Wednesday, December 31, 2014

New Year's Resolutions for 2015

First, let's look back at 2014.

December 31, 2013
New Year's Resolutions for 2014

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

Mission accomplished! I climbed a lot more stairs (a lifetime personal best) and ate a lot more food (also a lifetime personal best)!

Unfortunately, I weigh more now than I did when I started. Sigh. Getting Shingles in the spring really did some damage to me both on a physical and mental level. That was roughly 4 months without any exercise at all to speak of (just laid there on the couch like a boneless chicken). It also took out yet another hiking season (the previous year was lost to a very serious ankle sprain). It really brought me down. Very depressing.

You can see the symptoms in the four months of reduced blog posting activity (April through September).

1. Don't get Shingles.
2. See Rule #1.

For what it is worth, I was severely deficient in Vitamin D (as was confirmed with a blood test during my annual physical). I live in the Pacific Northwest. I intend to take Vitamin D supplements for life. It's possible that this deficiency helped trigger Shingles for me, especially since my ankle injury in the summer of 2013 kept me inside and away from the sun. Who knows?

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).


Or bust! That's the minimum time I wish to see a year from now.

Mission accomplished! Two hours to spare! I hadn't really factored in what Shingles could do ("slightly more than that" indeed), but I made it to the goal just the same. Whew! I got off to an excellent start before the Shingles hit and managed to make up the lost time in the fall and winter. Thank goodness I set this goal in public or who knows where I'd be now.

It is also my intent to make climbing 20 flights of stairs each and every day a permanent habit again.

Mission accomplished!

It was my intent. Even with Shingles, I never stopped intending to exercise each and every day, lol. Hurray! Saved by a technicality! And Vicodin! And Naproxen! And Tylenol! The latter two did nothing for me at all near as I could tell, especially the Tylenol.

And for those curious, I had no chance of getting hooked on Vicodin. It offered great relief but when you've got chronic pain and only have about 70 pills spread out over 3-4 months, it's a bit like throwing water balloons at a house fire. The directions said I could take 1-2 every 4-6 hours. Good luck on keeping up that pace! Try 2 every other day or so (one alone generally wasn't all that effective). Let's just say that I have great sympathy for those who experience ongoing chronic pain.

Here are my New Year's resolutions for 2015.

1. Climb even more stairs.
2. Don't eat even more food!
3. Drink at least one extra glass of water each day.
4. Lose some weight.
5. More hiking!

I'm back to 227 pounds, and at 6'3" that's just too much to be comfortable. I don't care how much I lose, but I do want to see progress in the downward direction.

I'm increasing my pace from a leisurely 25 feet per minute to 30 feet per minute. I'm shooting for 60 miles of climbing. It will take me the same 7 days and 8 hours of total exercise (~29 minutes per day on average). It would be another lifetime personal best if I can do it.

Assuming the timer flips at 30 days, I therefore wish to see the following minimum time on the exercise timer at the end of 2015.


The primary goal for 2015 is not to lose weight or to eat less food. It's to be in good shape for the hiking season. The weight will come off naturally if I'm outside doing something I really enjoy doing. In general, I gain weight in the winter and lose it in the summer. 2014's summer was a complete nothingburger though. And on that note...

Happy New Year! :)

Thursday, December 25, 2014

A "Soft Landing" Christmas Miracle (Musical Tribute)

The following chart shows the annual change in the 13-week moving average of initial claims.

Click to enlarge.

The 13-week average of initial claims hasn't been this low since the year 2000 (not seen in the chart). That alone might make one believe in miracles, but wait, there's more.

Should we continue on the current parabolic trend in red, initial claims will actually go negative within 2 years!

Don't you see what this means? Not only will all layoffs be a distant memory, but people will actually be plucked right of the street and placed in cubicle farms! Perhaps even against their will! Oh, the humanity!

May 10, 2014
Warren Buffett on the Fed: Bernanke Was a Hero

Zero rates have had a huge effect on rejuvenating the economy and asset prices. We are not in a bubble situation at all right now, but it is an unusual situation.

Bernanke, what a hero! He kept rates at zero! Who said anything about bubbles?

December 24, 2014
Don’t Be a Hero, Leave Rates at Zero

Talking about raising rates makes sense to contain excess speculations. Actually raising rates makes no sense until inflation arrives in earnest.

Yellen, don't be a hero! Keep rates at zero! Who said anything about excess speculations?

Swamped in Unusual Situations

Once we've bought the sure things
Once we've bought the sure things
Once we've bought the sure things
Once we've bought the sure things
Oh, no

Risk assets
They are fueled by doves
We know not all gains can be realized

Risk assets who cares?
When they turn around
And we know that they descend down for free

The trend is underway
The risk is gone
Don't be alarmed
That a few have sold
Few have sold
Few have sold

Risk assets
Can't replace the lie
Scary shadows of the past are implied

Risk assets who cares?
When they turn around
And we know trends can descend by a mile

The trend is underway
The risk is gone
Don't be alarmed
That a few might sell today

It's just a parody
That risk is free
Don't be alarmed
That a few have sold

Once we've bought the sure things
Once we've bought the sure things
Once we've bought the sure things
Once we've bought the sure things
Oh, no

The trend is underway
The risk is gone
Don't be alarmed
That a few might sell today

It's just a parody
That risk is free
Don't be alarmed
That a few have sold
Few have sold
Few have sold

Source Data:
St. Louis Fed: Custom Chart

Wednesday, December 24, 2014

Cocoa in Slow Mo

Mark put one of Cocoa's favorite toys on top of his head. It drives Cocoa kookoo!!

Tuesday, December 23, 2014

Merry Craftiness! (Musical Tribute)

Happy amusement to you and yours! :)

When Can We Expect a Complete Housing Recovery?

The following chart shows the 12-month moving total of new one family housing units sold per capita.

Click to enlarge.

Let's zoom in for a closer look.

Click to enlarge.

Due to the exponential trend failure, we can no longer expect a complete housing recovery in 2017. The new estimate is just this side of never.

