Massive Economic Uncertainty Continues

So many consumer surveys, but none of them ask the key questions for the next year:
- How much did you accumulate in savings during the pandemic?
- How much do you have left?
- How much of that do you intend to spend?
Without the answers, forecast margins of error are *massive.*

Twitter: Ian Shepherdson

Great questions. Too bad the Fed Chairman can't see the answers.

Trading Update VI

Sold all KMI @ 17.80 and all OKE @ 61.94 to buy VDC @ 182.41.

Sold rapidly appreciating high dividend pipelines and replaced with slowly appreciating low dividend consumer staples. In a world where bull markets make geniuses out of everyone, might not exactly look like a genius move.

Clearly not looking to swing for the fences. Locking in a 13.9% gain might not seem like much, but that's almost the same gain that a 10-year Treasury bought today and held to maturity would net. And it only took a month. I don't want to be exposed to too much risk if the music stops playing, again. What can go up quickly, can also come down quickly.

That said, there should be a lot of upside for pipelines from here. I'm likely leaving a lot on the table (wouldn't be the first time). If I had a job to fall back on or I was more interested in growing wealth than preserving capital, I might have let it ride much longer.

Apocalypse Fatigue

It's been a rough month.

Our 25-year-old bird is sick. We took her to the emergency vet. She stayed overnight. We think she ate part of her cage. Ingested some metals. She's prone to seizures and these were the most violent we'd ever seen. Feathers and blood everywhere. Not good.

Took her to her regular vet for a followup. She was terrified and escaped their control long enough for even more feathers and blood. Ouch.

We've set up a hospital cage for her made out of a large plastic storage container drilled with holes and filled with towels. It's treating her well so far.

Meanwhile, we ordered a new large steel cage for her. We were fortunate to find one on sale, because they are not cheap. There are SO many out of stock right now. It was originally supposed to be delivered two days ago but there was a delay due to a train derailment. I kid you not. It arrived today and we put it together. Fortunately, that went well. She's not ready for her new and improved home, but it will be ready when she is.

In other news, it's not been a great month for the stock market. I'm still up 10% since I bought back in December, even with today's tobacco stock selloff. The decision to diversify out of utilities is still holding up well. Utilities are not reacting well at all to the rise in the 10-year yield. Had I stayed entirely in utilities, the gains would be cut in half. On a brighter note, still doing better than the 30-year Treasury bond. By. A. Wide. Margin. A 0.37% increase in yield x 30 years is roughly an 11% loss.

No more VPU specific reports. It's only 20% of my IRA now (and my IRA is a relatively small part of my net worth), so my motivation to track it closely just isn't there any longer.

Cabin fever is becoming apocalypse fatigue. Since 2020, it’s starting to feel like we're in the "what can go wrong, will go wrong" era. My hoarding tendencies are on high alert, with each new "out of stock", "shortage", "supply chain disruption", and "Covid" story adding to the personal drama. The drama is real. Any resemblances to the many fine disaster movies I often enjoy are hopefully entirely coincidental, military soldiers driving gasoline tanker trucks in Great Britain notwithstanding. *cringe*

And lastly, my posting frequency will most likely be somewhat reduced in the coming weeks. Looking to take a break. I will definitely continue to post trading updates, not that I have many trading plans. I’m comfortable with what I own. The next purchase will probably be more savings bonds at the start of the new year.

Oil and Natural Gas Extraction Employment per Capita

As a group, KMI and OKE have risen 9% since I recently purchased them. The high volatility, even when it works in my favor, makes me more than a bit nervous. A primary goal of mine is to not lose sleep over my investments. A secondary goal is to be especially fearful when investors are especially greedy. Are oil and natural gas investors being especially greedy right now? The following chart suggests that we are not.

I thouht about locking in some oil and natural gas gains and reducing my exposure today. After creating this chart, the feeling passed. There seems to be plenty of room left to run.

September 27, 2021
Nasdaq: US Oil & Natural Gas Rig Tally Rises for 3 Straight Weeks

Natural Gas Rig Count Declines in US: Natural gas rig count of 99 was lower than the prior-week count of 100. The count of rigs exploring the commodity was, however, higher than the prior-year week’s 75. Per the latest report, the number of natural gas-directed rigs is roughly 94% below the all-time high of 1,606 recorded in 2008.

This is definitely not investment/speculation advice. There's a reason why these stocks have high dividends and are so volatile. With great rewards come great risks. Only hindsight can show if the risk was actually worth it, and even then it might not be. If one bets their life savings on a triple or nothing coin flip, the math says it is a great bet. It would be little consolation if one loses though.

