Almost Back to Abby Normal

The following chart shows personal consumption of goods over services.

I can't speak for others, but I started buying a lot more stuff when the pandemic hit. Stuck at home, not much else to do. Some of that is seen in the chart and was directly responsible for the higher inflation rate in goods. Currently trying to wean myself off of this new temporary behavior.

There's something else going on too though, as seen in the upward slope of the red trend line channel. Here's one theory.

January 22, 2024
Study shows how social media fuels unhappiness and materialism

Clothes, cars, travel, followers: People with a materialistic mindset always want more and, above all, more than others. Social media provides them with ideal opportunities to compare themselves with others, which makes them susceptible to passive and addictive user behavior. This stresses them out and, ultimately, leads to low life satisfaction. This downward spiral, which turns materialists into less happy people, was identified by researchers from Bochum in an online survey of over 1,200 participants. They published their findings in the journal Telematics and Informatics Reports from January, 8, 2024.

Net Worth to Total Debt Ratio

The following chart shows household and nonprofit organization net worth divided by total debt in all sectors.

As seen using the red channel, this 60-year linear trend has failed by a large amount in the aftermath of the Great Recession. Epic failure, actually. Should have more of them. Never before has so much additional prosperity been generated by so little additional debt.

Of course, not everyone believes that fairy tales always have happy endings. Here's a scary fable involving bears that's just in time for Halloween.

Net worth has been falling rapidly lately, thanks to the stock and bond markets. We'd be back in the channel if it were to fall another 30% or so, assuming it were to continue to happen rather quickly. And what would be quicker than rapidly rising mortgage rates combined with million dollar homes?

Of course, there's another way to get back in the trend channel. Total credit market debt outstanding is only $91.2 trillion. Yes, only $91.2 trillion. A pittance, really. If we were to quickly increase it by 40% then back in the "safety" of the declining channel we would be. Think what we could do with all that free money! Here's an idea. A $36 trillion Halloween party in the name of world peace! Everyone on the planet could be invited. Nobody goes home empty handed. Woohoo!

Please don't confuse my love of gallows humor for sarcasm, nor my love of sarcasm for gallows humor. It's both. It's almost always both these days, lol. Sigh.

Earning $1 in Interest

 

This chart shows how many dollars we need to invest in 30-year Treasury bonds to earn $1 in annual interest. I have added a linear trend channel in red. It’s just another way to look at the chart in my last post.

To infinity and beyond! (Not joking. See German bonds below.)

It continues to be more and more difficult to make money off of money. Those betting on this long-term trend reversing anytime soon will most likely be sorely disappointed.

It’s not a bug. It’s a feature. Nearly infinite borrowing at 0% interest is seen as the least-worst option. We’ve been gliding on this path for decades. Not seeing much that can change the trajectory in my lifetime. (Keep in mind that at age 56, I’m not likely to be alive in 30 years.)

The German government sold 869 million euros of 30-year bonds with a negative yield, for the first time ever, adding to the world’s growing $15 trillion in existing negative yielding debt. - Patti Domm, CNBC, August 21, 2019

James Bullard's Linear Trend Failure of the Day (Musical Tribute)

November 14, 2014
Does Low Inflation Justify a Zero Policy Rate?

Market-based measures of inflation expectations have declined to low levels in recent months, but rebounded since mid-October.

Click to enlarge.

ZIRP-a-Dee-Doo-Dah!



Source Data:
St. Louis Fed: Custom Chart

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

Wage Growth: Dead Cat Parabola

The following chart shows the 6-month moving average of the annual hourly earnings growth of production and nonsupervisory private service providing employees.


Click to enlarge.

Conventional wisdom says, "As the unemployment rate falls, hourly earnings growth must rise. Companies will be forced to pay more to attract quality workers."

Unconventional wisdom says, "Service employment glut. With so many service providing workers out there competing with each other, how can any individual service worker expect to get ahead?"

Let's hope conventional wisdom finally has it right this time, or our service economy risks getting seriously "serviced" yet again.

Source Data:
St. Louis Fed: Custom Chart

An Economy Built on Sand (Musical Tribute)

The first chart shows the 12-month moving average of construction sand and gravel mining employment.


Click to enlarge.

We're now below levels seen during the early 1990s recession. Too dire? Secretly wishing to read the newspaper instead? Well, better hurry!

The next chart shows the 12-month moving average of newspaper publishing employment.