Source Data:
St. Louis Fed: Custom Chart

Exponential Trend Failure of the Day: Long-Term Nominal Hourly Earnings Growth (Musical Tribute)

The following chart shows the average hourly earnings of private production and nonsupervisory employees. I have added an exponential trend in red.

Click to enlarge.

Note the trend failure.

The next chart shows the deviation of the hourly earnings from the long-term trend.

Click to enlarge.

Check out that recovery.

1. We're now more than 5% below the long-term trend.
2. The linear free fall continues.

Source Data:
St. Louis Fed: Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private

Monday, December 22, 2014

The Sarcasm Report v.203

December 16, 2014
U.S. News and World Report: Living Paycheck to Paycheck: 7 Strategies for Survival

If you're always short on cash, here's how to take control of your finances.

Plan for the worst.

Try to save.

Seattle Seahawks Quote of the Day

December 22, 2014
Seahawks punter will fight you if you talk crap about Seahawks kicker

If anyone out there wants to talk crap about our kicker who is one of the best in the game u can meet me at the swing set at recess to fight. - Jon Ryan

I love the sarcastic grade school imagery. There's just no good comeback for that. Hahaha!

Steven Hauschka had a bad day. There's no denying that. The first two field goal attempts were long and missed to the right. As a believer in return to the mean theories, I cringed as he lined up for that third long attempt. Would he overcompensate to the left?  Let's just say that, on average, they all went right between the posts. D'oh!

Don't let it get you down Steven. In the grand scheme of things, who among us aren't entitled to one bad day? You carried the team in the past, and Sunday it was the team's chance to carry you. What goes around, comes around.

And carry you they did. It was like every member on the team wasn't going to let you go home knowing that we lost the game by a single failed field goal attempt, much less three. A 29 point spread pretty much assured that. Talk about overkill. Wow!

Go Hauschka! Go Seahawks! :)

The Coincident Economic Activity Parabolic Trend Channel

Click to enlarge.

As long as we keep hugging the top of the channel, nobody gets hurt again.

Source Data:
St. Louis Fed: Custom Chart

An Alternate Theory for Yellen's Patience

First, let's start off with the mainstream theory. It's fairly well established now.

December 18, 2014
Yellen’s Patience Echoes Greenspan 2004 Run-Up to Rate Liftoff

Yellen told a press conference after the FOMC meeting yesterday that “the statement that the committee can be patient should be interpreted as meaning that it is unlikely to begin the normalization process for at least the next couple of meetings.” She then said “a couple means two.” The next two meetings are in January and March.

It goes without saying that "at least" can be safely ignored while "couple means two" and only two.

For example, today's the 22nd. Try telling your kids that it is unlikely that they can open Santa's gifts over the next couple of days. After grilling you on the definition of "couple", they'll expect Santa's gifts on the morning of the 24th. Count on it. It's okay though. Santa can show up early at your house. He's just an illusionary stranger who brings toys for your children anyway. I'm sure any stranger will do. What's the worst that could happen? Go with the stranger in the van! You know, since vans can hold more toys.

Shame on me.

But enough about that mainstream theory. Here's my alternate "crazy" theory.

The following chart shows the price of crude oil.

Click to enlarge.

Are you curious what was in that crazy speech by Charles Evans? Have no fear! I am to please! And just to be clear, the commentary will be coming from me and not from Janet Yellen. I'm not a mind reader.

September 24, 2014
Federal Reserve Bank of Chicago: Patience Is a Virtue When Normalizing Monetary Policy

But today, with the collapse of labor demand during the Great Recession and ongoing structural changes...

Oh, @#$%! He did not just say ongoing structural changes! Somebody tell me he didn't say that!

Accordingly, before the Fed raises rates we should have a great deal of confidence that we won’t be forced to backtrack on our moves and face another painful period at the ZLB.

Oh, @#$%! He did not just say that another painful period of ZIRP could be possible!

We should be exceptionally patient in adjusting the stance of U.S. monetary policy...

Oh, @#$%! Exceptionally patient? It's been more than 5 years already! @#$%!

As everyone in this room is aware, the labor force participation rate has fallen throughout the recession and recovery and is now at a 35-year low.

OMG! He mentioned the elephant in the room! What if other people notice it? Then what?

Virtually all the gap during this cycle has been due to withdrawal from the labor market of workers without a college degree. By contrast, a participation gap never materialized for college graduates, even during the depths of the recession. There is no simple explanation for this striking contrast.

OMG! What if those with college degrees are taking jobs that don't require college degrees! Oh, wait. There is no simple explanation. Never mind. This one was a false alarm. Whew!

Looking ahead, we think that declines in the labor force participation rate and population growth will bring the trend in payroll employment growth down to fewer than 50,000 jobs per month by 2016. This new benchmark probably will only become apparent in the monthly data once the economy closes the current 3.8 million employment gap. But barring sizable changes in immigration policy, policymakers and the public will need to get accustomed to a slower base of employment growth by the latter part of the decade.

Oh, @#$%! Somebody put a gag order on this crazy man! Have either Mark Zandi or Jeremy Siegel been informed that the future might not be like the ancient past? How about the pension funds counting on growth to mimic what it once did? Oh, the humanity!

Alternatively, more stringent hiring standards might signal a persistent structural problem.

Oh, @#$%! A persistent structural problem? What is it with him and structural problems? @#$%!

It’s hard for me to imagine a full labor market recovery without genuine improvement in compensation growth. But am I wrong? Has the wage Phillips curve completely broken down?

@#$%! @#$%ing @#$% @#$%!!

By many economic accounts, it took the big fiscal expansion associated with World War II to exit the Great Depression.

OMG! World War II! WTF! Albert Einstein once said that World War IV will be fought with sticks and stones! World War III is therefore not an option!!

We can also learn from the Japanese experience over the past 20 years.

Oh, @#$%! He said Japan! WTF was he thinking!

Many forecasters — myself included — assume that stable 2 percent inflation expectations will be an important factor helping to pull actual inflation up.

Oh, @#$%! Inflation expectations have been falling like a rock since his speech, along with the price of oil! So much for important factors! @#$%!

To summarize, I am very uncomfortable with calls to raise our policy rate sooner than later.

