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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

Click to enlarge.

The line in black shows real net corporate dividends.

The line in blue shows the real trade deficit (same scale).

The red line shows the exponential trend in real dividends from 1947:Q1 to 1987:Q1. Note the exponential trend failure (to the upside).

Will real dividends stay permanently elevated? Will profit margins stay permanently elevated? Can we be assured that the worst is behind us? Can we expect future growth in real dividends to match the growth we've seen since the early 1990s? I wouldn't answer a resounding yes to any of those questions. Call me skeptical, to put it mildly. Instead, I would ask the following question.


Put another way, it really helped the corporate bottom line to transition from "Made in USA" to "Made in ____." Mission accomplished. Now what? Persistently high oil prices (financial meltdowns notwithstanding)? Persistently stagnant wage growth? Persistently high unemployment? Increased rate of US (and/or global) financial meltdowns? In and out of ZIRP from here on out (if ever out)? Even more giant sucking sounds?

February 13, 2014
China auto market growth slows sharply in January



Other than corporate executives wishing to boost the value of their net worth and retire before the @#$% really hit(s) the fan, did anyone in power really think this through?

The Chinese drive more. We drive less out of necessity (as seen in annual vehicle miles traveled per capita that fell apart during the Great Recession and has yet to make any sort of recovery). That's our plan for a more prosperous America? Seriously?

Source Data:
St. Louis Fed: Custom Chart

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 the natural log of imports from China divided by disposable personal income. When using natural logs, constant exponential growth is seen as a straight line.


Click to enlarge.

Can you say market saturation?

Source Data:
St. Louis Fed: Custom Chart

Click to enlarge.

Real GDP growth averaged 3.48% per year from 1947 to 2000.

Starting in 2000, this long-term exponential trend began to fail. First the dotcom bubble popped, then came the housing bust. Let's take a close-up look at the most recent recovery for any signs of hope.


Click to enlarge.

From the bottom of the Great Recession, real GDP growth has averaged just 2.28%. That is an especially pathetic growth rate for at least five reasons.

1. "The worse a situation becomes the less it takes to turn it around, the bigger the upside." - George Soros (I think we can all agree that the situation qualified as much worse. So where is the bigger upside in response?)

2. The growth rate is a full 1.2% lower than the long-term average heading into 2000. This pig desperately needs lipstick in my opinion.

3. We can't blame any recessions for it being this low. There haven't been any recessions since the bottom! This data has been cherry picked to be recession free. Duh! I threw the optimists a bone here and it still came up way short! Seriously.

4. We're currently following the exponential growth trend line with great precision (r-squared = 0.988). The last time it failed, it failed to the downside. Historically speaking, recessions tend to do that. I know. Shocking.

5. How much will the 2.28% average drop once the next recession hits? In other words, what will the true growth rate be over a complete business cycle? 3.48%? I doubt it with every fiber of my being. I'd even be willing to leverage up that fiber with Super Colon Blow!

The January 20th cover of Time Magazine calls Janet Yellen the sixteen trillion dollar woman. That's a pretty amazing title and her picture definitely inspires confidence. She's going to need to work some magic to restore prosperity over the full business cycle though. I therefore offer her a musical tribute to help inspire. The monumental task before her is legendary.




I can't speak for you, but I've got a really good feeling about this. Yes, very positive. Haven't been this optimistic in years. Why you ask? Her picture on the cover of Time is on a pitch black background ("over blackened plains she will find her way"). What could possibly go wrong?

See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Real GDP

Now that the consumer price index for 2013 is complete, let's look at the long-term trend of the annual percent change in the average annual CPI.


Click to enlarge.

Ten Questions for 2014

1. How many decades will we be stuck in ZIRP?
2. Will it be as many decades as Japan?
3. Why is the Fed tapering?
4. When will the Fed ramp up QE again?
5. How much more poning can the hyperinflationists take?
6. Why am I so willing to hold long-term TIPS to maturity?
7. Where have all the "bond vigilantes" gone?
8. What are they doing with all their profits?
9. Sears? (It's a rhetorical question.)
10. Why must I use the sarcasm label in nearly every post?

Source Data:
St. Louis Fed: Custom Chart

The following chart shows the annual job growth using the quarterly average of the equally weighted government establishment and household employment surveys. I'm using the quarterly average to filter the noise out a bit.


Click to enlarge.

Perhaps an optimist can find something good in that chart, but I certainly can't (at least over the long-term and/or full business cycle anyway).

May 18, 2012
Recession Prediction



For what it is worth, the odds of me turning optimistic any time soon are somewhere between slim and none. Just so you know, slim left town. Put another way, I see little reason to change my long-standing prediction.

This is not investment advice. Predicting the future is a fool's game. That said, it might be even more foolish to ignore the risks entirely. It's certainly easy and popular these days though. I'll give you that.

January 6, 2014
Hussman Funds: Confidence Abounds

Hey, what do you know? No sarcasm this time, unless sheer unadulterated long-term employment chart terror counts. I don't think it does but it is certainly open for debate.

See Also:
The Overleveraged Cone of Shame

Source Data:
St. Louis Fed: Custom Chart

The following chart shows construction and manufacturing payrolls as a fraction of nonfarm payrolls.


Click to enlarge.

That sure looks like a fish ladder to me. The only difference is that the fish aren't supposed to be heading downstream. Down 19% and temporarily holding!

Fish Ladder


Oh oh. Sounds like a faulty dam. What went wrong?


Click to enlarge.

Craziest monetary god dam design ever! That's what! Who in their right mind would put the monetary floodgate below the fish ladder?



I said in the past that some posts are mostly for the puns. How could I pass up this post's title once it got stuck in my head? Hahaha! Sigh. I sigh because the data is ugly, especially over the long-term. Gallows humor can't fix that.

See Also:
The "Recovery"

Source Data:
St. Louis Fed: Custom Chart
St. Louis Fed: Monetary Base