Political Calculations
Unexpectedly Intriguing!
September 26, 2018

Dividend futures provide a lot of valuable information about what investors anticipate for their investments in the stock market. In a sense, they are the best available quantification of investor expectations for the future, where changes in their level are ultimately reflected in today's stock prices.

Consequently, we pay a lot of attention to dividend futures for the S&P 500, where we've found the CME Group's futures data for the S&P 500's Quarterly Dividends per Share and the S&P 500's Annual Dividends per Share to be a valuable resource.

We're writing today because we've reached an interesting point in 2018, where there's a discrepancy between the CME Group's quarterly dividend per share futures data and its annual dividends per share futures data for the S&P 500. The following chart illustrates what we're seeing in the data as of 21 September 2018, the expiration date [1] for the futures contract period covering the third quarter of 2018 (2018-Q3).

Expected Quarterly and Annual S&P 500 Dividends per Share for 2018

With the dividend futures contracts for the first three quarters having expired, the cumulative total of the S&P 500's dividends per share for 2018 to date is $39.90 per share, based on the values for these periods that we recorded on the day the dividend futures contracts associated with them expired. As of 24 September 2018, the CME Group's quarterly dividend futures is indicating that the S&P 500's dividend payout for 2018-Q4 will be $13.95 per share, which would bring the index' total dividends for 2018 up to $53.85 per share.

But, the CME Group's futures data for the S&P 500's annual dividends per share is projected to be $54.20 for 2018. With $39.90 of that total already on the books, that implies that the S&P 500's dividend payout for 2018-Q4 will be $14.30 per share, about 2.5% higher than what the CME Group's quarterly dividend futures for 2018-Q4 are indicating.

Granted, that's not a large amount, but the important thing to consider is that one of the these numbers is wrong. And when numbers tied to futures contracts like these are wrong, some sharp investor has an opportunity to make money. The question now is how should that sharp investor take advantage of the disparity between these two expectations for what the S&P 500's dividends per share will be in 2018-Q4?


[1] Dividend futures contracts run from the end of the third Friday of the month preceding the indicated period they cover through the third Friday of the month ending their indicated period of coverage, where they will indicate the amount of dividends expected to be paid out during this interval. For example, the dividend futures contract for 2018-Q1 ran from the end of Friday, 15 December 2017 through 16 March 2018, while the dividend futures contract for 2018 covers the period from the end of Friday, 15 December 2017 through 21 December 2018.

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September 25, 2018

When we first visualized the long-term trends for American household spending through 2017, we couldn't help but notice how similar the trends were for the expenditures on Entertainment and on Health Insurance & Medical Expenses over much of that period, or really, from 1984 through 2008, after which, they diverged. The following chart zeroes in on the average annual expenditures that an estimated 130,001,000 American household "consumer units" spent on these two major categories from 1984 through 2017, where we've identified the primary contributing factor to that outcome.

Average Annual Expenditures for Health Care and Entertainment per Consumer Unit, 1984-2017

In the next chart, we look at the same expenditures as a percentage of the total annual average expenditures of an American household consumer unit, this time, without the annotations identifying the Affordable Care Act as the primary contributor to the escalation in health care costs that caused the two household expenditures to diverge.

Health Care and Entertainment as Percent Share of Average Annual Total Consumer Expenditures per Consumer Unit, 1984-2017

In the third chart, we drilled down into the subcategories of health care expenditures to break out the average amount that American household consumer units have spent on health insurance, medical services, medical supplies, and drugs to see how they've changed after 2008, which is when one or more of these expenses began to explode.

Health Care and Entertainment as Percent Share of Average Annual Total Consumer Expenditures per Consumer Unit, 1984-2017

Wasn't the Affordable Care Act supposed to bend the cost curve for health insurance in the other direction?

Clearly, that didn't happen, where we find the cost of health insurance has continued to grow at similar rates after spiking in 2014 with the 2013 implementation of the Affordable Care Act (while implemented in 2013, much of the increased cost associated with the ACA began to be incurred by U.S. households in 2014). Here's a neat chart that accompanied a September 2017 Motley Fool article showing what has happened to the average cost of health insurance coverage for American families from 2008 through 2017:

Average Annual Health Insurance Costs for Family Coverage, Premiums and Deductibles, 2008-2017 - Source: https://www.commercialappeal.com/story/opinion/contributors/2017/09/08/access-health-insurance-but-can-we-afford-it/636570001/

The important thing to recognize about all this data on the runaway cost of health insurance being paid by American households since the Affordable Care Act was signed into law and especially since it was implemented is that it is entirely attributable to actions taken by President Obama while in office for his signature domestic policy "achievement", which also encompassed the setting of health insurance 2017's premiums and deductibles, and also the Affordable Care Act's main enrollment period for that upcoming year.

If President Trump has done anything to influence health insurance costs, it hasn't shown up in any of this data yet. We'll have to wait to September 2019 when the results of the Consumer Expenditure Survey for 2018 become available to find out what that may be!

Data Sources

U.S. Bureau of Labor Statistics and U.S. Census Bureau.  Consumer Expenditure Survey.  Multiyear Tables.  [PDF Documents: 1984-1991, 1992-1999, 2000-2005, 2006-2012, 2013-2017]. Reference Directory: https://www.bls.gov/cex/csxmulti.htm. Accessed 11 September 2018. 

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September 24, 2018

The fourth week of September 2018 was fairly uneventful for the U.S. stock market. Mainly, that's attibutable to the pre-FOMC meeting media blackout that silences Fed officials, who had been making quite a bit of noise in previous weeks.

Still, it was a big week for the S&P 500 (Index: SPX), in that it reached a new record high closing value of 2,930.75 on Thursday, 20 September 2018. And while the S&P dipped slightly on Friday, coinciding with a pullback in tech stocks, the Dow Jones Industrial Average (Index: IND) went on to set its own new record high to close the week.