Click to enlarge.

We're now below levels seen during the post-war 1940s. Look, I'm not intending to send you into a claw your own eyes out and jump off the nearest bridge style clinical depression. Let me spin you a positive "yarn" to cheer you up!

This last chart shows the 12-month moving average of textile mill employment.


Click to enlarge.

The Fed has apparently permanently halted the decline! Just look at that trend failure. Sometimes small victories are the best victories. So get out there and pick up some of these textile jobs before the next person does. I have a really good feeling about our textile employment future! That's right India and China! We're gunnin' for ya!



Source Data:
BLS: CES Databases

Consume!

The following chart shows the 4-quarter moving average of personal consumption expenditures divided by GDP.


Click to enlarge.

100% here we come! Straight as an arrow, that one! Not sure what will happen when we hit 100% (psst: guaranteed linear trend failure), but let's not worry about it now! It's a time for celebration!

Let's zoom in for a closer look.


Click to enlarge.

What? Who drew that blue trend line on my optimistic chart? Shame on them!

There are two easy ways to get back to the red long-term trend line. This does not need to end in failure yet!

1. Increase consumption growth! Yay!
2. Reduce GDP growth. Boo!

This is America! If anyone can consume more, it is us. So get out there and do your part! Don't let the blue trend win!

Source Data:
St. Louis Fed: Custom Chart

Terminator QE: Rise of the Machinery

The following chart shows the quarterly average of real monthly manufacturers' new orders for machinery per capita (September 2014 dollars).


Click to enlarge.

I have added a linear trend channel in red. As seen in the chart, we seem to be exploring new territory. I think everyone can agree that this is a really great development! We're finally permanently free of the downward long-term trend! Woohoo!

Now let's take a look at construction machinery in particular. The next chart shows the quarterly average of real monthly manufacturers' new orders for construction machinery per capita (September 2014 dollars).


Click to enlarge.

I have added a "klaxon" trend channel in red. Please ignore that commentary in blue (within the chart). It seems a bit alarmist (pun intended). I certainly don't want to pop anyone's optimism bubble. In fact, you should probably just stop reading here. There's no point continuing.

Unlike the machinery data in the previous chart, the construction machinery data for the third quarter of this year has not been released yet. I can say this though. July and August averaged just $15.69 (as seen here). Unless September is a blowout month, the next data point on this chart won't be hugging the top of the red "klaxon" trend channel any longer.

But have no fear! Klaxon trend channels are known for their stability! Nothing to worry about! As time passes, the channel will continue to grow (both to the upside *and* the downside)! Therefore, the odds are high that we actually can stay within the channel over the long-term! Isn't that wonderful? There's very low risk of ever experiencing a klaxon trend failure in this data! That's true even if new orders for construction machinery eventually fall all the way to zero! Woohoo!

The future's so bright, I gotta hear the klaxon!



If Albert Einstein's definition of insanity is doing the same thing over and over again and expecting different results, then we certainly can't accuse the Fed of insanity. They aren't doing exactly the same thing. Based on the increasing volatility in the construction machinery chart, I'd say they are amplifying the "thing" each time! Bigger and badder! That's what I say! Insane? Like a runaway train! Woohoo!

Oh, what the hell. Clown horn time!



See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart (Machinery)
St. Louis Fed: Custom Chart (Construction Machinery)

The Sarcasm Report v.190 (Musical Tribute)

October 24, 2014
What your dog's costume says about the economy: The week ahead

Macke also asserts, “There are no items on the planet earth as discretionary as dog Halloween costumes.” The National Retail Federation says the average person will spend $77.52 this Halloween, compared to $75.03 last year...

$77.52 / $75.03 = 3.3% Growth Rate

3.3% growth not counting inflation! Woohoo! If this won't drive the 30-year treasury bond yield above 3.3% then nothing will! And with typical hourly earnings growth seemingly topping out at 2.3%, we know 3.3% is sustainable!

November 22, 2011
Superbunker Mentality

I should have never allowed our dog Honey to study the European debt crisis. She entered the superbunker and there's just no getting her out.

Our dog Honey remains bunkered. It's worse now. She seems insulted by the premise that a dog Halloween costume is declared to be the most discretionary item on the planet earth. Surely there is a "softer side" item even more discretionary?

The following chart shows real monthly department stores' sales per capita (excluding leased departments, September 2014 dollars).


Click to enlarge.

