The Banking System: Don't Be a Hero

June 19, 2016
USA Today: What to do if you’re in a bank robbery

1. STAY CALM
2. OBSERVE THE ROBBER, IF YOU CAN
3. DON’T BE A HERO
4. BE COOPERATIVE, UNLESS …
5. DON’T COMPARE NOTES WITH OTHER WITNESSES
6. CONTINUE TO BANK CONFIDENTLY

1. Stay calm as you sell all of your banking stocks at the early stages of the financial crisis. Always better to calmly sell early, than sell late in a blind panic.
2. Observe the bank CEOs, if you can. In times of trouble, they can be elusive. Do not lose hope. For those who are patient, simply wait for them to testify before Congress. Watch them squirm for taxpayer bailouts.
3. Don't be a hero. Don't deposit more money in the weaker institutions until the crisis has passed. You'll know when the crisis has passed. Interest rates will be normalized to what they were just before the legendary dotcom crash, because nothing is more normal than that.
4. Cooperate. As they say, don't fight the Fed, unless fighting the Fed involves buying long-term treasuries before the Fed does. If that's the case, fight the Fed with every fiber of your being. Don't let the Fed win! Gobble them up faster than they can! And should you ever "need" to sell instead of simply holding to maturity as I intend, then be prepared to potentially fight the Fed again. Sell before they do or you might regret it, unless, of course, the Fed intends to hold to maturity too, like they've been doing.
5. Don't compare notes with other witnesses. The last thing this country needs is a bunch of naysayers continually pointing out the weak financials. Whatever you do, don't start an Illusion of Prosperity blog. Oops.
6. Continue to bank confidently. 25-sigma events are relatively rare. The odds of two of them happening in one lifetime are probably less than 50%, unless something unexpected happens. You know, like the sudden appearance of a flock of black swans flapping to the beat of the Candy Mountain song.

First World Problem of the Day

June 17, 2016
Why Spending Tends to Increase in Retirement

Filling Up Time Costs Money

“Once you enter retirement, your weekend is now seven days a week instead of two, which gives you triple the amount of free time to make spending decisions,” said CFP Chris Teofilak of the Index Fund Wealth Group.

Nobody warns us about having to make so many more spending decisions. It's exhausting!

Finding hobbies, attending events and traveling all cost money — more than retirees may have budgeted for.

Finding hobbies is my single largest retirement expense. No doubt about it.

My Typical Retirement Morning

7:00am: Butler wakes me. I slip him an extra $5 for the effort.
7:05am: Full day ahead so take a quick shower.
7:10am: Head down to the dining room for breakfast.
7:15am: Thank my chef. Hand him two tickets to today's baseball game.
7:20am: Order something fun at Amazon.com.
7:30am: Tell the chauffeur to bring the car around.
7:40am: Meet my personal hobby consultant. Browse list of potential new hobbies.
7:41am: Ask him how he likes his new yacht, secretly hoping that he'll offer to take me around the lake, since the fees he charges paid for it. No luck. There's always tomorrow though.
7:45am: Getting a bit hungry. Time for second breakfast. Decide to slum it at McDonalds with my chauffeur. I notice that he has quite an appetite on days when I offer to pay.
8:00am: Need some coffee. Off to Starbucks.
8:10am: Boredom's setting in. Desperately need to buy something. Closest store is Home Depot. Buy some valve thingy from the plumbing aisle. Not sure what it does. Has an interesting shape though.
8:20am: Arrive back at home. Butler offers to take my valve thingy and store it in the valve thingy room. He's always looking out for me. Give him another $5.
8:30am: Call my broker. Tell him I want to sell something that's not going up and buy something that will. He says that won't be a problem. Great guy. Make mental note to buy him something special this Christmas.
8:40am: Watch 10 minutes of a live wrestling event on the TV. I really thought the big one would win but apparently should have gone with the guy in the better costume. Live and learn.
8:50am: Call my bookie to see how much that's going to cost me.
9:00am: Head out to the backyard to watch the Amazon drone land. I know I bought something fun. Wonder what it is!
9:05am: Oops! It's the same valve thingy I just bought at Home Depot. Don't I feel silly!
9:10am: Slip the butler another $5 and hand him the valve thingy. He tells me the valve thingy room is 95% full.
9:15am: Call my personal general contractor on speed dial. Wants to know if I want to continue expanding my mansion towards the protected wetlands. That's a no-brainer. Certainly not going to expand it towards the pool!
9:30am: Call my personal politician about acquiring the necessary permits. He asks me the same question he always does. Of course I will contribute to his campaign. He knows how to get things done!
9:45am: Brunch! Making so many spending decisions builds up the appetite. But where? Hmm.
10:00am: Deciding to circle the city in my private jet while eating fresh fruit and cottage cheese is the best decision I've made today. It wasn't a hard decision though. I've been making the same decision every day since I retired.

