I live in the USA and I am concerned about the future. I created this blog to share my thoughts on the economy and anything else that might catch my attention.
This is the End and a New Beginning
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I've been thinking about this for some time.
After 21 years of writing this blog almost daily, I've decided to stop
writing the daily updates on the blog.
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Silver Deep Dive
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Silver had a memorable year (+148%). Some of this can be explained by a
decline in the dollar. I decided to do some ML analysis to look for other
insights....
I bought a pretty fantastic magnetic tool on Amazon for drawing circles. Amazon pestered me to leave reviews, so I opted to comply. After submitting the following one sentence glowing review with this video demonstrating the product in all of its glory, Amazon deleted all of my reviews and has warned me to follow their guidelines. By the way, ignoring these guidelines can apparently lead to my account being suspended. Since I own Kindle books and am not much of a risk taker, no more Amazon reviews from me. Ever.
Welcome to social media dystopian crazy metropolis, which is a few steps up from crazy town. We've come a long way since the days I deleted my Twitter account for being shadow banned due to posting puppy pictures. A long, long way. You don't even need to incite an insurrection. Progress!
We are so headed down the doom scrolling dystopian path, and with it the illusion of prosperity will surely prosper. The illusion that is, not so much the prosperity. Sigh.
The following chart shows the natural log of the CPI for shelter. When using natural logs, constant exponential growth is seen as a straight line. I have added long-term trend lines in red.
With lofty housing prices and lofty mortgage rates, it seems very unlikely that we're going to make it back to the top of the trend channel anytime soon. Which, if you think about it, is kind of odd. I could swear that the Fed really wanted that. Just not all at once, apparently. Too bad.
If I were a gambling man, I would wager that there is more risk leaving the channel to the downside than to the upside. And maybe I am a gambling man, because I continue to hold TLT. Very encouraged by today's CPI report. One battle doesn't win the war though, of course.
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.*
The following chart shows the unemployment rate minus the 12-month percentage change in the median CPI. I have added long-term trend lines in red and a short-term arrow in green.
I looked at Earl and his eyes was wide
His lip was curled, and his leg was fried
And his hand was froze to the wheel
Like a tongue to a sled in the middle of a blizzard
I says, Earl, "I'm not the type to complain
But the time has come for me to explain
That if you don't apply some brake real soon
They're gonna have to pick us up with a stick and a spoon"
The following chart shows the natural log of the 30-year Treasury yield. When using natural logs, constant exponential growth (or decay) is seen as a straight line. I have added long-term trend lines in red and a short-term trend arrow in green.
Will the long-term trend ultimately prevail? Trapped in a world of nearly permanent ZIRP?
Will the short-term trend break everything? Housing! Stocks! Bonds! Employment!
Will it be a combination of both? Or neither?
Stay tuned for the next exciting and terrifying episode of...
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.
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.
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.
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.
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.
Six in 10 adults say they even want to become a billionaire one day, according to a recent report.
If 60% of Americans get their wish, then hello hyperinflation. Talk about unintended wish consequences.
Some 44% of U.S. adults believe they have the available tools to become billionaires, largely fueled by speculative investments such as cryptocurrencies, according to the Harris Poll’s recent Americans and Billionaires Survey.
Gone is the old school illusion of prosperity era. All hail the new and improved delusion of prosperity era! 44% can't be wrong!!
Bought a narrow white Billy bookcase at the Seattle area Ikea store yesterday. Would have bought it sooner but it has been out of stock. It's been a day. It's already out of stock again. Out of curiosity, I checked the status of their normal white Billy bookcase. It too is out of stock.
Bought a white 5x5 Kallax at Ikea recently. Would have bought it sooner but it had been out of stock. It was also out of stock shortly after I bought it. It's out of stock right now. Once again, out of curiosity, I checked the status of their other white Kallax shelf units.
4x4? Out of stock.
4x3? Out of stock.
4x2? Out of stock.
4x1? Out of stock.
3x3? Out of stock.
2x2? Out of stock.
It's like we're living in a WW2 supply chain disruption movie. Doesn't seem to be getting better yet. The U-Boats are now seemingly hunting allied cargo ships in packs.
The following chart shows the natural log of the median CPI. When using natural logs, constant exponential growth is seen as a straight line. I have added a trend channel in red.
Once the inflationary extremes are stripped out, it's just more of the same. When combined with exponentially decaying long-term interest rates, it is of little consolation to safety-seeking long-term savers though.
The broken-down car was a Mercedes that had come to a stop in a travel lane. The police cruiser was stopped behind it with its emergency lights flashing. The left front of the Tesla Model 3 crashed into the side of the police car, and then hit the Mercedes.
That darn car! What kooky crime caper will it think up next?
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