The "Driver" of American "Prosperity"

The following chart shows personal income divided by personal consumption expenditures.


Click to enlarge.

No matter how important you think income is, consumption is always more important!

Show of hands: Who thinks this can end well?

January 31, 2014
Consumers spent more than expected last month despite flat incomes

WASHINGTON -- Consumers opened their wallets more than expected last month even though their incomes failed to grow, another indication the economy picked up steam heading into the new year, the Commerce Department said Friday.

Steam power for the win apparently.

Source Data:
St. Louis Fed: Custom Chart

charts employment oil sarcasm vehicles

What to Expect From Janet Yellen's Fed (Musical Tribute)

Q&A: What to Expect From Janet Yellen's Fed

Beyond that, I wouldn't be surprised if the Fed under Yellen lowers the unemployment-rate threshold that could trigger an increase in interest rates. A number of years ago, the Fed introduced this idea of a 6.5% unemployment threshold for considering rate hikes. But that threshold is almost certainly out of date. That's because the unemployment rate continues to drop for the wrong reasons: We keep getting a decline in the number of people looking for work. The Fed wants strong job growth, not people abandoning the labor force. And so it has to decide whether to throw it away or go to lower the level. Our feeling is the Fed will lower it to 6% or perhaps 5.5%.

And how long would we expect that unemployment rate to stay at 5.5%?

The following chart shows the 30 year moving average of the unemployment rate.


Click to enlarge.

Note that 5.5% seems like a pipe dream over the long-term (unless we can somehow magically undo the permanent damage done in the 1970s).



Yellen love you long time.

(Shame on me for going there, lol. Sigh.)

Source Data:
St. Louis Fed: Unemployment Rate

charts employment fed chairman musical tribute oil sarcasm videos

Real Oil Price: Old Normal vs. New Normal

Click to enlarge.

The Fed wants 2% inflation per year. If real household median income and real household debt per capita can't get us there, then oil will have to do.

Here's the good news. If real household median income starts to fall again, then the Fed may help raise the price of oil to compensate again. In fact, the lower real median income goes, the more help they may offer! Genius!

Put another way, the less you make at work the more it may cost you to get to work! You know, just to balance it out and what not. This is such a great idea. Should give you all the motivation in the world to get paid more.

What label should we use to describe what's going on?

1. Deflation.
2. Inflation.
3. Stagflation.
4. All of the above.

You make the call. As for me, I'm calling it hyperdefstaginflation! We'll need two words to describe what we're feeling as well.

For the optimists: hyperdefstaginfelationed!
For the pessimists: hyperdefstaginfestationed!

As a side note, one can probably deduce the typical feeling based on how little it costs to fill one's gas tank as a percentage of net worth. The closer you are to the top 1%, the more you'll feel hyperdefstaginfelationed! Well, not always. There may be a little bit of whining involved.

January 28, 2014
VC legend Tom Perkins apologizes for comparing attack on rich to holocaust

Perkins told Bloomberg Television that he made the analogy between wealthy Americans and Jews because the rich are a minority, like the Jews who made up just 1 percent of the German population before the Holocaust.

File:If-us-land-mass-were-distributed-like-us-wealth.png (Stephen Ewen)

The 1% minority are being persecuted by that little red dot. Oh the humanity! Although none have lost their lives so far, there's been a great deal of emotional damage. When your net worth is over a billion dollars and you experience even 2% emotional damage, that's tens of millions of dollars! For a 200 pound billionaire, that's easily $6,250 per ounce in tainted self-worth! Don't the poor realize this?

Source Data:
St. Louis Fed: Custom Chart

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The Exquisite Timing of TBT

Click to enlarge.

Yahoo's data didn't start at the inception date, but it's close enough for government work.

Moral of the story? Wall Street always has your back!


File:Stab-in-the-back postcard.jpg

TBT Profile

Annual Report Expense Ratio (net): 0.93%

To put it in perspective, 0.93% is roughly double what the average 5-year CD is paying. That's just adding insult to back injury.

Source Data:
St. Louis Fed: WTI Crude Oil Prices
Yahoo Finance: TBT Historical Prices

charts oil sarcasm treasuries

Vehicle Miles Traveled

Click to enlarge.

Once we get through this post-recession soft patch, things are really looking up!

Source Data:
St. Louis Fed: Moving 12-Month Total Vehicle Miles Traveled

charts oil sarcasm vehicles

"Cheap Energy"

I heard this phrase from a guest on CNBC today. Perhaps it is time for a refresher course on the meaning of the word cheap.

