Get off of My Cloud 7/20/2018. Brown Sugar: Deriving Satisfaction through Data Analysis CONSUMER CONFIDENCE GLOBAL SNAPSHOT

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1 Brown Sugar: Deriving Satisfaction through Data Analysis By: Anirban Basu Sage Policy Group, Inc. July 16 th, 2018 On Behalf of Michigan Land Title Association Summer Convention Disclaimer: Any resemblance between the presentation s title and the speaker is purely coincidental. Get off of My Cloud Ipsos Consumer Confidence Index CONSUMER CONFIDENCE GLOBAL SNAPSHOT June 2018 IPSOS Global Confidence Index, June 2018 Ipsos Consumer Confidence Index Belgium Germany June / / +0.2 Great Britain 50.4 Poland 50.7/ /-0.7 Russia Sweden 42.2/ Global Average: Canada 61.0/ -2.9 (3-month change: -0.1) 55.3/ +0.6 Hungary 45.2/ +1.2 France China Highest (over 60) in: China, India, U.S., 71.2/+0.9 US 43.3/-2.4 Japan Israel Sweden 61.9/ -0.9 Spain 45.2/ / +1.5 Lowest (below 40) in: 44.3/+1.4 Italy South Korea Turkey Mexico 40.9/+2.3 Turkey India 47.7/ /+1.3 Up in 4 countries: 37.9/ / -0.9 Saudi Arabia, Italy, South Brazil Largest gains Argentina 42.7/ -1.2 Saudi Arabia Korea, Israel Saudi Arabia 57.9/ / -3.3 South Africa Down in 5 countries: Italy 43.1/ -3.8 South Korea Turkey, South Africa, Australia Argentina, Sweden, Largest drops France Largest gains Country 53.8/-0.4 Arabia Turkey Index/3-month change South Africa Change +1.5 Africa Argentina High Low Change Ipsos Based on data from Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI). K Source: IPSOS Largest drops Country 1

2 May-00 Nov-00 May-01 Nov-01 May-02 Nov-02 May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 OECD Business Confidence Index Select Regions/Countries May May OECD - Total Euro area (19 countries) United States China The business confidence index (BCI) is based on enterprises assessment of production, orders and stocks, as well as its current position and expectations for the immediate future. Opinions compared to a normal state are collected and the difference between positive and negative answers provides a qualitative index on economic conditions. Source: OECD Global Monetary Policy Tightening/Easing As of June 2018 The CFR Global Monetary Policy Tracker covers fifty-four large countries mainly those that target inflation in some manner. Tightening policy is indicated in red, loosening in blue. The more a country has raised (lowered) rates, in percentage points, from the most recent trough (peak) in its policy rate, the darker the shade of red (blue). Generally, the policy rate target is the overnight interbank rate, with exceptions indicated. Source: Council on Foreign Relations (CFR), Global Monetary Policy Tracker Estimated Growth in Output by Select Global Areas 2018 Projected Advanced Economies Euro Area Spain Germany France United Kingdom Italy Japan Australia Canada United States Emerging Market & Developing Economies Sub-Saharan Africa Emerging & Developing Europe Russia Emerging & Developing Asia China India Middle East, North Africa, Afghanistan, & Pakistan Latin America & the Caribbean Mexico Brazil 2018 Proj. Global Output Growth: +3.9% 2017 Growth (Estimate) World: 3.8% Euro Area: 2.3% United States: 2.3% Japan: 1.7% Source: International Monetary Fund: World Economic Outlook Database, April % 2.4% 2.5% 1.5% 2.5% 1.2% 2.8% 1.6% 2.1% 3.0% 2.9% 3.4% 4.9% 4.3% 1.7% 6.5% 6.6% 2.0% 3.4% 7.4% 2.3% 2.3% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Annual % Change 2

3 2005 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Jun-86 Jun-87 Jun-88 Jun-89 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Start Me Up Conference Board Consumer Confidence Index 2005 June June 2018 = where 1985 = Source: Conference Board NFIB Index of Small Business Optimism: Good Time to Expand % of respondents who think the next 3 months will be a good time to for small business to expand June 2018: 29% Source: National Federation of Independent Business (NFIB) 3