OMG! It's like he's laying on a bed of nails! He can't possibly be more comfortable now! The falling price of oil is like a two ton stone on his chest!

Once again, I want to stress that the commentary is by me, and in no way would represent what Janet Yellen is/was thinking about the speech. I've never heard her swear. I can't imagine she'd be thinking what I was thinking. And in no way would I imply that she would use so much dramatic punctuation, at least not in public.

Source Data:
St. Louis Fed: Custom Chart

Every 25-Year-Old In America Should Read This Sarcasm (Musical Tribute)

December 17, 2014
Business Insider: Every 25-Year-Old In America Should See This Chart

The folks at JPMorgan Asset Management demonstrate the true power of compound interest in their 2014 "Guide to Retirement."

The chart is frickin' awesome! Wow! Just look at that money grow! I'm especially impressed with Susan's performance! $50,000 turns into $602,070? In today's low interest rate environment, she must be planning on swinging for the fences! Kudos to her for taking on serious risk! Hope it works out for her!

The longer you wait to start saving for retirement, the more you miss out on the benefits of the incredible power of compound interest.

Indeed! Check out how fast money has been growing lately!

The following chart shows the national rate on a non-jumbo 12-month CD minus the inflation rate over the previous year.

Click to enlarge.
We'd generally want to see it above 0% in order for the money to grow in real terms, but there are a lotta things about Pee Wee compound interest we don't know anything about. Things we wouldn't understand. Things we couldn't understand. Things we shouldn't understand. We don't wanna get mixed up with a 0.2% nominal interest rate if we're trying to turn $50,000 into $602,070 (give or take a few pennies)!

Put $5,000 in there and a year from now we'll have earned what,  a whopping $10? We might be tempted to use that $10 to help pay next year's health insurance premiums. We can't do it though. The "incredible power of compound interest" won't work if we spend the interest! We must not only let it ride, but add another $5,000 to it! It's the JPMorgan Asset Management growth miracle at work!

Isn't our new and improved financially innovative economy wonderful?

I offer a special thanks to JPMorgan Asset Management for supplying such a wonderfully optimistic chart. There's nothing quite like an excellent hindsight analysis of a nearly forgotten era of higher interest rates to generate a smile and a chuckle. Good times.

It might seem crazy what I'm about to say
Sunshine she's here, you can take away
I'm a hot air balloon, I could go to space
With the air, like I don't care baby by the way

In all seriousness, over 110,00 people dislike that song? I feel a bit sorry for these people. It's got a good beat. He's got a pleasant voice. It does make me happy just hearing it. That said, it is possible to be happy and still be very concerned about our long-term future though. Go figure.

Source Data:
St. Louis Fed: Custom Chart

Sunday, December 21, 2014

The USA Is Not Japan!

The following chart shows the 10-year moving average of the Japanese life expectancy minus the United States life expectancy.

Click to enlarge.

The Japanese have figured out how to live more than 4 years longer than us.

The next chart shows the 10-year moving average of the United States infant mortality rate divided by the Japanese infant mortality rate.

Click to enlarge.

The Japanese have also managed to keep their babies alive much, much better than us.

Infant Mortality

The infant mortality rate correlates very strongly with, and is among the best predictors of, state failure. IMR is therefore also a useful indicator of a country's level of health or development, and is a component of the physical quality of life index.

Health care system in Japan

Hospitals, by law, must be run as non-profit and be managed by physicians. For-profit corporations are not allowed to own or operate hospitals.

See? Nothing like us.

While some countries like the U.S. allowed costs to rise, Japan tightly regulated the health industry to rein in costs.

Nothing like us at all! Tightly regulated? Where's free market capitalism? Somebody needs to do something!!

[I]n the U.S. an MRI of the neck region could cost $1,500, but in Japan it cost US$98.

Not even comparable! How are they going to generate higher inflation rates when an MRI only costs $98? WTF are they thinking!!

Japan has about three times as many hospitals per capita as the US and, on average, Japanese people visit the hospital more than four times as often as the average American.

And yet they spend far less than we do overall! How can they possibly hope to create inflation, lower life expectancies, and higher infant mortality rates without the help of an extremely inefficient and greedy for-profit free market capitalism health care industry? It's insanity I tell you!

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Saturday, December 20, 2014

The Leisure and Hospitality Employment Growth Bubble

The following chart shows the natural log of leisure and hospitality employment per capita. When using natural logs, constant exponential growth can be seen as a straight line.

Click to enlarge.

Let's zoom in for a closer look.

Click to enlarge.

We're way above the long-term trend again (last seen heading into the dotcom and housing bubbles).

There sure are a lot of leisure and hospitality employees out there per capita. Isn't that fantastic? What's the worst that could happen again? There are only 14.8 million jobs in this industry!

December 8, 2014
McDonald’s Decline in U.S. Sales Accelerates

McDonald’s blamed the decline on “strong competitive activity”...

What happens in the subprime shale oil industry (strong competitive activity), stays in the subprime shale oil industry! That's what we're told! Therefore, this is just a fluke!

Have no fear! The unintended consequences of easy money are well contained again!

Too much sarcasm? Too many optimistic exclamation points? Not enough forehead action? Easily solved!

Forehead. Desk. Whack. Whack. Whack.

Source Data:
St. Louis Fed: Custom Chart

Washington D.C.'s Guide to Parabolic Job Creation in the USA

The following chart shows the 5-year moving average of leisure and hospitality employment in the District of Columbia.

Click to enlarge.

Source Data:
St. Louis Fed: All Employees: Leisure and Hospitality in the District of Columbia

Animated State Population Growth (1900 to 2013)

Click to enlarge.

This one definitely took some time to create. Enjoy!

Source Data:
St. Louis Fed: Federal Reserve Economic Data

Nevada Employment: Good News and Bad News

First, the good news.

December 16, 2014
Nevada employment climbing toward 2007 peak

CARSON CITY — In 2016, Nevada employment will surpass its peak year of 2007, a jobs expert predicted Tuesday.

Now, the bad news.

Even if it is a good prediction, that's nine years of nothing burger. That's not the bad news though. It's coming next.