It's not easy spending money to fill time, but somehow I make do.

In all seriousness, if you are looking for ways to fill your free time with money then I feel very, very sorry for you. Free time should be savored for the precious commodity that it is, not filled. It's not some sort of evil sinkhole that causes nothing but pain and despair!

I am never looking to fill my free time. I cannot relate to the concept. Time flies when you're having fun! There are an infinite number of fun things to do. Saying that they all cost money means that before money was created, nobody had any fun. Yeah, right. And I've got some oceanfront property in Kansas I'd like to sell you!

We've Hit Poo Poo Point Again

Click to enlarge.

I rest my case.

Dammit. I burned free time posting this. You burned free time reading it. We're certifiable! I hope you realize that!! Maybe I can still salvage something from the wreckage though.

Hahaha! :) < ---- Fun! Whew!!

The World Needs Federal Reserve Trading Cards

June 17, 2016
Yahoo Finance: It's time for the Federal Reserve to fire James Bullard

How does one with such a poor track record stay employed?

The answer is simple. It gives us all something to talk about. Keeps the conversation flowing. Gets our minds off the upcoming presidential election. Unites the country at a time when we are most polarized! James Bullard must not be fired! He's doing the country a great service!

Look at all the support I've given him over the years. Is it not enough?

May 30, 2016
Fed's Bullard: Global Markets Well-Prepared for Summer Rate Hike

Potty trained, I said. Potty trained!

April 15, 2015
Fed Up

Bullard also expressed his continued frustration that financial markets are not pricing in the same level of interest rates as the Fed’s own projections. Fed fund futures suggest the first increase in rates will come in December.

Does it really matter if the markets were exactly right and Bullard was exactly wrong? Not in the least! Got us talking! Communicating! Being more transparent!

January 16, 2015
James Bullard's Linear Trend Failure of the Day (Musical Tribute)

That one inspired me to actually make a chart. People love charts! Good job!

November 16, 2014
Bubble Blowing Careers for Dummies (Musical Tribute)

Don't let the title fool you. It's all about Bullard!

October 9, 2014
My Nomination for Hubris Quote of the Year

I have a great bet for you. I have no idea who I nominated. It's been a long time and my memory just isn't what it used to be. That said, I'll bet you $100 that, out of 7 billion people on this planet, it was James Bullard. 7 billion to 1. The odds are incredibly stacked in your favor. You'd be a fool not to take the bet. I'm practically giving my money away!

So what does all this mean? Isn't it obvious?

We need Federal Reserve collectible trading cards! I'd definitely trade one Yellen for two Bullards! Those Bullards would only go up in value as time goes on! We can't ever seem to stop talking about him. Collectible paper assets that only go up in price? Never deflate? A monetary policy dream come true! Get you some!!

Bad Mark. Bad! Bad! Hahaha! :)

The Sarcasm Report v.255

June 17, 2016
Yahoo Finance: America's hidden epidemic: food addiction

We hide it so well!



That's it. I'm ending my food addiction.

I went cold turkey today, with mayonnaise, three sliced olives, a slice of Swiss cheese, and two slices of whole wheat bread. Seriously. Ending an addiction has never been so easy!



What can I say? I'm addicted to the craziest things. Food, water, oxygen, and video games! Ridiculous!