1. The linear trend in blue failed in 1999.
2. The exponential decay trend has yet to fail.
3. Just think what that says about the economy!

January 16, 2014
Stores Confront New World of Reduced Shopper Traffic

Anthony Dolphin, 23, a mechanical engineer from Westborough, Mass., said he likes to look up deals online before making the trek to stores. Even so, he only made three or four short trips to stores over the holidays.

"I just buy the essentials and pay off student loans with the rest," he said.

Source Data:
St. Louis Fed: Custom Chart

The Corkscrewed Recovery

The following scatter chart compares real GDP (bottom scale) to the number of nonfarm employees (left scale). There was a time when you could predict one with uncanny accuracy simply by knowing the other. It was a nearly perfect linear relationship. As seen in the chart below, that is no longer the case. It is different this time.


Click to enlarge.

1. The first coming of trend failure was linear. Rejoice.
2. The second coming of trend failure was parabolic. Praise be.
3. The third coming of trend failure was also parabolic. Amen.

Not only did the linear trend fail in the early 1990s, but it was replaced by an upside down parabolic trend that has failed twice so far. For those who believe that the labor force is important to future prosperity in a capitalistic society, that's just sickening.

Let's zoom in for a closer look.


Click to enlarge.

We're finally back to the upside down parabolic trend.

1. The optimists believe that this is a reason for celebration! Woohoo!
2. The realists believe that the corkscrewing will continue until morale improves.
3. The pessimists believe that morale will never improve.

For the record, I am not an optimist. I am very uneasy about the failure in 2007 in particular. It reached the extrapolated parabola from 1992:Q2 to 2001:Q1 and died right then and there, as if the parabola was an impenetrable wall that could not be breached. I'm also very uneasy that we're right back to the wall (as of 2014:Q2).

Is it any wonder the Fed is afraid to raise interest rates? If I was Yellen, then I'd be terrified. Fortunately, I am not Yellen. I can be terrified as a witness instead, lol. Sigh. Assuming the parabola has merit long-term, then good luck postponing the inevitable! ZIRP might work for awhile, but forever?



Source Data:
St. Louis Fed: Custom Chart

Pop Quiz: Furniture Sales

The following chart shows the 12 month moving average of retail sales at furniture and home furnishings stores as a percentage of wage and salary disbursements.


Click to enlarge.

It does not include the pitiful sales for September released today (due to not having wage and salary disbursement data for September yet). As seen in the chart, does it really matter though?

Which answer best describes the data?

1. Strong recovery!
2. Fed rate hike imminent!
3. Ebola fully explains the drop!
4. Hedge funds will soon gamble on furniture too! No worries!
5. The future's so bright, I gotta wear shades!
6. All of the above!

What? You want another choice? Seriously? Okay, okay. For the life of me I can't understand why you need one though. Are you not drinking the Kool-Aid?

7. F@#%ing new normal. Clown horn! Ugh. Deep sigh. :(



Source Data:
St. Louis Fed: Custom Chart

Ugly Chart of the Quarter (Musical Tribute)

Click to enlarge.

The 1990s are so over.

Something's wrong, shut the light
Heavy thoughts tonight
And they aren't of Snow White

Source Data:
St. Louis Fed: Custom Chart

The Employment Recovery (Musical Tribute)

The following chart shows civilian employment divided by the civilian noninstitutional population.


Click to enlarge.

For what it is worth, I'm confident that we will make a "full recovery" during the next recession.

It was one helluva party though. Wasn't it?



Source Data:
St. Louis Fed: Custom Chart

Auto Industry Dreamland

The following chart shows the 12 month moving average of the annual percentage change in new orders for motor vehicles and parts industries divided by disposable personal income.


Click to enlarge.

Dreamland case: Growth accelerates to the upside from here.
Best case: We return to the blue trend line.
Worst case: We continue on to the red trend channel.

March 5, 2014
Subprime Auto Boom Besieged by Late-Payment Jump: Credit Markets

Underwriting standards began to decline amid five years of Federal Reserve stimulus that set off a race for higher-yielding assets, spurring a surge in issuance of bonds tied to subprime auto loans.

This is your captain. Please fasten your seat belts and brace for impact again.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

CBO: Congressional Budget Optimists

The following chart shows the annual change in annual nominal potential GDP as estimated by the Congressional Budget Office.


Click to enlarge.