The following chart shows the 4-month moving average of total nonfarm employment in Nevada.

Click to enlarge.

As seen in the blue trend line, employment was growing parabolically since the end of the Great Recession. That favorable employment trend failed in February of 2014. In that very month, a new parabola in red took its place. The new trend is most unfavorable. One wonders if the jobs expert has factored this in.

Let's zoom in for a closer look.

Click to enlarge.

There's no denying that the data (in black) is no longer following the blue parabola and is now following the red parabola. The smooth transition from the blue parabola to the red parabola at the beginning of this year is a work of art.

This new red parabola will make 1.3 million jobs in 2016 extremely difficult.

As seen in the link, he's putting his money (so to speak) on the creation of 3,500 jobs at a new Tesla battery plant. Says it will play a big part. Good luck on that.

October 2, 2014
Tesla's Massive Battery Factory Could Make Nevada The 'Richest Place On Earth Again'

"There's a tsunami coming in," Gilman said, referring to the businesses, developers and workers he envisions occupying the place some day.

Richest place on earth? Well, I'm certainly glad expectations are well-anchored to what people can envision. For what it is worth, I'm envisioning a red parabolic tsunami that better fail soon, and to the upside (or all hope is lost).

As they say, talk's cheap. This is not investment advice.

Source Data:
St. Louis Fed: All Employees: Total Nonfarm in Nevada

Chris Christie's Parabolagate

December 16, 2014
Atlantic City casino woes dragging down N.J. job growth, Rutgers economist says

“Cities and states get a little boost from construction jobs, but then what?” - Nancy Mantell, director of the Rutgers Economic Advisory Service

Awesome question!

Spokesmen for Christie did not immediately return a request for comment today on the economic forecast from Rutgers.

Big shocker.

Click to enlarge.

Well, somebody should tell the governor that his red employment parabola is unzipped. If not Nancy Mantell, then who?

How embarrassing!

Source Data:
St. Louis Fed: All Employees: Total Nonfarm in New Jersey

Friday, December 19, 2014

Bank Ride of the Valkyries (Musical Tribute)

The following chart shows the 5-year moving average of bank deposits at all commercial banks divided by GDP.

Click to enlarge.

Hurray! Another parabola! If there's one thing I like to see, it's unsustainable parabolas in the banking system. This one, like all others, is guaranteed to fail at some point.

On the one hand, we're slightly below trend right now. This could be the start of a trend failure.

On the other hand, I am not at all confident about long-term GDP growth from here. The trend could therefore recover.

November 21, 2002
Deflation: Making Sure "It" Doesn't Happen Here

A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

Perhaps the helicopters should have been deployed more evenly? I sure don't see much that has prevented "it" from happening yet. If flooding the banks with cash is so effective, then why hasn't it worked in Japan or Switzerland?

December 18, 2014
Swiss National Bank will cut interest rate to minus 0.25%

Switzerland is also chary of attracting yet more money into its banking-heavy small country.

Bank Run

A bank run (also known as a run on the bank) occurs in a fractional reserve banking system when a large number of customers withdraw their deposits from a financial institution at the same time and either demand cash or transfer those funds into government bonds, precious metals or stones, or a safer institution because they believe that the financial institution is, or might become, insolvent.

Switzerland is begging you to run! For the love of all that is holy, please stop relentlessly assaulting their banks with your helicopter money!

Source Data:
St. Louis Fed: Custom Chart

Yellen's Clawlessness Leaves Bulls Confused

December 19, 2014
Yellen Claus rally leaves bears Scrooged - Jeff Macke

Once again this year the optimists are the ones making the money. With a few notable exceptions that's always the case.

Of course, the notable exception for 2014 would be those who were not optimistic and chose instead to embrace long-term treasury bonds!

Find a little Christmas cheer and trade the market you have, not the one you think should be.

The market we have is one in which the bears sitting in TLT (long-term treasury bond fund) made 28% in 2014. Optimistic investors sitting in stocks, not so much.

It is extremely rare to hear someone on CNBC say, "You don't want to miss out on the rally going on in treasury bonds." And yet, they say it all the time concerning the stock market. And do you know why that is?

It is common knowledge that interest rates can only go up. It was true in 1982 and it is still true today. Let's say it again to reinforce the propaganda.

Interest rates can only go up from here!

That's the market everyone thinks should be, not the one we have had.

September 9, 2014
Gundlach Doesn't Think Yellen Wants To Raise Rates

Gundlach talked a bit about the rally in bonds this year, and wondered why market participants never ask if they should be buying the rally in bonds the way people ask about buying the rally in stocks.

You da man Gundlach! It's a long article filled with interesting charts and opinions. Well worth your time! That's especially true if you assume the bears got scrooged in 2014. Seriously. That's forehead meeting desk repeatedly style confusion. Allow me to demonstrate.

Forehead. Desk. Whack. Whack. Whack.

MZM Growth: Slip Slidin' Away (Musical Tribute)

The following chart compares the annual change in the MZM money stock (in black) to the interest rate that money earns (in blue).

Click to enlarge.

Slip slidin' away
Slip slidin' away
You know it is not hyperinflation
The more we're slip slidin' away

I know a man
With policies unsound
He has a passion for depressions
Says they don't confound
His name's Bernanke
He was concerned
Set interest rates so underpowering
To ensure that savers would get burned

Slip slidin' away
Slip slidin' away
You know it is not hyperinflation
The more we're slip slidin' away

I know a woman
In charge of strife
These are the words that Yellen uses
To describe her knife
She says a good day
Has got low rates
She said a bad day's when credit dries up
And that debt just evaporates

Slip slidin' away
Slip slidin' away
You know it is not hyperinflation
The more we're slip slidin' away

And then there is Greenspan
Who Fed our fun
He longs to tell us all the reasons
He should not be shunned
Debt came a long way
It still remains
Thought the housing boom was safekeeping
But then turned to bust and headed down again

Slip slidin' away
Slip slidin' away
You know it is not hyperinflation
The more we're slip slidin' away

Stocks only grow
That is the plan
Best information is available
To the inside man
We're working our jobs
Gambling our pay
Believe that it won't all fade today
When in fact we're slip slidin' away

Slip slidin' away
Slip slidin' away
You know it is not hyperinflation
The more we're slip slidin' away

Slip slidin' away
Slip slidin' away
You know it is not hyperinflation
The more we're slip slidin' away

Source Data:
St. Louis Fed: Custom Chart

The Fed Is Apparently Trapped Inside a Japanese Pachinko Machine!

