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This chart shows the retail sales at food service and drinking places as a percentage of sales made at food service and drinking places AND food and beverage stores. I think it is safe to say that upward trend is being seriously tested, again.
Is it a good time to open up a new restaurant? There sure are a lot of restaurant/chef shows on TV these days. However...
We live on a placid island of ignorance in the midst of black seas of infinity, and it was not meant that we should voyage far. - H.P. Lovecraft
Let's just hope people don't turn as bearish as I am and/or begin to question their ongoing prosperity. I'm down to around 10% on that chart. There's not one thing Bernanke can do to get me to change my behavior either. Sorry Ben! The more he tries, the more homecooked spaghetti I'll be eating. If you think pushing on a string is bad, try pushing on a wet noodle!
See Also:
Eating Out vs. Eating at Home v.2
Source Data:
Food Service and Drinking Places Sales
Food and Beverage Store Sales
16 comments:
Stag,
I'm surprised that your chart has no negative growth since 1992 - numerator shrinking more than the denominator. Must be cutting back across the board.
Do you remember S&H Green Stamps? Clipping coupons? The family budget got outsourced to China & illegal aliens in restaurants. Perhaps it's making a comeback.
BTW, if I recall correctly, Buffett stubbed his toe with the Green Stamp investment. It just shows, you don't need to be perfect.
I'm with you Mark, I've been hunkered down for some time now too and the more Ben tries the tighter I get. Can't help out the banks either and don't want to as I don't need the money unless it free. I started planting the garden already and added to the crops that will be in it this year. I've seen this movie before and I did't like it the first time.
MAB,
1992 to 2000 was a prosperous time for us and we chose to eat out a lot more.
2002 to 2006 was a continuation of the prosperous behavior it seems, but was built on false prosperity (never ending real estate appreciation/inflation).
2006 to present appears to neither be a continuation of the prosperous behavior nor a continuation of the actual prosperity.
I strongly suspect that this chart could actually move down if we embrace an anti-prosperous behavior. Once the illusion is gone, oh oh!
Anonymous,
I've seen this movie before and I did't like it the first time.
But this time the popcorn is free! Well, mostly free. There's a small surcharge for the corn, a small surcharge for the popcorn oil, a small surcharge for the buttered flavoring, and a small surcharge for the container.
StagMark,
Have you revisited your ports data lately?
Stag,
I have enough money to last me the rest of my life, unless I buy something. Jackie Mason
Lately, this one really hits home. I'm cutting back on one of my few luxuries - high octane coffee.
I'm still waiting for deflation. Apparently, it only affects unrealized and imaginary wealth. Monthly expenses are immune.
As far as I can tell, you need to be a true koolaide addict in order to "benefit" from the mythical deflation. Tragically, only the true believers need suffer from the scourge of falling prices.
As if it ever really existed.
Energyecon,
Have you revisited your ports data lately?
I haven't. The game Rockband has me hook, line, and sinker these days. It is a frickin' anti-productivity miracle!
MAB,
As far as I can tell, you need to be a true koolaide addict in order to "benefit" from the mythical deflation.
No deflation? I had to delete the comment before yours because he offered us all free spam!
In all seriousness, you do have to be a true koolaide addict to believe that any deflation we get will be long-term. You know you really drank too much once you start using the higher prices will lead to lower prices argument. You also know you are drunk if you stop looking at all the money we send overseas (through our trade deficit) and pretend it doesn't count in a global economy.
I've been harping on China's rising inflation problems since starting this blog and now it really seems to be hitting the fan.
From September...
Stagflation: Slow Growth With High Inflation
http://illusionofprosperity.blogspot.com/2007/09/stagflation-slow-growth-with-high.html
I'd argue that price controls to stop price gouging would work, but I'm not sure that's all it is. Price controls on food cannot magically generate more food any more than printing more money (or more credit) can magically create more prosperity.
Price controls are not magically generating more food. Go figure.
Today...
China's Inflation Control Frets on Fuel and Food Shortages
http://www.chinastakes.com/story.aspx?id=273
Among the 600 listed types of major consumer goods, the supply of 8 kinds were lacking; this is more than 3 kinds more than during the second half of 2007. The lacking products included: pork, mutton, beef, soybean and soybean oil.
Stag,
http://online.wsj.com/article/SB120416213296398435.html?mod=todays_us_opinion
You are in esteemed company.
I've given the deflation thingy some more thought. It appears that I have once again missed the obvious. I have been experiencing deflation on a monthly basis - in my purchasing power. Whew! Bill Gross is right. Deflation is the issue. Just who is going to buy his funds' assets with the prices of necessities (like food) soaring?
Stag,
http://dispatch.com/live/content/local_news/stories/2008/03/22/foodstamps.ART_ART_03-22-08_A1_NN9NE83.html?sid=101
One in ten Ohians on food stamps? Inconceivable.
Where is Ohio anyway? Central America? Near Ethiopia? Why don't they just move somewhere prosperous?
I really hope we're not going back to powdered milk. Yuck! I'm probably one of the few who remember that 70's show Hotel Baltimore? One of the characters was so poor he ate dog food. MMMMMM, dijon Cadillac.
MAB,
From your WSJ link...
Both inflation and unemployment rose on average, then fell together in the 1980s -- after the Fed controlled inflation.