I hope they didn't spend too many man-hours coming up with those long-term future estimates. I managed to do it in a few minutes by simply extrapolating the past two bubbles (and adding the point heading into the recession of the early 1990s for extra stability).

Although the Congressional Budget Office clearly acknowledges the declining long-term potential growth in nominal GDP (much like I did with my trend line), they appear to be a bit overly optimistic looking forward.

That's assuming that you find it as hard to believe as I do that we can stick to that red trend line for 7 years in a row (from 2018 through 2024) without another recessionary linear trend failure occurring.

Further, if it takes ever larger "bubbles" to unlock the true declining nominal "potential" of our economy, then we are seriously @#$%ed over the long-term. What if we can't think up enough suitably epic bubbles to inflate? How could we make it back to the declining trend line?

In the meantime, might as well come up with something else to believe in, just so we have a backup plan.

February 23, 2010
The Earth is flat? What planet is he on?

"I haven't taken this position just to be difficult. To look around, the world does appear to be flat, so I think it is ­incumbent on others to prove ­decisively that it isn't. And I don't think that burden of proof has been met yet."

Does the chart in this post prove that our country is in decline? Not really. Perhaps it would be best to just ignore the evidence then and pretend it does not exist. See? Doesn't that make things feel better?

See Also:
Real Potential GDP Growth: 75 Years of Bad Weather So Far

Source Data:
St. Louis Fed: Custom Chart

Real Total Business Sales per Capita: A Tale of 4 Trend Failures

The following chart shows the 12 month moving average of real total monthly business sales per capita (January 2014 dollars).


Click to enlarge.

I have never seen so many "sure thing" linear trend failures in one chart before. I am pointing out four of the most important ones and will leave the other three as an exercise for the reader.

Okay, here's the commentary.

Investing in the Dotcom Bust Aftermath

1. Invest in the steep "sure thing" orange trend line until it fails.
2. Although you are well above the median in blue, just ignore it.
3. Invest in the flatter "sure thing" purple trend line until it fails.
4. Panic.

Investing in the Housing Bust Aftermath

1. Invest in the steep "sure thing" red trend line until it fails.
2. Although you are well above the median in blue, just ignore it.
3. Invest in the flatter "sure thing" green trend line until it fails.
4. Panic?

How can you possibly lose?

This is definitely NOT investment advice.

Source Data:
St. Louis Fed: Custom Chart

Jolting to Prosperity Again (Musical Tribute)

The following chart shows the 6 month moving average of nonfarm job openings minus nonfarm job quits adjusted by the population.


Click to enlarge.

This musical tribute is dedicated to the financial experts who predict that employment growth is destined to accelerate to the upside from here.

)

Source Data:
St. Louis Fed: Custom Chart

Office Employment Growth

The following chart shows the annual change in the annual employment level for office and administrative support occupations.


Click to enlarge.

As seen in the chart, I haven't been this excited about office employment growth since 2000. We're right there at the top of the declining trend channel again. Hurray.

Here is a closer look using monthly data over the past year.


Click to enlarge.

The trend has gone from down to downer. Let's just blame the linear trend failure on the weather and call it good. Nearly everyone else is.

Meanwhile, as seen at Gongol.com today, we have the following gem.

March 9, 2014
Crossroads, other planned office space adds up, but when will it be filled up?

Omaha has more than 3 million square feet of office space in various stages of planning and development, an unprecedented amount that could take 15 years to lease and set off intense competition among new and existing properties.

What? Me worry?

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

The Four Horsemen of the Jobpocalypse

The following chart shows the total number of manufacturing, information services, construction, and financial activities employees (thousands).


Click to enlarge.

Within these industries, we're about 6.6 million employees below the peak. Call me crazy if you must, but I predict that we will never make it back to the trend channel.

The next chart shows the same employment data per capita (as a fraction of total population).


Click to enlarge.

I predict that we will never make it back to the historical norm. I know. I'm certifiable. Lock me up. Put a straight-jacket on me. It's just the crazy rantings of a lunatic!

I'm not done yet though. I suspect, thanks to the rise of Amazon.com and other online retailers, that we will be adding even more horsemen during the next recession. In fact, we may need to swap party hats. Something made of tin foil? Or perhaps a hat with a rodeo theme would be more appropriate? We will certainly want something to blend in with all those horsemen.


File:Strawhat.jpg (Ealdgyth)

This is not investment advice. Sigh.

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