Trading Update (Tongue-in-Cheek)

Sold zero shares of pipeline stocks to buy one unit of Pipeline game.



If time is money, then I expect this trade to provide a very negative return on investment. That's the amusing thing about games. The more time they waste, the more value they have. If this one ultimately wastes 50 hours, for example, that will bring its cost down to just $1 per hour. It's a very reaasonable goal for entertainment, in my very humble opinion.

For those interested, there are highly-rated unofficial solo rules available. That's probably how I will mostly be playing this one, assuming I can't talk anyone of the female persuasion in this household into embracing this gaming experience. A fairly safe assumption!

It's just another Panic Monday. No big deal, in the grand scheme of things. I'm comfortable with my current investments. No desire to sell.

Trading Update V

Sold some VPU @ 150.40 to buy TSN @ 75.63.

New IRA asset allocation:

This is definitely a stock that I intend to hold long-term. I'm overweighting it and bracing for more pain. Not only has Tyson been in falling knife mode for the past month, but the White House isn't at all happy that the company raised meat prices during a pandemic. Makes inflation look bad, as if there aren't enough reasons already that inflation looks bad.

I suspect that the pace of my trading will soon grind to a halt, now that VPU is down to just 20% of my IRA. The buying and selling seems mostly done. Now it's time for the holding. If I thought that there was even a chance that we'd soon see 1% real yields on the 30-year TIPS then I would not be taking such risks.

Trading Update IV

Sold some VPU @ 151.29 to buy OKE @ 52.68 and KMI @ 16.14.

New IRA asset allocation:

Lured by the high dividends of ONEOK and Kinder Morgan. I'm certainly taking on a lot of risk for an economy in uncharted waters. *shrug*

Tech vs. Utilities (Musical Tribute)

The following chart shows the QQQ to XLU ratio since 1999.

Chart courtesy of StockCharts.com.

The ratio peaked in 2000. 21 years later, we've almost come full circle. What good fortunes will the next 21 years bring? Fully autonomous self-driving cars? Better late than never. Am I right?



This is not investment advice. As a utility investor, I am indifferent when it comes to how utilities perform relative to tech stocks from here. That said, it would not surprise me in the least if utilities outperform Tesla. Keep in mind that I want Tesla to succeed, just as I would have wanted Ford to succeed in the early days if I would have been a gasoline investor.

As a side note, my first mower was gas-powered. My next mower was battery-powered. I really liked how quiet it was, but I did not like that, as it got older, it took more than one charge to mow my lawn (nor did I like that the battery was not easy to swap out). My current mower is gas-powered. Spent more than an hour today cleaning its carburetor. My next mower may be battery-powered, again. As much as the thought of a fully-autonomous self-driving lawn mower appeals to me, I don’t think I’m emotionally prepared to risk having it mow over things that randomly might appear in my lawn completely unsupervised though. You know, like the neighborhood kids and pets.

I’m not even emotionally prepared to risk owning a fully-autonomous self-driving vacuum. We have two dogs and a cat. All it took was one poopocalypse story involving a Roomba to cure me of that desire.

Charting VPU

 

This chart shows the adjusted close (adjusted for dividends and stock splits) of VPU since the depths of the Great Recession. It is plotted on a log scale so that constant exponential growth will appear as a straight line. I have added a trend channel in red for your consideration.

I offer no predictions on where this fund goes from here. I’m simply offering a glimpse of history. As they say, past performance is not necessarily indicative of future results. I think that would be especially true in this case.

My expectations remain low. I do not expect VPU to permanently stay in the channel. However, it is my hope that this fund will outperform the 1.64% 30-year treasury bond if held the full 30 years, and I intend to personally test the theory to its ultimate conclusion.

The ability to easily and safely make money off of money continues to become both more difficult and less safe. Unfortunately, this is a trend that I do not see improving within my lifetime.

The source data for this chart can be found at Yahoo Finance.

Thoughts on VPU

 From MarketEdge:

“Until VPU can find a price level that supports the stock, further price depreciation is probable. Momentum is negative. Wait for accumulation indicators to turn positive as a sign that demand for the stock is improving.The stock has underperformed the market when compared to the S&P 500 over the last 50 trading days.”

They rate VPU as avoid, for the same reasons I rate it as attractive. I’m not a momentum trader. I seek value. Heaven help us all if utility stocks outperform the market over the long-term.

I do expect VPU to outperform the 30-year treasury over the next 30 years though. VPU’s dividend yield is about 3%. The 30-year treasury now yields just 1.64%. My expectations are set very low. Not feeling any exuberance.

