Tuesday, October 2, 2012

How to Become a Permabear in One Easy Step


Click to enlarge.

The leading index for each state predicts the six-month growth rate of the state's coincident index. In addition to the coincident index, the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.

Step 1


Click to enlarge.

Deep sigh.

Source Data:
St. Louis Fed: Leading Index

6 comments:

Mr Slippery said...

On the bright side, if we can keep the economy chugging where it is for 4 more years, we can get back to the top of the downward sloping channel.

For a little while.

Troy said...

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

wages over debt.

U2 - Running To Stand Still (Chicago Live)

Stagflationary Mark said...

Mr Slippery & Troy,

Creative possibilities!

Something's bound to work, lol. Sigh.

Craig M. Brandenburg said...

Hey Mark. You've said you became a permabear in 2004. Can you explain a little bit about what led you to permabearishness? You were several years ahead of the curve on that one.

Stagflationary Mark said...

Craig M. Brandenburg,

It all started by reading the fine print of the mortgage offers I was getting in my mail. I didn't need a mortgage (my house is paid off) but I am generally a curious person.

I'll share one from memory. It had a great teaser rate but the payments went up 7.5% each year for the next 5 years. I found that pretty shocking.

That made me look into a great many other things about our economy and the more I looked, the more bearish I got.

One of my top holdings at the time was Citigroup. It treated me very well over the years, but I sold it and everything else.

That's not to say that we can't slowly grow from here. Maybe we can. I hope we can. However, anyone who thinks we're going back to the 1980s and 1990s again is dreaming. That party's over.

Pension funds still assume 8% returns. What's going to happen when they don't materialize? Sigh.

And lastly, if I still had a job then perhaps my permabearishness might be a bit more tempered. I just can't afford to take big risks without a job to fall back on. Some argue that stocks are not risky over the long-term. I am NOT in that camp. A casual inspection of Japan's lousy stock market since their housing bubble popped is all that it takes to persuade me of the dangers.

Stagflationary Mark said...

Here's a chart of Japan's stock market since their housing bubble burst in 1990.

In my opinion, we're doing pretty much the same things they tried.

“Insanity is doing the same thing, over and over again, but expecting different results.” - Albert Einstein