From Bad to Worse

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Source Data:
St. Louis Fed: Median Duration of Unemployment

Mind Blowing Chart of the Day

Yesterday, I posted the following chart.

November 10, 2012
The Interest Rates of World War II

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I realized last night that I had seen that chart shape before. The following chart adds in manufacturing employment as a 2nd data series (in red).


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Let's use 10-year moving averages to remove the short-term cyclical noise.


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Mind blowing! Now let's take that data and put it on a scatter chart.


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This chart is consistent with my view that the 3-month treasury bill rate may remain low for a very, very long time. There are powerful inflationary forces in the world but there are powerful deflationary forces too. Thanks to increasing automation, it is my opinion that global manufacturing employment is definitely not on the rise (at least over the long-term).

Source Data:
St. Louis Fed: Custom Chart

The Interest Rates of World War II

I posted a chart earlier today and thought it would be interesting to see the same data plotted on a log scale.


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Note that we were heading into World War II the last time 3-month treasury bills were yielding so little.

World War II

World War II, or the Second World War (often abbreviated as WWII or WW2), was a global war that was underway by 1939 and ended in 1945.

I'm reminded of a quote.

"I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones." - Albert Einstein

It would seem that World War III will be fought with global debt and monetary printing presses. I think it will be slightly less effective at reducing global overcapacity in steel production though. Just a hunch.

This post inspired by Jazzbumpa's comment seen here.

Source Data:
St. Louis Fed: 3-Month Treasury Bill: Secondary Market Rate

The Irrational Exuberance Seen in Short-Term Treasuries

I'm probably not going where you think I'm going based on the title. Sorry about that!


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The six diamond points in red were used to create the two exponential trend channels in red. As seen in the chart, there was a major trend shift in the early 1980s. The diamond points in blue suggest that perhaps stock market investors didn't get the memo.

Many have tried to predict when the next exponential trend channel change will occur.

Dune (1984) - Memorable Quotes

Paul: They tried and failed?
Reverend Mother Mohiam: They tried and died.

In the fall of 2004, my biggest concern was that it would be harder and harder to make money off of money. It is still my biggest concern. I think the chart clearly shows that my concern is/was valid.

As a saver, I pose three serious questions.

1. When will the next major exponential trend channel change occur?
2. What if it doesn't occur within my lifetime?
3. What if our economy actually requires continually falling interest rates?

The latter question is especially interesting to me. If the answer is yes then stock market investors may be taking on a lot more risk than they think they are. At 0%, there isn't a whole lot further rates can come down.

See Also:
Wikipedia: Irrational Exuberance

Source Data:
St. Louis Fed: 3-Month Treasury Bill: Secondary Market Rate

Operation Titty Twister

The following chart shows the Fed's treasury securities maturing in more than 10 years divided by the Fed's treasury securities maturing in 1 to 5 years.


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The twisting will continue until morale improves?

What is Operation Twist?

“Operation Twist” is a program conducted by the U.S. Federal Reserve (“the Fed”) in late 2011 and 2012 to help stimulate the economy. Operation Twist is the nickname for the Fed’s initiative of buying longer-term Treasuries and simultaneously selling some of the shorter-dated issues it already held in order to bring down long-term interest rates.

From Dusk Till Dawn

After successfully reaching Mexico, they arrive at the "Titty Twister", a strip club/brothel in the middle of a desolate part of Mexico, to meet their contact Carlos at dawn.

Coincidence?



What would we do without gallows humor?

Source Data:
St. Louis Fed: Custom Chart

Stock Market Risk

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Feeling lucky?

Source Data:
St. Louis Fed: Custom Chart

20-Year TIPS Yield Hits New Record Low

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I suffered through a lousy economy for 20 years and all I got was a stinkin' -0.17% real yield.

Make the t-shirts now using cheap foreign labor. Hoard them for 20 years. Sell them then as collectors' items once their value goes up. Just an idea! Could happen, lol. Sigh.

As a side note, you will lose 3.3% of your purchasing power over the 20 years if you buy this bond today. That's in addition to any income tax the bond generates over the period.

(1-0.0017)^20 = 0.967

In order for this investment to make any sense at today's prices, the economy has to do pretty darned poorly over the next 20 years. As a permabear since 2004, I'm not exactly ruling it out.

Here's a shout out to the pension fund managers still expecting 8% returns well into the distant future.

[Expletive Deleted] YOU!

Just so I'm perfectly clear here, "THANK" is not the word. ;)

Source Data:
FRB: Selected Interest Rates
U.S. Treasury: Daily Real Yield Curve

Initial Claims Danger v.22

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This crappy initial claims report was better than I expected. I'm therefore downgrading the danger from extreme. I'm backhanding the compliments today. That's right. There's a sense of optimism in the air!

The biggest news of the day is found within the report.

In the week ending November 3, the advance figure for seasonally adjusted initial claims was 355,000, a decrease of 8,000 from the previous week's unrevised figure of 363,000.

Holy Mother of God! A miracle has occurred! So endeth 70 straight weeks of upward revisions!

See Also:
Extreme Initial Claims Danger v.21

Source Data:
St. Louis Fed: Initial Claims
DOL: Initial Claims