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The following chart shows the 20 year moving average of annual miles traveled per capita. A trend line in red has been added.


Click to enlarge.

This is definitely the most impressive "sure thing" failure yet. 0.9997! Sis boom bah!




January 12, 2014
Toyota Sees Auto Industry Growth Slowing in 2014


You think?

Source Data:
St. Louis Fed: Custom Chart

The following chart shows the annual change in the semiannual average of new one family homes sold in the West Census Region.


Click to enlarge.

What's the worst that could happen from here? Okay, sure. The growth rate is currently negative and has been falling for 18 months. That's just this winter's East Coast's polar vortex temporarily rippling back through space and time though. Any rational optimist can see that.

Further, we already knew that the East Coast's weather would carry over to existing home sales in the West. To think otherwise is just crazy talk!

In all seriousness, the housing optimists better hope we not only stay in the channel but move back above 0% soon, or speculators may someday wish that they had embraced their fistfuls of dollars instead.



Source Data:
St. Louis Fed: Custom Chart

The following chart shows the annual growth in the S&P 500 Index divided by the annual growth in retail sales (excluding food services). I offer two data sets. One starts at 2004:Q1 (in black) and the other starts at 2010:Q2 (in blue). A parabolic trend line has been added for each series.


Click to enlarge.

Note that both parabolic trends are nearly identical. So much for the "fool me once shame on you, fool me twice shame on me" theory to investing.

We are currently seeing each 1% of retail sales growth turn into 6% in S&P 500 Index growth (a 6-1 leverage ratio), just like we were heading into the Great Recession. That is not the most disturbing part though. It's how we got here and where investors seem to think we're headed.





The future's so bright I gotta snipe hunt.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

The following chart shows annual nonstore retail sales as a fraction of total retail sales (excluding food services).


Click to enlarge.

The growth trend is extrapolated out to 2050. I'm simply showing what the future will look like if the current trend continues. If 10% causes shopping mall pain now (which it clearly does), then what would 20% do in just 17 more years? Or 40% just 17 years after that?

A 4.2% growth rate means that the thing growing doubles every 17 years. In this case, that thing is shopping mall pain.

If you get stung by a bee and every 17 seconds you get stung by twice as many, how many minutes will it take before you realize that you're standing on a bee hive? How's that for optimism?

The following chart shows retail employees as a fraction of all nonfarm employees.


Click to enlarge.

Although there has been recent illusionary relative strength brought on by misplaced faith in the Fed to heal all that ails us, I fully expect the downward trend in red to continue. Further, I do not expect the blue trend line to offer any meaningful support to halt the decline.

February 26, 2013
The Death of the American Mall and the Rebirth of Public Space


Our older less prosperous economy is divesting itself of older less prosperous malls? Shocking.



Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

The following chart shows real GDP.


Click to enlarge.

Four exponential trend lines and their growth rates have been added.

Note that each time an exponential trend fails, it is replaced with an exponential trend of lesser quality. What doesn't kill us, doesn't make us stronger. Go figure.

The next chart shows the long-term trend of those growth rates. I'm using the midpoint of my hand-picked expansions as the x-axis.


Click to enlarge.

The most recent data point is open to serious revision. The growth rate probably won't change much, but the x-axis position may (it could move to the right on the chart). It really comes down to how long this expansion lasts.

Real yields have fallen because real GDP growth has fallen (and continues to fall). It really is just that simple. Put another way, it is becoming harder and harder to make money off of money (current lofty stock market valuations notwithstanding).

Those hoping for a return to normal better hope that the downward trend does not continue, because that's about the only normal thing going on right now.

The future's so bright I gotta werewolves.



See Also:
The Long-Term Death of Real Yields

Source Data:
St. Louis Fed: Real GDP

The following chart shows the US trade deficit with China divided by the price of crude oil (annualized billions of barrels).


Click to enlarge.

It shows the amount of oil China could buy if they were to use their entire trade surplus with us to do so. That's assuming the price of oil would not be driven even higher in response to increased purchases of course, which is no doubt a bad assumption.

The next chart plots the natural log so that constant exponential growth can be seen as a straight line.


Click to enlarge.

China "sent" us ever increasing amounts of stuff that we want, yet we do not seem to be returning the favor by sending them ever increasing amounts of the stuff that they want (barrels of oil). Note that I used "sent" instead of "sends." The next chart explains why. It shows the annual growth rate of imports from China.


Click to enlarge.

As seen in the chart, the nominal growth rate is just about dead now. The growth rate in the middle of the channel is roughly 0%, which oddly enough is what the Fed feels short-term interest rates should be over an "extended period."