I had similar expectations for the one long-term TIPS bond filling my retirement account. For years, it poked along exactly meeting my low expectations of 2% per year plus inflation. Was happy holding to maturity. This year, money flooded into bonds though. The market made me an offer I couldn’t refuse. In theory, the same thing could happen to utilities. All it would take is more safety seeking low expectation “savers” to someday make the same decision I have recently made. And if they never do, that’s fine too. As one who is reinvesting the dividends, I’m not going to complain much about cheaper share prices to keep buying.

Setting expectations below what is likely means life is often filled with pleasant surprises. It is ultimately more rewarding to me to invest in something mundane that turns exciting than something exciting that turns mundane.

Note that I chose to buy mundane utility stocks over shares in a very exciting $669 billion car company. Perhaps too exciting. That’s roughly equivalent to a $2000 stimulus check for every man, woman, and child in the United States. How many more times do Tesla investors realistically think it can double from here? Dare I ask?

Trading Update Part 2

I slept on yesterday’s purchase decision and am reasonably comfortable with it.

Used the remaining cash in retirement account today to buy VPU @ 134.748. I’m now all in on the Vanguard Utilities ETF. Other than reinvesting dividends on autopilot, the only trading I intend to do in this account is withdrawing to meet minimum IRA distributions. That starts in about 14 years.

This also means that I’m officially an old geezer. Don’t expect any more fireworks in my retirement account, unless the entire United States power grid someday fails. Of course, in that instance cash would have hardly been a much better investment. I only half-joke. *cringe*

Still intend to use money outside my retirement account to buy more savings bonds. That part isn’t changing.

The Sarcasm Report v.272

December 4, 2016
If you can bet on one thing in this world, bet on this: Gartman

"Clearly we were wrong in selling crude oil short the day before the OPEC meeting," the editor and publisher of The Gartman Letter wrote Thursday.

Okay, so what's the next bet? I'm looking to recoup my gambling losses!

"If you can bet on one thing in this world, bet on a mother's love, and bet on the fact that OPEC cheats," he said in a recent interview on CNBC's "Futures Now."

Dammit. I'm supposed to bet on one thing but there are actually two things. Is this some sort of ongoing trick to separate me from my money?

Choices, choices. That's it. I'm going all in on this mystery mother.

10 Media Depictions Of Stepmoms That Every Mom Hates

Every mom hates? Dammit Gartman! Your sure things fooled me again!

Transocean's Mothballing Gamble

September 19, 2016
Bloomberg: Mothballing the World's Fanciest Oil Rigs Is a Massive Gamble

And while the decision to idle a chunk of its fleet would seem logical enough given the collapse in oil drilling activity, Transocean is in truth taking an enormous, and unprecedented, risk. No one, it turns out, had ever shut off these ships before. In the two decades since the newest models hit the market, there never had really been a need to. And no one can tell you, with any certainty or precision, what will happen when they flip the switch back on.

What's the worst that could happen?



[Braedon Keller backs away from computers]

Programmer: There's no need for that. It's all very quiet. It's just internal switching.

Braedon Keller: Really? No one's ever switched off a scanner before.

[Scanner switched off]

Programmer: See? I told you. No fireworks.

[Fireworks]

The Sarcasm Report v.256

Welcome to the 2^8th sarcasm report! Momentous day! So let's get right to it.

June 24, 2016
Yahoo Finance: After the Brexit turmoil, expect a stock-market rebound

FAQ

Q: When can we expect the stock market rebound?
A: Just after the Brexit turmoil ends.

Q: When can we expect the Brexit turmoil to end?
A: Just before the stock market rebounds.

Q: When would the best time to buy stocks be?
A: Just before the stock market rebounds.

Q: Would it therefore be best to buy just after the Brexit turmoil ends?
A: Yes.

Q: Is there a way we can know exactly when to buy?
A: Yes. You will want to buy just before the stock market rebounds.

Q: Exactly how will we know?
A: The Brexit turmoil will have just ended.

Q: What's the best way to know that the Brexit turmoil has not ended?
A: The stock market is not rebounding.

Q: What if the Brexit turmoil takes a long time to end?
A: Then the stock market rebound may take a long time to start.

Q: If the goal is to buy stocks after the Brexit turmoil ends but before the stock market rebounds, then how might I accomplish this?
A: You need to be informed that the Brexit turmoil is over before other investors cause the stock market to rebound.

Q: As a retail investor, how could I do this?
A: Rapidly click on Yahoo Finance headlines until you see "Brexit Turmoil Has Ended" then rapidly click the buy button on your broker's website.

Q: How will Yahoo Finance most likely know that the Brexit turmoil has ended?
A: The stock market will have rebounded.

