Thursday, March 15, 2012

Retail Sales vs. Wages

Click to enlarge.

I've added a few 3rd order polynomial trend lines for your amusement. The trend line in red is just one potential outcome out of many of course.

"The best things in life come in threes, like friends, dreams, and memories."

There are exceptions of course.

The Three Curses

1. "May you live in interesting times."
2. "May you come to the attention of those in authority."
3. "May you find what you are looking for."

Here's what we know.

1. We definitely live in interesting times. (That's assuming two epic financial bubbles in just one decade can be thought of as interesting.)
2. Those in authority wish to know more about us. (It's called the Patriot Act.)
3. We found exactly what we were looking for. (We somehow managed to convince China to send us a seemingly never ending stream of goods in exchange for a seemingly never ending stream of paper dollars.)

See Also:
Trend Line Disclaimer

Source Data:
St. Louis Fed: Custom Chart


Stagflationary Mark said...

Here's a business cycle theory to support the parabolas.

1. People think they can't make money. They decide to live it up at the shopping malls instead. You only live once, right?

2. Corporate profits rise as they shop.

3. Stock market takes off.

4. People stop shopping and instead invest the money in the "sure thing" stock market near the peak.

5. Corporate profits dry up since people stopped shopping.

6. Stock market tanks.

7. People sell stocks at the bottom and park money in the bank to earn interest instead. They're too scared to invest. They're too scared to shop.

8. Fed slashes rates to entice them to go shopping.

9. Repeat.

It's just a theory of course. If it was reality and I was forced to guess then I'd be tempted to think we're directly between #3 and #4. The stock market has doubled from the bottom after all.

Stagflationary Mark said...

Bonus thought.

So what happens if we enter the next recession with interest rates at 0% and unemployment already high?

You'd think that would be a popular question on CNBC. And yet it never seems to come up. Go figure. ;)

Fritz_O said...

Another question never asked...

When defined-benefit pensions are history, what are we going to do with all the people who don't save?

I saw today that the state of New York (I think) has drawn up plans to increase the age before eligibility and to move to 401k plans for new employees. There was a guy on BTV today talking about how important it is going to be for people to save more and how the banking system needs to be a part of this new trend.

He said we need to increase mandatory contributions to retirement savings by 5% immediately.

He never said what effect this will have on company earnings. lol

And so it goes...caught in an infinite loop without an exit statement.

Stagflationary Mark said...


And so it goes...caught in an infinite loop without an exit statement.

Welcome to the new economy! ;)