The Procrastinator's Guide to the 30 Year Treasury Bond

The following chart shows how many years it would take for a 30-Year Treasury Bond purchase to double in nominal value (based solely on the interest earned and not on market price).


Click to enlarge.

I have added a linear trend line in red to show the long-term floor. Note that it continues to get harder and harder to make money off of money (more and more years needed to double in value), which has been a long-standing theory of mine (since I turned permabearish in 2004).

Those sitting in cash anxiously awaiting better terms are finding out that the 30-Year Treasury Bond is not exactly a procrastinator's dream. As seen in the chart, the train left the station in February of 2011 and does not appear to be returning anytime soon.

Speaking of February of 2011, that sure rings a bell.

February 2, 2011
More Dangerous Advice from Jeremy Siegel

All this means that Tips investors should beware. Although Tips may compensate holders for future inflation, the interest rate that they offer is far too low to offset the risk of rising rates.

Rising rates? Isn't that a hoot? He did not mention the risk of falling rates of course. In hindsight (so far), that was definitely the bigger risk. It was one of my best calls on this blog and I put my money where my mouth was (backed up the truck, so to speak).

Risk abounds? If we buy the 30-Year TIPS and hold it until maturity then we will earn 2.08% over inflation. That's the current rate. No matter what rates do this is what we will earn going forward. As a retiree who values safety, I am completely fine with that. I'm locking it in. I'll be buying the 30-Year TIPS this month in the auction.

The timing could not have been much better. As of today, the rate on the 30-Year TIPS is just 0.90%. The falling rate doesn't do anything for me personally, since I am holding to maturity anyway. I can say this though. I am very thankful that I avoided Jeremy Siegel's "dangerous advice"!

Where do long-term yields go from here? The talking heads say that they can only go up. I would point out that they have been saying that for as long as I can remember. Someday they might even be right, much like The Sun Will Eventually Engulf Earth--Maybe . It's complicated. It will be especially complicated if the global economy continues to sputter. And when I say especially complicated, I really mean...



The clown horn never gets old, lol. Sigh.

See Also:
Wikipedia: Rule of 72

Source Data:
St. Louis Fed: 30-Year Treasury Constant Maturity Rate

China's Miraculous Parabolic Growth Engine

The following chart shows the 12 month moving average of the natural log of U.S. imports of goods from mainland China. When using natural logs, constant exponential growth is seen as a straight line.


Click to enlarge.

It's a miracle! Just look at how well it follows the upside down parabola. Sure, there were a few hiccups (dotcom bust and Great Recession, as seen in the chart), but we're right back on the toppy lookin' long-term trend. Woohoo!

In all seriousness, China better find more customers if it wants to continue to grow like it has been. How about France or Japan?



Oops. Sorry about that. It wasn't all seriousness apparently. I apologize.

In all seriousness (attempt #2), thank goodness the global economy has apparently decoupled again. The USA will be completely sheltered from what happens next no doubt! Woohoo!



Oh, crap. I wasn't serious again? Seriously? Shame on me.

Source Data:
St. Louis Fed: Custom Chart

Is the 1 Year Treasury Yield Too High? (Musical Tribute)

With the 1 year treasury yield at a miserly 0.1%, it seems like a silly question. Or is it?

The following chart shows the 1 year treasury yield minus the annual growth in the average hourly earnings of production and nonsupervisory employees. I have added a linear trend in red (and a ±2% trend channel to go with it).


Click to enlarge.

We're currently in the top half of the channel, and in a grand scheme of continually falling interest rates to boost a decaying overleveraged economy sense, that may mean that monetary policy is actually tight right now (like it was in 2000 and 2007 as seen in the chart).

It will be interesting to see what happens when this long-term trend can no longer continue. And when I say interesting, I really mean horrifying.



In all seriousness, one of my worst economic nightmares is and has been that we would slide into a recession while already stuck in ZIRP. The bulls seem to think it is impossible. Good luck on that theory. Many things are impossible. I'm pretty sure that this isn't one of them though (see Japan). Sigh.

Source Data:
St. Louis Fed: Custom Chart

My Nomination for Hubris Quote of the Year

October 9, 2014
Bullard worried markets, Fed not on same page on rate outlook

Right now, “the markets are making a mistake” and expect the Fed to maintain its ultra-easy policy stance longer than Fed officials themselves currently expect, Bullard said.

