New Year's Resolutions for 2014

1. Climb more stairs.
2. Eat more food.

Hey, I'm just trying to be realistic! If I really go all out on #1 then #2 is going to happen anyway. ;)

2013 was a rough year for me. For two straight years I stuck to the plan. I climbed a minimum of 20 extra flights of stairs each and every day. Our cat died in the spring of 2013 and some weight started going back on. Like many, I eat more when I'm feeling down. I stuck to the plan just the same though.

In July of 2013, I seriously sprained my ankle. It happened at a rest stop 250 miles from home. I drove the rest of the way and then went straight to the emergency room. Based on its current condition and the swelling, they gave me the talk about how fractures aren't so bad. Fortunately, it wasn't fractured. It was an extremely bad sprain though. It prevented me from doing any climbing at all for months (unless one counts hobbling around the house on crutches), which completely took out the entire summer's hiking season. The lack of activity also put a nail in my weight loss coffin. Needless to say, I was feeling down. Sigh.

Speaking of injuries, our dog Honey has been through many surgeries in the past year or so (to the tune of $12,000+ in various vet bills, liver surgery being the biggest). Her most recent surgery was to have several teeth removed. That was just a few weeks ago. They broke while she was playing with her soft toys. Yeah, soft. Even the vet can't understand how she did that. She said her teeth were really strong and hard to extract, what was left of them anyway. It's a mystery within a conundrum. She's doing excellent right now though and if asked, she'd definitely say the medical attention was worth it. They believe she can live out her normal lifespan.

So anyway, hopefully much of that bad news is now behind me. I've got some pent-up climbing demand and I intend to put it to work. I've been planning to make 2014 a banner year. Midlife crisis? I don't think it is but I would not swear to it in court, lol. I was a bit discouraged recently because my ankle still isn't back to 100% (nearly 6 months later). I slowed down my pace considerably in recent weeks and my ankle is doing pretty well in response. Surprisingly, my legs are holding up great. I did several marathon sessions recently as a test. The forced rest has not hampered my leg strength to a noticeable degree.



The past few months were spent climbing enough to reset the time on the stair climber to a nice starting point in preparation for 2014 (much of it at 50 feet per minute in 5 minute sprints). That's 0 months, 18 days, 0 hours, and 0 minutes of climbing since I purchased it roughly 14 years ago (minus a trivial amount of time that was on it when I bought it new).

I'm going to climb at a consistent 25 feet per minute in 2014. It's a leisurely pace that I can maintain fairly indefinitely. I would have set the pace higher if not for my ankle, but it will be plenty sufficient for what I intend to do. It's definitely enough to make me sweat, especially at the one hour mark (700+ calories per hour at my present weight).

50 miles of vertical is my minimum goal. It will take me 10,560 minutes. That's exactly 7 days and 8 hours of exercise. I'll need to average roughly 30 minutes per day (slightly more than that to cover when I'm potentially sick or out of town of course).

0:25:08:00

Or bust! That's the minimum time I wish to see a year from now. You won't be getting any updates between now and December 31, 2014. No record keeping this time. I'm letting the climber do the work. I promise to make every effort to post its time on that day (the exception being anything outside of my control), and that should be reason enough to keep me motivated. I like games and this is definitely a game now. This game starts at midnight! This is in addition to any hiking/climbing I do in the real world next summer (and I plan to do plenty).

As a side note, I would not consider doing this had I not turned climbing 20 flights of stairs each and every day into a nearly permanent habit (ankle injury notwithstanding) several years ago. Baby steps for the win.

It is also my intent to make climbing 20 flights of stairs each and every day a permanent habit again. Seems odd to use the "again" word, but it is the best I can do. Would you believe that I actually asked the nurse in the emergency room if I could simply scoot up the stairs on my butt 20 times per day just to keep the habit going? She told me no! The ankle needs to remain elevated and get rest! Seriously. (I'm fairly sure she thought I was nuts for asking. I just really didn't want to end the streak! Hahaha!)

And lastly, Happy New Year!! May prosperity flow like warm slop to pigs on a cold frosty morning! Bliss! Or something like that anyway. Feel free to come up with a better analogy. ;)

1995 vs. 2013

I heard on CNBC that the DJIA had its best year since 1995. It was theorized that perhaps the market would continue to behave like the late 1990s.

The following scatter chart shows the 10-year treasury yield vs. the DJIA in 1995.


Click to enlarge.

As interest rates fell consistently, the stock market rose consistently.

Let's do the same chart for 2013.


Click to enlarge.

As interest rates rose chaotically, the stock market rose consistently.

Other than the added chaos and inverted interest rate trend, the two charts are nearly identical! You just need to be wearing rose colored glasses so that you cannot see my commentary in red easily. It also helps to look at one of the two charts using a rear view mirror. That way the image will reverse and the trends will therefore look much more similar. It's a small price to pay for optimism!

If 1996 through 1999 is any indication (using red smoke and mirrors), I think we can expect great things from 2014 through 2017. Yes!

Too much sarcasm? Seems fairly heavy this time.

Source Data:
St. Louis Fed: Custom Chart (1995)
St. Louis Fed: Custom Chart (2013)

The Bondmageddon Zone of Death

Click to enlarge.