Alternative Futures - S&P 500 - 2018Q3 - Standard Model with Redzone Forecast for 2019Q1 Focus between 20180808 and 20180911 - Snapshot on 21 Sep 2018

What makes the week that was really stand out from preceding weeks is how little news there was to drive stock prices during it, where investors appear to be focusing more strongly on the distant future quarter of 2019-Q1 in setting the level of the S&P 500, as suggested by our spaghetti forecast chart. The likely reason why is because investors are now giving a little over a 50% chance that the Fed will hike short term interest rates in the U.S. shortly before the end of that quarter, where investors will be looking toward the FOMC meeting this week for indications of what the Fed will do at that time.

Until that happens, we're afraid that we're all in for an extended and unsatisfyingly bad episode of "Will They Or Won't They?" in market-related news coverage this week. And then the calm before storm will end on Wednesday afternoon, after which, investors will switch to "Watch What Happens Next". Which should not ever be confused with a market-edition of Watch What Happens L!ve, although that might be more entertaining.

Speaking of calm before the storm, here's what an uneventful week looks like in terms of market-moving news headlines when the Fed's minions have been muffled....

Monday, 17 September 2018
Tuesday, 18 September 2018
Wednesday, 19 September 2018
Thursday, 20 September 2018
Friday, 21 September 2018

Elsewhere, Barry Ritholtz listed the positives and negatives he identified from the week's news of the economy and markets.

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September 21, 2018
Roy Fure's Alarm Clock - Source: National Park Service - https://www.nps.gov/katm/blogs/fures-alarm-clock.htm

Suppose, for an instant, that there's nothing unique about you, other than being an average American that has reached your current age. As such an average American, how much longer can you reasonably expect to live?

That isn't an idle question! While unique circumstances such as your heredity and your lifestyle choices certainly affect your odds of reaching a given age, where the government is concerned, you're just a statistic. A numeric blip around which things like future spending levels for Medicare and Social Security benefits are determined, where you are just a number to be managed. Managed, that is, until your personal lifespan countdown clock stops ticking.

How much time do the government's planners, who don't know you any better than we do, think you have left?

Answering that question is what our latest tool is all about! We extracted the latest remaining life expectancy data from the National Center for Health Statistics' United States Life Tables for 2014, which is the most recent data available. From that data, we constructed a mathematical model to represent the remaining life expectancy for all Americans given their current age. The following chart shows the model we created against the official remaining life expectancy data.

United States: Remaining Life Expectancy by Age, Based Upon Life Tables for the Total Population, 2014

From here, if you want to estimate how much time you have remaining, assuming that you're an average American drawn from random among the total population, just enter your current age into the tool below. If you're reading this article on a site that republishes our RSS news feed, please click here to access a working version of the tool on our site.

Age Data
Input Data Values
Your Current Age

Your Estimated Remaining Life Expectancy
Calculated Results Values
Years Remaining
Age to Which An Average American Will Live

Because the life tables don't extend beyond Age 100, we've capped the maximum age to that level for our tool's results. If you enter a higher age, you'll get the results for Age 100. We've likewise set a minimum age of 0 for the tool as well.

If you'd like to get a better indication of how much time you, as an individual, might reasonably expect to live, we recommend the Living to 100 calculator, which allows you to factor in many of the unique factors that can significantly influence how long you'll actually live.

Previously on Political Calculations

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September 20, 2018

How has the taste of Americans for alcohol changed since the start of the 21st century?

We're going to answer that question today using excise tax collection data reported by the Alcohol and Tobacco Tax and Trade Bureau to the Internal Revenue Service from 2000 through 2017, which can give us an idea of how much beer, wine and distilled spirits Americans are consuming because the federal excise taxes that apply for these products are assessed by the gallon or barrel. Since the excise tax rates for these products have been stable since the beginning of the century, the amount of taxes per capita (or really, per American adult Age 21 or older) should be directly proportionate to the amount of each of these alcohol types that Americans have consumed in each year since 2000.

The following chart shows what we found in doing that math:

U.S. Alcohol Excise Taxes per Adult (Age 21+ Population), by Alcohol Type, 2000-2017

Overall, the amount of alcohol excise taxes collected per Age 21+ American has risen from $41.12 in 2000 to $44.89 in 2017, which suggests that the average adult American has increased their alcohol consumption by 9%. Within that consumption, there are clear rising trends for wine and especially for distilled spirits, which are displacing beer as a source of alcohol excise tax revenue for the U.S. government.

These trends can be seen more clearly in the following chart, where we show the relative share that each type of alcohol has contributed to federal excise tax collections from 2000 through 2017.

Relative Share of U.S. Alcohol Excise Tax Revenue by Alcohol Type, 2000-2017


Political Calculations. U.S. Federal Alcohol Taxes in the 21st Century, 23 August 2018.

U.S. Internal Revenue Service. Federal Excise Taxes or Fees Reported to or Collected by the Internal Revenue Service, Alcohol and Tobacco Tax and Trade Bureau, and Customs Service. 1999-2016. [Excel Spreadsheet]. Accessed 18 August 2018.

U.S. Census Bureau, Population Division. Intercensal Estimates of the Resident Population by Single Year of Age and Sex for States and the United States: April 1, 2000 to July 1, 2010. [CSV Data]. 12 December 2016. Accessed 18 August 2018.

U.S. Census Bureau, Population Division. Annual Estimates of the Resident Population by Sex, Single Year of Age, Race, and Hispanic Origin for the United States: April 1, 2010 to July 1, 2017. [Online Database]. 12 June 2018. Accessed 18 August 2018.

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Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

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