Stock Market Risk

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Source Data:
St. Louis Fed: Custom Chart

The Death Of Services Pricing Power

The following chart shows the consumer price index for services divided by the consumer price index for nondurables.


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Goodbye service economy tailwinds.
Hello service economy headwinds.

Perhaps Bernanke can give our service economy some inflation but he sure can't seem to target where it goes. As seen in the chart, we eventually managed to get back to the trend line in the aftermath of the 1970s. We're sure making feeble progress these days though. Fantastic. Get out the party hats.

In fact, I am not confident that we will ever return to the trend line. This is yet another epic exponential growth failure. Using the power of future hindsight, we might even consider ourselves fortunate if we can maintain present levels. Sigh.

Why is this bad? When nondurables rise in price faster than services then this service economy's many, many service employees get the short end of the stick (even less stick than they currently think they are getting).

Durable good

Examples of nondurable goods include fast moving consumer goods such as cosmetics and cleaning products, food, fuel, beer, cigarettes, medication, office supplies, packaging and containers, paper and paper products, personal products, rubber, plastics, textiles, clothing and footwear.

While durable goods can usually be rented as well as bought, nondurable goods generally are not rented.

Nondurables are generally not rented yet? Say what? I sense a business opportunity!

May 4, 2012
Renting Prosperity

Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.

Rent the good life! Premium Gasoline! Beluga Caviar! Gurkha Black Dragons! Samuel Adams' Utopias! Lucentis! The Nondurable Rental Corporation of America will fulfill all your nondurable rental dreams and then some with low, low payments amortized over your remaining expected lifespan (with only modest surcharges of course)!

Have I mentioned lately that I'm a permabear? This is not investment advice. It's a business opportunity! Tap those severely tapped consumers before they are entirely tapped-out again! What could possibly go wrong? Genius!

In the epic battle between health care services, college education services, and nondurable fuel prices, which pain will ultimately reign supreme? Stay tuned! It's sure to be a hoot!

Source Data:
St. Louis Fed: Custom Chart

A Tale of Three Exponential Trend Failures

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1. Although we cannot see it in all its grandeur, we can infer that there was a failure during the dotcom bust. Note the decline heading into 2002.

2. We can clearly see the failure during the housing bust. The data stopped following the blue line.

3. We now have something new. The data no longer follows the red line and it seems extremely unlikely that it will return to it. Those expecting a surge in growth from here may soon be very disappointed.

I'm repeatedly told that there will be no unhappy ending this time though. So we've got that going for us, which is nice.

Quits and openings are only part of the picture of course. I'm not looking at hires or other separations. I think quits offer a fairly interesting take on how optimistic workers can be. I'd say they are way too optimistic right now. That's especially true of recent retirees who became convinced that recent stock market performance can be extrapolated well into the distant future. Good luck on that theory!

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Annual Nonfarm Payroll Growth per Capita Euphoria!

The following chart shows the annual change in nonfarm payrolls divided by the population.


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This time it's REALLY permanent!

Jaws: The Revenge

The increasing number of sequels in the Jaws series was spoofed in the 1989 film Back to the Future Part II (which was produced by Steven Spielberg and featured Jaws 3 star Lea Thompson), when Marty McFly travels to the year 2015 and sees a theater showing Jaws 19, (fictionally directed by Max Spielberg) with the tagline "This time it's REALLY personal!". This alludes to the tagline of Jaws: The Revenge: "This time it's personal." After being "attacked" by a promotional volumetric image of the shark outside the theatre, Marty says "the shark still looks fake."

Source Data:
St. Louis Fed: Custom Chart

That Darned Disinflationary Service Economy!

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The good news is that we almost made it back to the top of the trend channel again. I'll leave the bad news as an exercise for the reader.

Source Data:
St. Louis Fed: CPI-U: Services Less Energy Services

10-Year Treasury Yield vs. Nominal GDP Growth

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As seen in the chart, nominal GDP took a giant leap to the left during the Great Recession. There was a dead cat bounce to the right (as the dotcom bust left the 10 year moving average) but it is now being pulled to the left yet again. Where it stops nobody knows.

