, but 1400, no way.

With that, I humbly ask the Trading Gods to be merciful in their punishment of me.  My intention — to demonstrate in real-time one of Farrell’s Rules — was noble.  Frankly, given our current circumstances, I find the prospect of a 17% gain between now and year-end fairly remote.  But I have been wrong a couple thousand times in my career.  Only time will tell if I should have waited until January 2012 to publish this, but that would evidence a total lack of cojones on my part; I’ll take my medicine at the appropriate time.

Obama had one shot at a stimulus package when the economy was reeling from the near economic collapse of 2008.  Some members of his team argued it needed to be bigger (it did), but for whatever reasons they did not prevail.  What was needed then — as now — was to put money to work in such a way as to get the best bang for the buck and put as many people to work as possible.  It’s been my long-held contention that infrastructure would have been an ideal use of stimulus funds.  Consider (much more data at the link):

With 45 percent of roads in less than good condition and 12 percent of bridges structurally deficient, the U.S. faces severe infrastructure needs that significantly impact the nation’s economy.

More than 150,000 miles—or 45 percent—of federal highways and major roads in the U.S. are not in good condition, according to the Federal Highway Administration.

More than 71,000 of the nation’s bridges—12 percent—are rated as structurally deficient. More than 78,000 are rated as functionally obsolete.

More than 20 states this year will likely reduce transportation investments because of federal inaction on a new surface transportation authorization bill.

So, perhaps we could have used some money to give our highways and streets some needed attention.  Other areas that come to my mind as good candidates for construction are:  Public Safety, Sewage & Waste Disposal, Water Supply, and Educational.  Sadly, it seems as though not much money went to these necessities.  Thanks to some data sets recently picked up by FRED, we can take a look at all of these areas.  First up, Highway & Street and Educational construction spending.  What I’d really like to see here is a spike — a big one — which would indicate stimulus funds had been allocated to these crucial areas.  Do you see a meaningful spike?  Neither do I, and what’s worse is that both series are now on the decline.

(NOTE:  These expenditures all have to do solely with construction spending)

Let’s look at the other areas I mentioned (I broke the data into multiple charts to keep similar dollar expenditure levels together and thereby render greater detail).

No signs of a meaningful spike here, either.

One last look, this time at Transportation (like, say, the high speed rail I’ve always hoped Obama would embrace):

So, nothing significant has really been done on any of these files, and now Obama’s out of bullets.  The beauty of construction spending is that you wind up with things — roads, bridges, tunnels, rails, schools, sewage treatment plants, power plants, airports, dams — that last for decades and get passed from one generation to the next.  Now that opportunity has been squandered — DC is in full-on austerity mode, and the states and municipalities are having their own issues.

I wrote in June 2010:  “And, for the record,  I’ll state here that I think Obama and his team badly misallocated the stimulus in ways that did little to create jobs, unarguably its most important objective.  And that will cost him dearly (as evidenced by yesterday’s third defeat of an unemployment benefits extension?).” Nothing that has happened in the past 14 months has caused me to waver from that position.

Final note:  As I was wrapping up this post, I received an alert that the Philly Fed’s Leading Index series had been updated, so of course I took a gander.  The contours of our two “soft patches” are clear.  The difference is that last year at this time The Bernank was announcing QE2.  It remains to be seen whether or not Ben has another rabbit to pull out of another hat.

UPDATING, Aug 3, 10:24AM:  In his daily today, David Rosenberg makes the same point regarding the stimulus:

The overhang of excessive debt burdens is still with us today and the problem with the government stimulus programs that were put into place is that they were not designed properly; the multiplier impacts never did kick in.  So we can’t “grow” our way out.