The 5-year treasury yield is shown in red.
The 5-year CD rate of national banks is shown in black.
The difference (when noteworthy) is shown in pink.
The bondmageddon zone of death is shown in green.

What's the bondmageddon zone of death? I believe that it is a special burial ground where misguided bondmageddon theories go to die.

I say this somewhat tongue in cheek of course. Unlike most these days, I can't say with any certainty where yields are headed. I can say that I see little evidence here that the recent trend higher in the 5-year treasury yield is sustainable though. I offer the following as my reasoning.

If the economy is so healthy and treasury rates are therefore rising in response, then why isn't it forcing banks to pay more interest on CDs?

How are banks getting anyone to buy the typical 5-year CD when the 5-year treasury yields so much more?

I offer an alternative theory. We're in Bondmageddon 2.0 and it will end much like Bondmageddon 1.0 ended. This coincides well with my long standing belief that we'll be stuck in ZIRP far longer than most believe possible.

February 2, 2011
More Dangerous Advice from Jeremy Siegel

Although Tips may compensate holders for future inflation, the interest rate that they offer is far too low to offset the risk of rising rates.

Note where February of 2011 falls in my chart above. Thanks for the Bondmageddon 1.0 warning Siegel!

What would we do without him? He waited until rates temporarily spiked higher and then warned us that rates might rise. In hindsight, kind of a crappy plan.

Let's apply this same line of reasoning to the weather.

I've noticed that the weather has been getting colder lately. Current swimwear has far too little insulation to offset the risk of falling temperatures. I therefore recommend that you purchase fully insulated GORE-TEX® swimwear right now in preparation for next summer's ice age! You can't ever be too insulated from risk! Lock in that protection right now before the next person does!

This is not investment advice. As always, just opinions. And sarcasm. Mustn't forget the sarcasm. Please factor the latter in should you choose to actually purchase swimwear based on what I've written here. Heaven help you, lol. :)

Source Data:
St. Louis Fed: Custom Chart

Mainstream Hypocrite of the Year Award

December 20, 2013
7 things you should have learned in 2013 -- but didn't

2. Forecasting doesn't work

Sure, some forecasters get it right. But nobody gets it right frequently enough to be depended upon — so stop using investment bank research as your primary source for buy or sell calls. It will only end in disappointment.

If there is one thing I have learned from this article it is that forecasting doesn't work. Got it.

4. Be careful with long-term bond funds

Rates have rolled back a bit, but you can bet they will rise again at some point in 2014.

This is a bond market forecast intended to entice us into gambling ("you can bet"). If we can safely bet that rates will rise again at some point in 2014, then shorting bond funds is a sure thing. Free money! They are practically giving it away!

7.You can't win if you don't play

Oh yeah, and the S&P is up 25 percent, its best year since 2003.

You think it's really all going to stop NOW, after what we've been through?

This is a stock market forecast that uses uppercase ("NOW") inside a rhetorical question as an emotional debate tactic. Since the S&P 500 has risen dramatically, it is implied that it must continue to rise. Gambling on the S&P 500 is therefore a sure thing. Free money! They are practically giving it away!

"I always say, buy high and sell higher." - Suze Orman, April 2000

In a world where "forecasting doesn't work", I sure hope hindsight is kind to his sure thing bond market forecast and his sure thing stock market forecast.

I'm also a bit surprised that he didn't give us a sure thing climate change forecast for 2014 as well to round out the list. Perhaps weather is not his area of prophecy expertise? Perhaps the all-knowing mainstream Nostradamus sees an ice age coming and he's too afraid to share it with us lest we panic? Perhaps there's just no free money in amazingly accurate climate predictions? The world may never know!

In any event, I sure love the hypocrisy here. There is no way we could have learned all 7 things in 2013. We'd be fools to believe that forecasting doesn't work while simultaneously gambling on two of his forecasts.

Is it an elaborate PARADOX to see if we're paying attention?

Uppercase inside a rhetorical question as an emotional debate tactic for the win! Yes!

This is not investment advice. Seriously. I'd be the last person to suggest I knew for sure where bond yields and stock prices are headed in 2014. As a bond investor, I'm actually hoping he's right and that real rates rise in 2014 (and stay elevated). I could then reinvest at higher rates as my bonds mature. I'm not exactly holding my breath over the long run though. This is one long-term trend that has not been kind to procrastinators. And he, with his omniscient wisdom, has decided to bet against it. Good luck!

I'm not quite done yet. Here's a bonus heckle.

3. Stop buying negative yield TIPS

But please don't let your hyperventilation about hyperinflation lose you money — again — in 2014.

Anyone buying TIPS for hyperinflation defense doesn't understand the first thing about TIPS. TIPS would be a horrible investment during hyperinflation.

1. When held outside a retirement account, you'd have to pay massive taxes on the hyperinflationary gains each and every year. Those taxes could easily ruin you financially over time. Keep in mind that you might very well be forced to sell TIPS bonds just to pay the taxes on them. Ouch.

2. There is a lag. TIPS don't respond instantly to rising inflation. Inflation numbers only come out once a month. Hyperinflation could easily mean that you'd wish they came out hourly. Seriously. Think this through. During extreme hyperinflation, are you really going to be happy getting compensated for what milk prices were a month ago? I think not.

