Derailed

There was an uptick in passenger train travel after the Great Recession. Unfortunately, it was not a permanently high plateau.

It will be interesting to see what what happens after the Covid-19 recession.

Is a train trip a way to enjoy the newfound freedoms offered by the end of a pandemic? Or will it feel more like being stuck in a home with wheels on it? Is train cabin fever a thing?

The Sarcasm Report v.284

March 10, 2021
Bloomberg: A New ETF Named FOMO Targets Everything From SPACs to Volatility

If it comes to market, FOMO will be the latest in a series of ETFs appealing to the runaway risk appetite sweeping across assets.

Don't forget to buy FOMO on margin. Wouldn't want to risk missing out on the extra returns that leverage can provide when buying an ETF based on the fear of missing out.

M2 and Interest Rates

The following chart shows how much interest would be generated if the M2 money supply earned the same interest as the 10-year Treasury bond.

The M2 money supply is growing exponentially. The 10-year Treasury yield has been decaying exponentially. Ignoring volatility, the end result has pretty much been a constant for 40 years. Behold the power of falling off the gold standard.

Although correlation doesn't imply causation, I don't believe this is a coincidence. Deep down, I think we all know what would happen to our economy if interest rates rose to 10%. Saying that it would not be pretty would be an understatement.

Those expecting interest rates to increase because the money supply has suddenly increased may be very disappointed. To support my belief, why would banks raise interest rates to attract more deposits when they are already flooded with deposits?

As a side note, should we be worried that the chart has become more volatile over the past 20 years?



Nothing lasts forever.

Thoughts on CPI and Food

Yawn. What about food?

Yawn. What about producer prices for food?

Yawn.

Can't promise that I won't be screaming in abject terror at some point in the future though, especially if I am wrong about the future of ZIRP, inflation, and/or long-term interest rates.

The Road to NIRP Is Paved with ZIRP Intentions

The following table shows the annualized inflation rate in the 2 years before each recent recession, the inflation rate in the 2 years after each recent recession, and the differences between them.

I am not a believer in the economy will soon overheat theory. A $1.9 trillion stimulus package might sound like a shockingly large sum of money, but let's put this in perspective. Household net worth now stands at $123 trillion and has grown $63 trillion since the Great Recession in 2009. By comparison, $1.9 trillion is like loose change found in the couch.

Our exponentially growing monetary addiction requires ever increasing sums just so the wheels don't fall off. Has anyone actually considered that $1.9 trillion might not be enough?

Ten Rhetorical Stimulus Questions

1. Are we supposed to be shock and awed by a $1.9 trillion stimulus package that's only equivalent to 1.5% of household net worth?
2. What if savers continue to save?
3. Are we counting on savers to spend?
4. Are we counting on spenders to spend what they've already spent?
5. How does one hoard services?
6. If there really is pent-up demand for haircuts, will people be getting twice as many over the next 2 years?
7. How much of a $1400 stimulus check would we need to save to earn $4.20 in annual interest in an online savings account that only has a 0.3% interest rate?
8. Should we use the $1400 instead to buy 100+ fast food meals, 2 shares of Tesla @ $674, or 5 shares of GameStop @ $247?
9. Easy come, easy go. Am I right?
10. Human sacrifice? Dogs and cats living together? Mass hysteria?

Humans needlessly sacrificed, dogs and cats living together, mass hysteria. It's been quite a year.

Mount Deadcatbouncus

The following chart shows the national average of 5-year CD rates on amounts less than $100,000.

As seen in the chart, Mount Deadcatbouncus erupted in the spring of 2019, long before Covid-19 was even a thing.

Thanks to the "rising" interest rate environment we now find ourselves in, savers nationwide are pinning their hopes and dreams on a new and more prosperous Mount Fatchancus forming. May they find much better luck than their predecessors.

GDP to M2 Ratio: We’re Not in Kansas Anymore

The Sarcasm Report v.283

March 4, 2021
CNBC: Cramer says investors are in denial about stocks: ‘The sell-off is real’

“Right now, even after a 6% decline, we’ve still got a ton of denial,” Cramer said. “People don’t want to believe the sell-off is real. The market’s been so good for so long, and many newer investors have never seen this kind of pummeling, so the downdraft does seem pretty surreal.”

I know that many newer investors probably don't want to read up on ancient history, but the 2020 stock market crash also seemed pretty surreal.