Friday, November 30, 2012

Real Disposable Personal Income per Civilian Employed

Click to enlarge.

It would seem that the low real interest rate environment is finally trickling in.

Click to enlarge.

Source Data:
St. Louis Fed: Real Disposable Personal Income per Civilian Employed
St. Louis Fed: 10-Year Treasury Inflation-Indexed Security

The "Free Lunch" Weight Loss Plan v.018

I continue to climb a minimum of an extra 20 flights of stairs each day. This month it was pretty much the bare minimum every day.

Click to enlarge.

It was a good month, especially compared to last November.

Here's the long-term chart.

Click to enlarge.

Thanksgiving definitely worked against me. You can see the blip in the first chart quite clearly (23rd and 24th). My girlfriend and I have eaten two pumpkin pies since then and are half way through an apple pie. That doesn't even count all the ham I ate. Serious seasonal effect!

So what worked? Well, I had some pent-up walking demand from catching a cold in October. I also had a new pair of waterproof hiking shoes thanks to the recommendation of Mr Slippery (a hiker and blogger). As seen in the following chart, what started off as baby steps just kept growing.

Click to enlarge.

That's 164.5 miles of outdoor walking. No blisters. Hurray!

That said, hello exponential trend failure. Livin' the dream! Let's call the 29th the point of failure since it is raining hard today and the wind is a bit gusty. I was curious how many miles I could comfortably walk in a month. I might try it again at some point. Our dog certainly loved it.

And lastly, let's assume I could double the distance I walk each month and keep doing it every month. That's pretty much the trend in the chart. How far would I need to walk 32 months from now?

164.5*2^32 = 706,522,120,192 miles

Let's assume I walked 24 hours per day. How fast would I need to be moving?

706,522,120,192 miles per 30-day month = 272,578 miles per second

Let's just say that seems more than a bit unlikely. No, sir. Let's just call it an exponential trend failure today and get it over with.

See Also:
The "Free Lunch" Weight Loss Plan v.000

Wednesday, November 28, 2012

The Long-Term Cherry Picked Employment Trend

Click to enlarge.

I started with nonfarm payrolls which already exclude the long-term decline in farm labor. I then subtracted the declining long-term trend in manufacturing employees. I then subtracted the awful construction employment numbers of late. And lastly, retail trade employment hasn't been performing well at all since the success of

What's left? All that cherry picked employment trend goodness! That's what!

Oh, crap. It's still a massive exponential trend failure? 29.6 million jobs below trend? Seriously? Can't say I didn't try. Hey, at least there has been some growth since 2000. That's something I guess. Sigh.

And people wonder why I'm a permabear?

This post inspired by Rob Dawg's comments found here.

Source Data:
St. Louis Fed: Custom Chart

The U.S. Service Economy

Click to enlarge.

To infinity, and beyond! - Buzz Lightyear

Source Data:
St. Louis Fed: Custom Chart

Thought Experiment

The common theme out there is that the Fed is trying to create a wealth effect with its monetary policy. The wealthier we are the more we spend. I think that's safe to say.

Investors of the past made money in bonds. They also made money in stocks. Right?

If the Fed comes in and buys up bonds then that forces interest rates down. Right?

If interest rates on bonds are driven down then at some point investors can no longer get wealthy owning bonds though. Nobody's getting rich off of a -0.74% 10-year TIPS held to maturity. Right?

That would mean that the Fed has put a stop to any wealth building that bonds once did. Right?

If the Fed has removed one of the two most obvious ways for investors to get wealthy then perhaps someone can tell me how this is supposed to create a permanent wealth effect.

Oh, wait. I remember. Never mind.

It's all about inspiring confidence. What have confident investors been doing for the past few years? Doubled their money! That's what. It's a sure thing (again). Can't lose (again). No doubt about it. That's the one thing we can always count on. The stock market only goes up.

Let's look at this another way.

The Fed bought Investment A (bonds) but not Investment B (stocks). Clearly everyone needs to pile into Investment B then. That's just common sense.

Forehead. Desk. Whack. Whack. Whack.

As always, just opinions of course.

Tuesday, November 27, 2012

Matterhorn Economics


The Matterhorn was one of the last of the main Alpine mountains to be ascended, not because of its technical difficulty, but because of the fear it inspired in early mountaineers.

