The Exponential Path to Dystopia

The following chart shows the natural log of the dividends to wages ratio. When using natural logs, constant exponential growth is seen as a straight line. I have added two trend lines in red (one for the peaks and one for the troughs).

The two trend lines can be traced back to where they meet. The year was roughly 1971. Doubt it's a coincidence. I'm tempted to say that falling off of the gold standard is when the illusion of long-term prosperity truly began. Kind of makes me feel like a prosperity chart archeologist.

As disturbing as that is, I'm not done yet. Note that:

1. Bad things often happen when we move towards the troughs.
2. We've been moving towards a trough lately.
3. Very bad things have been happening lately.
4. Should we ultimately reach the next trough, there's still a very long way to go.

Risky Businesses

The following chart compares the investment performance of XLU (utilities ETF) to TLT (long-term treasury bond fund).

Chart courtesy of StockCharts.com.

The only thing I can say with 100% certainty is that I have absolutely no desire to sell TLT to buy XLU right now, and if I can't buy "safe" XLU then I definitely don't want to own any other stocks.

Not investment advice.

Trading Update

Sold the platinum eagles I bought at $1083.74 on 8/24/21 for $904.34 ($40 over spot) today. Fairly hefty loss, with nearly half of it coming from transaction fees (counting both the buying and the selling). In hindsight, not ideal. It was a very small position, but painful just the same.

I intended to hold for many years, but what a difference a year makes. When I bought, the 10-year TIPS yielded -1.01%. Today, it yields +1.39%. I must admit that I never saw that coming. It's a game changer, at least temporarily, if nothing else.

That's not the main reason why I sold though. I needed to sell something in order to pay ongoing expenses. My choices were TIPS outside my retirement account, I-Bonds, EE-Bonds, and these coins.

I don't want to sell anything that would push up my income this year, because I still qualify for the health insurance subsidy of the Affordable Care Act. I also don't want to sell things that are generating inflationary gains with inflation running so hot.

So, as much as it pains me, the coins had to go (and some I-Bonds too, soon). At least I can put the capital loss to very good taxation use thanks to my other investments tied directly to inflation.

Not the first difficult selling choice I've had to make. Won't be the last. TIPS generate plenty of inflationary gains but not all that much current income, savings bonds generate no income until cashed out, but the ongoing expenses continue to mostly come at night, mostly.

Soft Landing?

The following chart shows the natural log of the median consumer price index. I have added a long-term trend channel in green and a short-term trend line in red.

If the green channel represents the runway and the red line represents our current flight path, then we'll be very lucky not to careen off into the wastelands.

Household Net Worth

The following chart shows the natural log of household net worth. When using natural logs, constant exponential growth is seen as a straight line. I have added a long-term trend channel in red.

Metaverse Real Estate Gallows Humor

As seen in the image below, I just did an Internet search for "metaverse real estate prices" and I feel the need to share the results.

It's a rare treat to stumble upon such a rewarding gem. Do I keep searching? Do I read the two articles that I found? No, I'm good. I think my questions have been fully answered, lol.

This search was inspired by today's tweet from @MacroAlf:

Thoughts and prayers to people who took a mortgage to buy real estate in the Metaverse.

Mark Twain once said, "Buy land, they're not making it anymore." Too bad he's not still around to offer his thoughts on imaginary land, lol.

SPY vs. TLT

The following chart compares the investment performance of SPY to TLT, as a ratio between the two. I have added 3 trend channels in blue, red, and green.

Chart courtesy of StockCharts.com.

You're a true optimist if you believe any of the following::

1. There's any chance that we'll stay in the green channel long-term.
2. There's a reasonable chance that we'll stay well above the red channel long-term.
3. Entering the blue channel ever again would be absolutely, totally, and in all other ways inconceivable.

I'm not saying that you would necessarily be wrong to be a true optimist, and that the future we will find ourselves in truly could be the best of all possible worlds. However, I am saying that if you are a true optimist right now, at this moment, then I'd sure like to be smoking what you're smoking!

I am not an optimist. You can try to pry the shares of TLT from my cold dead fingers, but I'm not dead yet. Might seem that way as I patiently wait for trends to break though! Trends break. That's what they do. And each time the Fed raises rates, it puts us one step closer to the edge.

Food at Home

The following chart shows the natural log of the consumer price index for food at home. When using natural logs, constant exponential growth is seen as a straight line. I have added a long-term trend channel in green, a steeper short-term trend line in blue (heading into the Great Recession), and an even steeper short-term channel in red (our current trajectory).

The stock market sure doesn't like it. Not one bit. Isn't feeling all that confident about a soft landing. Starting to wonder why the captain's warning of "some pain" while wearing a parachute?

It's not all bad news. Hey, at least we're sitting in the middle of the long-term trend channel. Small comfort, I know.

Illusion of Rationality

The following chart compares the yield of the 20-year Treasury bond (in black) to the average of the 10-year and 30-year Treasury bonds (in red).

Current Yields

10-Year: 3.37%
20-Year: 3.76%
30-Year: 3.53%

The 20-year Treasury bond currently yields a whopping 0.31% more than the average of the 10-year and 30-year Treasury bonds. How likely is that rational?

You could use rational arguments to convince me to sell TLT and take my losses, but don't you dare tell me to sell 20-year Treasury bonds and buy 10-year and 30-year Treasury bonds instead, while simultaneously p$*sing down my back while claiming it's raining. No sir, of all the bonds I'd think about selling right now, the 20-year Treasury bond would be near the very bottom of the list. But hey, maybe that's just me.