I certainly do not buy long-term TIPS as a hyperinflation defense. That's just being silly. I like TIPS as a real yield defense. I believed and continue to believe that it will be harder and harder to make money off of money in the future. That implies real yields fall. It is actually one of my better calls since starting this blog, cherry-picked 2013 notwithstanding. There were no negative yield TIPS when I was doing most of my buying (before the Great Recession). There certainly are now! It's almost like we're stuck in ZIRP. Go figure.

Once again, this is not investment advice. I do not claim to know the future with any certainty. I can say this though. As of 2004, I am risk averse over the long-term and no longer ever wish to swing for the fences. As a retiree, I have no job to fall back on if my "risk on" bets go against me.

The Financial Profit Tank-Slapper (Musical Tribute)

I suggest that you watch the following video before reading further. It should really help put you in the right state of mind. Or better still, fire it up and have it playing as the background music for the charts that follow.



The first chart shows domestic financial industry corporate profits divided by overall wages and salary accruals.


Click to enlarge.

It's looking pretty good lately but let's really get into the details. And when I say pretty good, I mean that it isn't actually crashing again right now (even though it appears to be fully primed for another crash).

Three charts to go! The next chart shows the quarterly change.


Click to enlarge.

Note the increasing amplitude of the vibrations. In the next chart, let's just look at the absolute value of the quarterly change. This will give us the magnitude of the increasing chaos that is clearly evident in the system.


Click to enlarge.

In the next chart, let's look at the 5 year moving average of that absolute value and slap an exponential trend on it.


Click to enlarge.

Epic tank-slapper! Epic exponential trend failure! Epic system failure!

I will end with some good news and bad news.

First, the good news. The chaos appears to be receding.

Now, the bad news. Is it actually receding or does it just appear to be receding? Over the short-term? Over the long-term? Who knows! I have doubts. I believe that the tank-slapper is being managed with illusionary and unsustainable dampening. What we can't see yet, can't hurt us yet! It's the modern and financially innovative ostrich effect!

July/August 2009
This Year’s Battle over Mark-to-Market Versus Mark-to-Model Accounting Was Worth the Fight

FSP FAS 157-4 relates to determining fair values when there is no active market or where the prices being used represent distressed sales. It reaffirms that the objective of fair value measurement is to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced sale).

There's only one thing that determines value better than the free markets. That's a group of corporate executives tweeking financial models as they look to enhance the value of their stock options. Risk on, baby! Risk on!

Too bad we can't apply this same concept to home sellers. I know that you are only willing to pay $150,000 for this house but my economic model clearly shows that it is worth $300,000! You just need to be patient until the economy returns to its "orderly" peak again!

This post once again inspired by Rob Dawg's tank-slapper concept (as seen in the comments of previous posts). I went looking for an epic tank-slapper chart that could really do it justice today. Found one on my first attempt. I didn't even have to call a personal astrologer. Go frickin' figure.

Source Data:
St. Louis Fed: Custom Chart

A False Sense of Securities

The following chart shows a smoothed version of 5 year annualized real S&P 500 growth (the index is adjusted for inflation as seen in the CPI).


Click to enlarge.

Each data point in the chart is constructed by creating an exponential trend over the previous 5 years of data and then using that trend to determine an annualized growth rate over the 5 year period. That's a lot of exponential curve fitting (and smoothing).

For those interested, this is what the cell contents are for that last data point.

=(GROWTH(B634:B694,A634:A694,A694,TRUE)/GROWTH(B634:B694,A634:A694,A634,TRUE))^0.2-1

Needless to say, I'm thankful that I did not have to calculate it by hand. Good thing we live in a modern and financially innovative age!

Let's zoom in and add some modern and financially innovative commentary to go with that data.


Click to enlarge.

Don't worry. It is different this time! In no way am I trying to imply that Sure Thing #3 will end in failure at some point just because Sure Thing #1 and Sure Thing #2 did. Heavens no. Our economy was weakened far too much by the previous two failures for there to ever be a third.

Here's the best part. As seen in the chart, I had to rotate the text for Sure Thing #3 a bit extra. That means Sure Thing #3 is the steepest sure thing yet! To infinity and beyond! What an awesome story! What could possibly go wrong?

This is definitely not investment advice.

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

Happy Holidays!

An Irrational Fancy: A Tale of Two Charts

Click to enlarge.

In blue (left scale), we have the 5-year treasury yield minus the 5-year CD rate. I claim that the current spread is as irrational now as it was in 2007. This can be forgiven perhaps since the typical investor is never told to buy a 5-year treasury directly from the government. Wall Street cannot earn a penny on purchases made outside of their control.

In red (right scale), we have the S&P 500 index adjusted for inflation. I claim that the current inflation adjusted index is as irrational now as it was in 2000 and 2007. This can be forgiven perhaps since the typical investor is never told to buy a 5-year treasury directly from the government. Wall Street cannot earn a penny on purchases made outside of their control.

It is by no means an irrational fancy that, in a future existence, we shall look upon what we think our present existence, as a dream. - Edgar Allan Poe

This is not investment advice. Just opinions!

Source Data:
St. Louis Fed: Custom Chart

Rome Did Not Fall in a Day

The following chart shows the natural log of real disposable personal income per capita. Once again, constant exponential growth shows up as a straight line when using natural logs.


Click to enlarge.

There are at least a few things worth considering.