Source Data:
Wikipedia: File:Matterhorn Riffelsee 2005-06-11.jpg
St. Louis Fed: All-Transactions House Price Index for Florida / Consumer Price Index

U.S. Oil Consumption

Click to enlarge.

Didn't I already post this chart this month? It sure rings a bell.

November 7, 2012
Exponential Trend Failure of the Day

Click to enlarge.

Let me redo it with a starting point of 1992.

Click to enlarge.

Oh, yeah. That's definitely the chart I was thinking of. Never mind. Sigh.

Source Data:
EIA: Weekly U.S. Product Supplied of Petroleum Products
USDA: Supplemental Nutrition Assistance Program
St. Louis Fed: Population

And Now for Something Completely Different

50 People You Wish You Knew In Real Life

Life would be SO MUCH better with these people around all the time.

One word: Hilarious!

1-Star Review of Jamie's Septic Service of Kent, WA

Jamie's Septic Service: About Us

There are other companies that are cheaper, but the old saying goes "you get what you pay for" holds true.

I offer the following facts to support my 1 star (out of 5 stars) review of his service.

On June 24, 2010, I paid Jamie to install a new pump and new wiring.

On October 26, 2012, I paid Jamie to pump out my tanks and fix the problem I was having with the wiring he installed in 2010.

Click to enlarge.

Click to enlarge.

The photo shows the "waterproof" box that Jamie originally installed. When he opened it up roughly half a cup of water was found inside. He told me he was not qualified to rewire it. This begs a question. How can one be qualified to wire a box without also being qualified to rewire it?

Did I ask Jamie this question? No. Did I complain? No. I was friendly and very understanding. It had been 2+ years. Water got in. @#$% happens. He called an electrician he works with and told me if that the electrician didn't call me by Monday that I should call him. Once again, no complaints from me. I just wanted the problem fixed.

On October 29, 2012 (Monday), there was still no response from the electrician. I called him directly. No answer. I called Jamie and asked if he'd heard from him. He said that he had and that I should call again. I called and left a message.

On October 30, 2012, the electrician left me a message. I called him back and left another message. Phone tag began, or so I thought.

On November 1, 2012, I called the electrician again. There had been no response. His voice mail inbox was full. I therefore couldn't leave another message. That's never a good sign. I then called Jamie and asked if he could recommend someone else. I was still being very friendly and reasonable. Once again, I just wanted the problem fixed.

On November 2, 2012, there had been no response from either the electrician or Jamie. I called Jamie again and asked him to please return my phone call (which his voice mail claims is done within the hour in most cases). All I wanted was a recommendation of someone else who could fix the problem, or at the very least a reply that said he couldn't offer another recommendation. Keep in mind that I did not have a functional septic tank. I was therefore on borrowed time. Once that third tank fills back up again, it was no more water usage. Period.

On November 8, 2012, a professional electrician came out to fix the wiring problem. My girlfriend found a company that specializes in septic systems and it seemed good to me. I think there's a much better chance that this wiring job will stand the test of time.

It is now November 27, 2012. There's been no further word from Jamie. He ignored my phone calls asking for help. He hung me out to dry just like he hung my waterproof box out to dry. The photos above are exactly how he left my site.

All Jamie would have needed to do was simply call me back and say that he did not know of another electrician to help me. That's it. That was the bare minimum in my opinion. I would not have given him a 5-star review for it of course, but he would have definitely avoided a 1-star review (complete with pictures).

And lastly, I was tempted to give him 2 stars because he did promptly pump out my tanks. Then again...

Jamie's Septic Service: Services Provided

Jamie's Septic Service is a full service company here to cater to your needs. Our services include but are not limited too;


Digging out of septic tank manhole covers

Emphasis added.

Jamie told me on the phone that he would really prefer me to dig the holes, even though I said I was sick and taking NyQuil. I didn't complain until now. I simply grabbed a shovel and started digging. It doesn't inspire me to give him a 5-star review though. My needs were not exactly catered to.

I have tried to keep the opinions to a minimum and the facts to a maximum. I documented it as it went along. None of this is from memory. I took notes as it was happening. If Jamie has a problem with what I wrote here, then perhaps he should have stood behind his work.

Exponential Trend Failures of the Day

Click to enlarge.

The record was last set in October of 1978. Unless someone is going to push the record to 1,000 mph soon, I think it is relatively safe to say that we've had an exponential trend failure here.

