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The above chart shows retail sales per capita adjusted for inflation. It excludes food and beverage stores, food service and drinking places, and gasoline station sales in order to strip out the ever popular "food and energy" that is all the rage these days. The trend line is a 4th order polynomial. Needless to say, I'm not all that impressed with the supposed resiliency of our economy (nor am I impressed with the supposedly strong January retail sales numbers once adjusted for inflation).
Next up, rising inflation:
The above chart shows the annual inflation rate as determined by using the previous five years worth of inflation data. I keep hearing on the TV that we should stay the course and keep the long-term perspective. Well, there's the long-term perspective. If we stay the course we'll be using digital wheelbarrows to buy bread someday (i.e., charged $100k to buy a loaf of bread + interest of course). Is it just me or is that starting to look a bit parabolic? Oh oh.
I've been stagflationary for over 3 1/2 years so far. My biggest mistake, using hindsight, is that I was too optimistic. Yeah, you heard me. Using hindsight, this food and basic necessities hoarder has been too optimistic! Had I been even more bearish I'd still own gold and silver (owned from 2004 to 2006). That being said, I suspect I'll be stagflationary for MANY more years to come. I'm not in the short and shallow economic troubles camp. Unfortunately, the investments that work best during stagflation continue to work well. Too well. I bought more TIPS yesterday. I had a three month treasury bill mature last week and pushed much of it into my TIP fund. I no longer own any three month treasury bills. I put the rest of it in a new ING Direct savings account (paying better interest and FDIC insured). I'm almost entirely in TIPS and I-Bonds these days though. I'm growing more confident that the long-term stagflationary case is a solid one.
Hey, I wonder if all those people who were so giddy over our home prices appreciating are as giddy over what is going on to the assets in our pantries? I recently bought 24 jars of Prego on sale (four 26 ounce jars for $5) at Albertsons. I'm confident that I made at least a 10% nominal return on that investment so far. How cool is that? The reason I'm confident is that my local Costco was out of Prego until yesterday. When it was restocked it came with a much higher price tag. Go figure. You won't see me jumping up and down with joy over it though. I don't see how having 24 jars of Prego at a higher price actually helps me any. It will taste EXACTLY the same and I'll be eating the profits (I LOVE spaghetti :)). Oh well. Hey, at least I don't have to pay property taxes (next year's property taxes are going up 9% for me, *sigh*) on my Prego hoard nor will I need to pay capital gains on it. Woohoo! *gallows humor sarcasm* I have a similar 10% story as it relates to Pace Picante.
The battle between the red sauces and being in the red (borrowing our prosperity) continues on. The former appears to be gaining serious traction though. Or is that losing traction? As in well-anchored inflation expectations eventually breaking loose of their moorings?
Once again, this is not investment advice. I'm merely stating what I believe and what I have done to potentially protect myself somewhat. I could be wrong on both counts (especially if stagflation becomes hyperinflation and/or I'm missing some part of the big picture).
I suppose I should also be happy that my recent clothing/sheet hoarding moves were well rewarded by our government's monetary printing press activity. Apparel prices up 0.4% in January? That must be driving the deflationists insane. For all intents and purposes Christmas was a bust, right? Just imagine what clothing prices would have done had Christmas been a smashing success. Once again, I'll be paying no property taxes and/or capital gains on my t-shirt "collection" (sounds more elegant than "hoard" I suppose). I'll no doubt be wearing them to the point of worthlessness someday (especially with a shoulder riding parrot who likes to make holes), lol.
I hope you find these charts useful. I don't make nearly as many as I once did obviously, but still intend to do some from time to time. There just isn't as much point these days. Most of my charts point to long-term problems. What's a month's worth of data really going to do to change them?
Sorry to be the bearer of bad news. Oh how I am sorry.
See Also:
Trend Line Disclaimer
Source Data:
St. Louis Fed: Consumer Price Index For All Urban Consumers: All Items
St. Louis Fed: Population: Mid-Month
U.S. Census Bureau: Monthly Retail Sales
7 comments:
http://quotes.ino.com/chart/?s=NYBOT_CI
The more the FED cuts
the higher she goes
shaking over indebted American consumers down to their toes
where she stops nobody knows
Kevin
http://www.bankrate.com/brm/graphs/graph_trend.asp?product=1&prodtype=M&ec_id=brmint_brm_large_new_mpro_mtg_all
Bye, Bye refi
Kevin
Kevin,
Arrr, you have gi'en us all two 'ery nasty charts t' consider. Ye'll ne'er get me buried booty!
Ahoy, this economy is goin' down the toilet. Aye, me parrot concurs.
http://www.talklikeapirateday.com/translate/
"You have given us all two very nasty charts to consider."
"This economy is going down the toilet."
P.S. My parrot really does concur. :)
Stag,
Thanks for updating the charts. Ugly, but not surprising. I've really been feeling that inflation for years now. And its always been centered in my fixed costs (gas, insurance, taxes). People were willing to ignore inflation while the asset inflation train was steaming ahead. Attitudes are sure to change with the recent de-railment in stock and housing prices. The fed is terrified of this coming change in attitude.
Your charts also show just how useless the fed is at governing the economy. Long run inflation rising, unemployment rising & GDP likely falling. All with banks teetering on the verge of insolvency.
I suppose the fed has some utility as a lender of last resort. Otherwise, the fed seems ineffective at best. The "faith in the fed" mantra is a red herring. The reality is closer to "faith in a government bailout."
US banks in the past week borrowed from the Federal Reserve's discount window at a pace not seen since mid-January.
The Fed reported today that its outstanding primary credit loans to banks totaled 1.368 bln usd as of Wednesday, compared to 38 mln usd in the prior week.
That's the largest outstanding discount window debt since the week through January 16.
Discount window borrowing had dropped off in recent weeks since the Fed introduced its new Term Auction Facility (TAF), which allows banks to access funds at interest rates that are lower than those offered at the discount window.
http://www.iii.co.uk/news/?type=afxnews&articleid=6561664&action=article
What really pisses me off about this whole thing is this is to bail out the same ones that put us in this predicament in the first place.
Kevin
Pacific Investment Management Co., which oversees the world's biggest bond fund, said the Federal Reserve is more likely to reduce its benchmark interest rate to 1 percent than return it to 3 percent in the next 12 months.
http://www.bloomberg.com/apps/news?pid=20601009&sid=aMfaTEaw_A1c&refer=bondheads
They also called inflation ``disappointing,'' and some foresaw raising rates, possibly at a ``rapid'' pace once the economy recovers.
Funny.
I thought we were in the recovery period and were waiting for median wages to once again keep up with inflation. I think I can prove it.
1. Oil is rising just like it would during a recovery.
2. Unemployment is low just like it would be during a recovery.
3. We're told that the economy is strong just like it would be during a recovery.
Oh well! Apparently I'm just confused. I look forward to the post-recovery recovery period. Bring it on!
Why do I get the sense that the economy won't be recovering quite like the textbooks would suggest it should? Oh yeah, now I remember. I'm just so darned pessimistic. That's why!
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