Thursday, April 10, 2014

Exponential Trend Failure of the Day


Click to enlarge.

It is different this time.



Source Data:
FRB: Motor Vehicle Loans

A Rash of Bad News

The economy?

Well, maybe. This particular rash of bad news of which I speak is located in a band covering the left side of my chest and back though.

If you are wondering why my posting activity has been running a bit light lately then the answer is clear. I've got shingles. It would seem that I had chicken pox when I was very young and it has decided to reactivate.

It's a real party let me tell you. Not! It burns, it burns.

I'm not going to complain too much though. At least it hasn't gotten near my face or eyes (at least so far, knock on wood). It's a textbook case apparently.

I guess I just prefer to see the dark side of things. The glass is always half empty. And cracked. And I just cut my lip on it. And chipped a tooth. - Janeane Garofalo

And has shingles, and caused the Nasdaq to fall 3.1% today, and so on, and so on, lol. Sigh.

Gallows humor. Seriously. Sometimes you just have to laugh it off.

That which does not kill us makes us stronger. - Friedrich Nietzsche

I'm not convinced.

Monday, April 7, 2014

Quote of the Day (Musical Tribute)

April 3, 2014
"5 ETFs for a Relaxed Retired Life"

Vanguard Dividend Appreciation ETF (VIG)

The product returned more than 137% over the past five years.

Vanguard Total Stock Market ETF (VTI)

The fund gained nearly 173% over the past five years...

SPDR Barclays Capital High Yield Bond ETF (JNK)

JNK delivered strong returns of 116% over the past five years.

Ah, yes! Look at the relaxing predictable performance that only stocks and junk bonds can provide! Don't let it concern you that the starting point five years ago was during the Great Recession! We can easily repeat this process by sliding into another Great Recession! So simply extrapolate this performance forward and know that the Fed will never allow anything bad to ever happen again!

So what if VIG and VTI are down 2% since this article was written just two trading days ago (awesome timing by the way)? Relax I tell you! There's no need to panic! There are still ample gains to be realized for those who bought in April of 2009! Heck, the market could drop 50% from here and they'd still have gains! See? No point worrying!

And whatever you do, don't let my excessive use of exclamation points get to you! That's just me trying to inspire extra confidence in these trying times!!

Please take a deep breath, lean back in that La-Z-Boy recliner recently purchased on what's left of revolving credit growth, and relax to the smooth, calming sounds of Dream Theater! Crank it up to the point you cannot hear the screams of Jim Cramer on Mad Money! Drown it out! That's what I say!!

Dream Theater - Panic Attack


This is definitely not investment advice.

Rising Interest Rates: Autoimmune Disease

The following chart shows the "rising interest rate" environment as seen through the eyes of commercial banks offering 48 month new auto loans.


Click to enlarge.

1. Note that auto loans appear to be immune.
2. Check out that Motor Trend (we're right on it).



Autoimmune Disease

The treatment of autoimmune diseases is typically with immunosuppression—medication that decreases the immune response.

Alternatively, the Fed can just keep giving this economy more crack cocaine. Tough call.

Crack Cocaine

Crack cocaine is a substance that affects the brain chemistry of the user: causing euphoria, supreme confidence, loss of appetite, insomnia, alertness, increased energy, a craving for more cocaine, and potential paranoia (ending after use).

Source Data:
St. Louis Fed: Custom Chart

The Fed's (Pig) Lip(stick) Service


Click to enlarge.

As the 10 year treasury yield doubled (black, left scale), the Fed Funds rate was cut in half (blue, right scale).

It would seem that the Federal Reserve Board doesn't have much confidence in rising interest rate theories (based on what they do compared to what they say).

The following chart shows the ratio between the two rates.


Click to enlarge.

Behold the "Great Bond Yield Bubble" of 2011. Been there, done that. (Note that a bond yield bubble is the inverse of a bond price bubble.)


Click to enlarge.

It might not seem like it for long-term savers in despair (or stock market investors still swinging for the fences at any price), but the 10 year treasury yielding roughly 40x the Fed Funds rate is a very rare treat. In the grand scheme of things, it just doesn't come around very often. That's especially true nearly 5 years into a strong and resilient "recovery".

This is not investment advice.

See Also:
Wiktionary: Lip Service
Wikipedia: Lipstick on a Pig

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Saturday, April 5, 2014

Restaurant Employment Growth Has Peaked Again

The following chart shows the 2 year moving average of the annual growth in the number of food service and drinking places employees.


Click to enlarge.

For those considering opening a new restaurant, there were probably better times in all of recorded history to do so.

March 14, 2014
Restaurant sales growth slows in 2013

“Competition for share of stomach is getting more and more challenging.” - Ron Paul, Technomic’s President

This is not investment advice.

See Also:
Be Honest: Does This Recovery Make Me Look Fat?

Source Data:
St. Louis Fed: Custom Chart

The Sarcasm Report v.189

April 5, 2014
Calculated Risk: WSJ Employment Graph ignores Demographics, Needs Correction

The dashed line assumes that this ratio stayed constant since January 2008 - and seems to suggest that there should be 7.2 million more private sector jobs today.

This is nonsense. This ignores the decline in the participation rate due to demographics.


Speaking of ignoring demographics...


Click to enlarge.

Over the past 4 years:

1. As seen in the black line, the economy has added a whopping 5.3 million jobs for those aged 65 years and older. Keep in mind that many of the jobs "added" are simply due to people reaching age 65 and continuing to work. But still, it is a staggering number.

2. As seen in the red line, the economy has added a mere 1.7 million jobs for everyone else. It's not quite as bad as it looks though. Each person aged 64 who turns 65 but continues to work, basically destroys a potential job for this group (which needs to be offset by jobs added elsewhere). But still, it is a meager number of jobs added just the same.

And why should we care?

Investopedia: Working Age Population Definition

Each region may have a different range of ages, but typically the ages of 20 to 65 are used.

Somebody better point this definition out to those 65 years and older, for they have become our economy's employment growth engine. This poses a serious problem for those coming out of college saddled with heavy student loan debt.

To sum this up, I most certainly do not see the "nonsense" that Calculated Risk sees. There are currently 19.6 million total unemployed plus all marginally attached workers plus total employed part time for economic reasons. Does 7.2 million really seem so far out of line when seen in this context? We could debate the particulars no doubt, but my closing argument would be, "Nonsense my @$$!"

Perhaps the future's so bright some gotta apply shades of rose-colored lipstick to this economy's pig? As you can probably guess, it certainly won't be me.

Source Data:
St. Louis Fed: Custom Chart

Friday, April 4, 2014

The Employment Recovery (Musical Tribute)

The following chart shows civilian employment divided by the civilian noninstitutional population.


Click to enlarge.

For what it is worth, I'm confident that we will make a "full recovery" during the next recession.

It was one helluva party though. Wasn't it?



Source Data:
St. Louis Fed: Custom Chart