I find these 3 charts, courtesy of Ron Griess of The Chart Store, fascinating. They contextualize market gains, dollar weakness and inflation and deflation relative to various markets:

click for larger charts

S&P500

Commodities

Gold

Category: Commodities, Inflation, Investing, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “Hours of Labor Needed to Buy SPX, CRB, Gold”

  1. Mannwich says:

    All look bubblicious to me. How can anyone look at these charts and not draw the conclusion that another bubble is merely starting up? That S&P chart is ridiculous. 3 clear bubbles for all to see.

  2. Steve Barry says:

    So stocks are about double their average price relative to wages if we return to pre-bubble times prior to 1995…sounds about right. If we overshoot to the bottom (we are in a near depression afterall), S&P could be cut in 1/4.

  3. Mannwich says:

    But there’s no inflation anywhere during “The Great Moderation”. No siree bobby. Except if you look at housing prices, food prices, energy prices, etc. etc., but those don’t count so all is well. All is well.

  4. Steve Barry says:

    How funny is it that the March low of 666 was only able to touch pre-bubble HIGHS, let alone lows? How detached from reality have wee been for the last 15 years?

  5. Steve Barry says:

    Gee, didn’t CNBC start 20 years ago…could there be a connection between lack of reality and CNBC?

  6. dead hobo says:

    Steve Barry Says:
    January 12th, 2010 at 12:10 pm

    How detached from reality have wee been for the last 15 years?

    reply:
    ————–
    Here’s a theory for you.

    Back in the golden days of about 1995, a spry younger Fed chairman noticed that expansive monetary policy pumped the stock market. This pump increased transaction flow, which increased capital gains tax revenues. The US annual deficit turned into a surplus thanks to a new miracle inflation involving asset bubbles and all looked good.

    If managed correctly, it became dogma that a Greenspan Put was good for all that ails you. Uncle Stupid could run deficits forever and capital gains revenues from transaction based on asset inflation would be the secret nobody talked about. Just tell the rubes that asset inflation doesn’t exist and can’t be predicted. (The PPTs real mission?)

    Uncle Stupid and Greenspan, along with his young protege Bernanke, believed they had invented perpetual motion. Asset bubbles were assumed to be representations of real prosperity, and the occasional burst was only an inconvenience.

    So, yes, we are at the end of a 15 year managed inflationary spiral. Assuming a reversion to the mean, it may take 15 years to fall to a proper bottom and replace printed paper profits with real wealth. Employment is horrible and only financial sales people say it will be better soon. The reasons for hunkering down have been enumerated ad nauseum and none have magically disappeared.

    On top of that, the Fed will no longer be able to monetize tax revenues via new asset inflation. Yes, they might be able to spike the punchbowl now and then and monetize stocks for some quick trades and ‘good calls’ (ha ha about the ‘good calls’ thingy, like betting on red is a good call.)

    I think I just discovered the new economics of the 2010 decade and a credible explanation for the past decade.

  7. Steve Barry says:

    @ Dead hobo:

    I disagree with nothing you say. Whenever I place blame for the mess we find ourselves in, numbers 1-5 are always Greenspan. The one quibble I have with what you wrote is it is too narrow…they didn’t notice that their monetary expansion just pumped the stock market (though that was of course a beautiful thing), it pumped every aspect of American wealth, earned Greenspan the name Maestro and eventually an 8.5 million dollar book advance, plus a fortune in speaking fees.

  8. Mannwich says:

    Great points, dead hobo. I believe you nailed it.

  9. dead hobo says:

    Steve Barry Says:
    January 12th, 2010 at 1:03 pm

    The one quibble I have with what you wrote is it is too narrow…they didn’t notice that their monetary expansion just pumped the stock market (though that was of course a beautiful thing), it pumped every aspect of American wealth, earned Greenspan the name Maestro and eventually an 8.5 million dollar book advance, plus a fortune in speaking fees.

    reply:
    ————-
    Very true. Had I thought of that I would have added it. The expansion of the world economy since 1995, to a large extent, has been based on a cynical stunt to raise tax revenue via capital gains so Uncle Stupid could spend without limit. The Fed has monetized assets in an attempt to support binge spending by Uncle Stupid. We are now at the end. What we see now is a sputtering stock market engine. The only thing to make it go up now is a direct injection of electron money, just like last year. Will Ben the Bubble commit again?