ZIRP-a-Dee-Doo-Dah


For what it is worth, I am not even remotely bullish on China (nor have I been since starting this blog in 2007). I also don't believe that I will ever feel the need to bribe a border guard to let me on the last plane to China. You know, as a desperate attempt to protect my future standard of living and freedoms (Patriot Act notwithstanding). Sigh.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2
St. Louis Fed: Custom Chart #3

The following chart shows nonfarm payrolls divided by initial claims. I'm using quarterly averages to smooth things out a bit (1967:Q1 to 2013:Q4). In my opinion, the higher the ratio, the higher the potential for layoff surprises.


Click to enlarge.

The 3rd order polynomial trend channel in red uses the red data points.

The 3rd order polynomial trend in blue uses all the data points.

I would be among the last to argue that a 3rd order polynomial can accurately predict the future. It can't, especially over the long-term. That said, damn. It's an ugly chart. We all better hope there is absolutely no truth buried within it. Unfortunately, as a permabear since 2004, I do believe there is some truth buried within it (or I would not have made the chart). How much truth remains to be seen.

In any event, I would once again point out that this is not 1982. We are not at the very bottom of the long-term channel with favorable long-term tailwinds. Instead, we are at the top of the channel with winds of a potentially different nature. Sigh.

Is it really any wonder that we're still trapped in ZIRP?



This is not investment advice.

See Also:
Trend Line Disclaimer

Source Data:
St. Louis Fed: Custom Chart

The following chart shows the 6-month moving average of the annual growth in clothing and clothing accessory store retail sales per capita. Keep in mind that it is not adjusted for inflation.


Click to enlarge.

We've experienced a lot of weather over the past few years. I doubt there's any reason to worry about the trend.



Source Data:
St. Louis Fed: Custom Chart

The following chart shows the retail sales at food services and drinking places divided by the sales at food and beverage stores.


Click to enlarge.

Our service economy apparently requires us to grow the amount we spend at restaurants compared to the amount we spend at food and beverage stores. Put another way, our service economy requires ever increasing amounts of service lest we slip into recession.

I know what you may be thinking. It was very cold. People stayed home. Okay, let's go with that and try a thought experiment. I shall be your consumption guinea pig. Buckle in. It's going to be an laboratory adventure!

I'm sitting at home. The weather is too awful to leave the house. I'm a consumer, and man have I got some pent-up consumption demand. I'm sipping my hot chocolate. I'm looking over at my computer. I take a few more sips. I look at my computer again. I take another sip. I see a smart phone on the coffee table. I drink the last sip from a now empty mug. Empty! Bah! Say it isn't so! I can't stand it! I'm going to make a purchase and have it delivered to me! Snow be damned! It's the only way to end the agony!

The following chart shows the annual growth in nonstore retail sales. We should definitely see the cold weather surge in all its glory! It must be there!


Click to enlarge.

Hmmm. There's a Christmas surge within a declining trend channel and a hangover to go with it. That's not quite what we were looking for with our optimistic cold weather theory. Oh, well. Can't say we didn't try!



Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

iShares Short Treasury Bond ETF


Perfect!

It is just like cash, only it isn't cash. It's a professionally managed bond fund! Genius!

Check out the fund's chart. What's not to like? $2.4 billion in assets! Very popular!

July 20, 2009
Focus on short end of yield curve, PIMCO says

Focus as you patiently await the end of ZIRP! 5 years so far! But we really, really, really mean it this time!




This concludes today's sarcasm report. :)

The following chart shows the annual change in beer, wine, and distilled alcoholic beverage wholesalers' sales.


Click to enlarge.

Don't let the trend line concern you. As seen in the next chart, I assure you that we are more than prepared to throw a legendary party!


Click to enlarge.

Just look at all that inventory accumulation. Yes, sir. Somebody must know something. The party's definitely coming!




Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Click to enlarge.

The blue line (left scale) shows the civilian labor force participation rate of those aged 25 to 54. It peaked in the late 1990s and it has been pretty much going down ever since.

The red line (left scale) shows the civilian labor force participation rate of those aged 55 and over. It bottomed in the early 1990s and it has been generally going up ever since (recent flattening notwithstanding).

The green line (right scale) shows the civilian labor force participation rate of those aged 25 to 54 divided by the civilian labor force participation rate of those aged 55 and over.

In a truly healthy economy, should those aged 25 to 54 really be dropping out of the labor force at faster pace than those aged 55 and over (as seen in that green line since the early 1990s)?



Wikipedia: Giant Sucking Sound


In space no one can hear you scream suck.

Source Data:
St. Louis Fed: Custom Chart

The following chart shows annual food services and drinking places employment growth.


Click to enlarge.

3.7% annual growth! Very impressive. Each time we get a recession (the deeper the recession the better), we get more growth. More recessions for the win! Genius!