Water Speed Record

With an approximate fatality rate of 85% since 1940, the record is one of the sporting world's most hazardous competitions.

This post inspired by Craig M. Brandenburg's following comment found here.

It still amazes me how so many economic charts hint at the conclusion that the United States' prosperity peaked at around the same time as domestic oil production peaked.

Check out the following chart in support of the theory. It shows inflation adjusted average hourly earnings of production and nonsupervisory manufacturing employees (October 2012 dollars).

Click to enlarge.

As seen in the chart, real manufacturing pay peaked in December of 1978. That's within two months of the last water speed record. Go figure.

Household Net Worth vs. Personal Consumption Expenditures

Click to enlarge.

I'd love to ask a permabull what will be driving personal consumption expenditures exponentially higher from here. This chart would imply that it is important if we expect household net worth to grow.

Inflation? More debt? An ever dwindling supply of Americans not on food stamps?

Seriously, what is it?

This post inspired by Rob Dawg's comment found here.

Source Data:
St. Louis Fed: Custom Chart

IOP's Working Man Index (Musical Tribute)

I figure every amateur economic blog should have its own economic index that tracks the health of the economy. I therefore present the Illusion of Prosperity's Working Man Index.

Click to enlarge.

I won't go into the gory details of how my index is constructed (you are free to look in the "source data" link below). I will simply say that it factors in hourly wages, inflation, and nonfarm payrolls as a percent of the population.

Check out that trend line in blue. Can't you just feel the illusion of prosperity leaking out?

Kudos to the government for giving us a temporary reprieve in 2007. (The key word is temporary.)

Would anyone like to make a gentleman's bet that we won't eventually return to the red trend line? I think the odds are fairly high that we will. I might even go double or nothing on the notion that we'll overshoot it.

But what would you expect? I'm a permabear. Sigh.


I've made a slight improvement to the index. The upper end of the base period has been extended to December of 1995 (previously December of 1992).

Source Data:
St. Louis Fed: Custom Chart

Monday, November 26, 2012

Grinding to a Halt v.2

Click to enlarge.

We continue to grind. The long-term trend is not our long-term friend.

The first version of this chart was inspired by the CFNAI Yellow Alert as seen at Dollar Death $piral.

This version of the chart was inspired by the CFNAI Red Alert as seen at Dollar Death $piral.

Source Data:
St. Louis Fed: Chicago Fed National Activity Index

Sunday, November 25, 2012

Real GDP per Capita: USA vs. Japan

Click to enlarge.

After seeing the boost to Japan's real GDP per capita due to the creation of their housing bubble, we decided to try it too.

One wonders if we'll meet up again on the red trend line now that both bubbles have popped.

Source Data:
St. Louis Fed: Custom Chart

Housing vs. Wages

Click to enlarge.

If you believe inflation adjusted housing prices will rise over the long-term then you better believe inflation adjusted wages per capita will also rise over the long-term. Call me skeptical.

Women participated more and more in the workforce during this period. That drove real wages per capita higher. They're here. Now what?

Note: I set the y-intercept at zero for this chart's trend line (Zero Wages = Zero House Prices). It helped the trend fit the data much better in my opinion.

Source Data:
St. Louis Fed: Custom Chart

Saturday, November 24, 2012

M-m-m-monster Chart

M-m-m-monster Kill

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.

Source Data:
St. Louis Fed: GDP
St. Louis Fed: Total Credit Market Debt Owed

Friday, November 23, 2012

Funky Chart of the Day (Musical Tribute)

Click to enlarge.

For at least 16 years (1980 through 1995) one could very accurately predict what the 10-year average of real median home prices would be simply by knowing the 10-year average of total vehicle miles driven.

Welcome to the new era of wiggle.

Be patient with the song. Just like the chart (and the bridge), it really picks up in the 2nd half, lol.

Gallows humor. Sigh.


Click to enlarge.

This chart shows where we currently are (without the 10-year moving averages). The red dot is September 2012. We are well below the peak miles driven and the peak real median house price.

Source Data:
St. Louis Fed: Custom Chart

Wednesday, November 21, 2012

Happy Thanksgiving!

As seen within the following link, 5 years ago I said, "It is a time to be thankful for all we have. Things could be worse!"

November 21, 2007
Happy Thanksgiving!