1. Due to rising income inequality, the typical person isn't doing nearly as well as this chart would suggest.

2. As automation takes on more and more human work, how will billions of people find employment? How much of this is seen in the chart?

3. The trend is definitely not a straight line. It is curving downwards with a very high correlation of 0.993. If the current trend continues, then we'll peak in 2058 (45 years from now). That's a big if. If I'm alive to see it, I'll be 94 years old. That's another big if.

4. It is mathematically impossible for this upside down parabolic trend to continue forever. There must be a failure at some point. If nothing else, I don't think any rational person would expect real disposable personal income per capita to ever fall below zero. That would happen in 2164. This would certainly not be the first failure we've seen in recent years. We live in the era of long-term trend failures.

5. Any failure would probably be to the downside, since that is the direction the data is being pulled (much like a camel's back when more and more weight is placed upon it).

6. Contrary to some, I therefore definitely believe that the long-term future is not so bright that I gotta wear shades.

“I believe in making the world safe for our children, but not our children's children, because I don't think children should be having sex.” - Jack Handey

Japan (our partner in ZIRP crime) must love Jack Handey quotes.

December 23, 2013
Japan’s Diaper Shift and Global Population Trends

As I concluded: “…world population could peak sooner and begin declining well below the 10 billion currently projected for the close of the 21st century.”

For what it is worth, I'm very much a believer in the theory. In some ways, we're like locusts and the lowest hanging fruit has already been eaten (USA prosperity analogy). I know it sounds grim, but that's what I believe. The good news is that I'm thankful every day that I was born where and when I was.

As seen in the chart, I'm not at all convinced that our children's children will be quite as thankful. It isn't that I think they will be unhappy being born in America. Far from it. I simply question the timing. It's not like I would tell them to move to China. Let's just put it that way.

Source Data:
St. Louis Fed: Custom Chart

Rising Interest Rates: A Long-Term Saver's Perspective

The following chart shows the natural log of the 10-year treasury yield. When using natural logs, exponential growth is seen as a straight line.


Click to enlarge.

We've actually clawed our way back to the middle of the long-term declining trend channel. Hurray.

The 10-year yield is destined to climb up well outside of that miserable channel soon thanks to our financially innovative, modern, improved, strong, robust, and resilient economy. There are just four things we need to see first.

1. The End of ZIRP
2. Skyrocketing 5-Year CD Rates
3. Hot Snowballs
4. Avian Pigs

I could be wrong of course. Perhaps we'll get pork hot dogs at 50% off and flying snowballs instead. What a Christmas that would be!

December 23, 2013
Procrastinators may be rewarded

Abercrombie & Fitch: Fifty percent off the entire store.

Don't forget to load up on Abercrombie & Fitch stock too! 50% off! It's all a part of their long-term plan to be financially innovative, modern, improved, strong, robust, and resilient! Pillar of retail strength!

December 23, 2013
Dark Side of After-Christmas Sales Starting BEFORE Christmas

As some consumers jubilantly hop from store-to-store reaping the benefits of these price-slashing events, I suspect that there may be a hangover waiting.

You think? This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Wages vs. Personal Consumption Expenditures

The following chart shows wages and salary accruals divided by personal consumption expenditures.


Click to enlarge.

This truly is a typical post-recession recovery! Note the lack of anything significant happening to the upside again.

I probably should have put quote marks around the word recovery to imply sarcasm.

If the overall downward trend in this chart is a good thing, then we clearly need more recessions. That's pretty much when the perma-drop (a drop with no recovery) happens.

More spending! Less pay! Long-term! Food-stamp utopia!

December 18, 2013
Most Americans Want Tougher Food-Stamp Requirements

National Journal poll finds two in three people think the biggest problems with the program are waste, fraud, and abuse.

Those are certainly the "biggest" problems with the food-stamp program, right behind rising income inequality, bubble growth, and the Lesser Depression of course. That said, one in seven people may strongly disagree with two in three people. Hard to say!

Whew! Got those sarcastic quote marks around the word that time! Yes!

Source Data:
St. Louis Fed: Custom Chart

Sticky Rate Valve

The following chart shows the spread between the 1-year adjustable rate mortgage rate and the 1-year treasury rate.


Click to enlarge.

There's a problem with the "Fed Sir" valve. We 'll need some 3-in-1 oil and some gauze pads. That's in addition to the ball bearings and ten quarts of Quaker State antifreeze of course.



December 20, 2013
‘After Christmas’ Sales Arrive Extra Early This Year — Like Now, Basically

What’s especially interesting is that in some cases, consumers won’t have to wait until after Christmas for the arrival of “after Christmas” sales. In the same way that retailers have messed with the timing of Black Friday sales — which certainly began on Thanksgiving Thursday, and were launched a week earlier by some stores — shoppers can expect to be presented with “after Christmas” deals before Christmas.

The internal consumption engine clearly lacks fuel. How else can one explain a pre-Christmas post-Christmas sale? This could lead to shopping exhaust. Hope it doesn't backfire.

Just know that if the paper is flapping in and out and sucking against the tailpipe any at all, then you have issues with your valves and that they need to be checked out by your local mechanic.

There's plenty of paper flapping and it can definitely suck for some. No doubt about it.