The following 30-year treasury chart shows the machine in action.

Click to enlarge.

Look at all those little balls falling down through the channel!

December 18, 2014
Oil’s Drop Hits Big Investors Hard

Those caught flat-footed by the price pullback include Prosperity Capital Management’s Mattias Westman, a longtime investor in Russia whose firm lost more than $1 billion this year, in part on stakes in Russian energy companies OAO Gazprom , OAO Bashneft and Lukoil Holdings .

Nothing says enduring prosperity like a chance at the Big Money Multiplier!

October 2, 2013
The Onion: U.S. Treasury Announces Bonus Financial Quarter Worth Double The Cash

“And you know what that sound means,” Lew said after a loud klaxon suddenly blared in the Treasury press room. “We’re raising the stakes even higher, allowing you to wager your entire 401(k) balance for a chance at the Big Money Multiplier, which could potentially boost your net worth threefold, fivefold, or even tenfold through an investment in an undiversified portfolio of high-yield, high-volatility equities and speculative-grade corporate bonds.”

Jackpot! Woohoo!

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

The Nonstore Shopping Mall Grinch (Musical Tribute)

December 2014
Area malls report solid early holiday season sales

“Black Friday weekend shopper traffic at Tacoma Mall shows that mall shopping was alive and well.” - Sarah Bonds, director of marketing and business development at Tacoma Mall

“At the beginning of the recession, Best Buy was very concerned with this idea of ‘showrooming’ (in which shoppers examine merchandise in stores but make their final purchase online). Well, we’ve actually seen that the inverse – called ‘webrooming’ — is more true. - Jesse Tron, director of communications and media relations at the New York-based International Council of Shopping Centers

1. Mall shopping is alive and well.
2. Showrooming is not a concern.
3. Webrooming is "more true".
4. I was born yesterday.
5. And I fell off the back of a turnip truck.

The following chart shows real nonstore retail sales per capita in November and December of each year (November 2014 dollars).

Click to enlarge.

That relentless trend channel is not good for shopping malls over the long-term. One might even argue that it is getting exponentially worse for them each year.

The current rising tide (economic expansion) is barely lifting all boats. We're going to see some serious shopping mall damage the next time the tide goes out (economic contraction) though. I have few doubts about that.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Thursday, December 18, 2014

The Sarcasm Report v.202

December 18, 2014
Junk Debt Rebounds as Investors Buoyed by Fed Pledge

Demand for junk-rated debt is bouncing back from a selloff triggered by plunging oil prices on optimism that the Federal Reserve will be in no rush to raise interest rates next year.

Risk on investors, deeply relieved to know that the Fed will not be raising short-term interest rates by as much as 0.25% over the next 6 months, opted to celebrate by raising long-term interest rates 0.08% in just one day.

Today's Movement in Treasury Yields

5-Year: +0.07%
10-Year: +0.08%
20-Year: +0.08%
30-Year: +0.08%


December 18, 2014
Mish: Students Support Deporting US Citizens to Allow Illegal Immigrants to Stay

Source Data:
U.S. Treasury: Daily Yield Curve Rates

Retail, Leisure, and Hospitalilty Career Outlook (Musical Tribute)

The following chart shows the 10-year moving average of retail, leisure, and hospitality employment as a percentage of the population.

Click to enlarge.

Source Data:
St. Louis Fed: Custom Chart

When Will Interest Rates Normalize?

That repeatedly asked question makes me want to poke my own eyes out. Seriously.

It's like asking when the median CPI will normalize.

The following chart shows the 36-month moving average of the annualized median CPI.

Click to enlarge.

We're in the declining blue trend channel and we're currently riding the red parabola. As a follower of declining economies and unstable parabolas, it all looks pretty frickin' normal to me.

Let's zoom in for a closer look.

Click to enlarge.

We peaked and we're now heading down the other side of the red parabola. I'm going to go way out on the limb here and suggest with 80% confidence that we won't be returning to the top of the blue channel any time soon, especially now that the price of oil has crashed.

Think about that for a moment. We peaked and the Fed hasn't even raised interest rates yet. So why should they need to raise them other than to inspire confidence when little is warranted?

It would take a lot of wage pressure to reverse our course at this point. At the very least, I would expect wage pressure to push many of this country's many "new and improved" discretionary small businesses (think restaurants and nail salons) right over the side of the cliff at some point.

I see a hard landing no matter what the Fed does or doesn't do. When a plane is low on fuel, the terrain is rocky, we're hurtling towards the ground, and the landing gear can only be lowered zero percent, why should we expect much different? In the meantime, this economy sure has some momentum built up. I'll give it that.

This is not investment advice.

Source Data:
St. Louis Fed: Median Consumer Price Index

Wednesday, December 17, 2014

What Lies Beneath the Rubles?

The following chart shows the 13-week moving average of the spread between the 2-year treasury yield and the 1-year treasury yield.

Click to enlarge.

Nice parabolic trend floor and failure.

December 17, 2015
2014 Monetary Policy Release

Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

The next chart shows the 10-year inflation expectations as seen when subtracting the 10-year inflation protected treasury yield from the 10-year nominal treasury yield.

Click to enlarge.

The Fed might want to cut the deflationary anchor loose. We're in danger of being pulled under by it again, not that many seem to notice or care.

The Committee expects inflation to rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate.

Good luck on that. I am at least 80% confident that the treasury market, as a whole, is smarter than a small group of relatively detached elitist policy makers meeting behind closed doors. Yeah, call me crazy if you must.

For what it is worth, and as a holder of long-term treasury bonds (with inflation protection), I also remain 80% confident that the Fed will not raise interest rates in 2015 and that the 30-year nominal treasury yield will not exceed 3% in 2015.