What if the markets (and all of its many participants) are right and the Fed is actually making the mistake? I know, I know. That's just crazy talk. A small group of detached elitists holding meetings behind closed doors will always be smarter than the markets overall. That pretty much goes without saying.

Then again...

Perhaps the markets wonder why the Fed would need to raise interest rates if the price of oil keeps crashing, the global economy continues to sputter, and inflation therefore continues to remain stubbornly below the Fed's target?

February 6, 2012
Fed should raise rates in 2013, Bullard says

The belief that the U.S. economy suffering from an "output gap" that can be bridged only if borrowing costs are kept low enough for long enough is wrong, he said.

"If we continue using this interpretation of events, it may be very difficult for the U.S. to ever move off of the zero lower bound on nominal interest rates," Bullard said.

We didn't raise rates in 2013. Oops. As shocking as this must seem even in hindsight, we continued with ZIRP. Perhaps the markets remember what he said would happen if we continued? That it would be very difficult for the U.S. to ever move off the zero lower bound?

Perhaps the markets can remember even more? Could the markets think they are at least as smart as the Fed?

January 18, 2013
Fed Admitted Ignorance, Underplayed Severity Of Situation Just Ahead Of Massive Crisis, New Docs Reveal

If you want to feel confident that the Federal Reserve knows where it's going as it steers the world's biggest economy, then you probably should not read the transcripts of its 2007 policy meetings.

Those transcripts, released on Friday, show a Fed groping blindly for answers about the early market tremors preceding the financial crisis, while also blithely deciding that everything was probably going to be just fine.

The markets tend to create tremors heading into a crisis. The Fed tends to grope blindly. Perhaps that's how we can tell the difference between the two, lol. Sigh.

See Also:
Wasatch Economics: Fed failed to predict 2008 recession

We Have Fallen and We Can't Get Up (Musical Tribute)

The following chart shows the natural log of the 3 month treasury bill yield. When using natural logs, constant exponential growth (or in this case, decay) can be seen as a straight line.


Click to enlarge.

Advice for the Fed: Push on that string! Push on it!



Source Data:
St. Louis Fed: Custom Chart

Exponential Trend Failure(s) of the Day: San Francisco Tech Pulse

Click to enlarge.

The Tech Pulse Index is a coincidence index of activity in the U.S. information technology sector. The index interpreted as the health of the tech sector. The indicators used to compute the index include investment in IT goods, consumption of personal computers and software, employment in the IT sector, industrial production of the technology sector, and shipments by the technology sector.

1. The purple trend failed first (18.9% annual growth rate).
2. The weakened blue trend failed next (7.5% annual growth rate).
3. When will the weakest red trend fail (4.0% annual growth rate)?

The orange trend shows 0.0% growth since June of 1996. For those keeping track at home, that was nearly two decades ago. If this index represents the health of the tech sector, then the patient is flatlining.



October 7, 2014
Cramer’s golden rule for long-term market prosperity

Jim Cramer believes the stock market presents the best path to prosperity. But only if you follow this rule: Know what you own.

That may sound somewhat simple; it may even seem a little patronizing, but all too many times the "Mad Money" host is confounded to learn that investors don't really understand their holdings.

Long-term prosperity? The "Mad Money" host understands *his* holdings? Seriously? Forehead. Desk. Whack. Whack. Whack.

February 9, 2000
Winners of the New World - Jim Cramer

So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own?

A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?

You can have them.

In hindsight, the tech "winners of the new world" imploded. It's all perfectly understandable. The stock market, as he says, presents the best path to prosperity. Implosions add value, lol. Sigh.



Source Data:
Federal Reserve Bank of San Francisco: Tech Pulse Data Releases
St. Louis Fed: San Francisco Tech Pulse

Our Temporary Recovery (Musical Tribute)

The following chart shows temporary help services employees as a percent of all professional and business services employees.


Click to enlarge.

Always with the negative waves Moriarty, always with the negative waves.

Source Data:
St. Louis Fed: Custom Chart

Consumer Credit: To Infinity and Beyond! (Musical Tribute)

The following chart shows consumer credit divided by annual wage and salary disbursements.


Click to enlarge.

Your mission, should you choose to accept it:

Stay in that trend channel forever!

Source Data:
St. Louis Fed: Custom Chart