The Free Dictionary: Cheap

a. Relatively low in cost; inexpensive or comparatively inexpensive.

Let's attempt to compare the cost of energy to the cost of everything to find out how relatively low in cost energy actually is. The following chart shows the annual average of the consumer price index for energy divided by the consumer price index for all items.


Click to enlarge.

Did I somehow manage to transport myself to a Pulp Fiction alternate universe? It's sure starting to feel that way lately.

Say "cheap energy" one more time! I dare you!

See Also:
The Pulp Fiction of Rising Interest Rates

Source Data:
St. Louis Fed: Custom Chart

charts electricity inflation natural gas oil sarcasm

The Auto Sales to Food Sales Ratio

The following chart shows auto and other motor vehicle sales divided by sales at food and beverage stores and food services and drinking places.


Click to enlarge.

Since this is an illusion of prosperity blog, you can probably guess which "sure thing" seems more likely to me over the long term.

1. When the downward trend in blue failed, it failed to the downside.
2. We have fully recovered back to the trend in blue.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

charts linear trend failure oil vehicles

Rome Did Not Fall in a Day

The following chart shows the natural log of real disposable personal income per capita. Once again, constant exponential growth shows up as a straight line when using natural logs.


Click to enlarge.

There are at least a few things worth considering.

1. Due to rising income inequality, the typical person isn't doing nearly as well as this chart would suggest.

2. As automation takes on more and more human work, how will billions of people find employment? How much of this is seen in the chart?

3. The trend is definitely not a straight line. It is curving downwards with a very high correlation of 0.993. If the current trend continues, then we'll peak in 2058 (45 years from now). That's a big if. If I'm alive to see it, I'll be 94 years old. That's another big if.

4. It is mathematically impossible for this upside down parabolic trend to continue forever. There must be a failure at some point. If nothing else, I don't think any rational person would expect real disposable personal income per capita to ever fall below zero. That would happen in 2164. This would certainly not be the first failure we've seen in recent years. We live in the era of long-term trend failures.

5. Any failure would probably be to the downside, since that is the direction the data is being pulled (much like a camel's back when more and more weight is placed upon it).

6. Contrary to some, I therefore definitely believe that the long-term future is not so bright that I gotta wear shades.

“I believe in making the world safe for our children, but not our children's children, because I don't think children should be having sex.” - Jack Handey

Japan (our partner in ZIRP crime) must love Jack Handey quotes.

December 23, 2013
Japan’s Diaper Shift and Global Population Trends

As I concluded: “…world population could peak sooner and begin declining well below the 10 billion currently projected for the close of the 21st century.”

For what it is worth, I'm very much a believer in the theory. In some ways, we're like locusts and the lowest hanging fruit has already been eaten (USA prosperity analogy). I know it sounds grim, but that's what I believe. The good news is that I'm thankful every day that I was born where and when I was.

As seen in the chart, I'm not at all convinced that our children's children will be quite as thankful. It isn't that I think they will be unhappy being born in America. Far from it. I simply question the timing. It's not like I would tell them to move to China. Let's just put it that way.

Source Data:
St. Louis Fed: Custom Chart

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The Death Of Services Pricing Power

The following chart shows the consumer price index for services divided by the consumer price index for nondurables.


Click to enlarge.

Goodbye service economy tailwinds.
Hello service economy headwinds.

Perhaps Bernanke can give our service economy some inflation but he sure can't seem to target where it goes. As seen in the chart, we eventually managed to get back to the trend line in the aftermath of the 1970s. We're sure making feeble progress these days though. Fantastic. Get out the party hats.

In fact, I am not confident that we will ever return to the trend line. This is yet another epic exponential growth failure. Using the power of future hindsight, we might even consider ourselves fortunate if we can maintain present levels. Sigh.

Why is this bad? When nondurables rise in price faster than services then this service economy's many, many service employees get the short end of the stick (even less stick than they currently think they are getting).

Durable good

Examples of nondurable goods include fast moving consumer goods such as cosmetics and cleaning products, food, fuel, beer, cigarettes, medication, office supplies, packaging and containers, paper and paper products, personal products, rubber, plastics, textiles, clothing and footwear.

While durable goods can usually be rented as well as bought, nondurable goods generally are not rented.

Nondurables are generally not rented yet? Say what? I sense a business opportunity!