4 Thousands Job Openings (Millions) 1950Q1 1952Q1 1954Q1 1956Q1 1958Q1 1960Q1 1962Q1 1964Q1 1966Q1 1968Q1 1970Q1 1972Q1 1974Q1 1976Q1 1978Q1 1980Q1 1982Q1 1984Q1 1986Q1 1988Q1 1990Q1 1992Q1 1994Q1 1996Q1 1998Q1 2000Q1 2002Q1 2004Q1 2006Q1 2008Q1 2010Q1 2012Q1 2014Q1 2016Q1 2018Q1 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 May-01 Nov-01 May-02 Nov-02 May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 Paint It Black Corporate Profits U.S. Corporate Profits After Tax* $ Billions $2,000 $1, Q1: $1.92 Trillion $1,200 $800 $400 $0 Source: U.S. Bureau of Economic Analysis *With Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj); Seasonally Adjusted Annual Rate U.S. Job Openings May 2001 through May May 2018: 6.64M Openings Net Change in U.S. Jobs June 2002 through June June 2018: +213K

5 2000Q2 2000Q4 2001Q2 2001Q4 2002Q2 2002Q4 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 2017Q4 2018Q2 National Nonfarm Employment by Industry Sector, June 2017 v. June 2018 Professional and Business Services 521 Education and Health Services 445 Trade, Transportation, and Utilities 308 Manufacturing 285 Construction 282 Leisure and Hospitality 261 Financial Activities 127 Other Services 99 Mining and Logging 57 Government Information All told 2,374K jobs gained Thousands, SA U.S. Labor Force Participation: Men Ages % 93% 92% 91% 90% 89% 89.2% 88%, Current Population Survey Michigan Nonfarm Employment by Industry Sector Groups (SA) May 2017 v. May 2018 Absolute Change Construction 12,500 Leisure & Hospitality 8,800 Professional & Business Services 8,200 Trade, Transportation, & Utilities 7,800 Education & Health Services 6,700 Government 5,900 Manufacturing 3,700 Other Services Financial Activities Mining and Logging Information -2, ,600 3,600 MI Total: +57.8K; +1.3% US Total (SA): +2,400K; +1.6% *According to the Local Area Unemployment Statistics (LAUS) series MI added 28,117 jobs between May 2017 and May ,000-3,000-1,000 1,000 3,000 5,000 7,000 9,000 11,000 13,000 15,000 5

6 Detroit-Warren-Dearborn MSA Nonfarm Employment by Industry Sector Groups (NSA) May 2017 v. May 2018 Absolute Change Leisure & Hospitality 7,700 Trade, Transportation, & Utilities 5,900 Mining, Logging, & Construction 4,600 Financial Activities Education & Health Services 1,400 2,100 Manufacturing Other Services Government Information Professional & Business Services -3, Detroit Total: +17.2K; +0.9% MI Total (SA): +57.8K; +1.3% US Total (SA): +2,400K; +1.6% -5,000-2,000 1,000 4,000 7,000 10,000 Grand Rapids-Wyoming MSA Nonfarm Employment by Industry Sector Groups (NSA) May 2017 v. May 2018 Absolute Change Education & Health Services 3,900 Professional & Business Services 2,400 Manufacturing Mining, Logging, & Construction 2,000 1,900 Leisure & Hospitality 700 Trade, Transportation, & Utilities Government Grand Rapids Total: +11.7K; +2.1% Other Services 200 MI Total (SA): +57.8K; +1.3% Information Financial Activities US Total (SA): +2,400K; +1.6% -1, ,000 2,000 3,000 4,000 Employment Growth, U.S. States (SA) May 2017 v. May 2018 Percent Change RANK STATE % RANK STATE % RANK STATE % 1 UTAH KANSAS ALABAMA IDAHO MASSACHUSETTS DISTRICT OF COLUMBIA TEXAS NEW MEXICO INDIANA WASHINGTON OKLAHOMA IOWA NEVADA RHODE ISLAND NEW YORK COLORADO MAINE ILLINOIS ARIZONA MISSISSIPPI LOUISIANA NORTH CAROLINA NEW JERSEY MINNESOTA OREGON OHIO KENTUCKY WEST VIRGINIA SOUTH DAKOTA CONNECTICUT FLORIDA MICHIGAN WISCONSIN NEW HAMPSHIRE DELAWARE MONTANA CALIFORNIA NEBRASKA MARYLAND SOUTH CAROLINA PENNSYLVANIA ARKANSAS TENNESSEE VIRGINIA VERMONT GEORGIA WYOMING ALASKA HAWAII MISSOURI NORTH DAKOTA -0.5 U.S. Year-over-year Percent Change: +1.6% 6