If the long-term trend does continue (down and to the left in the chart), then we'll be stuck in ZIRP till the cows come home (just like Japan), and that's if we're lucky. So all this talk of Fed tapering or not tapering is nearly meaningless to me. I refuse to have the bulk of my retirement nest egg parked in short-term savings patiently waiting for the Lord of Cattle to bless me with higher interest rates. That bovine deity is much more likely to milk short-term savers for all their worth.

The Phrase Finder: Till the cows come home

Cows are notoriously languid creatures and make their way home at their own unhurried pace.

They'll get home eventually though. They've got to be here once the cow tipping point is reached. I strongly suspect that is a very long time from now, perhaps even long after I'm dead and buried cremated. It's all in the timing. Rome did not fall in a day.

As a side note, I went with "their worth" over "they're worth". Both are apparently technically correct (perhaps because worth can be a noun or an adjective). Maybe. Even Grammar Girl isn't sure.

Thief #1: How much should we milk from it?
Thief #2: We should milk it for all it's worth.
Thief #1: What if it keeps its wealth in a bag? It's its worth.
Thief #2: For what it's worth, then we should milk it for all its worth!

Dizzying. Who thought this frickin' language up, anyway?

November 13, 2013
Takeover bids milk factory for all it is worth

THERE is a bargain in the Australian dairy sector, but it is no longer Warrnambool Cheese & Butter Factory.

Don't even get me started again! The milk factory's worth? Its worth?

This is not investment advice. Don't look to me for grammar advice either for that matter. I pretty much only use the math side of my brain at best. I'll end a sentence with a preposition and create sentences with single adverbs if the mood suits me. That's what moods are for. Seriously. ;)

Source Data:
St. Louis Fed: Custom Chart

Peak U.S. Public Air Transportation Services

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I know what you are thinking. Okay, sure. That's definitely a peak. It can't be the ultimate peak though. Our population is growing and the future is so bright I gotta wear shades!

Not so fast. Let's put that same data on a log chart. On a log chart, constant exponential growth is seen as a straight line.


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That's not straight. It's curving exactly like a baseball in flight would, and when I say exactly I mean with an r-squared of 0.995.


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If the 80+ year long-term trend continues, only the wealthiest among us will be flying in planes someday. How's that for a kick to the long-term prosperity gonads? It isn't just flying either. Driving looks mighty suspect as well. Just doing my part to add some perspective! Sigh.

Despair.com: Perspective

Less is more. Unless you're standing next to the one with more. Then less just looks pathetic.

This post inspired by Rob Dawg who pointed me to a whole new world of FRED quantity indices (in the comments found here).

Source Data:
St. Louis Fed: Public Air Transportation
St. Louis Fed: Public Air Transportation (Natural Log)

Power to the People!

The following chart shows real annualized power construction spending per capita (October 2013 dollars).


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Tack on another $117 per year that will ultimately be passed on to the people (each man, woman, and child).

Hey, maybe it won't appear all at once though, thanks to the Fed's ZIRP providing long-term financing at supposedly super cheap long-term interest rates. That debt could potentially just brew and percolate for a few decades perhaps. So we've got that going for us, which is nice.

Power to the people (slogan)

During the 1960s in the United States, young people began speaking and writing this phrase as a form of rebellion against what they perceived as the oppression by the older generation, especially The Establishment.

With $90+ oil, power to the people has a whole new meaning now of course.

It doesn't look like we can expect much power construction job growth per capita from here. As seen in the chart, real spending per capita is just sliding along sideways at a higher new normal. I guess we'll just have to make it up on fast food jobs.

August 29, 2013
The Fast-Food Restaurants That Require Few Human Workers

"The fight for $15 is a fight against technology, not management — and that's a fight that these union-organized protestors can't win. Instead of securing a bigger paycheck, the less-experienced employees demanding a more than 100 percent pay increase will find their jobs replaced by less-costly alternatives," Michael Saltsman, research director at EPI, said in a statement.

...

Today, Amsterdam's Febo chain of stores feature only vending-machine service for burgers, fries and more. A few employees are responsible for stocking the items behind the machines but way out of customer view, so you can walk up, drop in your coins and get a hot meal after a long night out without talking to anyone face-to-face.

Introverts of the world unite! I say this as an introvert who generally enjoys gallows sarcasm of course. Deep sigh.

Source Data:
St. Louis Fed: Custom Chart