Three More Years of Goldilocks? - Larry Kudlow, November 21, 2007

S&P 500 on 11/21/07: 1,416.77
S&P 500 on 11/21/12: 1,391.03

It is once again a time to be thankful for all we have. Things really could be worse! Five more years of Goldilocks?

In all seriousness, may you and yours have a holiday filled with non-sarcasm! :)

Source Data:
Yahoo: S&P 500 Historical Prices

Extreme Initial Claims Danger v.24

Click to enlarge.

Click to enlarge.

Hurricane Sandy continues to do some damage. Some would argue that it is a one-time only event and therefore we shouldn't even factor it in. I'm in a somewhat different camp. For what I see coming, I believe black swans outnumber white swans. A hurricane is just one black swan of many.

What is the white swan version of a hurricane? Is there a force of nature that can actually strengthen the typical businesses within its path? Is there a healing tornado? Is there a prosperity earthquake? From where I sit, mother nature seems a bit lopsided.

And lastly, if this was all due to Hurricane Sandy then why were 24,693 more people (compared to the previous week) sent to the unemployment lines in California in the week ending November 10? Sympathy pain? I've heard rumors California was doing so well.

See Also:
Extreme Initial Claims Danger v.23

Source Data:
St. Louis Fed: Initial Claims
DOL: Initial Claims

Tuesday, November 20, 2012

How Low Could Mortgage Rates Go?

Click to enlarge.

Should the economy continue to struggle and short-term CD rates therefore stay near 0% for longer than most assume possible (think Japan after their housing bubble popped), then this chart would suggest mortgage rates could fall below 2% (at least temporarily).

In any event, those thinking that today's mortgage rates are currently at extreme bargain levels may wish to reconsider. Compared to 3-month certificates of deposit, they are pretty much what we would expect to see.

This is not a prediction nor is it investment advice. It is simply something to think about.

Source Data:
St. Louis Fed: Custom Chart

Monday, November 19, 2012

Money, Money, Money (Musical Tribute)

Click to enlarge.

Source Data:
St. Louis Fed: Custom Chart

From "Sure Thing" to "Sure Thing" (Musical Tribute)

Click to enlarge.

I don't know about you, but I've got a really good feeling about Sure Thing #3.

You can hedge your bet on a clean corvette
To get you there right on time

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

Dirty Money (Musical Tribute)

November 15, 2012
‘Dirty’ Money Affects Spending Behavior, Study Finds

"People want to get rid of worn currency because they're disgusted by the contamination of others." And they tend to spend those worn-out bills faster.

Don't you see what this means?

If the U.S. Bureau of Engraving and Printing infused the smell of death into freshly printed money then the economy would recover in no time!


The smell of death surrounds you

Sunday, November 18, 2012

Exponential Trend Failure of the Day (Musical Tribute)

Click to enlarge.

Mere words cannot do the trend line in blue justice.

Source Data:
St. Louis Fed: Industrial Production: Durable Materials

Anecdotal Evidence of a TIPS Bubble?


Bloomberg: United States Government Bonds

Bloomberg no longer displays what the TIPS rates are (treasury inflation protected securities). For years, that's where I've gone to see real-time TIPS rates. And now... poof. They're gone.

In my very best valley girl accent, I'm like... WTF!

Am I the only one left in America who actually wants to know? If that's the case, it sure would be a first in the modern era of interesting investment bubbles.

For now, I'll just have to amuse myself by watching the price of SFE Greasy Wool. That's right. I can still find the price of it.

Bloomberg: Agricultural Commodity Prices

As of today, SFE Greasy Wool is 1,120 cents per kilogram. Oh, yes. Thanks Bloomberg. That's a great substitute. All is well now. I can just feel all the pent-up demand for Greasy Wool charts, lol. Can't you?

What is Bloomberg thinking? Have they moved the TIPS rates somewhere else and I simply can't find them? Please let me know if you spot them. I suppose it is possible that these United States Government Bonds are no longer within the United States Government Bonds area.

As a side note, ever watch CNBC and see the TIPS rates displayed at the top of the screen? Yeah, me neither.

So what would it mean if long-term nominal treasuries really were in a bubble but long-term TIPS weren't? Well, one would expect to see the economy stagnate as the consumer price index moves unexpectedly higher at some point in the future. Sigh.

It is certainly not a prediction, but with a name like Stagflationary Mark I'm not exactly the best person to rule it out. It would be way too hypocritical.

