Friday, January 10, 2014

The Slippery Slope of Hope(lessness)

The following chart shows personal current transfer receipts divided by government current receipts.

Click to enlarge.

On Basilisk Station (David Weber, Copyright © 1994)

"Oh, that’s a wonderful idea!" Frankel snarled. "Those BLS increases are all that’s keeping the mob in check! They supported the wars to support their standard of living, and if we don’t—"

No worries! That quote comes from a book of science fiction. All governments appearing in this work are fictitious. I'm sure that any resemblance to real governments is purely coincidental.

Check out the last three data points at the trough of the long-term channel.

2000:Q1: Good times!
2007:Q2: Better times!
2013:Q2: Best times!

Other than 2000 and 2007, perhaps there has never been a better time to swing for the fences? The stock market only goes up again! What could possibly go wrong? It is possible that the 2013:Q2 data point isn't the actual bottom. I can say this though. First, we bounced off of it. Second, if I exclude the 2013:Q2 data point (which I have tested) then the channel changes insignificantly. Put another way, that's where the channel seems to want to go anyway.

This is not investment advice. It's a chart, some possibly meaningless trend lines, and a potential warning. No crystal ball here. I'm just trying to point out a risk that you won't hear on CNBC. That said, it is a risk that I'm not willing to embrace. I've been "risk off" since 2004 and intend to stay that way permanently. In hindsight, I have no complaints so far.

On Basilisk Station is a favorite book of mine. It is free to download on the Kindle. The second book, Honor of the Queen, is also free to download. I received a Kindle for Christmas. I have no idea how I ever lived without it (especially now that my comfortable reading distance isn't what it once was). The Kindle is one reason I have been posting a bit less lately. (Another reason is that I'm also working very diligently on my New Year's resolution.)

I know what you must be thinking. Free is fine and dandy but how much is it going to cost to download a complete collection of H.P. Lovecraft (my favorite author)? 99 cents. Infinitely more expensive! Right? Just keep telling yourself that the cost per word isn't all that hyperinflationary. That's how I'm planning to do it once I get over the sticker shock anyway. Don't forget to factor in the savings from not driving to the mall to pick it up. That helps too (perhaps not so much for mall employees, but that's a story for a different post).

What an odd economy we have. I've often said that the best things in life are free or nearly free (once basic necessities are covered anyway). Free and/or 99 cents certainly qualifies.

Source Data:
St. Louis Fed: Custom Chart


Mr Slippery said...

The great thing about this chart is it doesn't have to stop at 100% due to infinite dollar printing and quantitative easing, there is no limit!

Stagflationary Mark said...

Mr Slippery,

It doesn't! Heck, it is only based on the amount the government brings in, which we already know isn't even remotely related to how much the government spends! ;)

In other news...

The December employment report was bad. Was there some sort of holiday last month that I was supposed to spend $700+ on? Oops.

Mark Zandi just told us to completely ignore that report. Cramer just told us not to ignore it, but it is good for stocks because interest rates fell. Cramer is also "shocked" by how bad Sears is.

If only the report would have been good! Zandi could have told us how it matches his beliefs and Cramer could have told us it is good for stocks because it's just one more sign the economy is strong and resilient (Sears notwithstanding).

mab said...

Mark Zandi just told us to completely ignore that report. Cramer just told us not to ignore it, but it is good for stocks because interest rates fell. Cramer is also "shocked" by how bad Sears is.

I saw those segments this morning. I wish I could say I was shocked.

I rarely watch CNBC. But when I do, they always meet expectations. Pravda, American style!

Stagflationary Mark said...


I watch CNBC for the shock value sometimes (employment report days in particular).

Did you catch Andrew Ross Sorkin debating a guest over what innovation would do? In Andrew's opinion, with perfect innovation there probably wouldn't be all that many jobs. I agree! Shocking!

The guest conceded the point in theory, but not in practice. Not so shocking considering he just said we need more innovation to solve our employment problems. Robotic workers for the win apparently (not that he mentioned robotic workers directly of course).

And don't even get me started on financial innovation! Yeah, that worked out awesome in hindsight (structured investment vehicles notwithstanding).

I should make another New Year's resolution. Reduce the use of notwithstanding before it becomes a permanent habit. On the other hand, I love the term.

This economy's "not withstanding" dotcom bubbles, housing bubbles, and various other bubbles all that well (at least over the long-term). It's notwithstanding much at all really.

mab said...

I didn't see the Sorkin bit. I can only tolerate CNBC in small doses.

No mea culpa from Cramer about Sears. What a surprise. Cramer liked Sears at $140 (Eddie was a genius then), but hates it at $35. Go figure.

It's notwithstanding much at all really.

Yeah, but at least stocks have zirped their way to new highs. Sears notwithstanding!

Stagflationary Mark said...


Cramer liked Sears at $140 (Eddie was a genius then), but hates it at $35.


He's got an array of sound effect buttons to push on his show but in my opinion he really only needs one, lol. Sigh.