7 Employment Growth, 25 Largest Metros (NSA) May 2017 v. May 2018 Percent Change Rank MSA % Rank MSA % 1 Orlando-Kissimmee-Sanford, Springs-Roswell, 1.7 FL Atlanta-Sandy GA 2 Dallas-Fort Worth-Arlington, TX Boston-Cambridge-Nashua, MA-NH Seattle-Tacoma-Bellevue, WA Baltimore-Columbia-Towson, MD Phoenix-Mesa-Scottsdale, AZ Minneapolis-St. Paul-Bloomington, MN-WI Riverside-San Bernardino-Ontario, CA Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Denver-Aurora-Lakewood, CO 2.8 Washington-Arlington-Alexandria, DC-VA-MD WV 7 Charlotte-Concord-Gastonia, NC-SC Houston-The Woodlands-Sugar Land, TX Los Angeles-Long Beach-Anaheim, CA Portland-Vancouver-Hillsboro, OR-WA New York-Newark-Jersey City, NY-NJ-PA Tampa-St. Petersburg-Clearwater, FL Detroit-Warren-Dearborn, MI San Antonio-New Braunfels, TX Miami-Fort Lauderdale-West Palm Beach, FL San Diego-Carlsbad, CA St. Louis, MO-IL San Francisco-Oakland-Hayward, CA Chicago-Naperville-Elgin, IL-IN-WI 0.8, Current Employment Statistics (CES) Survey Unemployment Rates, 25 Largest Metros (NSA) May 2018 Rank MSA UR Rank MSA UR 1 Denver-Aurora-Lakewood, CO Dallas-Fort Worth-Arlington, TX Minneapolis-St. Paul-Bloomington, MN-WI Phoenix-Mesa-Scottsdale, AZ San Francisco-Oakland-Hayward, CA Portland-Vancouver-Hillsboro, OR-WA San Diego-Carlsbad, CA Miami-Fort Lauderdale-West Palm Beach, FL Orlando-Kissimmee-Sanford, FL New York-Newark-Jersey City, NY-NJ-PA Boston-Cambridge-Nashua, MA-NH Detroit-Warren-Dearborn, MI Washington-Arlington-Alexandria, DC-VA-MD- WV 7 San Antonio-New Braunfels, TX St. Louis, MO-IL (1) 3.3, Current Employment Statistics (CES) Survey. Note: 1. Area boundaries do not reflect official OMB definitions Los Angeles-Long Beach-Anaheim, CA Philadelphia-Camden-Wilmington, PA-NJ-DE- MD 9 Tampa-St. Petersburg-Clearwater, FL Riverside-San Bernardino-Ontario, CA Atlanta-Sandy Springs-Roswell, GA Seattle-Tacoma-Bellevue, WA Charlotte-Concord-Gastonia, NC-SC Baltimore-Columbia-Towson, MD Chicago-Naperville-Elgin, IL-IN-WI Houston-The Woodlands-Sugar Land, TX 4.2 U.S. Unemployment Rate May: 3.8% June: 4.0% 3.7 Gimme Shelter 7

8 Rate Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul Q1 1981Q1 1982Q1 1983Q1 1984Q1 1985Q1 1986Q1 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q Year & 30-Year Fixed Mortgage Rates July 1995 through July 2018* 10% 9% 15-yr 30-yr 8% 7% 6% 5% 4.53% 4% 3% 4.02% 2% 1% *Week ending 7/12/2018 Source: Freddie Mac U.S. Households: Owner v. Renter Occupied, From the number of households headed by owners remained relatively flat. At the same time, the number of households renting their home increased significantly (+26%). The share of renter households also increased from 31.2% of households in 2006 to 36.1% in # of Household Heads (Millions) Homeowners Renters Source: U.S. Census Bureau; Pew Research Center U.S. Homeownership (NSA) 1980Q1-2018Q1 70% 68% 2018Q1: 64.2% 66% 64% 62% 60% 58% Source: U.S. Census Bureau *NSA: not seasonally adjusted 8

9 $ Billions (SAAR) 12-Month % Change Thousands, SAAR May-93 May-99 Nov-99 May-00 Nov-00 May-01 Nov-01 May-02 Nov-02 May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 May-94 May-95 May-96 May-97 May-98 May-99 May-00 May-01 May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16 May-17 May-18 U.S. Private New Multifamily Construction May 1993 through May 2018 $70 $60 $50 $40 $30 $20 $10 $0 Source: U.S. Census Bureau S&P Case-Shiller Home Price Indices for Select Metros April 2018, 12-Month Percentage Change 12% 10.9% 12.7% 10% 8% 6% 4% 3.0% 3.2% 4.0% 5.0% 5.5% 5.7% 6.6% 6.9% 7.4% 8.3% 8.6% 2% 0% Source: Standard & Poor s U.S. Single-Family Housing Starts May 1999 through May ,000 1,800 1,600 1,400 1,200 1, May 2018: 936K Source: U.S. Census Bureau 9