As a side note, I've said this before and it is worth repeating. My long-term treasury bonds have inflation protection for the same reason my house has fire insurance. I do not expect my house to burn over the long-term. I do not expect inflation to be a problem over the long-term. That said, I'm only 80% confident. The insurance is for the remaining 20% of the time. Further, I do not root for heavy inflation any more than I would root for my house to burn.

Those sitting in inflation protected treasuries actively rooting for high inflation clearly do not understand the situation. One does not get wealthier paying heavy taxes on heavy inflationary gains (each and every year). That's a path to the poor house. Of course, those without any inflation protection during such a period would be riding a bullet train to the poor house, so it's all relative I guess.

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan, 1966

Pick your poison. I've picked mine. This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Great Depression Déjà Vu

The following chart shows personal consumption expenditures for services (ex health care) divided by disposable personal income.

Click to enlarge.

Who knew the 1932 resistance level would be so difficult to punch through?

Other than the failure of the trend in red and the fact that we're at 1932 levels, everyone knows our service economy just keeps getting stronger and stronger over time. It's common knowledge. There's no point even debating it. 70 years of economic history can't be wrong. Ignore the 80 years of economic history I say! This trend only goes up over the long-term! Right?

What's the worst that could happen from here?

The Mason-Overy Debate: "The Flight into War" theory

In Mason's view in the period between 1936–41, it was the state of the German economy, and not Hitler's 'will' or 'intentions' that was the most important determinate on German decision-making on foreign policy. Mason argued that the Nazi leaders were deeply haunted by the November Revolution of 1918, and was most unwilling to see any fall in working class living standards out of the fear that it might provoke another November Revolution.

This is a different world. I think we can pretty much rest assured that countries are willing to see falls in working class living standards. Take Russia for example. Let the ruble fall where it may. And China? I'm sure they only want aircraft carriers for their amusement parks.

Chinese aircraft carrier programme

Through various ventures, China has also purchased the ex-Soviet carriers Minsk and Kiev. These carriers have become floating amusement parks for tourists.

October 14, 2014
Why is the US Navy practising for war with China?

China's People's Liberation Army Navy is still no match for the US Navy, and won't be for a very long time. Instead, China has been developing other weapons designed to keep America's precious carriers far away from China's shores.

These include new quieter submarines, long-range hypersonic anti-ship missiles and, perhaps most worrying, very accurate medium range ballistic missiles that have been dubbed "carrier killers".

January 23, 2013
PLA 'sinks' US carrier in DF-21D missile test in Gobi

"It can be used like a stick to hit the dog intruding on our backyard, but it can never be used to attack the house where the dog comes from," the paper's commentary said.

Speaking of dogs and carriers, there may actually be a dog carrier glut. Just look at them all. Won't stop me from investing in the Chinese dog carrier market though! If there is one thing I learned from the housing bubble, it's that I gotta get my share of this infinitely growing industry before I'm priced out forever!

This is not investment advice.

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

A Parabolic Headwind for Our Long-Term Service Economy

The following chart shows the 10-year moving average of personal consumption expenditures for services divided by disposable personal income.

Click to enlarge.

If you are a permabull, then I suggest you concentrate on three hopes.

1. This parabolic trend fails soon (it must eventually).
2. It does not fail to the downside.
3. Health care services do not grow to the moon.

If you are a permabear, then I suggest you concentrate on one thing.

1. Don't ditch the handbasket. Over the long-term, the ride may just be getting started. Sigh.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Tuesday, December 16, 2014

The Sarcasm Report v.201

Two sarcasm reports within 24 hours?

O frabjous day! Callooh! Callay!'

December 10, 2014
Report: Restaurant same-store sales growth slows in November

“It wasn’t a good month,” MillerPulse cofounder Larry Miller said. “It took sort of a turn for the worse. It’s surprising and unexpected. It seemed like everything was picking up and comparisons weren’t any harder.”

Out of curiosity, was there any surprising and unexpected weather in November?

Miller suggested that a cold snap that hit much of the country in the middle of the month might have kept some people at home.

I knew it! Cold weather! In November! For part of the month! Oh, the humanity!

But given the overall improvement of the economy, Miller said the result was still a surprise.

Everyone loves parabolic surprises! I bet you can't wait to see what's coming next!

“It honestly doesn’t add up,” he said.

You know what really doesn't add up? Sustainable restaurant employment parabolas! Rumor has it that if restaurants keep expanding at the rate that they are, then eventually same store sales cannot keep up. I know! It's crazy math! Which idiot started the rumor? Me! Right now! Woohoo!

The following chart shows the 12-month moving average of the annual change in the number of food services and drinking places employees.

Click to enlarge.

Pardon my language, but nice @#$%ing parabola.

I'm sure glad the unintended parabolic consequences of ZIRP were confined to the subprime oil industry though. We certainly don't want anything bad to happen to 10.8 million restaurant jobs. Like the shale industry, restaurants are one of our best growth industries since the bottom fell out of our economy. It's amazing what "cheap" money and intense competition can do.

’Twas brillig, and the slithy toves! Did gyre and gimble in the wabe: all mimsy were the borogoves, and the mome raths outgrabe!

I can't speak for you, but I am most outgrabed by the absurdity of it all. Sigh.

Source Data:
St. Louis Fed: Custom Chart
Jabberwocky by Lewis Carroll

1-Unit Housing Permits: Nobody Expects the Parabolic Inquisition

December 16, 2014
Calculated Risk: Comments on November Housing Starts

A year ago, for November 2013, housing starts were reported at 1.091 million on a SAAR basis (seasonally adjusted annual rate), up 29.6% from November 2012. Starts in November 2013 have since been revised up to 1.105 million. That huge increase in starts was probably one reason that many analysts, myself included, were overly optimistic for housing starts in 2014.

Nobody expects the parabolic inquisition.

Note the exceptionally low level of single family starts and completions. The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

In order for that prediction to work out, we may need to see some building permit growth. So let's look for it!

The following chart shows the 12-month moving average of new private housing units authorized by building permits (in structures with 1 unit).

Click to enlarge.

Uh, oh. Let's zoom in for a closer look.