May 4, 2012
Renting Prosperity

Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.

Rent the good life! Premium Gasoline! Beluga Caviar! Gurkha Black Dragons! Samuel Adams' Utopias! Lucentis! The Nondurable Rental Corporation of America will fulfill all your nondurable rental dreams and then some with low, low payments amortized over your remaining expected lifespan (with only modest surcharges of course)!

Have I mentioned lately that I'm a permabear? This is not investment advice. It's a business opportunity! Tap those severely tapped consumers before they are entirely tapped-out again! What could possibly go wrong? Genius!

In the epic battle between health care services, college education services, and nondurable fuel prices, which pain will ultimately reign supreme? Stay tuned! It's sure to be a hoot!

Source Data:
St. Louis Fed: Custom Chart

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Peak U.S. Public Air Transportation Services

Click to enlarge.

I know what you are thinking. Okay, sure. That's definitely a peak. It can't be the ultimate peak though. Our population is growing and the future is so bright I gotta wear shades!

Not so fast. Let's put that same data on a log chart. On a log chart, constant exponential growth is seen as a straight line.


Click to enlarge.

That's not straight. It's curving exactly like a baseball in flight would, and when I say exactly I mean with an r-squared of 0.995.


Click to enlarge.

If the 80+ year long-term trend continues, only the wealthiest among us will be flying in planes someday. How's that for a kick to the long-term prosperity gonads? It isn't just flying either. Driving looks mighty suspect as well. Just doing my part to add some perspective! Sigh.

Despair.com: Perspective

Less is more. Unless you're standing next to the one with more. Then less just looks pathetic.

This post inspired by Rob Dawg who pointed me to a whole new world of FRED quantity indices (in the comments found here).

Source Data:
St. Louis Fed: Public Air Transportation
St. Louis Fed: Public Air Transportation (Natural Log)

charts oil sarcasm vehicles

Power to the People!

The following chart shows real annualized power construction spending per capita (October 2013 dollars).


Click to enlarge.

Tack on another $117 per year that will ultimately be passed on to the people (each man, woman, and child).

Hey, maybe it won't appear all at once though, thanks to the Fed's ZIRP providing long-term financing at supposedly super cheap long-term interest rates. That debt could potentially just brew and percolate for a few decades perhaps. So we've got that going for us, which is nice.

Power to the people (slogan)

During the 1960s in the United States, young people began speaking and writing this phrase as a form of rebellion against what they perceived as the oppression by the older generation, especially The Establishment.

With $90+ oil, power to the people has a whole new meaning now of course.

It doesn't look like we can expect much power construction job growth per capita from here. As seen in the chart, real spending per capita is just sliding along sideways at a higher new normal. I guess we'll just have to make it up on fast food jobs.

August 29, 2013
The Fast-Food Restaurants That Require Few Human Workers

"The fight for $15 is a fight against technology, not management — and that's a fight that these union-organized protestors can't win. Instead of securing a bigger paycheck, the less-experienced employees demanding a more than 100 percent pay increase will find their jobs replaced by less-costly alternatives," Michael Saltsman, research director at EPI, said in a statement.

...

Today, Amsterdam's Febo chain of stores feature only vending-machine service for burgers, fries and more. A few employees are responsible for stocking the items behind the machines but way out of customer view, so you can walk up, drop in your coins and get a hot meal after a long night out without talking to anyone face-to-face.

Introverts of the world unite! I say this as an introvert who generally enjoys gallows sarcasm of course. Deep sigh.

Source Data:
St. Louis Fed: Custom Chart

automation charts employment fed chairman inflation oil restaurant sarcasm treasuries

5-Year Treasuries vs. 10-Year Treasuries

Click to enlarge.

The herd sure loves the current 1.37% 5-year treasury compared to the 2.75% 10-year treasury. Good luck on that one.

Perhaps the herd is right though. Perhaps interest rates will be north of 4% on the 10-year in 5 years as the economy continues to "recover". We can all hope and dream. Right? Okay, maybe not all. The Japanese would clearly be harder to convince. They've had more time to watch what ZIRP can do to an economy over the long-term. Sigh.

FRB: Why are interest rates being kept at a low level?

Low interest rates help households and businesses finance new spending and help support the prices of many other assets, such as stocks and houses.