November 26, 2013
6 Ways You Can Beat Someone's Cash Offer When Buying A Home

5. Pay extra. Spending more money to beat a cash offer sounds crazy. But cash buyers nearly always expect a discount from the seller simply because they’re offering cash. As a result, the cash buyer will often make a lower offer. To increase your chances, top the cash offer. If you plan to live in the house for years, and it’s the home of your dreams, paying a bit extra may well be worth it.

Just pay extra! Genius! Since this one is guaranteed to work, forget the other 5 ways! Rates are nominally low but relatively high (see first chart). Prices have already fully recovered to normal pre-bubble levels (real median prices, November 2013 dollars). What could possibly go wrong again?

Speaking of what could possibly go wrong, I was watching the financial news on TV today and they ran a story about a couple who had lost their home. They couldn't afford the payments. Now that very same house is being rented back to them with payments $200 higher. It looks like a really nice house. That said, I might have been tempted to downsize on the off chance that this new and improved economy experiences yet another kick to the gonads at some point, but hey, perhaps that's just me.

Forehead. Desk. Whack. Whack. Whack.

Source Data:
St. Louis Fed: Custom Chart

The Tapeworm Hungers!

The following chart shows portfolio management revenue divided by corporate dividends. Keep in mind that portfolio management isn't just about dividend management, but I think the chart offers a fairly good parasite indication.


Click to enlarge.

That's one exponential trend failure I won't lose any sleep over. Hurray! Miracles really do happen!

As the bull market goes on, people who take great risks achieve great rewards, seemingly without punishment. It's like crime without punishment or sex without sin. - Ron Chernow

In a bull market, gotta pay the tapeworm to enhance the return that you could achieve yourself! You need professional expert portfolio management!

In a bear market, gotta keep paying the tapeworm to lose less money than you could lose yourself! You need professional expert portfolio management!

That's what I'm told. The only difference is that professionals just don't use the word tapeworm. "Value added portfolio manager" sounds better.

Over the long-term, how's that plan working out? Seriously.

Manager Value Added

MVA is a powerful concept that defines the extent of value added by active portfolio management. It's about how much value you are getting in return for the fees you pay to your fund manager. Managers with high MVA add value and can beat the index.

Managers with high MVA add added value and can did beat the index. Past performance is no guarantee of future results.

Why pay the high fees if you can get better returns with an index fund?

Great question.

For the less sohisticated investor, there is nothing wrong with this line of thinking which, as a matter of fact, is adopted by traditional mutual fund software and web sites.

Sohisticated is not a word. They would have known this if they would have used one of the many free value added online spell checkers.

Performance tables compare fund results to index returns, leading investors to conclude, in the majority of cases, that fund managers cannot beat the index.

Yeah, that's pretty much what I conclude.

The problem with that method is that it does not compare apples to apples. It's like saying: my apple tastes better than your orange. Fine, if that makes you happy, but I still like oranges more than apples.

The orange has bite marks and much of the juice is missing. Just sayin'.

Source Data:
St. Louis Fed: Custom Chart

Can't Ever Buy Too Many Durable Goods! (Musical Tribute)

The following chart shows the industrial production of durable goods divided by the industrial production of nondurable goods.


Click to enlarge.

Yay! New record! To infinity and beyond!

As seen in the chart, nothing bad ever happens when we buy too many durable goods (dotcom and housing bubble hangovers notwithstanding). It's the first thing they teach us in Central Banking School. When in doubt, buy them out!

Sleep Country USA: Get 36 Months Interest Free Financing!

Have you been dreaming of a new mattress? How about a new mattress AND over 1,000 peaceful nights with interest-free payments?

Yes! I'm sleeping like a baby just thinking about all that interest-free debt!

31 Ways to Get Your Baby to Sleep and Stay Asleep

Sleeping, like eating, is not a state you can force a baby into.

Surely zero interest rate policies can force me to sleep well though. Right?

Best you can do is to create a secure environment that allows sleep to overtake your baby.

Damn. There's no mention of highly speculative environments. Sigh.



Source Data:
St. Louis Fed: Custom Chart

Where Is the Cornpocalypse?

December 9, 2013
Farmers Hoard Corn as Prices Drop

If yields are "anywhere close to normal, we will really be buried in corn," he says.

Adjusted for relatively modest overall consumer price inflation as reported by the government, exported corn is currently trading at early 1990s levels (as seen in the following chart).


Click to enlarge.

For what it is worth, I think corn prices could easily go either way from here. I have no opinion other than to say that the farmers hoarding corn are definitely betting big in the casino. Good luck on that.

However, storing corn for too long "definitely" poses risks for farmers, says Scott Stoller, a grain merchandiser at agricultural-advisory firm AgPerspective Inc. in Dixon, Ill.

You think? Ben Bernanke must be very pleased to see so much risk taking though. Corn prices only go up! Every corn kernel needs a place to live! They just aren't making any more corn! Okay, maybe that last one isn't quite true. I got caught up in the housing bubble mentality. Probably read too much David Lereah. Sorry about that!

December 11, 2010
John Williams of ShadowStats Warns Hyperinflation Will Start in the Next Couple Months!

Williams is a respected economist who has a high level understanding of the fundamental numbers behind our economy, so his forecasts and recommendations should not be taken lightly...

It's been 36 months so far. Took the predictions very lightly. Still am. Yawn. If anything, perhaps I should brush up on my Japanese in case we're stuck in ZIRP (like they have been) for the rest of my life. Seriously.

