DOW Jones BUBBLES

Where are the corporate income tax payments?

Corporate income tax payments comparison, Where are the Corporate Income Tax Payments

Monthly Comparison of Corporate Income Taxes Paid  (In $Millions)  Orange highlight indicates monthly payments lower than same period in prior year, green highlight indicates greater payment.

See April 2017 comparison blogpost.

For most of 2017 we were told both from the financial media and corporate quarterly earnings reports that US corporations were having a blowout earnings year.  Earnings were supposedly up well over 10% year over year.  Well if that was the case, Where are the corporate income tax payments to match?  

It's pretty clear now no matter how it's sliced, fiscal YoY or calendar YoY, corporate income tax payments were down which implies earnings were as well.  I actually expect January payments to be down as well, and may even show an overall refund.  Why?  Because with the corporate tax cut, companies will do everything possible to push earnings into 2018 instead of 2017 to take advantage of the lower tax rate.  I suspect a lot of the bonuses paid in December were done in an effort to pull 2018 wage expense into 2017 and a there will be matching delays/lowering of raises for 2018 using the bonus as a justification.

We all better hope that the corporate tax cut works and/or the soft income tax payments were simply due to financial engineering by companies that were betting on the tax cut happening.  If not with this sky high stock market, and central banks unwinding their balance sheets, LOOK OUT because stops could IMPLODE!!!!

Seasonally Adjusted Non-Farm Jobs Change 2013-Present:  Comparison between Griz Method/Simple YoY and BLS Monthly Reports

Source Data:  BLS

Total Nonfarm 2017-8. xlsx

Here is my monthly update on the jobs report.  Again we see the monthly gain is exaggerated by about 15%, most likely to make up for the wild inaccuracies of March and May.

Not close to 222k jobs added in June 2017

Seasonally Adjusted Non-Farm Jobs Change 2013-Present:  Comparison between Griz Method/Simple YoY and BLS Monthly Reports

Source Data:  BLS

Total Nonfarm 2017-7. xlsx

I've been monitoring the inaccuracy and volatility in the monthly BLS jobs reports for several years now.  It is truly amazing to see how wild and inaccurate the monthly reporting of jobs gains is.  Hiring is not raging at a 222k/month pace as the most recent report claims.  184k/month is a lot closer to accurate.  About the only way to get a meaningful number from the BLS monthly jobs gain reported, is to average 12 months of data, and then the number tracks pretty close to reality.

The above chart makes it pretty clear that up to about December 2014 the monthly BLS report tended to over report jobs gains.  But since January 2015 it has been under reporting.  This can be seen by the blue and orange bars tracking pretty close in most months up to December 2014, with the orange bars periodically spiking over the blue.  But since January 2015 it the orange more typically track well below the blue.  Summing the difference between the orange and blue bars proves this as well.

Housing Bubble 2.0

Housing Bubble 2.0

This looks like housing bubble 2.0.  Looks like houses are about 20-30% overpriced vs. a 3% inflation trend line.  Not good when wage inflation is only 2%.

S&P 500 long term historical channel

The market can turn on a dime, NDX-100 Historical Chart

NDX-100 NASDAQ Index 2002 to May 2017

I'm posting this chart today because a friend of many told me that he was just starting to get aggressive in the market.  Actually in the process of rolling an annuity into something that would do better.  It struck me as classic behavior in a manic market top.  Nonsense, most would say.  Look how great the market is doing there is nothing stopping this.  Well look at the above chart.  What do you think the people were saying and doing in October 2007?  Do you think anyone that said the markets were about to crash in October 2007 were paid much heed?   But then look at November of 2007 and the following months.  It just got worse, with a single dead cat bounce.

The list of reasons why the conditions now are beginning to mimic those surrounding the housing bubble crash and dotcom crash is long.  And I plan to post on them in the future.  Virtually every line of reasoning used to dispel the bears can be easily be explained away as wrong or an outright lie.  The latest reason is that corporate earnings are up over 13% in the last year.

Here are some real numbers.  For fiscal 2016, Oct-Sept, corporate income tax payments were down 13% over 2015.  So if we are really up 13% earnings are at 2015 levels while stock prices are up 30%.  It looks like earnings have some real moving to do to justify the spike.  So let's look at a more recent period, the last 12 months.  Well that shows March 2016 to April 2107 corporate income tax payments were down 7.4% over the prior period.  And March 2015 to April 2016 were down 4% over the prior period.  It seems to me while some fancy corporate accounting was used to boost stock prices this last quarter, and others have written about this, the real trend is an accelerating decrease in corporate earnings as opposed to a sudden reversal to increasing earnings.  Maybe that is why the Schiller PE is 30.

Another recent reason for excitement was the 210k jobs supposedly added in April.  That was a giant lie as well.  With a multitude of store closings the report actually tried to claim retail jobs were up.  The underlying data set proves that was a lie/mistake.  The reality is about 175k jobs were added.  The job growth pace was about 1.45%., and in a decelerating trend  Guess what, in April 2007 the pace of job gains was about 1.25%  and decelerating.