10 Billions of $US National Nonresidential Construction Spending by Subsector May 2015 v. May 2018 Lodging Commercial Office Communication Amusement and Recreation Public Safety Transportation Educational Health Care Water Supply Highway and Street Conservation and Development Sewage and Waste Disposal Power Religious Manufacturing -10.3% -10.8% -17.6% -24.8% 45.4% 37.7% 25.4% 24.2% 22.7% 16.8% 13.9% 10.3% 5.7% 5.0% 4.4% 1.2% Total Nonresidential Construction: +$47.8B; +6.8% -35% -25% -15% -5% 5% 15% 25% 35% 45% 55% 3-year % Change Source: U.S. Census Bureau Commercial/Multifamily Offshore Investment Sales Volumes Reach New Heights in 2015/16 $60 Foreign investment increases 85.1% in 2015 $50 $40 $30 $20 $10 $ Cross-border investment remained elevated in 2016: Although down relative to a record 2015, offshore investment levels still exceeded the pre-2015 high in Source: Jones Lang LaSalle; Real Capital Analytics Note: Among transactions larger than $5.0 million Foreign Investment in U.S. Commercial Real Estate Top Destination Markets, 2017 New York City Washington, D.C. San Francisco Los Angeles Houston Boston Chicago Dallas Atlanta Seattle $1.5 $1.7 $ Deals ($Billions) $2.4 $2.7 $3.2 $3.5 $4.5 $5.0 $9.0 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 Source: Real Capital Analytics; Colliers International 10

11 One-month Percent Change % Change from Preceding Period (SAAR) Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1 19 th Nervous Breakdown Gross Domestic Product 1990Q1 through 2018Q1* 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 2018Q1: +2.0% Source: U.S. Bureau of Economic Analysis *3 rd (Final) Estimate Conference Board Leading Economic Indicators Index August 2007 through May % 1.0% 0.5% 0.0% -0.5% -1.0% May 2018: where 2016: % Source: Conference Board 11

12 Savings Rate (%) Jun-80 Jun-81 Jun-82 Jun-83 Jun-84 Jun-85 Jun-86 Jun-87 Jun-88 Jun-89 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 U.S. Saving Rate, May 2005 May 2018 (Savings as Percentage of Personal Disposable Income) May 2018: 3.2% Source: U.S. Bureau of Economic Analysis Global Debt Reaches All Time Highs (IIF) According to the International Institute of Finance (IIF), global debt has reached an all-time high in 2016; At $247 trillion as of 2018Q1, global debt including household, government, and corporate now represents 318% of global GDP; Last year the IMF warned of risks to the global economy: sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery Sources: 1. Institute of International Finance (IFF), Global Debt Monitor. 2. Business Insider. 3. The Telegraph. 4. Reuters. 50 Shiller Price-Earnings Ratio, June 2018: Source: Robert J. Shiller Data used in his book, "Irrational Exuberance" Princeton University Press. 12

13 7/1/14 9/1/14 11/1/14 1/1/15 3/1/15 5/1/15 7/1/15 9/1/15 11/1/15 1/1/16 3/1/16 5/1/16 7/1/16 9/1/16 11/1/16 1/1/17 3/1/17 5/1/17 7/1/17 9/1/17 11/1/17 1/1/18 3/1/18 5/1/18 7/1/18 Shattered! --- Bitcoin Price, $20,000 $16,000 7/8/2018: $6.8K $12,000 $8,000 $4,000 $0 Source: CoinMarketCap.com Time is on My Side, at least in the Near-Term U.S. setting up for best year since 05...; Global economy better than it was - - still; Job opportunities are abundant; Corporate profitability elevated; Consumer and business confidence has been surging...; And now tax cuts, including major reductions in corporate taxes... What could go wrong?; A lot can go wrong that s always true first there are the Black Swan threats: I m forever blowing bubbles, pretty bubbles in the air, they fly so high, nearly reach the sky, and like my dreams, they fade and die ; Where are all the pretty bubbles? Equity markets? U.S. bond market? Commercial real estate? Bitcoin? 2018 will be fine better than fine 2019 might be, too, but beyond that, potential deleveraging cycle prompted by a repricing of assets Bad!!!! Thank You Please follow me on Twitter Please look for updates of information at Please contact us when you require economic research & policy analysis. 13