Saturday, August 20, 2011

The Perfect Trade for the 1970s?

Wall Street gave us two ways to participate.

GLD is a gold bullion fund.
TBT is an ultra-short treasury fund.

Just picture the massive profits if we multiply the share price of GLD by the share price of TBT. Well, you don't have to picture it. Here's a chart!



Wall Street sure has a way of popping the 1970s party. That trend line is a sight to behold. Just look how flat it is. That's a whole lot of nothing. Once trading fees are factored in, it's like entering a casino and working your way over to the roulette table.

Those who owned gold? Nicely played!
Those who shorted treasuries? Sorry! Better luck next time.

This is just one more example of why I think we're trying to combine the very best of the deflationary Great Depression with the very best of the inflationary 1970s. High unemployment was common to both eras of course, as was stock market weakness.

Source Data:
Yahoo: GLD
Yahoo: TBT

14 comments:

Stagflationary Mark said...

I am not claiming to know where this chart goes next. I just find it ultra-amusing.

Troy said...

My Grand Theory of the 1970s was that it was the baby boom turning 20 that caused all the problems.

But a curious fact: every decade -- 1970s, 80s, and 90s -- saw 20 million enter the workforce. So the 1970s weren't THAT bad in comparison.

Plus they did that without blowing out the debt picture:

http://research.stlouisfed.org/fred2/graph/?g=1IH

yowza. Man do I hate that chart.

Sure we got inflation, but at least it was wage-price spiral kind. My general thinking is that the credit expansion we did get came from the baby boom earning their credit allocations as new adults. This was naturally inflationary, but since this was pre-internet, the economies of China and India might as well have been on the moon, which helped the wage side.

These days, pfft.

Stagflationary Mark said...

Troy,

Baby Boomers + Women's Lib

I'm a late boomer, born in 1964. Not many behind me.

Mom worked, now retired.

Both trends peaked.

Audrey said...

Mark,
So are you saying that women went to work because there were jobs (money through the credit expansion caused by Baby Boomers) available, and (this is my idea, not something I've seen you say) because technology had made housework so much easier? ( Washing machines, dishwashers, convenience food, etc.) And not, as is commonly spouted, because they suddenly saw that things were unfair and they were claiming their rights?

If that is part of what you are saying from your charts, then I agree.

tj and the bear said...

'64 eh? Late '63 here. As we have suspected, very much in common!

Stagflationary Mark said...

Audrey,

I'm trying to make the connection between women entering the workforce and how our economy has done. Since I was born in 1964, I don't really feel qualified to offer opinions on why women entered the workforce. That said, I see no reasons to disagree with your opinions. They seem valid to me.

Here's the important thing to me.

A ponzi economy needs never ending growth in order to function properly. Employment and/or wage growth is a vital driver of this.

Baby boomers entering the workforce helped to expand our economy.

Women entering the workforce helped to expand our economy.

Immigration policies helped to expand our economy.

There's been a reversal though.

Baby boomers are done entering the workforce. They are preparing to exit. I for one managed to exit a bit early.

Women are still entering the workforce but not like they once were. The workforce is now saturated. 50% of workers are women. That growth trend above and beyond population growth is over.

Immigration policies aren't helping as much as they once did, unless one thinks that millions of illegal aliens working for low pay can make us all more prosperous. Further, we're not exactly seeing huge inflows of highly compensated factory workers these days (as is seen in our massive trade deficit and the rise of factories outside of our country).

Robots replacing workers is a real concern of mine long-term. Although I love the appeal of new technology, I don't see robots adding to employment and/or wage growth. Put another way, if every job was automated then wages would go to zero. Without wages, who would buy goods and services?

Stagflationary Mark said...

tj and the bear,

You're going to love this one!

Baby Boomer

Baby Boomer cohort #2 or Generation Jones (born from circa 1956–1964)

Key characteristics: less optimistic, distrust of government, general cynicism

I'm pretty much there with one small exception. I have even less trust of corporations than I do of government. It has something to do with where I once worked. Go figure.

Audrey said...

Mark,
Thanks for the clarification.

I am also concerned about automation in the workforce. I see you have also read The Lights in the Tunnel. I find Ford's argument for how automation is affecting employment very compelling. Unfortunately I don't see any movement towards his proposed solution, but it would be nice if it worked. I have no idea if it would or wouldn't.

Audrey said...

Mark,
I've been interested to see your information about the change in retail employment over the years due to automation and the increasing trade deficit.

How about office workers? Have you seen any trends as a result of computers, software, etc? It seems like secretaries could do much more work with a computer than a typewriter, which might lead to fewer office workers. It might be harder to measure changes in total office workers though...

Stagflationary Mark said...

Audrey,

Here are two posts showing the employment bubble in retail trade.

October 22, 2007
Retail Trade Employment

March 4, 2011
Retail Trade

Note the progression.

As for office workers, I cannot understand the need for so many skyscrapers in the distant future. *shrug shoulders*

I don't think my girlfriend can either. She worked in human resources as a career but is now training to be a nurse.

That said, I worked as a software game engineer and we were on a trend where we needed more workers. When I started in the early 1990s a small team could make a pretty good game. When I left it took a large team. Increasing competition required increasing complexity. (Our company was apparently not up to the task.)

I can't see how that applies to office workers in general though. One would think that most day to day office jobs will continue to be automated. That's certainly what happened in the farming industry as can be seen in the following post.

September 25, 2007
Automation and Inequality

Stagflationary Mark said...

Here's a current chart to show how retail trade employment is doing now.

It's still on the ropes even during this supposed recovery.

Retail Trade Employees per Capita

tj and the bear said...

All you have to do is run a chart on retail space per capita for the US vs. the rest of the world to know it's toast.

And yes, those skyscrapers were built to hold zillions of clerks; nowadays more of them are nearly human-free data centers.

p.s.: Mark, check my political compass score on HCN. :-)

Stagflationary Mark said...

0.8/-3.6?

For what it is worth, I just took the test and got...

Economic Left/Right: -3.88
Social Libertarian/Authoritarian: -3.90

In the grand scheme of things, we're not all that far apart.

Stagflationary Mark said...

Based on the results, I should probably put a "Free Tibet" bumper sticker on my car.