Sunday, January 25, 2015

My Nomination for the 2015 Hubris Award of the Year

I know it is only January but I want to get my vote in early!

January 23, 2015
Bond market madness: How to profit from it

Can't you just feel what's coming based on the headline? Strap in folks, this is going to be a rough ride!

“We know higher rates are coming and it will probably be this year,” but what the market can’t predict is when. “Are you going to be able to time the bottom exactly? Who knows?”

We most certainly don't know higher rates are coming. That's what makes it even harder to time. And when I say we I really mean him and me. We, as a group, seem very divided about the future of long-term interest rates over complete business cycles. Further, I would never claim to know the future. I can only strongly suspect. Perhaps it stops me from investing in sure things, you know, like when everyone just sort of agrees that the only direction possible is up.

If everyone truly knows that long-term interest rates can only go higher from here then interest rates would already be higher. I, for one, would have sold all my long-term TIPS. Of course, that would be a problem in a world where nobody was buying them and everyone was selling. Go figure.

Another option, suggests Lydon, can be applied through The Market Vectors Treasury-Hedged High Yield Bond ETF (THHY) which shorts the treasury and is long high yield. “This actually has a short duration, very short, but a yield over 5%, kind of a neat scenario if your are looking at the treasury portfolio and saying I am not really that comfortable at this period in time because we know Yellen is going to be hiking rates.”

We do not know that Yellen is going to be hiking rates just because that's what she likes to talk about any more than we had proof that there was no housing bubble just because the lack of a housing bubble was all Bernanke wanted to talk about. Talk is cheap.

Further, I shall pass on profiting off the bond market madness if it involves shorting treasuries and loading up on high yield junk, no matter how "neat" and "comfortable" that sure thing advice seems to me.

This is not investment advice. We know this. And how do we know this? We don't. Yeah, I just told a lie. I know it isn't investment advice but how could I know that you know?  I therefore cannot speak for you. Sorry about that. Perhaps his hubristic tone is infectious.

If there's one thing we do know, it's that this sarcastic post was a joy to write. Oops. I did it again. Now we're thinking about Britney Spears, aren't we? It's uncanny how we can get inside our heads like that. We learned from the hubris master! Go us! ;)

Thursday, January 22, 2015

Transportation Winners of the New World

One of the more amusing theories of the modern age is that one must own stocks because there are no suitable alternatives. Take Jim Cramer's Winners of the New World. You will note that he did not mention bonds. It was heavily implied, as is the case now, that bonds could not be relative winners of the 21st century.

February 29, 2000
Winners of the New World

So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?

A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10.


I would like to now extrapolate this "no suitable alternatives" theory to the transportation industry.

We can't own cars. So many people die in cars each year that it has become a travesty. Death traps each and every one of them, and don't even get me started on the financial costs of owning and operating motor vehicles.

We can't own bicycles. We're now forced to wear helmets, and it isn't because bicycles are inherently safe, let me tell you.

We can't own helicopters and airplanes. There just aren't enough places to land them and parking at our local strip malls is just right out.

A-ha, that just leaves us with pogo sticks. What better vehicle could there possibly be to navigate this brave new economy's cyclical ups and downs while simultaneously getting virtually nowhere over the long-term? It is by process of elimination that I have determined the only suitable method of transportation of the new world. The rest? You can have them.

Stocks and pogo sticks for the win at any price! You heard it here first, lol. Sigh.

This is not investment advice.

Wednesday, January 21, 2015

Quote of the Day

January 20, 2015
Honda Warns Against ‘Stupid’ Loans Driving U.S. Sales Gains

“We’ve seen this movie before, we know how it ends, and it’s not pretty,” Webb told reporters at an event before last week’s show. “But I say that it has longer to run, and we have already paid the price of admission. So we might as well stay to the end. You just keep your eyes on the exit door.”

Stupid loans for the win!

This is my first attempt to post from an iPhone. Crossing fingers.

Monday, January 19, 2015

The Death of My PC Is Not Greatly Exaggerated

July 28, 2014
Why PC Sales Have Stalled

The third group covers ages 40-65, and this group's primary device is still a desktop PC or laptop. Yes, many have smartphones or even tablets, but the phones and tablets augment their digital life while the PC and laptop still sits at the center of their digital activities. Interestingly, in consumers, this is this age group that are buying the most PCs and laptops to replace their older models. This group started buying PCs when they were in their early 20s, and until recently these were the only digital tools they had. For them, it is the most efficient and comfortable way to get things done.

You might think this is the end of the story. Not exactly.

There was a power outage at our house yesterday due to a fairly severe wind storm (just before the Seahawks game, but fortunately power was restored in time). I hobbled along on a 10+ year old obsolete desktop computer but that ended with the smell of smoldering electrical wiring. Stick a fork in that computer. It's done. The storm was too much for it.

