Friday, March 7, 2014

"Employment Growth Is Slowing Again"

Stagflationary Mark:

"Employment growth has been slowing in a fairly predictable way since December of 2012. Contrary to popular expert financial opinion, this downtrend cannot be blamed on this winter's weather. It's been going on for more than a year.

I firmly believe that we are in the late stages of this business cycle and I'm fairly comfortable with my recession by October of 2014 prediction."

21 comments:

whydibuy said...

Oh, please.
If there was a recession coming in Oct. then the forward looking market would be sinking now.
What is it doing now? Making new all time highs.
Some recession we're going to have in Oct. , lolol.

Stagflationary Mark said...

Your mythical "forward looking market" hit its high heading into the Great Recession on:

S&P 500: 2007-10-09 1565.15

And was still a whopping:

S&P 500: 2007-12-10 1515.96

During the first month of the Great Recession.

You can heckle the prediction if you like, but you might want to consider using something other than faulty "conventional wisdom" logic to do so. That's especially true if you find it funny, for that just convinces me that investors such as yourself really have become way too complacent again.

I suggest in the future you limit your heckling to simply suggesting that nobody can accurately and consistently predict recession dates in advance and I would not disagree.

As a side note, the sarcasm gods are most displeased with your heavy use of sarcasm founded on misguided logic. I suggest you sacrifice something of value to them lest they unleash their wrath down upon you soon. ;)

Stagflationary Mark said...

Your heckle has also provided anecdotal evidence that years 3 to 4 following epic econimic disasters are filled with excessive complacency. Go figure.

Anonymous said...

I've been reading CBS for a long time. A why'd I buy heckle is usually good for a 5% correction.

CP said...

Mark,

The complacency charts are fantastic!

http://illusionofprosperity.blogspot.com/2014/03/theory-four-phases-of-extreme-bull.html
http://illusionofprosperity.blogspot.com/2014/03/bull-market-complacency-after-great.html

The bears capitulated in Q4 - think Hugh Hendry.

CP

P.S. http://www.creditbubblestocks.com/2014/03/theory-four-phases-of-extreme-bull.html

CP said...

And a puzzle:

http://www.creditbubblestocks.com/2014/03/china-puzzle.html

Stagflationary Mark said...

CP,

The complacency charts are fantastic!

I enjoyed making them. It was a relatively unique Excel puzzle that had a fairly elegant automated solution.

For those interested, one column was devoted to the maximum real monthly index level using the max() function on the range of cells since the start of the bull market. By locking the first cell with the "$", all I had to do was just copy and paste that first cell down the full column. And bingo, that column now shows the highest S&P 500 level since the starting point (all the local peaks as time goes on).

It was then trivial to compare where we were relative to that peak in the next column (to show both if there was a correction and its magnitude).

I think how difficult, time consuming, and error prone charts like this must have been before computers. Mind blowing. A man-week? Maybe!

(Technically, I did not require two columns, but I find it easier to verify that the reasoning is sound and bug-free if I can see the intermediate stages. One problem with blogging is that we have no editors who look over our research work before publishing it. It's all on us.)

Anonymous said...

Classic Stagflationary Mark. Living off of minute TIPS interest coupons and making innovative Excel charts of horrifying deflationary trends.

Anonymous said...

It is hard to compare. I was in my 20s in the 1990s, and in my first few years of work, my net worth was negative by several thousand dollars due to student loan debt, and my earnings went from $5.75 an hour, to $19,000 a year, to $30,000 a year, to somewhere around $50,000 by the end of the decade. I was lucky enough to be able to live with my parents for a couple of years, and of course their help left me with a much lower debt burden than I might otherwise have had if I'd had to pay for all of my education myself. When I look back at that time, I remember feeling the stress in those early years when I had my first apartment and struggled to pay all my bills while doing at least a little bit of the fun stuff a young adult wants to do.

My career advanced quickly enough to help me get past that stressful time fairly quickly, but the other thing that made the biggest difference was that I didn't procrastinate about saving. I was always aware that I needed to start saving money, and from my first job, I started contributing to a 401k. It might have only been 5% or 10% or 15% of my income at first, but pretty early on, I pushed that contribution as high as I could, knowing that it would be less painful if I learned to live without that money from the get-go. And somehow, as I saw that retirement account balance growing, it made me feel more inspired to save money. For some people, having savings might make them feel like it's ok to spend all the other money they've got coming in. But for me, I saw that having money makes more money, so I kept thinking about ways to cut expenses and debt. I paid off my student loans, and had become a homeowner rather than a renter by my late 20s. Seeing myself succeed in saving money made me feel great-- and when you know you're doing well at something, you want to do it more. It's a snowball effect.

For so many people, it's just the opposite. They start out with debt. They can't get ahead and fall deeper into debt. They live paycheck to paycheck, unable to invest in things that will pay off long term. Thinking about the situation is too depressing, so they put it off til another day. All that lost time is lost interest, lost investment gains, lost appreciation of a home's value. By the time they're 30 or 40, they may be making more money, but without the foundations laid in those early years, they're still in debt, maybe-- or even if they start to get ahead, they realize they'll never save enough money by the age at which they'd want to retire.
And of course none of this takes into account the curveballs life throws at you-- illness, injury, accidents, loss of a job, dependents to care for. I am so lucky to have had none of these to deal with yet, knock on wood. I am always so conscious that my life could easily have gone in a different direction...

http://www.myopenwallet.net/

Stagflationary Mark said...

