Exponential Trend Failure of the Day: U.S. Industrial Chemical Production

Click to enlarge.

The U.S. chemical industry, a more than $800 billion enterprise, is heavily linked to the overall condition of the nation’s economy. It has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain. - Zacks Investment Research, May 20, 2016

June 15, 2016
The Business Insider: US industrial output fell in May; auto production plummets

The Federal Reserve said Wednesday that industrial output - which includes factories, mines and utilities - dropped 0.4 percent from April. The decline reversed the 0.6 percent gain seen between April and March, an improvement that provided some evidence that the industrial economy was turning around after a period of extremely weak performance.

Source Data:
St. Louis Fed: Industrial Production: Nondurable Manufacturing: Chemical

The Fed's Altitude Problem

June 15, 2016
Insight - Fed faces battle to escape world's low interest rate grip

That is a far cry from the 3.5 to 4 percent that the Fed's policy rate has averaged since the 1990s, and means the central bank will treat each move with particular caution, current and former Fed officials say.

The Fed's been here since 1913. In 1954, 25 years after the Great Depression began, the Fed's policy rate was a mere 1%. It took another 27 years to peak at 22% in 1981. Barring the cyclical ups and downs, it's been falling ever since.

So what makes the 3.5 to 4 percent since the 1990s so special? How did it somehow become the benchmark for what is normal?

Control Tower: We show your altitude at 120 feet. Can you confirm?
Captain Yellen: Our instruments show 120 feet.
Control Tower: Increase altitude to 4,000 feet.
Captain Yellen: What it was 90 minutes into the flight?
Control Tower: Yes, 4,000 feet.
Captain Yellen: We have increased altitude to 370 feet.
Control Tower: Please increase altitude to 4,000 feet.
Captain Yellen: In order to reach 370 feet, we had to reduce airspeed.
Control Tower: Maintain airspeed!
Captain Yellen: We had no choice. One of our other gauges is dangerously low.
Control Tower: Which gauge?
Captain Yellen: Fuel. Shows empty.
Control Tower: When did this happen?
Captain Yellen: 81 minutes into the flight.
Control Tower: What was your altitude at that time?
Captain Yellen: 21,000 feet. We've been gliding ever since.
Control Tower: Why didn't you tell us then?
Captain Yellen: We didn't want you to panic.
Control Tower: At least you still have use of the control stick. That's something I guess.
Captain Yellen: It's a bit loose and accommodative.
Control Tower: WHAT? HOW LOOSE?
Captain Yellen: Let's just say that the flight attendants are currently asking the passengers if they can spare any duct tape or crazy glue.

Today's Don't Laugh Challenge v.004

It's the simple joys.

Hahaha! :)

How am I going to come up with a 5th challenge? Anyone who survived this one is immune!

Great News for Department Store Investors

Click to enlarge.

Although sales continue to decline at a relatively rapid pace and are therefore not even remotely keeping up with population growth or inflation, at least they are finally above the broken parabolic trend!

If past history great news was all there was to the game, the richest people would be librarians spin doctors.

Source Data:
St. Louis Fed: Retail Trade: Department Stores

Today's Don't Laugh Challenge v.003

There may very well be a special place in hell reserved for me for laughing during this video, but if you laughed too, see you there! Hahaha! :)

The Strong and Resilient U.S. Consumer

June 14, 2016
U.S. retail sales point to strong domestic demand

Economists said based on May's broad increase in retail sales, consumer spending in the second quarter was growing between a 3 percent and 4 percent annualized rate.

Hurray! Consumers still want to buy stuff!! Woohoo!!! :)

June 14, 2016
WSJ: Why Synchrony Financial Spooked the Credit-Card Industry

Consumers seem to have generally suffered a decline in their ability to pay debts, they said, possibly because they have taken on more auto and student loans.

Hurray. Consumers still want to buy stuff. Woohoo. :(

The Biggest Mistake This Investor Made Today

June 14, 2016
Most U.S. investors are making this big mistake

One of the biggest mistakes an investor can make is overweighting a single asset, but that’s what most U.S. investors are doing right now, according to analysts.

