SPY vs. TLT

The following chart compares the investment performance of SPY to TLT, as a ratio between the two. I have added 3 trend channels in blue, red, and green.

Chart courtesy of StockCharts.com.

You're a true optimist if you believe any of the following::

1. There's any chance that we'll stay in the green channel long-term.
2. There's a reasonable chance that we'll stay well above the red channel long-term.
3. Entering the blue channel ever again would be absolutely, totally, and in all other ways inconceivable.

I'm not saying that you would necessarily be wrong to be a true optimist, and that the future we will find ourselves in truly could be the best of all possible worlds. However, I am saying that if you are a true optimist right now, at this moment, then I'd sure like to be smoking what you're smoking!

I am not an optimist. You can try to pry the shares of TLT from my cold dead fingers, but I'm not dead yet. Might seem that way as I patiently wait for trends to break though! Trends break. That's what they do. And each time the Fed raises rates, it puts us one step closer to the edge.

Food at Home

The following chart shows the natural log of the consumer price index for food at home. When using natural logs, constant exponential growth is seen as a straight line. I have added a long-term trend channel in green, a steeper short-term trend line in blue (heading into the Great Recession), and an even steeper short-term channel in red (our current trajectory).

The stock market sure doesn't like it. Not one bit. Isn't feeling all that confident about a soft landing. Starting to wonder why the captain's warning of "some pain" while wearing a parachute?

It's not all bad news. Hey, at least we're sitting in the middle of the long-term trend channel. Small comfort, I know.

Illusion of Rationality

The following chart compares the yield of the 20-year Treasury bond (in black) to the average of the 10-year and 30-year Treasury bonds (in red).

Current Yields

10-Year: 3.37%
20-Year: 3.76%
30-Year: 3.53%

The 20-year Treasury bond currently yields a whopping 0.31% more than the average of the 10-year and 30-year Treasury bonds. How likely is that rational?

You could use rational arguments to convince me to sell TLT and take my losses, but don't you dare tell me to sell 20-year Treasury bonds and buy 10-year and 30-year Treasury bonds instead, while simultaneously p$*sing down my back while claiming it's raining. No sir, of all the bonds I'd think about selling right now, the 20-year Treasury bond would be near the very bottom of the list. But hey, maybe that's just me.

The Clown Horn Report v.003

August 31, 2022
CNBC: Who wants to be a billionaire? 6 in 10 Americans strive to be mega-wealthy, report finds

Six in 10 adults say they even want to become a billionaire one day, according to a recent report.

If 60% of Americans get their wish, then hello hyperinflation. Talk about unintended wish consequences.

Some 44% of U.S. adults believe they have the available tools to become billionaires, largely fueled by speculative investments such as cryptocurrencies, according to the Harris Poll’s recent Americans and Billionaires Survey.

Gone is the old school illusion of prosperity era. All hail the new and improved delusion of prosperity era! 44% can't be wrong!!

Retail Trade Employment per Capita

The good news, if you can call it that, is that we've managed to climb back to the declining trend line in red. Here's the reaction from our cat Dexter:

It's the same look he has when hunting buggies, birbs, bees, and bagholders. Okay, maybe not bagholders. He's just a cat, not a Wall Street professional trader. In a world of predators, it's easy to forget that.

In all seriousness, it would be an understatement to say that I am not optimistic about where retail trade employment heads from here. The short-term recovery tailwinds are gone. The long-term automation headwinds remain. May we live in dangerously interesting times. Sigh.

The Sarcasm Report v.290

May 26, 2022
Gizmodo: California Startup Raises $13 Million to Harvest Platinum From Asteroids

Tempting investment idea, but wouldn't it be better to invest just 442 bitcoin (at $29,420 each) to harvest more bitcoin right down here on earth?

If there's one thing this world really needs, it's even more cryptocurrency.

How Bad Could It Get?

The following chart shows the natural log of household and nonprofit net worth divided by the consumer price index. When using natural logs, constant exponential growth is seen as a straight line.

The future's so bright, I gotta wear shades night vision goggles.

Producer Price Index

The following chart shows the natural log of the producer price index for all commodities. When using natural logs, constant exponential growth is seen as a straight line.

We've been screaming towards the top of the channel like a runaway train. Our engineer (the Fed) is now desperately attempting to apply the brakes. The odds of a soft train landing seem incredibly low. Beware the rapidly approaching Deadman's Economy Curve. We're likely to derail!

Some might argue that we've already derailed. The worst is now behind us. I'm not convinced. Since when has maximum pain been achieved with near record low unemployment? It seems to me that we still have plenty of pent-up depressionary pain potential. Surely the unemployment rate has not achieved a permanently low plateau, especially given all the financial pain both the stock and bond markets have recently dished out. In fact, it's entirely possible that the pain party might just be getting started. Perhaps the Great Recession will be followed up with an even greater one. *cringe*

This is definitely not financial advice. I am and have been very concerned about our long-term future, much like many must have been during the fall of the Roman Empire. Who is responsible? We all are.

No single raindrop believes it is to blame for the flood.