This is not investment advice.

See Also:
Bananas for Silver!
Hyperinflation Theories Poned Again

Source Data:
St. Louis Fed: Custom Chart

Popping the Home Equity Loan Bubble

Click to enlarge.

Check out that pyramid scheme! We're all pharaohs now!

Estimated Completion Date: July 2020

Keep in mind that it is only an estimate. Since $1,500 is still triple the $500 in the 1990s, there's plenty of room for error should another recession hit between now and then.

Don't worry though. I'm just being silly. What could possibly go wrong now that the Fed has permanently put a stop to recessions? Just look at that 0.99 correlation since the peak! That linear trend will no doubt continue well past hitting the 1990s median! It's an unstoppable force and no immovable wall can slow it down! Yes, that's right. It's going negative, baby! This sure thing's got legs!

Don't you see what this means? We'll be borrowing negative amounts of money to fund our antimatter granite countertop purchases someday! It makes sense if you think about it. We apparently borrowed vast sums of positive money when real estate prices only went up. At some point in the future, we may be borrowing vast sums of negative money if real estate prices only go down again! Woohoo!

God does not build in straight lines. - Charlie Holloway, Prometheus (2012)

He does now! Charlie Holloway clearly never met Ben "There Is No Housing Bubble to Go Bust" Bernanke! He speaks! The world listens!

Why does the world listen? I have no idea. Such is the mystery of faith.

See Also:
Bernanke: There's No Housing Bubble to Go Bust

Source Data:
St. Louis Fed: Custom Chart

The Sarcasm Report v.182

December 11, 2013
New Republic: Techies Are the New Puritans

You can preach compassion, equality, and be the biggest lover in the world, but there is an area of town for degenerates and an area of town for the working class. There is nothing positive gained from having them so close to us. It's a burden and a liability having them so close to us. Believe me, if they added the smallest iota of value I'd consider thinking different, but the crazy toothless lady who kicks everyone that gets too close to her cardboard box hasn't made anyone's life better in a while.

Emphasis added.

I know what you must be thinking.

1. Why doesn't compassionate Greg Gopman (CEO) and all the other biggest lovers in the world just stay the @#$% away from her cardboard box?

2. Should we really expect a toothless lady (who may actually live in a cardboard box) to do anything to make the life of a CEO better?

3. Is there some sort of special bubble suit that CEOs could wear to protect them from the decaying environment around them?

The Retail Employment Abyss

The following chart shows the year over year percentage change in retail sales per retail sales employee. It is not adjusted for inflation.


Click to enlarge.

“There are horrors beyond life's edge that we do not suspect, and once in a while man's evil prying calls them just within our range.” - H.P. Lovecraft, The Thing on the Doorstep

No sarcasm this time, just pure horror.

Source Data:
St. Louis Fed: Custom Chart

Stock Market Risk

Click to enlarge.



Source Data:
St. Louis Fed: Custom Chart

The Death Of Services Pricing Power

The following chart shows the consumer price index for services divided by the consumer price index for nondurables.


Click to enlarge.

Goodbye service economy tailwinds.
Hello service economy headwinds.

Perhaps Bernanke can give our service economy some inflation but he sure can't seem to target where it goes. As seen in the chart, we eventually managed to get back to the trend line in the aftermath of the 1970s. We're sure making feeble progress these days though. Fantastic. Get out the party hats.

In fact, I am not confident that we will ever return to the trend line. This is yet another epic exponential growth failure. Using the power of future hindsight, we might even consider ourselves fortunate if we can maintain present levels. Sigh.

Why is this bad? When nondurables rise in price faster than services then this service economy's many, many service employees get the short end of the stick (even less stick than they currently think they are getting).

Durable good

Examples of nondurable goods include fast moving consumer goods such as cosmetics and cleaning products, food, fuel, beer, cigarettes, medication, office supplies, packaging and containers, paper and paper products, personal products, rubber, plastics, textiles, clothing and footwear.

While durable goods can usually be rented as well as bought, nondurable goods generally are not rented.

Nondurables are generally not rented yet? Say what? I sense a business opportunity!

May 4, 2012
Renting Prosperity

Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.

Rent the good life! Premium Gasoline! Beluga Caviar! Gurkha Black Dragons! Samuel Adams' Utopias! Lucentis! The Nondurable Rental Corporation of America will fulfill all your nondurable rental dreams and then some with low, low payments amortized over your remaining expected lifespan (with only modest surcharges of course)!

Have I mentioned lately that I'm a permabear? This is not investment advice. It's a business opportunity! Tap those severely tapped consumers before they are entirely tapped-out again! What could possibly go wrong? Genius!

In the epic battle between health care services, college education services, and nondurable fuel prices, which pain will ultimately reign supreme? Stay tuned! It's sure to be a hoot!

Source Data:
St. Louis Fed: Custom Chart

A Tale of Three Exponential Trend Failures

Click to enlarge.

1. Although we cannot see it in all its grandeur, we can infer that there was a failure during the dotcom bust. Note the decline heading into 2002.

2. We can clearly see the failure during the housing bust. The data stopped following the blue line.

3. We now have something new. The data no longer follows the red line and it seems extremely unlikely that it will return to it. Those expecting a surge in growth from here may soon be very disappointed.