It almost makes me want to laugh (but only in gallows humor). Let's summarize how the Fed "controlled inflation" in the 1980s and 1990s. To stop people from hoarding, they basically had to print even more money. Right? They had to reward monetary savers and punish non-monetary hoarders. This merely postponed the problems though. How was printing more money going to stop inflation long-term?
Now there are a LOT of savers who have made a LOT of money off of money (for over 20 years!). One can see this by looking at the money supply (MZM) even if (perhaps especially if) it is adjusted for CPI inflation. It is becoming increasingly difficult to keep rewarding these savers (such as myself) though. Many are starting to defect and begin their hoarding behaviors again (if I am any indicator). This is yet another reason why I believe that real yields will continue to fall in the coming years.
That being said, there are also serious deflationary forces at play right now. I offer one example. I bought a lot of pyrex storage containers that are shaped much like a TV dinner (not a coincidence) recently. That's a permanent behavior change for me. It does not bode well for the pricing power (and/or the profitability) of the companies who make traditional frozen TV dinners. Time will tell.
Similarly, I see that Progresso Soup is once again on sale this week at Albertsons. It is 10 for $10. I've never seen it cheaper (for those willing to only participate in the sales anyway). I dare them to try to charge more for ~250 calories of food. The last thing they want to see me do is buy a lot of pyrex containers in the shape of soup bowls. Right?
That's why this is all so complicated and why the deflation vs. inflation debate will continue on.
As for the Ohio article, how did we (mis)manage to do this to ourselves?
Stag,
I insightful points. A few thoughts.
First, we have created a LOT of money, but very FEW ended up with any.
Second, most observers seem to be focusing on the "supply" of money. In a fiat world, money supply is easily controlled. Too easily controlled imo. It's the other side of the equation (output) that bugs me. Much of the current economic analysis is flawed in that it never focuses on output. Likely a result of our asset inflation obsession (our perceived wealth).
In my view, money is the medium of exchange and should be neutral - neither gaining or losing value over time. An increasing money supply that is matched or exceeded by increasing output is healthy. There is no reason to hold gold or hoard in that type of increasing money supply environment. Unfortunately, we're hell bent on increasing the money supply (6% growth is sacred), but the associated output and its nature are questionable. The last time I looked, my granite counters were still not producing anything. Nada. Go figure.
The fact that our economy has for decades rewarded money over output is troubling and at the root of our current problems. All the wrong incentives. Volcker played a big part too. He excessively rewarded savers - a big reason productivity nosedived during the late 70s & early 80s. He also over shot and set the stage for the asset bubble economy. We've inflated our way into an untenable position. We don't want asset values to fall, but the majority are increasingly struggling to make ends meet. Maybe WE need to recognize that our asset valuations don't match our output. I think the world is recognizing this as seen in the falling value of our dollars. Naturally, it's tougher for us to accept.
There are indeed a lot of deflationary forces now. But I don't see DEFLATION in the ncessities of the typical American family. Nor do I see INFLATION in the income of the typical American family. A toxic mismatch that will get corrected in some manner. How and when is uncertain.
Hoarding makes sense, but just look at Ohio. How can you hoard if you're broke and unemployed?
One solution would be to end the unmatched growth in the money supply and have a totally non-inflationary CPI environment. This would help the majority of families, but would harm big spending politicos and overvalued financial assets that continually need new $$$ for support. Eventually, something has to change. Eventually the majority will get angry. Instability is not good for society let alone asset prices.
Finally, given the following historical data, its clear that there have only been a few times in our history when it was easy to make money from money. All occured after periods of hardship and started with historically low valuations. I challenge you or anyone else to convince me that now is one of them.
http://www.econ.yale.edu/~shiller/data/ie_data.htm
As much as I want to, I just can't be a bull here.
Maybe v.4 going to be "Eating Out vs. Eating at Home vs. Eating"
http://wallstreetexaminer.com/blogs/winter/?p=1517
MAB,
I challenge you or anyone else to convince me that now is one of them.
I accept your challenge! You should be bullish because we can't let the evil doers win! Hey, can't say I didn't try.
Anonymous,
Perhaps I should rename my blog to something that means almost the same thing.
Illusion of Eating (High on the Hog)
It still has not occured to most investors that we could be in an extended period where bonds outperform stocks. One hundred plus years of history makes for some really well anchored expectations.
There is no guarantee, however, that stocks have to outperform bonds in the long run. Especially now that stocks are richly valued on a historical basis yet still widely believed to be the sure path to wealth.
Currently, long term investment grade bonds are yielding 6%. That looks pretty good in light of the likely returns for stocks over the next decade. It looks even better if Bernanke can deliver on his 1% - 2% inflation target.
In a competitive global market place with low inflation, real yields should be hard to find. Then again, this probably looked like a winning strategy in the early 70s too.
I'm still at a loss here. Maybe that just proves stagflation.
In a competitive global market place with low inflation, real yields should be hard to find. Then again, this probably looked like a winning strategy in the early 70s too.
Buffett thought that stocks would outperform long-term bonds a few years back. He's often early to the party though. Long-term that is.
It was also quite the disclaimer for those who read between the lines though. He didn't say how stocks would perform relative to short-term bonds and he also felt TIPS weren't a bad investment for those worried about inflation. That is also a disclaimer. Clearly the deflationists aren't all that worried about inflation (I am worried for what it is worth, long-term).
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