Not sure that is a big mistake. Overweighting a single asset class allowed me to retire early.

Meb Faber, co-founder and chief investment officer at Cambria Investment Management, said that a majority of U.S. investors are too concentrated in domestic equities.

Although I don't own stocks any longer, I do know that stocks only go up. Everyone knows it. It's common knowledge, again. Don't let my sarcastic tone fool you. I have the utmost confidence in future returns from here, as long as I'm not required to back my words with my own money. Hey, is there a way I could back my words with other people's money?

“Managed futures funds are great to protect portfolios at times of stress, but they also tend to perform poorly in sideways markets. Managed futures funds that charge reasonable fees—between 1%-1.5% would be a good option to smooth out wild rides in the portfolio,” Faber said.

I might be making a big mistake here, but cash protects my portfolio in times of stress, and also tends to perform poorly in sideways markets. Perhaps I just need to find a manager who will manage my cash while charging me small fees? Or should I just continue to park it in an online savings account that pays at least some interest?

I bring it up because it will be a cold day in hell before I invest in a managed futures fund. If I wanted to pay someone else to gamble on zero-sum games with my money, games in which for every winner there must be a loser, then I'd be living in Las Vegas and using past performance to find the luckiest roulette table players. But hey, maybe that's just me.

So what actually was my biggest mistake today?

I read the comments of this article. Not only is GDFGDF DFDSGSDGFD nearly as prolific as I am, he/she has also mastered the use of UPPERCASE. Let me offer one small excerpt from just one of the many comments (out of 15).

ТHE R1CH РE0РLE АND C0MРАN1ES N0W H0LD А L0Т 0F SHАRES - F0R EXАMРLE 1F HYР0ТHEТ1CАLLY 1Т WАS 50 - 50 BEF0RE ТHE LАSТ BUYBАCK - ТHEN S0ME 10 ТR1LL10NS 0UТ 0F 20 1N USА 0UТ 0F 20 - ТHEN W1ТH S0ME 7 АND M0RE BUYBАCK ТHEY H0LD H1GH SHАRE 0F EQU1ТY. 1F EQU1ТY G0ES D0WN 0R ТHEY SТАRТ Т0 SELL ТHE РR1CE W1LL DECL1NE FАSТ. WH0 W1LL SECURE FURТHER BUYBАCK АS S0ME РR1VАТE B0NDS Y1ELDS 1NCREАSE АND ТHEE АRE N0Т MUCH FL0АТ1NG SHАRES 0N ТHE MАRKEТ SUРР0SEDLY - WH0 W1LL GEТ 1N 1RRАТ10NАL EXUBERАNCE FURТHER АS ТHE РR0F1ТS DECL1NE F0R SEVERАL QUАRТERS АLREАDY АND ТHE РR0SРECТS АRE F0R M0RE ТHEN 10 YEАRS RECESS10N 1N EU АND USА.

If you have made it this far into this post and are still reading, then I offer you a sincere apology. We will never get this time back, and as they say, time is money. It has been our biggest mistake today. ;)

Economics and the Completely Impossible

June 14, 2016
Bloomberg: How I Helped Inflate the Housing Bubble

But we turned out to be wrong about Twin Cities housing prices. As part of our move to Rochester, where I now work as a professor of economics, we recently sold that house. Including money spent on renovations over the years, our capital loss came to about 45 percent of the 2005 purchase price. Back when we bought the place, I would have said that such a loss was completely impossible.

Since it is completely impossible for an economist who lost 45% on real estate purchased at the peak of the housing bubble in 2005 to become the current president of the Minneapolis Fed, we all should have complete and utter confidence in the Fed.

What? He is the president? Stop it! Get out!



Since it is completely impossible to tune a piano, nobody will ever enjoy piano music.



What? That's completely impossible! There's no way her fingers can be moving that fast!