    Emerging market countries are the only bright spot since real wealth for them was a benefit. However China, with it’s brand new empty cities and empty malls, will soon be down at our level. Unfortunately, their eventual burst will just send us down further on the mean reversion.

  10. Mannwich says:

    @dh & sb: One quibble though – “American wealth” = “American PAPER wealth”. Big distinction.

  11. Steve Barry says:

    @Mannwich:

    True…we all are guilty of conflating assets with true wealth (equity) sometime. If I live in a 10 million dollar home, but owe 9 million in debt on it, I do have use of the asset, but my wealth is only 1 million…

    ASSETS=DEBT+EQUITY!!!

  12. dead hobo says:

    Mannwich Says:
    January 12th, 2010 at 1:16 pm

    @dh & sb: One quibble though – “American wealth” = “American PAPER wealth”. Big distinction.

    reply;
    ————–
    Disagree a bit. The coming deflation will rob most people of paper and assets. The current asset inflation with commodities will rob people of current cash on hand. Anyone with a pile of cash or anything of value will be sitting pretty. Personally, I wonder if the kind of squalor you used to see in movies such as RoboCop or other 1980s movies that showed a substantial underclass is pending in the 2020 decade?

  13. JustinTheSkeptic says:

    Who needs Labor…wait long enough and the FED will pump things up enough so that we’ll all be getting 5 to 10 credit card approvals per week!

  14. CTB says:

    Anyone know if the charts were generated from average or median hourly wage? Individual or family?
    We have seen a massive explosion of multiple-income families. Elizabeth Warren made the observation that a woman in 1970 with a 16 year old was less likely to be working than a woman in 2007 with a 6 month old.

    I imagine a lot of the inflation came about because of dual family income. Of course, now we’re seeing a reversion to the mean in terms of total employment percentage — with females now representing the majority of the working population.

    If a societal shift is beginning, we should see a corresponding decline in commodity and equity prices.

  15. Steve Barry says:

    @CTB

    Good questions…I think the use of average wage is a proxy for inflation adjustment…it is less prone to chicanery than CPI figures. I’d like to see a housing chart in avg earnings. If deflation were coming (I think so) that makes stocks even that more expensive, because it would take more and more hours worked to buy the same stocks….plus people would not have the wages to put into stocks. A reverse of the virtuous cycle.

  16. mathman says:

    Yet another look at what may unfold this year (or “soon enough” anyway):

    http://questioneverything.typepad.com/

  17. The Fed has monetized assets in an attempt to support binge spending by Uncle Stupid. We are now at the end.

    Ahhhh but are we? Now that we have reached the utopian ‘permanently high plateau’ it appears that our great and benevolent leaders led by Ben Bernanke, Time’s Person of the Year for 2009, will attempt to at least keep us here even if the ‘ever expanding’ part already has been repossessed and is sitting in the used ideology lot being greedily lusted after by Hugo Chavez

    BTW, don’t blame me, Fed printing has also caused my sentences to get longer

  18. [...] Illuminating: charts based in hours worked – Big Picture [...]

  19. crosey says:

    Team Elliott Wave will have fun analyzing the S&P chart to forecast the top of wave 4. Somewhere in the 70-80 hour range?

  20. kaleberg says:

    For another interesting chart, see:

    http://www.kaleberg.com/images2010/gdphours.jpg

    That’s the number of hours at BLS average hourly earnings of production worker wages (CES0500000008) to earn one individual’s share of the GDP. I got the GDP from the BEA and the population from the Census Bureau. There is no adjustment for inflation since wages and GDP are in nominal dollars.

    In 1964 it took less than 1400 hours of work, about 35 weeks of 40 hours each, to buy your share of the nation’s goods and services. This number rose fairly consistently to over 2700 hours, over 67 weeks or 1.35 years of 40 hour work, to buy the same share. Productivity has been rising, but you wouldn’t know it if you work for a living. If wages had kept up with productivity, they would be nearly twice as high. Of course, there are a lot more people working, but not twice as many.

    I’m glad to see that more people are looking at things in terms of hours of work, rather than cash value. Unlike the dollar, the hour hasn’t changed all that much over the years. During the Cold War, they always compared American workers with Russian workers in terms of the number of hours one would have to work to buy things. The Soviet era ruble had an official exchange rate and a more realistic black market rate, presumably adjusted for the risk of encounters with the KGB. The GDP value of an American work hour was pretty flat in the 60s, but it changed in the 70s, shrinking well into the Clinton 90s when the Soviet Union collapsed. They had stopped doing those hour to hour comparisons well before then.