In all seriousness, I don't think we can end our food addiction. We actually do NEED food. It's not like gambling, debt, cigarettes, or cocaine. I think we can all agree that many of us, myself included, would be doing better if we ate less though.

Eat fewer calories. Burn more calories.

This isn't exactly rocket science. My optimal diet book still needs more work though. There are 20% more words than needed.

Calories? Eat fewer. Burn more.

Much better! Needs a title. Hey, why don't I just move the contents to the title? That way the book won't need any pages! Think of the money that will be saved on printing costs! Genius!

Uh, oh. Did I type this in public? Don't you dare steal all five words of my optimal diet book! It could be worth millions! Hahaha! :)

The College Degree Prisoner's Dilemma

Of those aged 25 to 34 in the civilian labor force, how many have bachelor's degrees or higher?


Click to enlarge.

This is yet another parabola doomed to fail, for it will not be possible to exceed 100%.

Prisoner's Dilemma

The prisoner's dilemma is a standard example of a game analyzed in game theory that shows why two completely "rational" individuals might not cooperate, even if it appears that it is in their best interests to do so.

Let's say two high school seniors named John and Jane both really want a particular job in their small farming community. The job does not require a college education, but higher education would still be preferable. They are the only two people who will apply for it. The previous person who has that job will be retiring in 4 years. What should they do?

If John goes to college, then Jane must also go to college in order to compete. If Jane goes to college, then John must also go to college in order to compete. It would be in both of their best interests if they cooperated and neither went to college. Going to college pushes both of them into debt and if they both go, neither will have the advantage over the other.

I think that's where we are at in this country. That's why we're seeing the parabola in the chart. Unfortunately, jobs requiring college degrees are not growing as a parabola. Not even close. In my opinion, the number of heavily indebted overqualified workers in jobs that really shouldn't require a college degree will continue at an ever alarming rate. Sigh.

I don't see what can reverse the trend until it finally reaches the ultimate breaking point. College is becoming the new high school, only with extra debt and with four more wasted years. That's not true for everyone obviously, but for many workers it is. The advantage of going to college is being lost for those who will ultimately end up in jobs that don't require it.

Unfortunately, I don't see an alternative. Even if you end up in a job that doesn't require a college degree, you may still need the degree just to get it. All things being equal, most employers would choose the more educated worker. I'm therefore not offering "do not go to college" advice. I'm simply trying to point out the reality of what is happening. When it comes to college education for the masses, especially those who ultimately end up in low paying jobs even with a college degree, the glass is half full, and leaking.

Source Data:
St. Louis Fed: Custom Chart

Complete Faith in Our Corporate Prophets and Their Shrines

The following chart shows sales and office occupation employment. 33+ million workers can't be wrong. The economy is doing fantastic.


Click to enlarge.

I know what you must be thinking. Although the parabolic trend from 1984 through 2007 failed to the downside miserably, and we're still way below trend, we desperately need to build more office space for all of our future sales and office occupation employees in an increasingly modern, digital, outsourced, and automated world. Yes! Over the long-term, we'll need a lot more office space! No doubt about it. Just need to keep the faith!

The next chart shows total private office construction spending.


Click to enlarge.

Woohoo! Forget those last two times when office construction spending fell off a cliff, this time is totally sustainable! Just look at total private office construction spending go! Once more unto the breach, dear friends, once more! And then once more after that just to be safe!

But really, how much faith is there? Wouldn't it be nice to know? Let's find out. The following chart shows total private office construction spending divided by total private religious construction spending.


Click to enlarge.

Hallelujah! That's a biblical amount of faith! Preys be to our new gods! Corporate shrines for everyone!

Too much sarcasm? Hell no! Too much optimism! That's what I'm always suffering from, but somehow I manage to miraculously endure.

This is not investment advice, especially for those wishing to start a new corporate cult doing new corporate things in entirely new and exciting corporate ways. Oops, I mean corporate culture. Freudian slip.

In other news, I've updated the last post to show the 8,000 doctoral degree workers paid at or below the federal minimum wage. So we've got that going for us too, which is nice. Sigh.