Anonymous,

Classic Stagflationary Mark. Living off of minute TIPS interest coupons and making innovative Excel charts of horrifying deflationary trends.

Yes, indeed. Here's yet another one.

Office Employment Growth

It's got pain written all over it. Sigh.

Just to be clear, I am a relative inflation agnostic over the long-term. That's not my bet.

I own long-term TIPS because I believe that real growth will continue to fall over the long-term and that long-term real yields will perform similarly.

There may be a time when buried cash performs well too though and that's why I generally prefer I-Bonds. They are like TIPS but cannot actually deflate, even month to month. They are always worth, in nominal terms, at least as much as they were the previous month.

Put another way, I-Bonds are like buried cash with additional inflation protection.

whydibuy said...

So Mark pulls out the one time the market didn't move ahead of a economic drop. Why?
Because that drop was induced by the biggest idiot gov official we've seen in a long while. Paulson let a trillion dollar investment bank get gang raped by a few rogue traders not understanding the effect it would have on the financial world. Lehman should never have went down but after he also let bear sterns twist in the wind, there was no confidence in any money center institution.
Today, no such raid could take place without getting a intervention by the fed or treasury.
09 was not a huge recession until Paulson mismanaged the investment banks who in turn shut down ALL credit to everyone. Don't you remember even top rated companies having to pay nearly 10% on refi's because credit stopped? That was not a recession doing that, it was the money center banks cutting off credit and smashing the economy.

whydibuy said...

Thanks, anon.
5% correction followed by a resumption of the bull market, I'll take it. Thanks for giving me credit for the bull market but we really have to thank our resident permabears for building that wall of worry the bull market needs. They are doing a bang up job.

Stagflationary Mark said...

So Mark pulls out the one time the market didn't move ahead of a economic drop. Why?

Perhaps it has something to do with starting my Illusion of Prosperity blog in September of 2007 when it was plainly obvious to anyone who bothered to look that a serious recession was coming.

Meanwhile, you offer up a faulty "forward looking market" theory that couldn't spot the biggest recession since the Great Depression even though credit growth had been rapidly slowing for 2 full years and would create one of the most impressive exponential trend failures in American history.

Just a theory.

Here's another one. Even though we have had one of the most impressive exponential trend failues in American history and many other trend failures to go with it, you still assume that we can rely on American growth to do what it has always done over the long-term.

Good luck on that.

whydibuy said...

WOW, an "exponential trend failure".

Sounds catastrophic. Apocalyptic perhaps? It wasn't. The economy recovered as it always does. And it would have recovered without any fed stunts like quantitative easing.

BTW why not explain why the 87 drop didn't even hiccup the economy. Wasn't that another exponential trend failure?

Stagflationary Mark said...

Wasn't that another exponential trend failure?

It was not one of many LONG-TERM secular exponential trend failures that we've been seeing since 2000.

If you want to base your LONG-TERM investment decisions on LONG-TERM historical trends in the USA, then you better be sure that the LONG-TERM trends have not changed.

You are so confident and complacent that you won't even entertain the possibility that the LONG-TERM trends have changed, even though the proof is clear.

It is NOT MATHEMATICALLY POSSIBLE for nonfarm payroll growth to grow over the LONG-TERM at the pace it grew from 1939 to 2000. The employment growth you are seeing now is NOT SUSTAINABLE. Simple math proves it.

If the employment growth trend from 1939 to 2000 was still in place, there would be 40+ million more people employed. That trend is broken. We're NOT going back to it. Guaranteed.

Anonymous said...

LOL:

"If you want to base your LONG-TERM investment decisions on LONG-TERM historical trends in the USA, then you better be sure that the LONG-TERM trends have not changed."

CP said...

Lehman was breathtakingly insolvent from all of the bad real estate bets it had made.

http://www.creditbubblestocks.com/2013/09/review-colossal-failure-of-common-sense.html

CP said...

“I told them I’d heard a lot about Dick Fuld over the years. He’s a former commercial paper trader, but not once, not one time in all my years here, did I ever see him on the trading floor. Not even on the day me and the guys had the single most profitable day in the history of Lehman’s fixed - income division — two hundred fifty million clams, and the guy’s a no - show.”

Stagflationary Mark said...

Real GDP Growth per Capita (Musical Tribute)

The following chart shows the 20 year moving average of annual real GDP growth per capita.

This musical tribute is dedicated to the bulls.

Oh, I believe in yesterday

CP said...

Exactly as you would expect with the demographics - aging population.

Stagflationary Mark said...

CP,

Exactly as you would expect with the demographics - aging population.

It would look even worse if we hadn't turned to debt growth as a solution. Well, sort of. Depends on what your definition of "solution" is, lol. Sigh.

Real GDP Growth per Capita (in black) vs. Real Total Credit Market Debt Growth per Capita (in red)