That said, I suspect there could be even less inflationary pressure this Christmas than there was last Christmas. The operative word is "could".

This is not investment advice.

Saturday, November 17, 2012

Is California Recovering Faster?

November 17, 2012
California: Unemployment Rate falls to 10.1% in October, Payroll jobs increase 45,800

Recently I've been talking to a few friends from around the country, and they all seemed unaware that the California economy is clearly improving. California is seeing a pickup in employment, the delinquency rate is falling, and I wouldn't be surprised if California reports a balanced budget soon.

I was certainly unaware that California's economy was improving so much. It prompted me to create a few charts.

Click to enlarge.

As seen in nonfarm payrolls since 2010, California's employment is improving exactly like the rest of the country. No better, no worse.

Click to enlarge.

As seen in initial claims since 2010, California sends people to the unemployment lines exactly like the rest of the country. No better, no worse.

If you think California's economy is doing fantastic, then you no doubt think the rest of the country is too. Do you? I sure don't.

Hey, I just call it the way I see it.

Source Data:
BLS: State and Metro Area Employment, Hours, & Earnings
St. Louis Fed: Nonfarm Payrolls
St. Louis Fed: Initial Claims Custom Chart

The Softer Side of Sears (Musical Tribute)

Click to enlarge.

February 23, 2012
Sears Holding Corporation: Chairman's Letter

Our poor financial results in 2011, culminating in a very poor fourth quarter, underscore the need to accelerate the transformation of Sears Holdings. While some may claim that these results are a continuation of a trend...

I agree. Some might claim that.

See Also:
Our Pillars of Retail Strength
Dwindling Retail Sales

Source Data:
Sears Holdings Corporation: Annual Reports

What Recovery?

Click to enlarge.

Here's the same data plotted on a log chart.

Click to enlarge.

Ouch. The changing trends are not our friends. The exponential trend failed in the mid 1970s. It failed again about 12 years ago. Should it ever fail again, watch out below.

November 16, 2012
Hostess shutdown prompts snack cake buying binge

On Friday, the 82-year-old company announced it will liquidate and fire more than 18,000 workers, saying a nationwide strike by bakery workers forced a shutdown of operations. And consumers stocked up, fearing Hostess treats would disappear forever, though it's more likely the brands will be sold off and returned to the market by new owners. Shoppers at Giant Food and Safeway stores in the Baltimore area were buying large quantities of Hostess foods, both grocers reported.

It's really hard for me to imagine people actually hoarding consumer goods. Then again, maybe not.

And lastly, are Twinkies actually nondurable? I think the jury is still out on that one!

Source Data:
Industrial Production: Nondurable Consumer Goods

Friday, November 16, 2012

The Sarcasm Report v.173

November 14, 2012
RPT-CORRECTED-UPDATE 1-Congress, Obama face dynamite in 'fiscal cliff' -CEOs

A failure in Washington to solve the crisis by the year's end could prompt major companies to curtail investment plans, said Duncan Niederauer, CEO of NYSE Euronext, operator of the New York Stock Exchange.

"We simply won't be investing in the United States. We will be investing elsewhere where we have more certainty of the outcome," Niederauer said in an interview.

If certainty of the outcome is all that matters then Europe seems the perfect place to invest! Or perhaps China? Rain or shine, their official numbers always seem fantastic!

Sandy Cutler, CEO of manufacturer Eaton Corp, shared his concern.

"Until we solve the fiscal issues (in the United States and Europe), you're not going to get back to normal GDP growth," Cutler told investors on Tuesday.

Normal GDP growth? What a hoot!

July 27, 2012
Real GDP Growth per Capita

Click to enlarge.

Step right up! We're running a special on old normals and new normals! Borrow the money to buy the old normal at the regular price and get a new normal at that same low price!

Dwindling Retail Sales

The following chart shows the monthly growth in inflation adjusted retail sales.

Click to enlarge.

You can blame the trend line in red on the hurricane if you like, but blaming the overall slope of the blue trend line on the hurricane will be a lot more difficult.

In any event, the trends are not our friends. If they continue then it is only a matter of time before we're knee-deep in a recession again.

Source Data:
St. Louis Fed: Real Retail and Food Services Sales

Thursday, November 15, 2012

The Insanity Test

The Insanity Test

I am unwilling to share my exact score but I will tell you that I am apparently less than 90% sane. I think that you have the right to know.