Most Americans love higher shelter costs. It's a fact. And let's not forget about higher priced tuition. Who doesn't love that? The more financing the better! Here's the best part. These low interest rates have not boosted the price of gasoline. It's just a coincidence that gasoline prices have tripled over the last decade or so. Can't hold the Fed responsible for that. They have no control over it at all.

February 29, 2012
Bernanke: The Fed 'Can't Do Much About The Price Of Gas'

In Congressional testimony, Fed Chairman Ben Bernanke told legislators the Fed “can’t do much about the price of gas,” after lashing out at those that criticize him for “hurting” the dollar.

Let me summarize.

Good asset prices rising: You can thank the Fed!
Bad asset prices rising: You can't blame the Fed!

Good asset prices falling: You can't blame the Fed!
Bad asset prices falling: You can thank the Fed!

The funny thing is that gasoline prices stopped going up. It's almost like the global economy is too weak to support high priced gasoline. Go figure.

So how exactly is the Fed going to generate consumer price inflation going forward if gasoline prices can't rise further and WalMart sells 32" flat screen televisions for $98? It's a puzzling conundrum of an enigma wrapped up in a mystery.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart
U.S. Treasury: Daily Yield Curve

debt deflation fed chairman housing inflation japan oil sarcasm treasuries

The Teenagers Can No Longer "Stuff the Channel"

The following chart shows the fraction of the civilian noninstitutional population aged 16 to 19 who are employed. It's basically a brutal combination of an extremely high unemployment rate and a very poor labor force participation rate among those aged 16 to 19.


Click to enlarge.

Teenagers can't stuff the channel if they are no longer in the channel! As seen in the chart, they are a long, long ways from being in the channel again (if ever).

Channel Stuffing

Channel stuffing is the business practice where a company, or a sales force within a company, inflates its sales figures by forcing more products through a distribution channel than the channel is capable of selling to the world at large.

For what it is worth and in the spirit of shady business practices, I think many teenagers are being stuffed. I'm not just talking Thanksgiving Day leftovers either.

November 25, 2013
USA Today: Government books $41.3 billion in student loan profits

The $41.3 billion profit for the 2013 fiscal year is down $3.6 billion from the previous year but it's a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion.

"It's actually neither accurate nor fair to characterize the student loan program as making a profit," Education Secretary Arne Duncan said during a July conference call with reporters after the Free Press and other news media reported on profits from student loans.

I wouldn't characterize it as making a profit. I'd suggest that the main purpose is to stuff the typical teenager with excessive "lifeblood". Perhaps that's just me though.

Source Data:
St. Louis Fed: Custom Chart

charts debt employment fed chairman oil sarcasm stock market

QE vs. Deflation

November 21, 2013
Deflation Is Crushing QE Right Now

Less attention is being paid to the biggest source of risk at present: deflation in the developed world. All of the past week’s data point to heightened deflationary risks. Paltry U.S. consumer price index (CPI) figures, German producer prices undershooting and another bout of weakness in commodity prices, particularly oil, suggest deflation is winning the battle over central bank stimulus. Which is something that Asia Confidential has been forecasting for some time.

The following chart shows the average annual growth in the CPI over the previous 5 years.


Click to enlarge.

1.5% is definitely below the Fed's target rate. The Fed has thrown pretty much everything at it too, including the kitchen sink. Too bad there are so many used kitchen sinks for sale. It hampers their progress.

Short-term market action is always difficult to call though. Long-term trends are easier to distinguish. And on this front, little has changed. You have an ongoing battle between deflation and central bank government efforts to prevent it via QE. Deflation is winning right now, which is why you should expect more QE, not less, going forward.

If that’s right, stimulus and low interest rates could be with us for some time yet. Asset prices may be bid up further. And the market bears may have to wait before a more serious correction happens. The catalyst for that is likely to be a loss of faith in central bank stimulus.

I'm a believer in the loss of faith theory, for what that's worth. Over the long-term, I never had it to begin with. I haven't been buying long-term bonds because of the Fed. I have been buying in spite of them.

It's funny that so much time is spent warning us about a treasury bubble when individually purchased treasury bonds make up such a tiny amount of our personal assets (less than 2%). In my experience, very few people even know how to buy them directly from the government. I'm not judging. I've seen many hours of financial TV in my life and I've never seen anyone offer advice on how to buy a treasury bond. I don't recall the term I-Bond ever coming up either. It's almost like there's no money in it for them if bonds are purchased directly from the government.

This is not investment advice.

