Monday, November 5, 2012

Post Stimulus Hangovers


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Hangover

While a hangover can be experienced at any time, generally a hangover is experienced the morning after a night of heavy drinking. In addition to the physical symptoms, a hangover may also induce psychological symptoms including heightened feelings of depression and anxiety.

Source Data:
St. Louis Fed: ISM Non-manufacturing: Business Activity Index

Saturday, November 3, 2012

Peak American Human Labor?


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Let's zoom in on the last two years and throw in a new trend line.


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Understand that I cannot accurately predict the future using trend lines (especially ones using 2nd order polynomials). That said, we do not appear to be on a trajectory that will break the record high of 107.7 set in December of 2007.

November 3, 2012
Mish on Capital Account: Jobs, Real Wages, Income Distribution, Fiscal Stimulus

The index of aggregate hours paints a good picture of the stall in the recovery. Employment is up, but hours are not up proportionally. This reflects the trend to part-time workers and the reduction of hours in part-time workers.

See Also:
Trend Line Disclaimer

Source Data:
St. Louis Fed: Custom Chart

New Savings Bond Rates Announced

The I-Bond fixed rate was set at 0.0%.
The I-Bond composite rate is 1.76%.

As you can see, this is very close to my 0.0% fixed rate and 1.76% composite rate prediction made on October 16, 2012. Shocking!

In all seriousness, it's like shooting fish in a barrel. All it takes is a belief that the economy is still in crisis mode. Seriously. That's it.

The EE-Bond rate was set at 0.2%.
The EE-Bond original term was kept at 20 years.

This was below my prediction of 0.4% made on October 17, 2012. Be sure to check out my reasoning. It really does involve "crisis mode", and yes, we're apparently still well in it.

Here's the good news. The government did not change the original term (for new purchases). EE-Bonds held 20 years are still guaranteed to double in price. This means bonds bought today will effectively earn 3.53% per year if held the full 20 years. This compares very favorably to the current 2.51% yield on the 20-year treasury bond.

I'm not suggesting that EE-Bonds are a great investment. Only hindsight will show that. I can definitely say that there is at least one investment worse though (and perhaps even more than one if post-housing bubble Japan is any indicator).

I've already made my purchases for 2012. In January, I'll be a buyer of I-Bonds (for the 14th consecutive year) and quite possibly a reluctant buyer of EE-Bonds yet again (for the 4th consecutive year). This is not investment advice.

See Also:
Extreme EE Savings Bond Mispricing

Source Data:
Treasury Direct: I Savings Bonds Rates & Terms
Treasury Direct: EE/E Bonds Rates & Terms

The Danger of a Flattening Yield Curve


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What makes it bad?


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Note that all of the "bad" points were followed by a recession.

On the one hand, we're currently above 0%. That's good news.

On the other hand, the 3-month treasury bills are stuck at 0.09% thanks to monetary policy. The 3-year rate is just 0.38%. How much more can we really expect the spread to shrink? Put another way, the danger signal is being distorted. There could easily be even more danger than this chart shows. That's bad news.

Yield curve

A flat curve sends signals of uncertainty in the economy.

I'm fairly certain that all is not well, especially over the long-term.

June 10, 2011
The Fallacy Of the Steep Yield Curve

Can we take the yield curve at face value if we know that the mass of transactions that make up its price discovery mechanisms are full of purchases by an entity that gives no distinction or thought to risk/return when executing bond trades? If the full value of the information content of the yield curve is supposed to be a product of millions of disagreements on the risk/return expectations, then that content is diluted by transactions that have no grounding in that primary calculus.

Dilution is probably understating the case by an order of magnitude since the Federal Reserve has been actively moving the yield curve at both ends. In other words, the Fed is the yield curve, through QE 1.0 and 2.0, and its actions have little to do with risk expectations. So how can anyone rightly say what the yield curve is telling us about those expectations?

Source Data:
St. Louis Fed: Custom Chart

Friday, November 2, 2012

The Great Employment Buckling


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Those who think lackluster employment growth is just a cyclical problem may wish to look more closely at the chart.