Click to enlarge.

I spy, with my little eye, a whole lotta nothing burger.

You expected a different video? What is this? Some sort of Parabolic Inquisition?

Source Data:
St. Louis Fed: New Private Housing Units Authorized by Building Permits - In Structures with 1 Unit

The Sarcasm Report v.200

July 6, 2009
Jim Rogers Sells Dollars, Plans to Short Treasuries

“The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me.”

The 30-year treasury yielded 4.35% then. It is 2.72% today. 24 1/2 years to go.

April 25, 2011
JIM ROGERS: Short Treasuries And Buy Commodities, Especially Silver

I plan to sell short US government bonds sometime in the next few weeks, months. Interest rates all over the world are going to go higher. We have inflation, staggering debt problems and currency problems facing us. So interest rates are going to go higher.

Silver was $46.25 per ounce then. The 30-year treasury yielded 4.46%.

October 15, 2012
I'd Rather Invest in Russia Than the US: Jim Rogers

"I'm convinced things are changing in Russia for the first time." Change

When the winds of change blow hard enough, the most trivial of things can turn into deadly projectiles.

March 30, 2014
Investor Jim Rogers: 'This Is the Time to Buy Russia'

"Russia's stock market right now is one of the cheapest in the world, and probably one of the most hated," said investor and commodities guru Jim Rogers, chairman of Rogers Holdings, in Singapore. "This is the time to buy Russia." Perseverance

The courage to ignore the obvious wisdom of turning back.

April 30, 2014
Sanctions Are Not Going to Hurt Russia At All-Jim Rogers

I mean, sanctions are not going to hurt Russia at all. Hope

May not be warranted at this point.

November 10, 2014
Russia Says Sanctions Hurting as Bank Moves to Defend Ruble

Russia’s financial guardians made their broadest acknowledgment yet that sanctions are sinking the economy, as the central bank moved to protect the ruble after the currency’s worst week in more than a decade.

December 12, 2014
Jim Rogers Is Bullish On Russia

"Well, I don’t quite see it as a crisis. They still have huge foreign currency reserves. This is helping their balance of trade, obviously. They still get paid for oil in dollars. And it’s certainly not – it’s not causing imports to go up in Russia with the currency collapsing. So I don’t see it as a crisis. They have many debts coming due – U.S. dollar debts, which I would suspect they can finance. But, again, I haven’t sat down and put pencil to paper to really determine whether it can be done or not."

December 16, 2014
Ruble Continues Its Decline in Russia, Despite Interest Rate Increase

“We are seeing an economic crisis,” Natalia V. Akindinova, a professor at the Higher School of Economics, said in a telephone interview. “We are seeing a sharp devaluation of the ruble at a time when the central bank doesn’t have the reserves to influence the market, as it did in the past crises.” Consistency

There is something to be said in doing things wrong the exact same way every time.

And for that, Jim Rogers, I honor you with my 200th sarcasm report! Well played, sir! Well played, indeed!

Monday, December 15, 2014

Everything You Need to Know About the Recovery in One 6 Second Video

Rosalia, WA: Another Boulevard of Broken Dreams (Musical Tribute)

April 3, 1994
Rosalia Is Thriving Again Despite Effects Of Highway Bypass

Rosalia's recovery is one of several cited in a new Washington State University analysis suggesting a state highway bypass doesn't have to sound the small-town death knell. Other towns in the study - Omak, Okanogan, Prosser and Sunnyside - all have managed to prosper.

I grew up in Rosalia in the 1970s and early 1980s. Analysis in the 1990s found prosperity? Big shocker. Unfortunately, the 1990s are over. I wonder what that same analysis would suggest today.

May 8, 2013
Rosalia on list of struggling locations

Still, “the likelihood of cities going bankrupt or dissolving is relatively small,” McCarty said. Mostly, “it’s the recession that’s catching up to them.”

1. Relatively small compared to what?
2. Recession? That was 4 years prior.

This area is going to be a big tourist destination,” Konishi said. “Rosalia is the gateway to the Palouse byway.”

A big tourist destination? Good luck on that.

~240 views since the video was put on YouTube a year ago. Note the lack of tourists (and cars, and people). I can say this with 99.9999% certainty. Rosalia will not be the next Disneyland. Sigh.

Deep down, all of us want to cling to hope. Unfortunately, hope doesn't pay the bills. Sigh.

Proof That ZIRP Leads to "Sure Thing" Hyperinflation

In unsustainable mining output! What did you think I meant? Dollars? Does this site look like ShadowStats to you? You can't be serious! I may be a permabear, but I'm not entirely crazy! Mwuhahaha!

The following chart shows the 12-month moving average of mining industrial output.

Click to enlarge.

Holy cow? What are we building ourselves? I sure hope it involves full scale copper replicas of the Great Pyramids! How cool would that be?

Note that before ZIRP, mining output was heading down, chaotic, and full of mystery.

No longer! We're permanently free of anything bad happening! This new exponential trend in red is as smooth and tender as a fine steak in an upscale restaurant! It will never fail to please! Tasty to the last delicious bite!

This Week on Mine Your Manners

If you have to ask how much a New York "stake" is going to cost you over the long run, then perhaps you can't afford it. For example, Silver Standard Resources lost another 15% today.

What Rich People Do: Finding your way around the steakhouse

You can ask for A1 in a high-class steakhouse, but it’s tantamount to saying “I hate America. And I’m in favor of incestuous gay marriage between Communists … at Disneyland.”

That's what I love about monetary policy! ZIRP isn't just a blunt tool. Its sauce makes a great surgical condiment! A1! Top notch! Targets only the mining industry! Any potential misallocation of capital only ends up there! That leaves the rest of our economy to thrive for all eternity!

In all seriousness, it is very difficult to solve deflationary debt and production overcapacity problems by borrowing extra money to increase production capacity. I know. More crazy talk.

See Also:
Poll: Is There a Sarcasm Bubble?
Parabolic Hyperinflation Theories Thwarted by Twisted Maize of Cornucopia Puns

Source Data:
St. Louis Fed: Industrial Production: Mining

Bond Yields: A Deadly Game of Cat and Mouse (and Hawks)

The following chart compares the 13-week average of the 30-year treasury yield (left scale, in red) to the 13-week average of the 2-year treasury yield (right scale, in blue).

