A phrase from Unreal Tournament and Unreal Tournament 2004 used as an award for getting 6 kills in a short amount of time. The effects in the sound are the letter M skipping 3 times (hence M-M-M-) and the word Kill echoing three times.
On that note I present the following unreal chart. This one is going to require some explanation. It's one of the most complicated charts yet.
Click to enlarge.
1. GDP represents the goods and services produced during a quarter. Total credit market debt owed is how much total debt there is at the end of a quarter. I made an adjustment to align the two series. For any given quarter's GDP, I averaged the debt at the end of the given quarter with the debt at the end of the previous quarter.
2. Using that data, I then created two series. The first was a 10-year average of GDP and the second was a 10-year average of total credit market debt owed.
3. I plotted that data on the scatter chart you see above. Note that using the long-term moving averages has virtually eliminated all short-term cyclical noise.
4. For the bulls, I offer a linear trend line in red based on the data since the start of the great recession. Note that the correlation of the trend line is an amazingly precise 0.999. Most bulls no doubt feel very confident that the path will continue.
5. For the bears, I offer a 2nd order polynomial in orange based on the data heading into the great recession. Note that the correlation of the trend line is an amazingly precise 0.997. Most bears no doubt feel very confident that the path will continue. The data's been rolling over for decades. It's a bit hard to believe that the great recession permanently put a stop to it. Right?
6. Clearly the bulls and/or bears must be wrong to be so confident. They both can't be right. It's not possible to follow both trend lines simultaneously. That's why I added the zone of uncertainty to the chart. In my opinion, that's probably where the truth lies. Think of it as a consensus of those who are neither overly bullish nor overly bearish.
7. I've also added a "You Are Here" point in purple to show where we are right now. It does not use 10-year moving averages. Think of it is an indication of where the 10-year moving averages are currently being pulled. We're being pulled above the red trend line but that makes sense. It's what we would expect to see in an economic expansion. It probably won't continue when the next recession hits.
Here's where it gets really interesting to me. I became a permabear in 2004. I'm still a permabear. I think that it is likely that we'll fall somewhere in the yellow zone in the distant future. That said, I'd be bearish even if we stuck to the bull's trend line in red. Why? It's all in the bull's equation. To put it bluntly, that equation sucks.
GDP = 0.171 x TCMDO + 5.622
Our current GDP is $15.8 trillion. In order to double our nominal GDP to $31.6 trillion then our total credit market debt owed would have to roughly triple from $55 trillion to $152 trillion?
That's the best case? Seriously? Good luck on that theory!
I think things are going to get really dicey during our next recession. I can't say when that will be with any certainty, but I'm a very patient permabear. Unless you think the Fed has permanently put a stop to recessions, at some point initial claims will bottom and start heading back up again. We might already be there. Sigh.
I consider this post to be a rebuttal to this article. Bill McBride of Calculated Risk is not a doomer. I clearly am. One of us is wrong. I really hope it is me. In any event, I'm not about to swing for the fences with my nest egg. I have yet to have a single regret about any "doomer" decision I've made since the party ended in 2000.
1. I started buying I-Bonds in 2000 and I've been buying them in every year since then. Any regrets? Not even close!
2. I bought gold and silver in 2004. Any regrets? The only regret I could possibly have is that I wasn't enough of a doomer. They went parabolic in 2006. I sold for a nice profit. In hindsight, I could have done even better.
3. Any regrets over building a TIPS ladder instead of a stock portfolio? Definitely not!
4. Any regrets over going all in on one TIPS bond for my IRA in 2011 ? Definitely not!
And yet, here I am being thought a fool for being a permadoomer? I just don't get it. How much more evidence of long-term economic structural issues does the world need to see? It's just not physically possible for us to grow like we once did. How many more long-term exponential trend failures must I post? Sigh.
St. Louis Fed: GDP
St. Louis Fed: Total Credit Market Debt Owed