Although I am in the favorable age group  (for PC purchases mentioned in the link above), I do not intend to replace my computer. Let me explain why. Here is the list of reasons I owned it.

1. Programming. I was a lead software engineer for quite a few years and I enjoyed writing code. Somewhere along the way I stopped doing it. The desktop is well suited for this task but it is a task I no longer do.

2. Finances. I tracked every expense on that computer (to the penny). I stopped in April of last year. That was when I got Shingles. I decided that life is too short to spend so much time on something that didn't really improve my quality of life. I'm a very frugal person. Tracking expenses doesn't really change my behavior. Should I wish to track my expenses in the future, the phone should actually make it easier. No more saving receipts only to reenter them at home. It was useful data to me, but the story isn't changing. I've pretty much seen all I need to see.

3. Bill paying. I expect the phone to work just as well. Time will tell.

4. Health. There was a time when I would track how much exercise I would do and how much I weighed. The personal computer is not ideal for this task. My new phone does a much better job. Heck, the iPhone even has an app that can easily check my pulse. It uses the camera lens and the flashlight to look at changes in my index finger. It also shows me a history of all my readings. I'm currently using it in conjunction with my 2015 goal of climbing 60 miles on the stair stepper. I check my pulse at the 30 minute mark during exercise (at 30 feet vertical per minute). What the trend will be over the full year? Down would be nice.

5. Email. The phone does a better job. The personal computer is obsolete for this task. As some of you may know, I could go more than a week between checking email on my PC. I check my phone at least once a day though (since it is almost always near me).

6. Surfing the web. The phone does a fine job and all from the comfort of wherever I happen to be at the time.

7. Music. I'd transfer data from my CD collection to my mp3 player. I'm currently using Spotify on my phone. I love it. I think of a song, any song, and chances are I can add it to my playlist. There are notable exceptions of course (AC/DC missing!). The phone is my music player now and the personal computer is no longer needed.

8. Gaming. This is a big one. I haven't played a game on a personal computer since the Playstation 3 came out, maybe even since the Playstation 2 came out. I find it much more comfortable to play games from the couch. Maybe that's just me.

And last but not least...

9. Blogging. I enjoy it but there are many things I enjoy. The other things just moved up the list, since most of them are free. Go figure.

So what does this mean? #9 was the only thing left from the original list. This could signal the death of my blog. Charting is what I enjoy most. My tools just died with my old computer. We'll see where it goes from here. Don't hold your breath though. I'm not really motivated to continue. The key here is motivation. I'm definitely lacking it.

One sign that the death of the PC is not greatly exaggerated is how little I have lost when mine died. I do not have much of a personal horror story to tell you. Most of what I've done on my computer still exists right here on this blog (and in the grand scheme of things, the universe would definitely not care if my blog died too). All I'm missing is some personal contact information (phone numbers and addresses) and some upcoming bill payment reminders. That's just about it. Go figure.

In some ways, the death of my PC is rather liberating. It should have died a long time ago. I was still running Windows 2000! I had the means to upgrade but the stubbornness to refuse. As one example of many, the thought of replacing Excel did not appeal to me at all. The old Excel was working fine for my needs. As an added bonus, I can laugh just a little harder every time I see some cheesy "fix my computer" and/or "computer running slow" advertisement on TV. As an even bigger bonus, one of my first thoughts was about this year's hiking season. The desktop anchor is now gone! Hurray!

Sorry Microsoft. It appears that I'm done buying your products (as of about 10 years ago or more). It's been an adventure though. I'll give you that. The blue screen of death adventure was the best of all. I realize that it's been a long time since I've seen one, but the post traumatic stress is with me to this day. ;)

I always liked Apple products better than Microsoft products, if for no other reason than I found them generally less buggy and cleaner (from a programmer perspective). I did far more programming on Apple computers than their Windows equivalents. There was a time at my company when I was forced to justify developing on Macs and simultaneously porting to Windows (vs. the other way around). To the best of my knowledge, we were the only team which did it that way. Upper management really didn't like that idea since most of our sales were not to Apple customers. It wasn't a very difficult fight though. Our team's tech support costs were at or near the lowest in the company. We never shipped with known bugs on either platform (so we must have been doing something right). They therefore let us continue developing as we had been.

In any event, they were wise to not press their point. I probably would have quit out of frustration. At the very least, our productivity would have dropped like a rock as we spent needless energy rewriting much of what we had done. That would have gone very poorly for us, me in particular. It would have been the equivalent of management asking the Captain of the Titanic to speed up just a bit, because they know best. I'm trying to picture what my performance review would have looked like and how many hours of overtime it would have taken to become unsatisfactory. Yeah, quitting would have been a good preemptive move I think. Nothing good would have come from staying. It's ironic though, because I did eventually quit and in hindsight, it was a good plan. Not much is left of that company now. As I left, I truly felt like a rat leaving a sinking ship (survived many rounds of layoffs, writing on the wall).