Q: So how will I be buying at the best time if I wait to see the news?
A: This time could be different.

Q: There were previous times?
A: Yes. There was a Great Depression, an oil crisis in the 1970s, a dotcom bust recently, and a housing bust even more recently, to name just a few.

Q: Were there always stock market rebounds after the turmoil?
A: Yes, without exception.

Q: What if there is always turmoil in the future?
A: Don't ask too many silly questions. The economy is always strong and resilient.

Q: Strong and resilient enough for "normalized" interest rates?
A: You ^*# #%*% naysaying little #%^*ing #%*%!

Q: Why the potty mouth?
A: Sorry, I just noticed that the stock market futures are in the red.

Q: Does that mean the Brexit turmoil isn't over yet?
A: Yes.

Q: Is turmoil another way of saying that the stock market is declining?
A: Yes. Nobody ever says that the markets have turmoiled to new highs.

Q: So once the stock market stops declining we can expect a stock market rebound?
A: Yes. Once the turmoil is over it will be the end of the turmoil.

Four Simple Solutions to Make Housing More Affordable

June 16, 2016
MarketWatch: Why there’s a new kind of housing crisis

The “crisis” is no longer defined by the layers of distress left behind after the subprime bubble burst, but about access to stable, affordable housing.

Simple government solutions exist.

1. Always lower interest rates faster than housing prices rise. That way mortgage payments will eventually fall to zero, and maybe even turn negative like the 30-year Swiss bond just did.

2. Always raise interest rates faster than housing prices fall. Push those prices low enough and people won't need a mortgage.

3. Always lower wages slower than housing prices fall. This one's tricky. It may feel like a deflationary depression. Been there, done that. Again.

4. Always raise wages faster than housing prices rise. This one's also tricky. It's tough to stop the bidding wars once workers have good money coming in. Then again, maybe much of the bidding will be confined to canned goods, toilet paper, ammunition, oil, and precious metals instead. In the name of housing affordability, one can always hope!

Surely, with the government's help of raising and lowering interest rates and wages randomly, some combination is eventually bound to create stable, affordable housing. Or not.

Despair.com: Government

If you think the problems we create are bad, just wait until you see our solutions.

The Perfect Amazon-Proof Retail Trade Business Model

June 9, 2016
Barron's: Why TJX & Ross Stores are Amazon Proof

1. Brick and mortar.
2. Sells clothing.

Over the long-term, what more proof do you need?

Yes, Amazon.com (AMZN) and other online retailers are taking a bigger shares of the apparel business–but so far off-price retailers like TJX Cos (TJX), Burlington Stores (BURL), and Ross Stores (ROST) appear to be thriving.

Come to think of it, I'm not sure "so far" and "appear to be" qualify as proof. My bad. Sorry about that.

I'm determined to not leave you empty handed though. You came here looking for the perfect business model. I shall not disappoint!

Gasoline stations have fended off Amazon so far, and appear to be safe over the long-term.

Dammit. I did it too. It's just that I can envision Amazon drones spewing gasoline at my car someday, using advanced AI while attempting to fill my tank.

Barring that outcome, gasoline stations really have fended off Amazon so far, and appear to be safe over the long-term though.

Dammit. I did it again? Now I'm picturing less need to drive my car because Amazon's drones keep delivering goods to my home.

Is there nothing safe? What about books? People always like to read.

Help me! I'm really clutching at straws here!

Comprehensive List of All AAA-Rated Companies in the U.S.

1. Johnson & Johnson
2. Microsoft

The entire list has been sorted alphabetically and the monospaced Courier font was chosen. Since the list is comprehensive, this should really cut down your search times, lol. Sigh.

April 27, 2016
MarketWatch: Exxon Mobil’s downgrade leaves just two AAA-rated companies in the U.S.

In a sign of deteriorating credit quality...

Strong economy. Resilient economy. Investor paradise.

P.S. If memory serves, only lost two companies from the list since the last time I bothered to check. Yay.

The Rationalized Investor

May 28, 2016
Barron's: 5 Reasons the Stock Market Won’t Crash–Yet

If stock valuations looked way too exuberant; if the inflation-adjusted house price were far above its previous peak; if the yield curve were flat or inverted; and if the price of oil were surging to triple-digit peaks—then investors might want to resort to defensive measures, like selling everything and going short.

It takes all four of those things simultaneously to resort to defensive measures? That's really good to know! I have therefore come up with a cunning plan to ensure none of that happens.

The Global Great Depression II Plan

1. If you never look at stock valuations then they can never look way too exuberant. Nobody who owns stocks will want to look at stock prices during the Global Great Depression II. Trust me on this.

