Click to enlarge.
Let's zoom in.
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Oh oh.
Who would have guessed that so much information could be packed into just one data series?
Source Data:
St. Louis Fed: All Employees: Total nonfarm
Check this quote from Stagflationary Lacy: "The 30-year yield is not at these low levels DUE to the Federal Reserve; but in SPITE OF the Fed," Hunt said.
ReplyDeleteA truly growing economy leads to rises in prosperity. GDP does NOT measure prosperity — it measures spending.
Missing job FTW.
Mr Slippery,
ReplyDelete"The 30-year yield is not at these low levels DUE to the Federal Reserve; but in SPITE OF the Fed," Hunt said.
As you may recall, that's pretty much what I've been saying. Go figure.
1. Interest rates would be lower if the Fed had done nothing. We'd be in a Great Depression this very moment and would have interest rates priced for it.
2. Each dollar the Fed spent buying treasuries convinced investors to buy MORE than one dollar of something riskier instead.
Neither of those things tell me that the Fed has artificially suppressed interest rates, as so many investors and mainstream economists seem to assume.
I'm sticking with my long-term "death of real yields" theory until I see evidence to the contrary. Today's job report definitely supported my theory.
Just opinions of course.
As a side note, I was watching CNBC when the employment numbers were released.
ReplyDeleteYou should have seen Mark Zandi and his pig lipstick kit in action. It was a sight to behold!
I added a video that seems to fit in nicely with the charts, lol. Sigh.
ReplyDeletehttp://research.stlouisfed.org/fred2/graph/?g=6YT
ReplyDeleteDunno why, but that graph I just made scared me.
Green line is total domestic debt less TBTF's debt, since I'm told the latter is just an accounting artifact.
Two clear inflection points -- coming out of the 1983 recession and coming out of the dotcom recession.
Seeing the training video reminded me of my work in Japan. In retrospect I think that was a pure stimulus job -- BOJ printed money, gave it to the MOF, which gave it to the National Police, which gave it to a traffic safety NGO ("Quango"), which gave it to a major aerospace manufacturer, which then funded a project to create traffic safety machines for driving schools, ending up paying me for a year or two of the work.
http://research.stlouisfed.org/fred2/graph/?g=6YT
ReplyDeleteDunno why, but that graph I just made scared me.
Green line is total domestic debt less TBTF's debt, since I'm told the latter is just an accounting artifact.
Two clear inflection points -- coming out of the 1983 recession and coming out of the dotcom recession.
Seeing the training video reminded me of my work in Japan. In retrospect I think that was a pure stimulus job -- BOJ printed money, gave it to the MOF, which gave it to the National Police, which gave it to a traffic safety NGO ("Quango"), which gave it to a major aerospace manufacturer, which then funded a project to create traffic safety machines for driving schools, ending up paying me for a year or two of the work.
hmmm, actually, there's *4* clear inflection points.
ReplyDeleteup in 1983 & 2003, and down in 1990 and 2009.
hmmm. Next stop, the Moon!
Mark,
ReplyDeleteI remember you saying that the Fed was artificially increasing rates and I ended up agreeing with that train of thought. Funny to see Lacy Hunt come to the same conclusion.
Makes me feel good about copying your trade on TIPS in my IRA. At least I can get a small real yield out to 2028. My real concern is an inflationary boom and TIPS are acting like gold in that regard. So, I have TIPS, gold, and cash weighted in that order. I'm done unless something major changes.
Troy,
ReplyDeleteDunno why, but that graph I just made scared me.
FRED has 45,000 data series! Simply stop picking the scary ones!
It's Friday. Live a little. Here let me show you. I'll pick one seemingly at random.
Mining Wages and Salaries in Utah
Damn. It's gone parabolic (again). That trend probably won't end well.
I'll try again.
Real Annual Growth in Dividends, Interest and Rent in Kentucky
Damn. Lower highs and lower lows. That trend probably won't end well (again).
I'm sure to find one uplifting chart at random if I try hard enough though! Right? ;)
Mr Slippery,
ReplyDeleteMy real concern is an inflationary boom and TIPS are acting like gold in that regard.
And yet, here we are with a 30-year nominal treasury that yields just 3.07% today.
That's not consistent with an inflationary boom story (nor is the average 2.5% annual CPI growth since 2000).
It is consistent with a dying real yield story though.
I'm not brave enough to bet on a 30-year treasury for 30 years that yields just 3.07%, but given the alternatives I am apparently brave enough to bet small amounts on 20 year EE Savings Bonds that will ultimately yield 3.53%.
I guess what I'm trying to say is that our big problems require lowered expectations.
That's not consistent with an inflationary boom story.
ReplyDeletePoor choice of phrases. I didn't mean a booming economy with high inflation. I meant an inflationary spike from a currency and bond crisis. An Argentina-style spike that lasts a couple of years and eats 40-50% of the dollar in those two years. That's what I am trying to hedge against.
Gold is a hedge against all debt, e.g. Exter's pyramid. I occupy the three bottom tiers.
Deflation is fine with me. Inflation is fine, too, unless it is hyperinflation. I am generally betting on inflation, whether it spins out of control or not.
I wish I had the problem of having to consider EE bonds, but I have a big fat mortgage that I can earn 4.25% by paying down (or rather, not have to pay 4.25% interest in the future). We are already paying a hefty amount of extra principal each month now.
With all the tax stuff expiring in 2013, it is going to be a very interesting year. Not that 2012 isn't turning out to be interesting.
Mr Slippery,
ReplyDeleteDeflation is fine with me. Inflation is fine, too, unless it is hyperinflation. I am generally betting on inflation, whether it spins out of control or not.
As you know, that's pretty much my plan as well.
If Bernanke can keep inflation to 2% or so (which seems possible to me), then paying off a 4.25% mortgage seems like a good plan. Based on today's real rates, you even have some wiggle room.