The Softer Side of Department Store Sales

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As disturbing as that chart looks for owners of department store stock, I have something even more disturbing to point out. It's not even adjusted for inflation! Am I done disturbing you yet? Not even close. It's going down as the population grows! Here's a crazy thought to maximize the discomfort. Let's chart where we are relative to that long-term trend in red.


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Hey, that looks an awful lot like I'm charting business cycles. We're more than 2% below the declining trend again (just like we were in 2002 and 2008). Third time's the charm!

I do have some words of encouragement for those who believe that the economy is virtually guaranteed to accelerate to the upside soon though. Good luck on that theory! Nothing is impossible if we all set our minds to it (and nobody panics at the first sign of things becoming unglued again)!

I'm known for my undying optimism you know, and/or my sarcasm. Mostly my sarcasm I guess. ;)

Have I mentioned lately that I have no desire to embrace "risk on" assets? Seriously. Sigh.

This is not investment advice.

See Also:
Third Time's the Charm (Musical Tribute)

Source Data:
U.S. Census: Monthly & Annual Retail Trade

Third Time's the Charm (Musical Tribute)

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As I look at the chart, I can't help but ask myself three questions.

1. Has the Fed permanently put an end to recessions?
2. What are the odds that the economy will soon accelerate to the upside from here?
3. Is this really the best time in all of recorded history to put new money to work in the stock market?

If you've been reading my blog, then you can probably guess my answers.

For those just tuning in, this is actually an update to a chart that I created back in March of 2012. Unfortunately, we're pretty much right on schedule. Check out the link.

I do not believe that retail sales will hit 72% of wages during this business cycle. That's just a guess though. I suppose it could happen. What is more important to me is how low this percentage goes once the peak is in.



Retail sales for June will be released a few short hours from now. I'm hardly sitting on pins and needles anxiously awaiting the report though. Regardless of what the numbers show, one month does not make a trend. One data point will not dramatically impact what the chart in this post is trying to say.

Source Data:
St. Louis Fed: Custom Chart

Linear Trend Failure of the Day

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Since I am a long-term believer in the long-term death of real yields theory, I am therefore willing to offer the following prediction.

Stick a fork in the chart's red trend line. It's over.

In my opinion, the peak was probably set on June 21, 2013 (the peak seen in the chart). That was one day after I made a purchase of a 19-year TIPS (with intent to hold to maturity). Thanks bond market! My patience has rarely been so rewarded. To think that I could have been stuck with 0.0% just 2 months earlier.

Those arguing that my linear trend failure prediction is wrong can mark October 16, 2013 on their calendars. That's the day Jeremy Siegel's mythical 3.5% real yields will arrive should the trend in red continue. I would not hold my breath for such an outcome though. At the very least, inhale extremely deeply before doing so, lol. Sigh.

Just opinions! This is definitely not investment advice.

Source Data:
St. Louis Fed: 20-Year Treasury Inflation-Indexed Security

Exponential Trend Failure of the Day

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Enough said.

Source Data:
St. Louis Fed: Real Estate Loans at All Commercial Banks

Bank Loans: "It's Getting Personal"

The following chart shows the finance rate on 24-month personal loans minus the finance rate on 48-month new auto loans.


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The 48-month auto rate for May 2013 was 4.13%.
The 24-month personal loan rate for May 2013 was 10.34%.

The spread between the two loans now stands at a new record: 6.21%.

This reminds me of something Ben Bernanke once said:

The world in which we live, as opposed to the one envisioned by the benchmark neoclassical model, is one in which credit markets are not frictionless, i.e., problems of information, incentives, and enforcement are pervasive. Because of these problems, credit can be extended more freely and at lower cost to borrowers who already have strong financial positions (hence, Ambrose Bierce’s definition of a banker as someone who lends you an umbrella when the sun is shining and wants it back when it starts to rain).

Got storm shutters?

Source Data:
St. Louis Fed: Custom Chart

A JOLT to the System

The following chart shows nonfarm job openings per capita growth (year over year). I have added two linear trend lines for your consideration.


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July 9, 2013
Job openings, hiring rise slightly in May

WASHINGTON (AP) — U.S. employers advertised slightly more jobs in May and total hiring increased, further signs of steady improvement in the job market.

As seen in the chart above, the red trend line shows almost the exact same "steady improvement" we saw in the blue trend line from July 2004 to December 2007.

This goes to show that one person's steady improvement is just another person's steady decline.

Got optimism? Sigh.

Source Data:
St. Louis Fed: Custom Chart

Stock Market Complacency Déjà Vu

The following chart shows corporate profits divided by wage and salary disbursements going back to 1947. I have added three trend lines for your consideration.


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Other than being near the very top of an exponential trend channel that cannot mathematically even exist long-term, what could possibly go wrong? And for those who think the exponential trend channel is sustainable, I would ask how corporate profits can someday exceed wages?

In my opinion, this is simply an accident waiting to happen. I expect a return to the blue trend line at some point in my lifetime, perhaps even many points.

In related news, I was driving back from 4th of July activities. Complacency struck me at a rest stop. I expected rest. What I got was a somewhat different outcome. I exited my vehicle and walked about 10'. My foot slid off the curb to the right and my body fell to the left. I sprained my ankle to the point I required a trip to the emergency room once I got home (250 miles away). I am now on crutches, much like this supposedly strong and resilient economy of ours. Sigh.

The good news is that unlike our economy over the last decade or so, I did not actually break anything.

Source Data:
St. Louis Fed: Custom Chart

Bondmageddon Thoughts

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Yawn.

Source Data:
St. Louis Fed: 10-Year Treasury Constant Maturity Rate