I'm repeatedly told that there will be no unhappy ending this time though. So we've got that going for us, which is nice.

Quits and openings are only part of the picture of course. I'm not looking at hires or other separations. I think quits offer a fairly interesting take on how optimistic workers can be. I'd say they are way too optimistic right now. That's especially true of recent retirees who became convinced that recent stock market performance can be extrapolated well into the distant future. Good luck on that theory!

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Annual Nonfarm Payroll Growth per Capita Euphoria!

The following chart shows the annual change in nonfarm payrolls divided by the population.


Click to enlarge.

This time it's REALLY permanent!

Jaws: The Revenge

The increasing number of sequels in the Jaws series was spoofed in the 1989 film Back to the Future Part II (which was produced by Steven Spielberg and featured Jaws 3 star Lea Thompson), when Marty McFly travels to the year 2015 and sees a theater showing Jaws 19, (fictionally directed by Max Spielberg) with the tagline "This time it's REALLY personal!". This alludes to the tagline of Jaws: The Revenge: "This time it's personal." After being "attacked" by a promotional volumetric image of the shark outside the theatre, Marty says "the shark still looks fake."

Source Data:
St. Louis Fed: Custom Chart

That Darned Disinflationary Service Economy!

Click to enlarge.

The good news is that we almost made it back to the top of the trend channel again. I'll leave the bad news as an exercise for the reader.

Source Data:
St. Louis Fed: CPI-U: Services Less Energy Services

10-Year Treasury Yield vs. Nominal GDP Growth

Click to enlarge.

As seen in the chart, nominal GDP took a giant leap to the left during the Great Recession. There was a dead cat bounce to the right (as the dotcom bust left the 10 year moving average) but it is now being pulled to the left yet again. Where it stops nobody knows.

If the long-term trend does continue (down and to the left in the chart), then we'll be stuck in ZIRP till the cows come home (just like Japan), and that's if we're lucky. So all this talk of Fed tapering or not tapering is nearly meaningless to me. I refuse to have the bulk of my retirement nest egg parked in short-term savings patiently waiting for the Lord of Cattle to bless me with higher interest rates. That bovine deity is much more likely to milk short-term savers for all their worth.

The Phrase Finder: Till the cows come home

Cows are notoriously languid creatures and make their way home at their own unhurried pace.

They'll get home eventually though. They've got to be here once the cow tipping point is reached. I strongly suspect that is a very long time from now, perhaps even long after I'm dead and buried cremated. It's all in the timing. Rome did not fall in a day.

As a side note, I went with "their worth" over "they're worth". Both are apparently technically correct (perhaps because worth can be a noun or an adjective). Maybe. Even Grammar Girl isn't sure.

Thief #1: How much should we milk from it?
Thief #2: We should milk it for all it's worth.
Thief #1: What if it keeps its wealth in a bag? It's its worth.
Thief #2: For what it's worth, then we should milk it for all its worth!

Dizzying. Who thought this frickin' language up, anyway?

November 13, 2013
Takeover bids milk factory for all it is worth

THERE is a bargain in the Australian dairy sector, but it is no longer Warrnambool Cheese & Butter Factory.

Don't even get me started again! The milk factory's worth? Its worth?

This is not investment advice. Don't look to me for grammar advice either for that matter. I pretty much only use the math side of my brain at best. I'll end a sentence with a preposition and create sentences with single adverbs if the mood suits me. That's what moods are for. Seriously. ;)

Source Data:
St. Louis Fed: Custom Chart

Peak U.S. Public Air Transportation Services

Click to enlarge.

I know what you are thinking. Okay, sure. That's definitely a peak. It can't be the ultimate peak though. Our population is growing and the future is so bright I gotta wear shades!

Not so fast. Let's put that same data on a log chart. On a log chart, constant exponential growth is seen as a straight line.


Click to enlarge.

That's not straight. It's curving exactly like a baseball in flight would, and when I say exactly I mean with an r-squared of 0.995.


Click to enlarge.

If the 80+ year long-term trend continues, only the wealthiest among us will be flying in planes someday. How's that for a kick to the long-term prosperity gonads? It isn't just flying either. Driving looks mighty suspect as well. Just doing my part to add some perspective! Sigh.

Despair.com: Perspective

Less is more. Unless you're standing next to the one with more. Then less just looks pathetic.

This post inspired by Rob Dawg who pointed me to a whole new world of FRED quantity indices (in the comments found here).

Source Data:
St. Louis Fed: Public Air Transportation
St. Louis Fed: Public Air Transportation (Natural Log)

Power to the People!

The following chart shows real annualized power construction spending per capita (October 2013 dollars).


Click to enlarge.

Tack on another $117 per year that will ultimately be passed on to the people (each man, woman, and child).

Hey, maybe it won't appear all at once though, thanks to the Fed's ZIRP providing long-term financing at supposedly super cheap long-term interest rates. That debt could potentially just brew and percolate for a few decades perhaps. So we've got that going for us, which is nice.

Power to the people (slogan)

During the 1960s in the United States, young people began speaking and writing this phrase as a form of rebellion against what they perceived as the oppression by the older generation, especially The Establishment.

With $90+ oil, power to the people has a whole new meaning now of course.

