Commercial Paper Outstanding

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October 7, 2008
FRB: Press Release

The commercial paper market has been under considerable strain in recent weeks as money market mutual funds and other investors, themselves often facing liquidity pressures, have become increasingly reluctant to purchase commercial paper, especially at longer-dated maturities. As a result, the volume of outstanding commercial paper has shrunk, interest rates on longer-term commercial paper have increased significantly, and an increasingly high percentage of outstanding paper must now be refinanced each day. A large share of outstanding commercial paper is issued or sponsored by financial intermediaries, and their difficulties placing commercial paper have made it more difficult for those intermediaries to play their vital role in meeting the credit needs of businesses and households.

As seen in the following chart, problem "solved".


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For what it is worth, I continue to believe that this economy cannot tolerate high real interest rates any longer. It's just way too leveraged. As seen in the first chart, the epic exponential trend failure in commercial paper outstanding began in 2004. As seen in the second chart, interest rates on commercial paper started to rise in 2004. I doubt very much that was just a coincidence.

March 27, 2012
Wrong Way Siegel Strikes Again


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Hello? Interest rates way too high relative to trend? Could someone please explain how Ben Bernanke became Time Magazine's 2009 Man of the Year? Seriously, I'd really like to know.

Just opinions. This is not investment advice.

Source Data:
St. Louis Fed: Commercial Paper Outstanding
St. Louis Fed; 3-Month AA Nonfinancial Commercial Paper Rate

Full Time vs. Part Time

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July 18, 2013
Actually, Bernanke Has Done a “Phenomenal Job”: Jack Rivkin

The ‘happening’ Rivkin refers to is the slow but steady recovery the U.S. economy has mustered since the dark days of the financial crisis.

Would Typhoid Mary have done a "phenomenal job" if she had offered ZIRP to her victims? It certainly sounds medicinal.

Perhaps "victims" isn't quite the right word. I'm sure Ben Bernanke was doing all he could to warn investors of the risks at the very top of the housing bubble.

But if Bernanke is confirmed as Fed chief, and if the housing market slows more than he expects, he would be unlikely to use the central bank's power over short-term interest rates to prop up falling housing prices for the sake of individual homeowners, according to comments he has made in numerous speeches and statements in academic papers.

"There's no housing bubble to go bust" but even if there is one, don't expect 4+ years of ZIRP? Memory lane sure cracks me up sometimes. Heck of a job Bernanke! ;)

Source Data:
St. Louis Fed: Custom Chart

Net Interest Margin's Angle of Descent

Net Interest Margin

Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets. It is similar to the gross margin of non-financial companies.

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This is your pilot. I have some good news and some bad news.

First, the good news. Thanks to the temporary benefit of ZIRP, we temporarily gained some altitude. We actually broke the long-term trend towards the ground (as seen in the blue trend line above). Hurray!

Now, the bad news. The plane has stalled. We'll be coming in a bit steeper than we had originally planned (as seen in the red trend line above). Please brace for "dramatic changes in cabin air pressure".


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I do have some more good news though. We're making excellent progress on our long-term plan to catch up to the Japanese banking system. A mere -0.03% per year? You call that a descent angle?

In all seriousness, if the net interest margin actually does rise from here then it probably won't be because banks suddenly decide to pay less interest to depositors. The typical yield of a 5-year CD is now just 0.5%. How much further can it fall? Amazingly, that's 0.9% less than a 5-year treasury that doesn't even require FDIC deposit insurance. In general, banks must have one heck of a marketing staff.

Survey: CD early withdrawal is costly

Savers who dump low-yielding CDs before maturity may pay a steep price, according to a Bankrate survey of early withdrawal penalties at 100 institutions.

Almost all of the institutions surveyed -- 92 percent -- not only levy a penalty, but also reach into principal to cover fees if necessary.

Source Data:
St. Louis Fed: Net Interest Margin for all U.S. Banks
St. Louis Fed: Bank's Net Interest Margin for Japan

Full-Time Employees per Capita

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Here's a crazy thought experiment.

Let's assume for the moment that this chart has merit.
Let's assume for the moment that ZIRP will end within 3 years.

Neither of these are a given of course. It's just a crazy thought experiment!

How many milliseconds will it take before we slide back into ZIRP again?

See Also:
Trend Line Disclaimer
Retail Trade Employees per Capita
Mish: An Analysis of July Employment Numbers 1955 to 2013...

