Thursday, December 23, 2021
Published irregularly, as conditions dictate.
Personal Income numbers are out today. Given the ever-increasing bonanza of government giveaways, we look at personal income minus these giveaways (“transfer receipts”):
It’s rare for this number to decline, and by the time it does, as evident in the chart above, the market is often in a full-on selloff. We can see from the table from which the chart is derived, the past 3 months values show a toping, perhaps the beginning of a decline of some magnitude shaping up. We are not even six-tenths of 1% above the February 2020 top. This is not healthy, not a robust economic expansion working individuals are experiencing in terms of personal income, despite the current “labor shortage.”
Manufacturers' New Order for Durable Goods came out this morning as well, and on the surface, play into the rosy narrative as well:
But the raw (and noisy) data on its own means little. Instead, the tale is told when we take out auto and defense from the basic calculation, above, then look at it adjusted for both population changes over the time period (as the basic calculation just shows raw millions spent on durable goods) and adjust for inflation:
This is one of many of the longer-term indicators which have been declining for a long time, along with M2 Velocity, labor force participation, and working-age-population-adjusted auto sales and housing starts. However, even on a short term basis, the dollar amount of durable goods purchased per individual per year, is clearly softening since April:
Economic numbers are cracking here, and with virtually any number you examine, if they are above the early 2020 peak, they are not commensurate with the rise in the indexes or risk assets in general in that time.
The economic indicators are one of The Six Main Pillars of the Market I will be covering in the year-end letter coming out in the next week or so, with serious look at the pillar of valuation (which is historic) and a special look at gold and inflation.