2. As long as inflation-adjusted house prices are only moderately above the previous bubble peak, and not far above, then there's nothing to worry about. That goes without saying. The Global Great Depression II should prevent this condition from happening in the first place though. Better safe than sorry.

3. The Global Great Depression II can definitely keep the yield curve from flattening or inverting. Permanent ZIRP permanently prevents it. As long as the short end is stuck at 0% and the long end is above 0%, then risk on, baby. Risk on! Woohoo!

4. The Global Great Depression II should easily keep oil prices from surging into the triple digits, as millions upon millions of laid off workers watch TV and surf the web instead of driving to work. Fantastic news! Don't you think?

So how do we get there? Stop buying goods and services. It's that easy. Stay home. Instead, use that money saved to purchase stocks. Barron's says they're a sure thing. Can't lose. In fact, the less goods and services you buy in exchange for the more stocks you buy, the more likely we can achieve the Global Great Depression II dream. In fact, if nobody is buying goods and services, then there won't be any need for any workers. We will have achieved economic utopia!

As a side note, since when did shorting stocks become a defensive measure? I always thought defensive measures tended to protect capital from potential losses, but hey, maybe that's just me. It's amazing what can be learned from reading Barron's. Next time I'm feeling defensive I'm just going to short stocks at random. And if I'm feeling extra defensive, I might just need to borrow money to do it. You know, leverage up my defensiveness.

This is not investment advice, lol. Sigh.

What If Jim Cramer Were a Trauma Surgeon?

May 26, 2016
CNBC: Cramer: Why lower oil prices aren’t helping millions of Americans

Nurse: The patient is bleeding profusely from both an arm and a leg. He requires immediate attention!
Doctor: That's too bad. Nothing I do can help.
Nurse: Couldn't you stitch up his arm?
Doctor: I could but it wouldn't help.
Nurse: Why not?
Doctor: Isn't it obvious? [long dramatic pause]
Nurse: No! Why?
Doctor: His leg would still be bleeding profusely.
Nurse: Couldn't you stitch up his leg?
Doctor: I could but it wouldn't help.
Nurse: Why not?
Doctor: Isn't it obvious? [long dramatic pause]
Nurse: No! Why?
Doctor: If I stitched up his leg instead, then his arm would still be bleeding profusely.
Nurse: What if you stitched up his arm and his leg?
Doctor: It would help but I can't do that.
Nurse: Why not?
Doctor: Isn't it obvious? [long dramatic pause]
Nurse: No! Why?
Doctor: Stitch up his arm and his leg with just two hands? I'm not a miracle worker!
Nurse: What if you stitched up his arm first and then stitched up his leg next?
Doctor: I could but it wouldn't help.
Nurse: Why not?
Doctor: Isn't it obvious? [long dramatic pause]
Nurse: No! Why?
Doctor: The patient died while you've been asking me all these pointless questions. This only proves what I've been saying all along.
Nurse: And what's that?
Doctor: Isn't it obvious? [long dramatic pause]
Nurse: Yes, I guess it is. Nothing you do can help.
Doctor: Booyah.

Bad Mark. Bad! Bad!

In all seriousness, lower oil prices are certainly helping millions of Americans. Is there some sort of financial news competition for posting the article with the most outlandish headline? Or is this all just part of a modern clickbait society?

I must admit that I too am guilty. Cramer as a trauma surgeon? Now that's outlandish! ;)

The Sweet Spots for the Global Economy

May 26, 2016
Wall Street Journal: Oil Prices Poised to Hit Sweet Spot for Global Economy

Range of $50 to $60 a barrel represents ‘goldilocks’ scenario for consumers, industry and the oil industry alike

What's the sweet spot for illicit drugs?

June 30, 2005
UN report puts world's illicit drug trade at estimated $321b

Annualized  worldwide illegal drug sales are greater than the gross domestic product of 88 percent of the countries in the world...

Just look at that GDP!

The bulk of the money, $214 billion, was made at the retail level; drugs sold in streets and back alleys.

Most investors love to see a good retail sales report. There is no reason our streets and back alleys can't become the envy of the world, more so than they already are.

Most of the buying was in North America, with 44 percent of all estimated sales, followed by Europe with 33 percent.

Looks like we're already in the sweet spot. That's fantastic! Now we just need to work on the other sweet spots.

Coal? It's too expensive. Nobody will be driving coal powered cars until the prices come down.

Nuclear weapons? Shouldn't cost more than a suitcase if we want consumers to buy and use them.

Human trafficking? Life is priceless. So what, maybe $15 per hour?

In all seriousness, Americans are driving 3.2 trillion miles per year in total. How much is enough?