Thursday, March 4, 2021

The Sarcasm Report v.283

March 4, 2021
CNBC: Cramer says investors are in denial about stocks: ‘The sell-off is real’

“Right now, even after a 6% decline, we’ve still got a ton of denial,” Cramer said. “People don’t want to believe the sell-off is real. The market’s been so good for so long, and many newer investors have never seen this kind of pummeling, so the downdraft does seem pretty surreal.”

I know that many newer investors probably don't want to read up on ancient history, but the 2020 stock market crash also seemed pretty surreal.

Sunday, February 28, 2021

TV Show Idea: Soap Bubble

The following chart shows nonresidential construction employees divided by residential construction employees.


With record low housing inventory, record low mortgage rates, a Fed committed to ZIRP for the foreseeable future, and a potential permanent increase in working from home, an acceleration of the downward trend in the chart seems inevitable to me.

Will history repeat? Will 2010 to 2027 play out exactly like 1990 to 2007? Will our next financial crisis be another housing bubble disaster? Will the Fed step in to save the economy with even more ZIRP in 2027? Will long-term Treasury yields continue to temporarily scream higher in a futile effort to resist the overwhelming long-term deflationary forces?

Tune in next week for another exciting episode of Soap Bubble!

Saturday, February 27, 2021

The Lords of Land

The following chart shows the rental income of persons with capital consumption adjustment divided by wage and salary disbursements.


We can't all be the lords of land. At some point, there would be a landlord glut. Might already be there.

The Sarcasm Report v.282


When using a credit card to buy bitcoin, what's the worst that can happen when you profit every time?

Friday, February 26, 2021

VPU Performance v.002


Months Elapsed: 2
Total Growth: -4.59%
Annualized Growth Rate: -24.59%

Thanks to rapidly rising long-term interest rates, the unmitigated utilities disaster in Texas, and possible increased national regulation due to the mostly man-made Texas disaster, it’s now looking more like a crime scene photo than a picture of paint drying.

2.09% of the 4.59% loss happened just today. Perhaps it is a sign of capitulation and March will be better? In any event, I’m in it for the long haul but bracing for more pain.

2 months down, 198 to go.

Wednesday, February 24, 2021

Consumer Prices Have Grown Linearly Since 1982


It is very interesting, at least to me, that prices have consistently been growing linearly (and not exponentially). On average, the consumer price index has been growing by about 4.4 points per year. Was true when the index was only 100. Was still true when the index exceeded 250.

Should the trend continue, the average growth rate of 1.72% per year over the last decade will fall to 1.56% over the next decade.

Of course, the trend won't necessarily continue. And if it doesn't continue, which way will it fail?

I'm leaning heavily towards eventually failing to the downside like Japan. Even if I am ultimately right (certainly not a given), eventually is a very hard thing to time. *shrug*

Source Data:
St. Louis Fed: CPI

Sunday, February 21, 2021

The 30 Trillion Dollar Elephant in the Room

The following chart shows household and nonprofit debt. I have added an exponential trend line in red based on the data from 1952 to 2007.


We are now $30 trillion below the consumer debt trend that was in place for 55 years. Ben Bernanke once said that credit is the lifeblood of our economy. The lifeblood is certainly not pumping like it once did. Is it any wonder that Janet Yellen is practically begging for more fiscal stimulus?

While others talk of an economy that will soon temporarily overheat, I ponder what this elephant's continuing long-term impact on real GDP growth will be and if yet another elephant will appear in a post-pandemic world.

See no elephants, hear no elephants, speak no elephants.

Source Data:
St. Louis Fed: Households and Nonprofit Organizations; Debt Securities and Loans; Liability, Level

Wednesday, February 17, 2021

3.2%

The following chart shows the natural log of the 30-year Treasury yield. On a log chart, exponential growth (or decay)) is seen as a straight line.


If the long-term exponential decay of the 30-year Treasury bond yield (in red) continues, then the current rise in the yield should max out at no more than roughly 3.2%.

As seen in the yellow line, the long-term trend (in red) and the short-term trend (in green) meet at about 1.17.

e1.17 = 3.2

Declaring that the long-term bull market in long-term Treasuries is over while the natural log of the yield is well below the red trend line seems more than a bit premature to me. Where's the evidence of the bull market's demise?

So, now we wait. Will the line in the sand hold at 3.2%? I think it will but I wouldn't bet my life on it. If it does not hold, things are going to get very interesting. And when I say interesting, I actually mean terrifying. I don't think that our increasingly leveraged consumer society would know how to cope with mortgage rates that no longer fall over the long-term.

Our increasingly leveraged consumer society isn't a bug. It's a feature. It's buy design. (Pun intended.)