I would have done worse but fortunately none of the questions had anything to do with obsessing over this economy's many exponential trend failures. ;)

Extreme Initial Claims Danger v.23

Click to enlarge.

Click to enlarge.

There are now two dangers.

1. We aren't making any progress back towards the red trend line.
2. We don't know how much of the recent spike higher is due to Hurricane Sandy and how much of it isn't.

Oh no, this isn't supposed to happen. Can you see me? We're flying blind here friend. - Guardian Angel, Borderlands

See Also:
Extreme Initial Claims Danger v.22

Source Data:
St. Louis Fed: Initial Claims
DOL: Initial Claims

Wednesday, November 14, 2012

The Rise of the Nonstores

Click to enlarge.

All exponential trends eventually fail. That said, this exponential trend could theoretically fail at infinity should the last department store shutter its doors.

November 14, 2012
Two fund managers disclose stakes in JC Penney

On Friday Penney reported that sales tumbled 26.1 percent during the third quarter, news that sent its shares down some 26 percent in the last five days.

Ackman is staying the course, telling anyone who will listen that when Ron Johnson, the former Apple Inc executive he handpicked to revive Penney, completes his job "you will shop at J.C. Penney."

Bill Ackman clearly doesn't know me. As seen in the following chart, I wonder if he knows retail trade employees any better?

Click to enlarge.

You can't shop without a job. For those keeping track at home, we are 9.4 million retail trade employees below the employment trend that was 51 years in the making. Why? Well, one reason is that nonstore retailers like simply don't need as many employees per dollar of goods sold.

Occupational Outlook Handbook: Retail Sales Workers

Employment of retail salespersons is expected to grow 17 percent from 2010 to 2020, about as fast as the average for all occupations.

Good luck on that theory. As seen in the chart above, there's been ZERO growth since 1999. You've got to be pretty darned optimistic to think retail trade employment will miraculously change for the better.

July 19, 2012
JCPenney’s To Eliminate Check-Out Clerks

In an email, a Penny’s spokesman would not say how many jobs would be lost, saying instead this new check-out would actually free employees to help customers in other ways.

I have no doubt that many employees will be freed.

Source Data:
U.S. Census: Monthly Retail Sales
St. Louis Fed: All Employees: Retail Trade

Restaurant Pain

The following chart shows roughly how much of our food dollars are spent in restaurants.

Click to enlarge.

I'm not at all convinced that the overall upward long-term trend is sustainable. In the distant future will we really be so prosperous that 100% our food dollars will be spent in restaurants?

I can't speak for others, but when I retired I actually ate out a lot less. That was especially true once the economy started falling apart. Call me crazy.

Note that there was a glimmer of hope that we were moving up and away from the most recent trend line in red. However, that's not been the case since April. I might even be so bold as to suggest that it has a certain return to the trend line look about it.

Source Data:
U.S. Census: Monthly Retail Sales

Tuesday, November 13, 2012

If It Truly Was the Fed's Goal to Hyperinflate...

Click to enlarge.

...and bring down the entire banking system, then they are certainly taking their sweet time about it. I, for one, am not complaining.

Meanwhile over on planet exponential trend failure...

Click to enlarge.

Ouch. It was a "sure thing" until it wasn't. With a 52% real annual growth rate, you can't convince me that most of its investors were simply trying to preserve capital.

Source Data:
St. Louis Fed: CPI (Not Seasonally Adjusted)
St. Louis Fed: CPI (Seasonally Adjusted)
Yahoo Finance: Silver Standard Resources Inc.

The Sarcasm Report v.172

I received the following in my email inbox today.

Prepare yourself to take on the market. Get educated and become the best independent trader you can be. TD Ameritrade has a variety of free resources that you can use to learn new skills and strategies.

I love it! I really want to take on the market. Me against the world? How can I lose? Within this email, there is a very confident looking man in what I would say is his fifties giving me the eye. Since I am 48, I can really relate to this. Imagine what I could do with the confidence he has. So, let's see. Where do I start educating myself? That's when I opted to read the very tiny print at the bottom of the email.

Options involve risks and are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.

The risk of loss in trading futures can be substantial. Clients must consider all relevant risk factors, including their own personal financial situation, before trading.

