The Death of ZIRP

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List of premature obituaries

Samuel Taylor Coleridge: in 1816 the writer heard his death mentioned in a hotel by a man reading out a newspaper report of a coroner's inquest. He asked to see the paper, and was told that "it was very extraordinary that Coleridge the poet should have hanged himself just after the success of his play [Remorse]; but he was always a strange mad fellow". Coleridge replied: "Indeed, sir, it is a most extraordinary thing that he should have hanged himself, be the subject of an inquest, and yet that he should at this moment be speaking to you."

Source Data:
St. Louis Fed: 1-Year Treasury Constant Maturity Rate
U.S. Treasury: Daily Treasury Yield Curve Rates

Where Are the Certificate of Deposit Vigilantes?

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We always hear about the bond vigilantes and how they are destined to arrive at any moment. However, as seen in the chart above, the certificate of deposit vigilantes are nowhere to be seen. Why do you suppose that is?

The following chart shows how much more the typical certificate of deposit "vigilante" could earn if they'd simply buy 5-year treasuries directly from the government instead of buying the typical 5-year CD from their local bank. As an added bonus, they wouldn't even need to worry about FDIC insurance.


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I participated in February 2011's treasury giveaway, much to the dismay of Jeremy Siegel. No complaints on that one so far. I also participated in June 2013's treasury giveaway (using interest from my purchase in 2011). No complaints on that one either.

I bought intending to hold to maturity. That is still the plan. Meanwhile, investors panic out of bond funds and into cash the instant interest rates go up? I can't really explain it. I guess many don't enjoy earning more interest. Need proof? Can we not see the willingness of savers to accept a mere 0.5% rate on 5-year CDs?

That said, I'm not at all advocating the purchase of a 5-year treasury. For what it is worth, I went out a heck of a lot further on that steep yield curve. Unlike many, I do not believe that this economy can support high real yields either now or well into the distant future. It has there for been my plan to lock real yields in whenever I could and I have been doing so since 2000 (the year I bought my first I-Bond).

This is not investment advice. It's just the opinion of a random anonymous blogger on the Internet. Take it for what it is worth.

Source Data:
St. Louis Fed: Custom Chart

Real GDP Growth: A Long Term Perspective

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A picture's worth a thousand words.

Have no fear though! Ben Bernanke assures us that 2.9% to 3.6% real GDP growth is coming back in 2015. And let's not forget the 3.5% real yields that will no doubt come with it! Mark them on your calendar people! Good times ahead! Just need to keep pushing this wreck of a derailed economic train right back on the tracks. What could possibly go wrong?

This post is in response to every talking head on CNBC who tells me to keep a long-term perspective. Oh, yeah. I'm keeping a long-term perspective all right. Don't you worry about that, lol. Sigh.

Source Data:
St. Louis Fed: Real Gross Domestic Product

Housing Starts and Stops

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32% annual growth can't last forever. Right?

As a side note, February of 2011 holds a special place in my heart.

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."

It's been 2 1/2 years since Jeremy Siegel warned us.


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Behold the rising interest rate environment!



See Also:
The Road Not Taken

Source Data:
St. Louis Fed: Housing Starts
St. Louis Fed: Federal Funds Rate

What Could Possibly Go Wrong?

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That?

It's just a simple answer to a simple question. I'm not saying that it will happen. I'm simply saying that it could happen.

July 17, 2013
Hilsenrath: What Bernanke Means

“If a substantial part of the reductions in measured unemployment were judged to reflect cyclical declines in labor force participation rather than gains in employment, the committee would be unlikely to view a decline in unemployment to 6.5 percent (unemployment rate) as a sufficient reason to raise its target for the federal funds rate.

What if we don't even make it down to 6.5 percent before the next recession hits? As seen in the following link, Ben Bernanke's powers of assumption appear to exceed his powers of prediction (by a fairly wide margin).

October 25, 2005
Bernanke: There's No Housing Bubble to Go Bust

"Without these policy blunders by the Federal Reserve, there is little reason to believe that the 1929 crash would have been followed by more than a moderate dip in U.S. economic activity," Bernanke wrote.

Welcome to the first "moderate dip" of the 21st century. Thankfully, there was no housing bubble to go bust and therefore there were no monetary policy blunders leading into it, lol. Sigh.

Sarcasm, it isn't just for breakfast any more.

See Also:
Trend Line Disclaimer

Source Data:
St. Louis Fed: Custom Chart

The Housing "Recovery" in One Chart

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Welcome to 1989.

Source Data:
St. Louis Fed: Custom Chart

Exponential Trend Failure of the Day

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How are we doing relative to the long-term exponential trend?


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It could be worse I suppose. At least we're still in the declining trend channel.

Source Data:
St. Louis Fed: Industrial Production Index

The Road Not Taken

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The Road Not Taken

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less travelled by,
And that has made all the difference.

Source Data:
St. Louis Fed: Custom Chart
The Road Not Taken, by Robert Frost (1916)