Buckling

In science, buckling is a mathematical instability, leading to a failure mode. Theoretically, buckling is caused by a bifurcation in the solution to the equations of static equilibrium. At a certain stage under an increasing load, further load is able to be sustained in one of two states of equilibrium: an undeformed state or a laterally-deformed state.

In practice, buckling is characterized by a sudden failure of a structural member subjected to high compressive stress, where the actual compressive stress at the point of failure is less than the ultimate compressive stresses that the material is capable of withstanding.

See Also:
40.8 Million Missing Jobs

Source Data:
St. Louis Fed: All Employees: Total Nonfarm
St. Louis Fed: Population

40.8 Million Missing Jobs

Long-Term


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@#$%!


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@#$%!


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@#$%!

Short-Term


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@#$%!


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@#$%!


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@#$%!

Once again, let's take it back to 1984.


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@#$%!

See Also:
40.7 Million Missing Jobs

Source Data:
St. Louis Fed: All Employees: Total nonfarm

Extreme Initial Claims Danger v.21


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That's 70 straight revisions to the upside.

Let's say you bet one penny on June 30, 2011 that the initial claims would be revised higher the next week. Each week you won you doubled your bet. This is how much money you would have now.

$0.01 x 2^70 = $11,805,916,207,174,113,034.24

Try not to spend it all in the same place!

See Also:
Initial Claims Danger v.20

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

Thursday, November 1, 2012

The "Free Lunch" Weight Loss Plan v.017


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If you had asked me how it was going on the 17th, I would have said I was roughly on track to repeat last October's weight loss success.

That's not the way it worked out though. I managed to give myself two blisters on my feet (new hiking shoes and pushing my luck with a 6 mile walk) on the 15th. It doesn't end there though. Several days later I caught a head cold that pretty much shut me down entirely for the next 10 days (3 bottles of NyQuil). You can certainly see the effect in the chart. Feed a cold, starve a fever.


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The good news is that even when sick (with blisters on both feet no less), I still managed to climb the extra 20 flights per day. The habit is permanent. There's not a doubt in my mind. When broken into 4 climbs of 5 flights of stairs each, they are trivial to do and fit well within a TV commercial break. I tend to do far more than the minimum of 20. This once again confirms to me that 20 makes a good minimum though. There were certainly many days in October that I did the bare minimum.

I'm directly on the long-term trend lines and I can't complain. I'm hopeful that I won't gain weight like I did last winter. I walked 9 miles over the previous 3 days. It rained every day. My new hiking shoes combined with actual hiking socks has made walking around in Puget Sound's fall weather a lot more enjoyable. I assume it will carry into winter as well. Hat tip to Mr. Slippery for suggesting the change in footwear.

I gave a gluten free diet a chance for the first 4 weeks of October. I saw some initial success in the first few days (placebo?), but there didn't seem to be any follow-through. I do not appear to be gluten sensitive and am therefore back to eating whatever I like. Hey, at least now I know.

On the one hand, I had hoped to see a huge improvement. No such luck. On the other hand, I enjoy many foods with gluten in them. For example, my girlfriend made pound cake a few days ago. That's really hard to pass up.

I think November is getting off to an excellent start. There's leftover Halloween candy but I don't really have much of a candy appetite. I ate about a dozen PayDay candy bars in October. What can I say? They're gluten free! I'm kind of burned out though, and that's a good thing more than likely.

The head cold gave me some cabin fever and I'm therefore looking forward to walking outside a lot more in the next few weeks. I might even try doing an actual hike soon. I'd like to try out the new shoes on something other than pavement. I just need to break them in a bit more first.

And lastly, I'm only a few pounds lighter than I was this time last year. However, I really do think some of it is increased muscle mass. My legs are in much better shape than they were last year. Put another way, perhaps I should have been measuring inches around the midsection instead of pounds on the bathroom scale. In any event, I am confident that the long-term weight trend is in the right direction.

I just keep plugging away each month. There's no hurry. It's a long-term change. All it took to get me started was baby steps. Literally.

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