We just need to stay in that strong, resilient, predictable, and consistent trend channel long-term, preferably near the top. The long-term trend is so obvious that I don't even feel the need to add a trend line. Did I mention how stable and sustainable the channel is? Just look at it! A few more years of this and it will be almost impossible to leave the channel no matter what happens. Who doesn't love certainty?

The annual data in the first chart doesn't include 2014 yet, but I can give you a glimpse of how the year is starting off using monthly data.


Click to enlarge.

There are a whopping 10.5 million people employed in this rapidly growing industry. Growth appears to have peaked back in July. As of January, the growth is still above 3% though and there's nothing but biscuits and gravy on the horizon! Can't you see it? And with average hourly earnings of production and nonsupervisory workers in this industry coming in at $10.96 (December 2013), what's not to like?

In honor of the charts, I suggest we all try to work Chipotle into our conversations (more than we already do). Start the day off right. When we wake up each morning we should exclaim, "What a great day to Chipotle!" Or alternatively, "The future's so bright I gotta Chipotle!"

January 30, 2014
Traffic jump boosts Chipotle restaurant sales, stock soars


People braved the extreme weather to eat burritos? It's a frickin' polar vortex miracle!



See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2

Long-time reader mab offers the following comment in this post:


In my opinion, this really deserves its own Christmas ship musical tribute!



Sing along! You know the tune!

Out in the Harbor

Out in the harbor, cruise ship ills
In through the dust mask, doctor bills
Down with economies, it destroys
Spreading little bugs, with sick bellboys

Oh, no, no! Who could've known?
Oh, no, no! Who wouldn't groan?
Out in the harbor, sick, sick, sick
In through the dust mask, it's ick, ick, ick

First came the sickness of little Bill
Oh dear God ships make him ill
Gave him a virus to choke and wheeze
One that fevered him to high degrees

Oh, no, no! Who could've known?
Oh, no, no! Who wouldn't groan?
Out in the harbor, sick, sick, sick
In through the dust mask, it's ick, ick, ick

Next came the sickness of little Mitt
Have we ever seen so much vomit?
Here was some fluid for what he lacked
Also a drug some say acts like crack

Oh, no, no! Who could've known?
Oh, no, no! Who wouldn't groan?
Out in the harbor, sick, sick, sick
In through the dust mask, it's ick, ick, ick

No day is complete without at least a little gallows humor. Sigh.

The following chart compares the trillions of dollars the monetary base has grown (in blue) to the trillions of dollars household net worth has grown (in red) since the first quarter of 2009.


Click to enlarge.

Each dollar the Fed spends gets us back ten! Why on earth is the Fed tapering the sure thing? We need even moar leverage! Not less!



Why hasn't anyone else thought of this? Genius!

December 17-18, 2013
Minutes of the Federal Open Market Committee


Oops. Please disregard my crazy theory above. It would seem that I was offering the very thing the Fed is most worried about. You have to admit that it seemed like a darned good theory on paper though. I just hadn't factored in any unintended consequences. In my defense, it's really easy to do once I went down the "excessive risk-taking" path (gambling $10.8 trillion on a "sure thing" would definitely qualify).

Marrakesh Night Market



See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

Click to enlarge.

It is not adjusted for inflation, population growth, or income inequality.



See Also:
Real Annual Disposable Personal Income per Capita Growth
Employment Hump Déjà Vu (Musical Tribute)

Source Data:
St. Louis Fed: Personal Income Growth

The following chart shows the natural log of the combined total of religious construction spending, sewage and waste disposal construction spending, and amusement and recreation construction spending all divided by disposable personal income. I am once again using a natural log so that exponential growth (or in this case decay) can be seen as a straight line.


Click to enlarge.

Why religious, sewage and waste disposal, and amusement and recreation construction spending you might ask?

1. We have lost faith.
2. The @#$% is hitting the fan again.
3. We are not amused.



"Bond" is certainly having a good year so far (the last few weeks in particular). Shocking.

The 20-year TIPS is back under 1%. Let's just blame the next 20 years on a few months of cold weather and call it good.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

Click to enlarge.

Wikipedia: Optimism


Hey! Look! A parabola! Woo-hoo!



See Also:
St. Louis Fed: Japan's Working Age Population
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

The following chart shows owner occupied housing units.



Jane's Addiction - Mountain Song



Source Data:
St. Louis Fed: Owner Occupied Housing Units

The following chart shows the semiannual average of the 30-year conventional mortgage rate.


Click to enlarge.

I have added an exponential decay trend line in blue and an exponential decay channel in red. To create the top of the channel, I multiplied the interest rate in blue by 1.2 (+20%). To create the bottom of the channel, I multiplied the interest rate in blue by 0.8 (-20%).

Over the long-term, does that look like a rising interest rate environment to you? Is there any indication, any indication at all, that the long-term trend is failing? As of the 2nd half of 2013, we're sitting right on the long-term trend line in blue.




This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart