Friday, March 21, 2014

Desperately Attempting to Relive the 1990s (Musical Tribute)

The following chart shows the annual average of nonfinancial corporate equities divided by disposable personal income.

Click to enlarge.

We've had two "sure thing" exponential trends fail so far (as seen in the green and orange trend lines). We're now working on our third (as seen in red). It's only a question of timing, since there is no way that 10.7% annual growth rate is sustainable over the long-term.

Note that the 1990s had a 10.7% growth rate with a 0.97 correlation. We've had that same "sure thing" growth rate and that same "sure thing" 0.97 correlation since the Great Recession ended.

Don't let it concern you that the ratio is now higher than it was heading into the Great Recession. What's the worst that could happen again? Baby needs new shoes! You can't win if you don't play! Buy now or forever be priced out!

My brain says I'm receiving pain
A lack of oxygen
From my life support
My iron lung

We're too young to fall asleep
To cynical to speak
We are losing it
Can't you tell?

We scratch our eternal itch
A twentieth century bitch
And we are grateful for
Our iron lung


Here is a bonus chart to show why the 1980s and 1990s will not be soon repeated.

Click to enlarge.

1. Parabolic growth is not even remotely sustainable.

2. 2013's average ratio was 1.55, which is more than triple the 0.49 ratio seen in 1982.

Source Data:
St. Louis Fed: Custom Chart


Joseph Constable said...

What do you mean by equities? Price? Number of issues outstanding? Number of shares outstanding?

Stagflationary Mark said...

Joseph Constable,

Nonfinancial Corpotate Equities: 2013 annual average total market cap of $19.4 trillion

Troy said...

I love how I got 'downvoted' to hell today trying to discuss issues with reddit conservatives.

This nation is so, so screwed, between the rabid right and milquetoast left, or what passes for left in this country.

We can't get permanent change from the top down, the masses have to grow a brain first.

This movie has been played in every national history I guess, the mushy middle is instinctively conservative, protecting their relative position even as the whole things slides off into the abyss.

Troy said...

the 1980s and 1990s will not be soon repeated

+40M jobs, over 40% expansion in payrolls.

Gen Y was age 18 in 2000, so they missed it entirely.

+40% from here would be 200m jobs, and we mathematically can't get there. Well, age 16+ population is 250M now and climbing, so we could I guess, but the 80m boomers are going to want to retire someday.

Stagflationary Mark said...


protecting their relative position even as the whole things slides off into the abyss

Sums it up. Sigh.

and we mathematically can't get there

I've debated mathematical uncertainties many times in the past 7 years, yet people still want to believe that something good will always happen just because it has in the past. Sigh.

Troy said...

is a ghetto chart of what 1999-level 'full employment' looks like over the next 50 years.

(0.74 * age 18-66)

150M now , 160M around 2029, then a knee up to 180M in the 2050s.

Stagflationary Mark said...


I wonder what the 'full employment' picture will look like with a dying mall adjustment. Sigh.

America's Shopping Malls Are Dying A Slow, Ugly Death

"It’s really going to be hard in the next 10 years to knock down that mall and rebuild it into something better because the economics just don’t work," Wood said at a conference in June 2012, according to The Wall Street Journal. A failing mall in a non-affluent market "most likely will just stay there and get worse and worse over the next 20 years."

What will eventually replace these ghost malls are community colleges, business offices, and health care facilities, according to Green Street Advisors.

More business offices? Seriously? I have serious doubts.