It doesn't look like we can expect much power construction job growth per capita from here. As seen in the chart, real spending per capita is just sliding along sideways at a higher new normal. I guess we'll just have to make it up on fast food jobs.

August 29, 2013
The Fast-Food Restaurants That Require Few Human Workers

"The fight for $15 is a fight against technology, not management — and that's a fight that these union-organized protestors can't win. Instead of securing a bigger paycheck, the less-experienced employees demanding a more than 100 percent pay increase will find their jobs replaced by less-costly alternatives," Michael Saltsman, research director at EPI, said in a statement.

...

Today, Amsterdam's Febo chain of stores feature only vending-machine service for burgers, fries and more. A few employees are responsible for stocking the items behind the machines but way out of customer view, so you can walk up, drop in your coins and get a hot meal after a long night out without talking to anyone face-to-face.

Introverts of the world unite! I say this as an introvert who generally enjoys gallows sarcasm of course. Deep sigh.

Source Data:
St. Louis Fed: Custom Chart

Once, Twice, Three Times a Maybe (Musical Tribute)

The following chart shows real annualized private office construction spending per capita (October 2013 dollars).


Click to enlarge.



Correction:

I originally posted that this was real monthly private construction spending per capita. The data is monthly but it is a seasonally adjusted annual rate. The chart remains the same, only the description changes.

Source Data:
St. Louis Fed: Custom Chart

More Bondmageddon Thoughts

The following chart shows the constant maturity rate of the 1-year, 2-year, 3-year, and 5-year treasuries.


Click to enlarge.

Bondmageddon Thoughts

1. ZIRP.
2. Yawn.

See Also:
Bondmageddon Thoughts

Source Data:
St. Louis Fed: Custom Chart

The Paycheck to Paycheck Recovery

December 2, 2013
Black Friday Weekend Spending Drop Pressures U.S. Stores

The first spending decline on a Black Friday weekend since 2009 reinforced projections for a lackluster holiday, increasing chances retailers will extend the deep discounts already hurting their profit margins.

We seem to be coming in a bit shy of Accenture's prediction of an 11% increase so far. Who could have seen that coming? Unfortunately, that is not the scariest quote of the article.

This year, 65 percent of Americans said they were living paycheck to paycheck, up from 61 percent last year, in part because their purchasing power has been eroded by higher costs, according to research from Booz.

We are so @#$%ed.

5-Year Treasuries vs. 10-Year Treasuries

Click to enlarge.

The herd sure loves the current 1.37% 5-year treasury compared to the 2.75% 10-year treasury. Good luck on that one.

Perhaps the herd is right though. Perhaps interest rates will be north of 4% on the 10-year in 5 years as the economy continues to "recover". We can all hope and dream. Right? Okay, maybe not all. The Japanese would clearly be harder to convince. They've had more time to watch what ZIRP can do to an economy over the long-term. Sigh.

FRB: Why are interest rates being kept at a low level?

Low interest rates help households and businesses finance new spending and help support the prices of many other assets, such as stocks and houses.

Most Americans love higher shelter costs. It's a fact. And let's not forget about higher priced tuition. Who doesn't love that? The more financing the better! Here's the best part. These low interest rates have not boosted the price of gasoline. It's just a coincidence that gasoline prices have tripled over the last decade or so. Can't hold the Fed responsible for that. They have no control over it at all.

February 29, 2012
Bernanke: The Fed 'Can't Do Much About The Price Of Gas'

In Congressional testimony, Fed Chairman Ben Bernanke told legislators the Fed “can’t do much about the price of gas,” after lashing out at those that criticize him for “hurting” the dollar.

Let me summarize.

Good asset prices rising: You can thank the Fed!
Bad asset prices rising: You can't blame the Fed!

Good asset prices falling: You can't blame the Fed!
Bad asset prices falling: You can thank the Fed!

The funny thing is that gasoline prices stopped going up. It's almost like the global economy is too weak to support high priced gasoline. Go figure.

So how exactly is the Fed going to generate consumer price inflation going forward if gasoline prices can't rise further and WalMart sells 32" flat screen televisions for $98? It's a puzzling conundrum of an enigma wrapped up in a mystery.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart
U.S. Treasury: Daily Yield Curve

Black Friday Quote of the Year

November 29, 2013
Black Friday live: Dummy holds shopper's place, cops say man shot over TV

Police Lt. David Gordon says the victim was carrying the TV at an apartment complex near the University of Nevada, Las Vegas when someone fired warning shots, prompting him to drop the appliance. Gordon says the robber snatched the TV and took it to a vehicle, and the victim tried to wrestle it back. That's when the robber fired shots and hit the victim in the leg.

Is that the quote of the year? No. Brace for it though. Here it comes!

It's unclear what happened to the TV.

WTF! How can they just leave us dangling like that? Is the television okay or isn't it? We know it was dropped. We know that there was some wrestling going on after that. We know it was taken away in a vehicle by a man with a gun. It just doesn't look good at all! What if the television is dead? If there isn't a ransom demand within the next 72 hours I'm going to start assuming the worst!

Let us hope and pray that the television is okay and will be reunited with its one true owner. Just think how much sentimental value was built up in their brief time together. It's like losing a baby, really. That's what makes Black Friday so special: so many people, so many solid gold babies.

What is it that makes a complete stranger dive into an icy river to save a solid gold baby? Maybe we'll never know. - Jack Handey