I live in the USA and I am concerned about the future. I created this blog to share my thoughts on the economy and anything else that might catch my attention.
This is the End and a New Beginning
-
I've been thinking about this for some time.
After 21 years of writing this blog almost daily, I've decided to stop
writing the daily updates on the blog.
...
Silver Deep Dive
-
Silver had a memorable year (+148%). Some of this can be explained by a
decline in the dollar. I decided to do some ML analysis to look for other
insights....
The following chart shows thecivilian labor force(those who have jobs or are seeking jobs). I've included an exponential trend line based on the data from 1948 through 1989.
Click to enlarge.
Here's a chart showing the difference between where we are and the trend line.
NAFTA is really less about trade than it is about investment. Its principal goal is to protect US companies and investors operating in Mexico. The text of the agreement is contained in two volumes covering more than 1,100 pages. The text is mind-numbingly dull. Large portions of it are written in the type of obscure legal terms found on the back of an insurance policy. Buried in the fine print are provisions that will give away American jobs and radically reduce the sovereignty of the US.
Mission accomplished. Now what?
It isn't just the trade deficit that hurts us going forward though. Think demographics.
There's a risk that the long-term trend is forming a bottom. There's an additional risk that it won't just bottom, but that it will actually begin to reverse. The stock market's been stagnant for a decade. Unemployment is now extremely high.
The population will most likely continue to grow, but if more and more people live together in the same household ("for economic reasons" as seen above) then that's just one more headwind for the housing market.
The following chart shows the improvement in employment since the previous major civilian employment peak.
Click to enlarge.
Civilian employment peaked at 146,584,000 in November of 2007. It is now 139,627,000. 45 months later it is still 4.75% below the peak.
The following chart shows civilian employment since 1948. I've included an exponential trend line based on the data from 1948 through 1999.
Click to enlarge.
We are 28.1 million jobs below the long-term exponential trend. As horrifying as that it, at least it isn't as bad as the39.0 million missing jobsseen in payrolls. That would imply that at least some people have found work outside of the payroll system. One wonders how many have becomestock marketand/oreBay day traders though.
I would bet all that I own that we will never return to the red trend line. That's true even if we could magically put every single unemployed person back to work.
This time it is different. This is not an opinion. It is a fact based on simple math.
The following chart compares the payroll employment we currently have to the long-term payroll employment trend from 1939 to 2000.
The following chart shows the distance we are from the long-term trend line.
Although zero payroll jobs were added in August I am sarcastically optimistic that we'll still be back to that trend line in no time. Can't you just feel the prosperity accelerating?
On the other hand, I might just be experiencing aLuskin moment.
“The Luskin moment” is the month that Don Luskin argued that the US was on the verge of “accelerating prosperity”.
Let's assume a fairly modest long-term inflation rate (so it can be safely ignored from the calculations), shoot for a real return of 1.07% (not counting taxes), and do some back of the envelope math. It's not perfect but it is better than nothing.
I present 5 options that are roughly equivalent.
Option 1 Buy the 30-Year TIPS. Lock in 1.07%. Done deal.
1.0107^30 = 1.376
Option 2 Buy the 20-Year TIPS. Earn 0.72% for 20 years and earn 1.78% for the following 10 years.
(1.0072^20)*(1.0178^10) = 1.377
Option 3 Buy the 10-Year TIPS. Earn 0.07% for 10 years and earn 1.58% for the following 20 years.
(1.0007^10)*(1.0158^20) = 1.378
Option 4 Buy the 7-Year TIPS. Earn -0.44% for 7 years and earn 1.54% for the following 23 years.
(0.9956^7)*(1.0154^23) = 1.378
Option 5 Buy the 5-Year TIPS. Earn -0.82% for 5 years and earn 1.46% for the following 25 years.
(0.9918^5)*(1.0146^25) = 1.379
So the real question becomes...
Is it better to lock in today's rate of 1.07% or is it better to hope that making money off of money will become easier in the future?
I think it is a tough call. I very much think the bond market is struggling with that question right now, as am I. On the one hand, 1.07% is pretty low. On the other hand, so are my predictions of real long-term GDP growth.
This is the reason why I continue to hold 30 year TIPS even as their prices have risen. I'm not convinced that it will become easier to make money off of money in the future. That's the whole premise of my blog.
Could rates spike higher and present opportunities even if I am right to think this way? Absolutely. Do I wish to bet on that outcome? Not exactly. I have a bird in the hand mindset.
That said, I am sitting on more cash than normal. I'd certainly be willing to put some of it back to work if an opportunity appeared. I won't hold my breath though.
Q: What happens when gold inflates and diamonds deflate?
Click to enlarge.
Click to enlarge.
A: You get charts that require a log scale.
Note: The prices in the first chart are adjusted for inflation. The median price for gold (in today's dollars) from 1913 through 2009 was $409.12. It now stands at$1829.20.
Thanks to the popularity of the Internet and the high price of gasoline, 20% of all retail sales (by dollar amount) can now be made without interacting with a human being. This isn't even counting the new self-checkout lanes at grocery stores.
20%!
Our automated self-serve economy isn't exactly churning out new jobs. Big shocker.
Another month has passed. I continue to drink 12 ounces of water and climb an extra 20 flights of stairs each day.
On the 22nd I went all out. I climbed the 20 flights in just 3 minutes and 50 seconds. I could not have done that back in June.
Since I believe this has become a habit, I felt comfortable doing a couple of marathon runs this month (without the risk of burning out on the stair stepper). Last night I watched the movieWasabi(subtitled) while stair climbing. That was good for over 200 flights (in addition to the 20 flights I did earlier in the day). It was a fairly leisurely pace. It made me hungry. I ate a large meal afterwards so I'm not sure I lost even an ounce overall, lol. That said, I was doing it as an alternative to just sitting on the couch while I watched the movie.
I do not feel compelled to do the marathon runs. They are not part of my plan. If they happen, they happen. If not, that's okay too.
The gains in Dr. Boreham’s study are modest enough that you shouldn’t view taking the stairs as the only thing needed to stay fit. But they offer encouraging evidence that simple decisions to be more active in your daily life can add up to measurable health benefits – even if you can’t climb the CN Tower.
I'm a believer in the theory that small simple decisions can eventually producelarge measurable effects. That's why I am posting these weight loss charts.
Dr. Boreham's study covered just 8-weeks of stair stepping. It started off at roughly the same intensity as my plan but became more intense. However, my plan is at the 13-week stage and will hopefully become permanent. So far, so good.
And lastly, no weight loss plan would be complete without some sarcasm.
The researchers are now investigating whether the protocol can be transferred to older adults, using a stepping machine rather than staircases.
I'm 47. Will climbing stairs benefit me too? Can a stepping machine actually replace staircases? I anxiously await the results of the new research, lol.
Posts