That seems like a lot of work, especially without my bifocals handy. Can someone help me out here? Does it really say potentially rapid and substantial losses and then go on to say that the risk of loss can be substantial? Maybe there's something more interesting higher up.


Yes!! That's certainly easy to read. These four words really inspired me. What if I used an exponential trading strategy? That sounds like pretty @#$%ing awesome expansion! The market won't even know what hit it!

That line of thought prompted me to do a bit of free research on my own using the power of Wikipedia. I need a strategy that both uses exponential growth *and* is a sure thing. How hard can it be? You know. Big profits! No risk!

Martingale (betting system)

The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake.

Since a gambler with infinite wealth will, almost surely, eventually flip heads, the martingale betting strategy was seen as a sure thing...

Genius! I see no point to read further. It's got everything I want! As for the infinite wealth part, you know what they say. It takes money to make money. I'm sure I will get all that's coming to me and more. Every time I lose, I'll simply double my bet. What's the worst that could happen? Mwuhahaha!

Progressive loss betting strategy

After another 15 minutes of observation, I realize that all 4 of these people are betting exponentially more after each loss.

I don't mean to spoil the surprise, but the strategy seemed to work for 3 out of 4 of them. The other 1 in 4? Not so much. Let's not dwell on the negative though! ;)

I'm just teasing you. I already have a sure thing gambling strategy to earn a fairly safe 3% return. I'm totally willing to share it with you.

Place $10,000 dollars on all numbers greater than 1 at the roulette table. It will cost you $350,000. Mortgage the house if need be. All you have to do then is pray that the ball doesn't land on 0, 00, or 1. If you win, you'll make $10,000 instantly. If you lose, well, sorry about that! $350,000 easy come, $350,000 easy go. Hey, don't sweat it. You've got a 92% chance of winning $10,000! Once again, what's the worst that could happen?

This post contains heavy sarcasm and is most definitely NOT investment advice!

See Also:
Sarcasm Disclaimer

Monday, November 12, 2012

Quote of the Day

November 11, 2012
In This Junkyard, It Seems, There Are No Dogs

Low yields are driving more and more investors into really strange territory,” says Lee Pacchia, a Bloomberg Law analyst who follows corporate bankruptcies. “They need to take on risk. While the market forces driving this trend could go on for a while, lowering standards could end badly. It’s called ‘junk’ for a reason.”

Words cannot describe how much I am salivating over the chance to invest.


Small Business Pain

Click to enlarge.

Exponential trend... fail.

October 1, 2007
Credit crunch hits small businesses

(FSB Magazine) -- Three years after scraping together $100,000 from family, friends, and credit cards to bootstrap Zensah (, a maker of athletic clothing in Hialeah, Fla., Ryan Oliver wanted expansion capital. He looked where thousands of entrepreneurs have found a ready source of funding - in the value his house. Applying for a $25,000 home-equity loan, he figured he was a shoo-in. shoo-in. His credit score was 750 out of a possible 850, and his house was appraised for $650,000, leaving him about $100,000 in untapped equity. His 15-employee business, which counts among its customers such professional sports teams as the Miami Heat and the New York Jets, had a three-year track record and was profitable.

But three banks - Great Florida, Wachovia, and Washington Mutual - shot him down without specifying why. "It's almost like they'd created new formulas," says Oliver, 34. No kidding. With the subprime mortgage market imploding and house prices slipping, lenders are making it far more difficult for entrepreneurs to leverage their homes to feed their businesses.

Source Data:
St. Louis Fed: Custom Chart

An Exponentially Increasing Exponential Trend

Click to enlarge.

As seen in the following chart, the exponential growth rates are themselves growing exponentially. In fact, it's nearly a perfect fit.

Click to enlarge.

If exponential trends are guaranteed to fail at some point (they are), then what does that say about exponentially increasing exponential growth rates?

The failure could be spectacular someday.

This would come as yet another major blow to the true believers of the Chinese economic miracle story. Note that the China Shanghai Composite Index is currently down 66% from the peak set in 2007. With miracles like that, who needs enemies?

November 8, 2012
Foxconn 'considers plan to open factories in US'

In Foxconn's huge assembly halls in China, iPhones and iPads are largely put together by human hands, with very little automation. In the US, sources say Foxconn will specialise in flatscreen TV sets, which are easier to assemble with the help of robots.

See Also:
Definition of Laspeyres Index

Source Data:
St. Louis Fed: Custom Chart