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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 compares the 3-month treasury bill yield in the aftermath of the Great Depression to the 3-month treasury bill yield in the aftermath of the Great Recession.


Click to enlarge.

For the record, I am not predicting World War III (nor would I expect it to even remotely solve our long-term ZIRP problem as effectively as World War II did).


I think you can see why I might be fond of ultra long-term inflation protected treasuries and I-Bonds. You might also understand why I might be somewhat skeptical of rising interest rate theories.

I believe we are trapped in ZIRP much like Japan has been since their housing bubble popped in the early 1990s (which will become all too apparent when the next recession hits, whenever that is).

We might temporarily escape from our padded cell at some point, but we'll never get the straight-jacket off, much less get past the search lights, the dogs, the barbed wire fences, and Janet Yellen, our trusted security guard. That's just asking too much, lol. Sigh.

Gallows humor.

February 11, 2014
Janet Yellen to Emerging Markets: Good Luck


Contrary to the opinion of those who think the stock market continues to go up easily from here and that vast riches await those willing to swing for the fences at any price, monetary policy is hard. For what it is worth, that's what I'm reading into what she has to say anyway.

This is not investment advice.

Source Data:
St. Louis Fed: 3-Month Treasury Bill: Secondary Market Rate
NBER: US Business Cycle Expansions and Contractions

The following scatter chart compares annual disposable personal income per capita growth (bottom scale) to the annual increase in the consumer price index (left scale).


Click to enlarge.

From 1960 to 2013:

1. 2009 was the worst year for disposable personal income growth per capita. It was also the record low year for consumer price inflation.

2. 2013 was the second worst year for disposable personal income growth per capita. Once again, inflation came in below expectations.

The following chart shows recent annual disposable personal income per capita growth. I'm using the monthly data instead of the annual averages this time to more adequately show all the gory details.


Click to enlarge.

January 10, 2014
Fed's Bullard: Inflation to pick up in 2014


1. Good luck on that inflation theory!
2. Brace for more surprises!

jjchandler.com: Tombstone Generator

Click to enlarge.

This is not investment advice, but damn.

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

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 shows the annual average of the St. Louis Fed Financial Stress Index and the Kansas City Financial Stress Index.

The red line shows the negative of the annual average of the real S&P 500 Index (December 2013 dollars).

1. The key to maintaining the stock market's currently lofty level is to keep the financial stress at a near record low. That's right. Keep it there permanently. Just say no to stress.

2. The key to maintaining the financial stress at a near record low is to keep the stock market at its currently lofty level. That's right. Keep it there permanently. Just say no to stress.

What could possibly go wrong with this circular reasoning strategy? As seen in the chart, there hasn't been this little financial stress in the system since the top of the housing bubble in the mid 2000s! Oh, what a carefree time that was!

I am very optimistic about our long-term future!! ZIRP! Employment growth! Real GDP growth! Real median household income growth! Uncharted territory growth! You name it! It's going to be an adventure.

February 11, 2014
ASX bets on derivatives clearing

This concludes the sarcasm report.

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

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

The following chart shows the annual average of the Dow Jones Industrial Average adjusted for inflation (December 2013 dollars). It does not account for dividends (which over the long-term can be very important clearly).


Click to enlarge.

This is not 1982. We know this because the Dow Jones Industrial Average is not trading at roughly 1916 levels (adjusted for inflation).

I'm just pointing it out for those who truly believe that this is 1982 and that a whole new era of American prosperity will soon be unleashed. That said, something may soon be unleashed (again). 1999 and 2007 weren't enough warnings?

It is yet another ugly chart, but what's new? As a retiree, I'm generally a risk-off kind of guy, and that's got risk written all over it.

1. Profit margins will stay permanently elevated?
2. ZIRP is guaranteed to work long-term?
3. The business cycle is dead so it's nothing but up from here?
4. There aren't any itchy trigger fingers hovering over sell buttons?
5. The Fed knows exactly what it is doing?
6. We can continue to borrow our way to prosperity forever?
7. America can never have too many restaurants?
8. The rise in Internet commerce won't hurt malls irreparably?


It takes a great deal of faith and/or hubris to answer a resounding "yes" to all those questions. I don't have enough faith to answer yes to any of them.

This is not investment advice, but damn. Surely there were better times in all of recorded history to put money to work in the stock market.

Source Data:
St. Louis Fed: Custom Chart