Click to enlarge.

1. The cat is moving down (~0.8%) about 4 times faster than the mouse is moving up (~0.2%).

2. The cat seems to have a plan. The mouse seems to have some concern (as seen in October).

3. The cat enjoys playing with birds.

The mighty Fed hawk is all like, "Hey, cat, why won't you be playin' with me?"

And the cat is all like, "Get outta my business and stuff. Kitty tryin' to nap."

Source Data:
St. Louis Fed: Custom Chart

HEW Knew? $3,500 Holiday Cash! (Musical Tribute)

This television commercial is currently running in my area.

Get up to $3,500 cash. No payments until March.

Welcome to HEW (Hyundai Equity Withdrawal).

Just look at all that cash sitting on that hood looking all sexy and stuff. The car's just a bonus!

Money, drive away
Keep that same job with same pay and you're okay

Money, and some gas
Grab that cash with new car and make a dash

New car, stereo, four door wet dream
Think I'll buy some extra esteem

Money, cash back
It's like some crack you won at the horse track

Money, tiny bit
Which is what one earns with large deposits

You're in the hi-fidelity Hyundai traveling car set
No one knows you just bought more debt

Money, so sublime
Need it right now since it's holiday wintertime

Money, so you'll pay
Not until some future March, someday

And if you buy a new car it's no surprise that they're giving cash away

Sunday, December 14, 2014

Parabolic Hyperinflation Theories Thwarted by Twisted Maize of Cornucopia Puns

The following chart shows the export price index for corn (in black), the 3-year moving average (in blue), and a parabolic trend of a section of that 3-year moving average (in red).

Click to enlarge (the chart is larger than normal).

Planting a few ideas...
Displaying the data in an easy to digest format...
Getting to the root of the problem...
Stalking the long-term trend like a rabid gopher...
Sticking a fork in it...
Serving the hyperinflationists on a silver platter...
Grilling the conspiracy theorists...

I sure hope you like puns. If not, this post is a complete turkey.

November 26, 2014
High Turkey Prices: Don't Blame Ethanol

“The low-priced feed is just coming in now,” Alexander told the Chicago Tribune earlier this month. “By next year, we’ll be looking at lower turkey prices.”

Cheaper turkeys seem baked in. Cornish game hens too? We'll certainly be well Fed! What might it mean?

We may continue razing long-term interest rates over the long-term! Hurray!

Just be very careful how you invest, or you might get Roger'd or Schiff'd.

August 28, 2013
Big Picture Agriculture: Remarkable Graphs of Corn & Soybean Profitability

If we were dealing with a commodity that feeds the world’s growing populations, like Jim Rogers always tells investors, the price of corn would go up because of natural, growing demand. Instead, we’ve had overproduction of corn for decades on end, and it feeds agribusiness, not the world’s growing populations.

August 3, 2011
Avoid Disaster, Get Out of U.S. Assets: Peter Schiff

Additionally, Schiff's inflationary outlook supports owning oil, agricultural commodities and industrial metals. "If the global economy is doing well, commodities are going to rise. There are a lot of commodity shortages and they will do well because governments will continue to create inflation. They're going to keep on printing money, so commodities will rise."

Yeah, only the United States is a disaster. The rest of the world is doing so much better. Can you hear my eyes sarcastically rolling around in their sockets? Lend me your ears!

I am often disappointed in my fellow permabears. As you can probably imagine, this is one of those times. Sigh.

See Also:
Where Is the Cornpocalypse?

Source Data:
St. Louis Fed: Export (End Use): Corn

Saturday, December 13, 2014

The Chinese Currency Miracle (Musical Tribute)

Click to enlarge.

If the blue trend represents United States hyperinflation theories on steroids, then what might the red trend represent?

Perhaps the following musical tribute (complete with color coding) would convey my opinion?

Sure Thing!

Buy yuan, buy yuan, buy yuan
Buy yuan, buy yuan, buy yuan
Buy yuan, buy yuan, buy yuan
Buy yuan, buy yuan, buy yuan
Sure thing!
Yeah! Yeah!

Just buy yuan, buy yuan, buy yuan
Cash flow streams are swollen
Keep them yuan a comin', sure thing!
Through pain we spend and wither
Yuan's a bellwether
Wishin' you all would buy my lie
All the things you're missin'
Pollution, greed, and bankin'
Are waiting at the end of your ride

Move yuan out, send 'em up
Send 'em up, move yuan out
Move yuan out, send 'em up
Sure thing!
Bag 'em up, ship 'em out
Bring 'em in, bag 'em up
Bag 'em up, bring 'em in
Sure thing!
Yeah! Yeah!

Now sell yuan, sell yuan, sell yuan
They ain't disapearin'
Cash flow is reversin', sure thing!
Don't try to understand 'em
Just bag an' haul an' sell 'em
Soon you'll be buyin' double-wides
My chart's calculatin'
The true wealth will be waitin'
Be waitin' at the end of your ride

Move yuan in, send 'em down
Send 'em down, move yuan in
Move yuan in, send 'em down
Sure thing!
Bag 'em up, ship 'em in
Bring 'em out, bag 'em up
Bag 'em up, bring 'em out
Sure thing!
Yeah! Yeah!

Sure thing!
Sure thing!

December 9, 2014
Barron's: Yuan Plays Catch Up, Moves Lower; Don’t Be Alarmed

Investors should not be alarmed.

I'm not alarmed. If I ever feel the need to move to China, then I might finally have some haggling power with the Chinese border guard. And why might I feel the need? No frickin' idea!

Source Data:
St. Louis Fed: China / U.S. Foreign Exchange Rate

The French Fry

The following chart shows the 4-month moving average of U.S. annual import growth from France.

Click to enlarge.

December 12, 2014
Fitch downgrades France ratings to 'AA'

The outlook on France’s long-term rating is now stable, Fitch said.

Stable? Over the long-term? Good luck on that.

Source Data:
St. Louis Fed: Custom Chart