Source Data:
St. Louis Fed: Employment Level: Sales and Office Occupations
St. Louis Fed: Total Private Construction Spending: Office
St. Louis Fed: Custom Chart

Statistics Challenge: How Many in 2015? (Updated)

Click to enlarge.

If it helps, here are some facts to get you started on your prediction(s) for the future.

1. There are seven data points at 1, four at 2, and two at 3.
2. The median is 1.
3. The average is 1.615.
4. The standard deviation is 0.768.

As a bonus challenge, if you can figure out exactly what this data represents by any means at your disposal, I will be seriously impressed.

Feel free to keep your guesses to yourself, but if you are curious about the answer, I will be updating this post in 24 hours or so to fill in the missing information.

Update:


Click to enlarge.

I bet if we would have asked each member of the Federal Open Market Committee how many doctoral degree workers would be paid at or below the federal minimum wage in 2015, they would have each said about 1,600. You know, because labor conditions are generally improving, blah, blah, blah. And since all may have agreed, one might even start to believe their predictions as a group would hold even more weight.

Nobody would have said 8,000. It is 8.3 standard deviations from the 2002 to 2014 average. It's an 8-sigma event! Virtually impossible!

And yet, it wasn't virtually impossible. It's just bad statistics. It's not a normal distribution. 12 years of data wasn't enough to accurately predict the future. No amount of data is. There are no black swans here. @#$% happens. That's especially true in this economy.

Moral of the Story

Past performance is not necessarily indicative of future returns. It's an important concept. There are no sure things. I don't waste my time parsing every last word the Fed says looking for ultimate wisdom. Although some wisdom may be found in the rear view mirror, most of it is found looking out the front window.

When the Fed says labor markets are improving, what they really mean is that the past shows labor markets were improving. Of course, presenting the truth that way doesn't inspire nearly as much confidence.

The captain of an airplane never announces, "You may be relieved to know that this flight has gone as well as can reasonably be expected since taking off at the airport. It's a large plane and it therefore handles sluggishly. Our ability to evade incoming surface-to-air missiles was therefore poor, and continues to be. That said, although you may already be aware of this, I'm very pleased to announce that we haven't crashed. That's very good news for all of us. There is more good news though. Any number of serious things that could have gone wrong so far, haven't. The number of mid-air collisions has been within the acceptable range of zero to one, favoring the lower end. Although there is no telling what the future might bring, each passing minute incrementally improves our odds of actually making it to our destination in one piece. That brings us to the landing. Please buckle your seat belts. The landing is the most dangerous aspect of air travel, but I'm anticipating a good one, which many define to be any landing that we can all walk away from, not just those of us who were lucky enough to make it to the plane's exits in time. Thank you for flying Honest Airlines. We'll be coming into contact with the ground soon and many of you may meet up with your loved ones, be it on earth in the baggage claim area, or in heaven should the tarmac become our final resting place. Have a great day! Please enjoy the rest of your flight! Oh, great. A fog bank? Seriously? Reminds me of the time my house was in foreclosure and I lost my will to live. Seems like only yesterday, probably because it was. Oops. Is my microphone still on?"

Bad Mark. Very bad! Very bad! Hahaha! :)

Speaking of very bad, I just want to say one more thing about the chart. 2015 was clearly not a good year for everyone. WTF! :(

Source Data:
St. Louis Fed: Wage and Salary Workers Paid At or Below Prevailing Federal Minimum Wage: 16 Years and Over: Doctoral Degree

Parabolic Trend of the Day: Charge-Off Rate on Commercial and Industrial Loans

Click to enlarge.

It would be completely unprecedented for this parabola to continue until something breaks! Nothing like this has ever happened before! A 25-sigma event!


Click to enlarge.

Is this the same chart? No? Sure looks the same. Starts in 2002? What? Doesn't change my optimistic outlook in the slightest though.

It was completely unprecedented for that parabola to continue until something broke! Nothing like that ever happened before! A 25-sigma event!



This is not a prediction of the future. If forced at gunpoint to make a prediction, you can probably guess which way I'd lean though. Sigh.

Source Data:
St. Louis Fed: Charge-Off Rate on Commercial and Industrial Loans, All Commercial Banks