Source Data:
St. Louis Fed: Full-Time Employees per Capita

Long-Term Bonds vs. Short-Term Bonds

The following chart shows the spread between the 20-year treasury yield and the 5-year treasury yield. There's a missing data gap in the late 80s to early 90s, but it should not materially affect the conclusions.


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This chart contains two glaring linear trend failures. The first was a break from the long-term trend in blue (dotcom bubble popping). The second was a temporary break from the short-term trend in red (just before the full effects of the housing bubble were apparent to all).

Investors have been seriously burned twice so far (dotcom and housing) and it is my belief that if we are constantly told that treasuries are in a bubble, then investors will believe that treasuries must be in a bubble. Few seem to question what yields in Japan have done following their housing bubble in the early 1990s though. Nearly 5 years of ZIRP here haven't seemed to change many opinions either. Go figure.

Since 2001, there has been unprecedented fear of investing in long-term treasury bonds. That's what the red line in the chart tells me.

In 2001, the 20-year treasury bond yield averaged 5.63%. Many investors would sell their souls for that yield now (especially the ones who are still sitting in cash awaiting even higher yields). What will investors wished they had sold once the next recession hits? I'm going to suggest that it might not be today's 3.39% 20-year treasury bonds. I think there is a much more likely asset.

July 29, 2013
DEJA VU: People Are Using Borrowed Money To Buy Stock Like It's 2007 Or 1999

Deutsche Bank has a monster note out on margin debt that has been making the rounds. The conclusion of the note is rather simple – today’s euphoric borrowing on margin to buy stocks is reminiscent of past bubbly equity market periods (see here for more).

Just opinions! This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart
U.S. Treasury: Daily Yield Curve Rates

Gold: Bulls vs. Bears

The following charts show how many hours the average production and nonsupervisory employee would have to work to buy one ounce of gold (assuming for the sake of argument that no taxes would be paid on the earnings).


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The exponential trend has failed. Working 80+ hours to buy a single ounce of gold is absolutely ridiculous. Just think how many rolls of toilet paper and cans of food that could buy! The gold bubble is popping just like it did in the early 1980s. Table pounding screaming sell!


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The exponential trend has not failed. The economy still stinks. Two-year treasuries pay just 0.3%. The economy is clearly not strong enough to support higher real yields. Any talk of rising real yields is therefore absolutely ridiculous! Gold sits at the very bottom of its exponential trend channel. Table pounding screaming buy!

I think I've pretty much summed up what you should do with gold. Invest accordingly, lol. Sigh.

Source Data:
St. Louis Fed: Custom Chart

Retail Trade Employees per Capita

The latest employment report is out. I see that 23% of the jobs added over the last three months were in retail trade. Wow, is that really where we can expect the jobs of the future to be? The long-term trend in the following chart would argue otherwise.


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I'm not suggesting that I can use 2nd order polynomials to accurately predict the future. That said, this is certainly a trend I would not want to bet against. For what it is worth, those red diamonds made lousy entry points for stock market investors.

I'm told that the blue diamond is an excellent entry point though, repeatedly, on CNBC. Please forgive me if I choose to pass.

This is not investment advice.

Source Data:
St. Louis Fed: All Employees: Retail Trade
St. Louis Fed: Population

The Construction Euphoria Is Over

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Those anxiously awaiting the next construction boom may have to wait a very long time. As seen in the chart, we're still sitting at the very top of the long-term exponential decay channel.

Is this really as bad as it looks?


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As seen in the chart above, the answer would probably be yes. It is as bad as it looks. The uptrend from the pit of despair (November 2009) is over. Now we're heading back down again. Further, we're actually below the declining trend line.

For what it is worth, I am still firmly in the permabear camp. I cannot understand the optimism in the face of overwhelming long-term evidence to the contrary.

August 1, 2013
Stock market roars to record highs, S&P 500 closes above 1,700 for first time

Because the stock market often looks ahead 6-9 months, it’s not unusual for stock indexes to be ahead of economic indicators, when the economy is improving or worsening. Right now, stock investors may be anticipating a stronger economy and better earnings next year.

It can "roar" without me, just like it did from 2004 to 2007. This is not investment advice.

Source Data:
St. Louis Fed: All Employees: Construction / All Employees: Total nonfarm
St. Louis Fed: Real Total Construction Spending Growth per Capita