Source Data:
St. Louis Fed: CPI

charts deflation fed chairman japan oil sarcasm stock market treasuries videos

Everyone Needs a Place to Sleep

The first chart shows furniture and home furnishings store sales divided by wages.


Click to enlarge.

The next chart shows the consumer price index for furniture and bedding.


Click to enlarge.

As seen in the second chart, the first cracks in the furniture dam began to form just about the time that the long-term exponential trend for job growth began to fail. In my opinion, this is not a coincidence. This is not a short-term cyclical problem. This is a long-term structural problem. The housing bust combined with rapidly rising oil prices just added insult to injury.

Weak job growth. Weak demand. Weak pricing. Weak recovery.

February 26, 2009
He Is Living in a Cardboard Box

“I’ve been living in these things for 15 years,” he said. “I get the materials from the hardware store and fix them right up.” He had a blue plastic tarp underneath in addition to the clear plastic on the top to keep out the rain.

“I saw them delivering refrigerators down on 14th Street and just leaving the boxes,” he said. “If you’re living on the street, that’s a home. So I picked up four of them and flattened them out and brought them up here. So I’m set for a while.”

Source Data:
BLS: CPI Database
St. Louis Fed: Custom Chart

charts deflation employment housing inflation oil

U-192

German submarine U-192

During her maiden voyage in May 1943 she disappeared without a trace, along with her 55 crew.

Why don't you knock it off with them negative waves? Why don't you dig how beautiful it is out here? Why don't you say something righteous and hopeful for a change? - Oddball

October 30, 2013
Passenger traffic fairly flat at Port Columbus last month

There were 501,354 passengers in and out of the local airport, an increase of 192, which is less than one-tenth of 1 percent.

For the year so far, the number of passengers is down 3 percent at Port Columbus, a trend that has been noted at airports across the country.

Shouldn't have gone down the negative waves path. Should have said something righteous and hopeful for a change. Perhaps it is not too late.

These 192 extra people will no doubt lead to all sorts of exciting extra retail sales and employment opportunities for the one person with a well positioned food truck! So what if the trend is down at airports across the country! Gotta keep the faith!

employment oil restaurant sarcasm vehicles videos

The Glass Driving Ceiling

Click to enlarge.

A glass driving ceiling is a political term used to describe "the unseen, yet unbreakable barrier that keeps a society from exponentially growing the number of miles driven each year, regardless of population increases and the level of automobile advertising dollars spent."

See Also:
Glass Ceiling

Source Data:
St. Louis Fed; Custom Chart

charts inflation oil sarcasm vehicles

Lost in America

The following chart shows the 12-month moving average of annualized production and nonsupervisory RV parks and recreational camps employee minutes worked per capita.


Click to enlarge.



Source Data:
BLS: Employment
St. Louis Fed: Population

charts debt employment linear trend failure oil sarcasm vehicles videos

Our Well-Grounded Economy

The following chart shows production and nonsupervisory employee hours worked in long-distance general  freight trucking by hours worked in air transportation.


Click to enlarge.

Expectation:

Bald Eagle with Fish (Yathin S Krishnappa)


Realization:

Pygoscelis papua (Stan Shebs)


Source Data:
BLS: Employment

charts employment exponential trend failure oil sarcasm

Investment Advice Insanity

The following chart shows the 12-month moving average of annualized production and nonsupervisory investment advice employee minutes worked per capita.


Click to enlarge.

As seen in the long-term trend, the "expert" advice is spewing exponentially. It's as if the floodgates have been opened. That said, it looks like we're starting to run out of greater fools again though. Oh oh.

The next chart shows the 12-month moving average of how much these financial "experts" are paid per hour in inflation adjusted terms.


Click to enlarge.

Is it any wonder they are so optimistic? Stocks for the long run, blah, blah, blah. Now cough up $38.20 (February's recent peak) or forever be priced out!

As a side note, who really believes the advice is nearly twice as good as it was in 1991? We might need to hedonically adjust that advice inflation to factor in dotcom bubbles, housing bubbles, subprime fiascos, debt crises, higher unemployment, $100 oil, perma-ZIRP, and what not. Few "experts" could have seen that coming! Can't blame them for the perfect despair storm. The view out the rear view mirror looked fantastic!

This is not investment advice.

Update:

After further review, I noticed that the first chart's data was per capita and not per 1,000 people. That's been fixed.

Source Data:
BLS: Employment
St. Louis Fed: CPI
St. Louis Fed: Population

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