That said, it does bother me a bit, from a cost perspective, that I'm seemingly permanently trapped in the Apple ecosystem. Once in, it becomes difficult to escape. The cloud is here to stay. I've thought for years that my personal computer should simply be a dumb terminal, if for no other reason than what happened to it this weekend. It died and everything on it died with it. I have backups for much of it, but what good is it to have a backup if one does not plan to get another computer? Not much. No big deal though.

In summary, I cannot speak for others but my personal computer is dead. No amount of life support or heavily discounted sales will bring it back to life. I have no desire at all to replace it (at any price). I've been liberated by a mobile phone and there's no going back. If my phone can't do the task from here on out, then the task won't get done. That's all there is to it.

The irony here is that I'm typing this from my girlfriend's laptop (blogger doesn't fully support my iPhone's browser). I'm hunched over in the dining room. It's not all that enjoyable. This posture is hard on my back (my own fault). I'm making all kinds of typing mistakes since this keyboard has a different feel. This may very well be the last gasp of a dying blog! Those looking for ongoing trend failure charts will be sorely disappointed. Hopefully this economy has given you a lifetime's worth though, lol. Sigh.

Thanks to everyone for being so supportive. I couldn't have asked for better commenters! And for the record, it's not a dead blog. It's just dying. This is probably not my last post. I'm fairly sure I have at least a few more sarcasm reports left in me. Mainstream financial news tends to offer an endless stream of candidates. :)

Friday, January 16, 2015

James Bullard's Linear Trend Failure of the Day (Musical Tribute)

November 14, 2014
Does Low Inflation Justify a Zero Policy Rate?

Market-based measures of inflation expectations have declined to low levels in recent months, but rebounded since mid-October.


Click to enlarge.

ZIRP-a-Dee-Doo-Dah!



Source Data:
St. Louis Fed: Custom Chart

Debt: All You Want (Musical Tribute)



I like to buy before yields fall
This bear believes growth will stall
And although high yields left me behind
There's no sure thing sold for free

As global growth began to slow
Stocks ran on empty, energy's been sold
But I can own the bonds I want
It's not the same with risk gone

Oh you did buy homes
I will give you that

All you want
Is the debt from that boom
All you want

All you need
Is hitting, no undo
All

It's been six years, it fell apart
But on this blog I did some charts
If only had our debt not grown
If bubbles had not been blown

Oh you can buy homes
I will give you that

All you want
Is the debt from this boom
All you want

All you need
Is hitting, no undo
All

Interest rates are falling to the floor
Could you please buy housing ever more
You will surely win
Just borrow from your next of kin

Send my regards to Ben
I will give you that

All you want
Is the debt from this boom
All you want

All you need
Is hitting, no undo
All

I like to buy before yields fall
This bear believes growth will stall

Wednesday, January 14, 2015

Quote of the Day

As seen on the Internet:

I have been playing the game for 32 days and have spent $130 and I am SH 15 and have all tier 3 troops. I am smart with my gold...

Behold the new free to play "Game of War" economy in all its grandeur, lol. Sigh.

Saturday, January 10, 2015

Spirit of '76

The following chart shows the interest rate that $12.9 trillion in MZM money stock is currently earning.


Click to enlarge.

As seen in the blue commentary, that's 5 straight months at 0.076%. We may have found the bottom! Woohoo!

Like all economic parabolic trends, the trend in red is guaranteed to fail at some point, but how will it fail?

1. The optimists might suggest that the rate is like a submarine that gently dove and is now preparing to gently surface. At best, any failure will be many years away. If they are right, then savers can expect more of the same until at least 2020.

2. The pessimists (especially Japanese pessimists) might suggest that the rate is like the Titanic. That ship found the ocean floor in 1912 and remains there to this day.

In spite of a rapidly falling unemployment rate, I lean towards the latter camp. Might get it to budge off the bottom in the short-term, but over the long-term? Let's just say that I'm not optimistic. Interest rates have generally been falling for 30+ years. It's hard for me to imagine how weak hourly earnings growth and an aging population will reverse the trend.

Spirit of '76 (sentiment)

Jefferson and the Second Continental Congress believed the Spirit of '76 "included the 'self-evident' truths of being 'created equal' and being 'endowed by their Creator with certain inalienable rights' including 'life, liberty, and the pursuit of happiness.'"

If the pursuit of happiness includes earning 76 cents in annual interest on each $1,000 deposited, then savers might want to stick to life and liberty.

All right, sweethearts, what are you waiting for? Breakfast in bed? Another glorious day in the Corps! A day in the Marine Corps is like a day on the farm. Every meal's a banquet! Every paycheck a fortune! Every formation a parade! I LOVE the Corps! - Apone, Aliens (1986)

Embrace the interest rate corps(e).

Source Data:
St. Louis Fed: MZM Own Rate