Thanks to technology, productivity has allowed costs to equip a typical household in terms of hours worked to collapse

Technology has enabled incredible productivity gains evident in American households in terms of the hours of work it takes to afford a typical set of appliances.  The following chart displays the collapse in the number of hours of work it takes to acquire washing machines, clothes dryers, dishwashers, refrigerators, freezers, stoves and other items including an all important color TV.  Yes-the retail price of these items has gone up by 78% since 1959 thanks to inflation.  But, and more importantly, the number of hours of work it takes to buy them has plummeted by 81%! What took nearly 6 months worth of wages in 1959 only takes slightly more than 4 weeks today.  (I have taken data from Mark Perry’s Carpe Diem blog to prepare the chart below).  There are even more productivity gains to come with these appliances as wireless technologies will be used to connect and manage all these household devices.  Jeb B. Terry, Sr. Oct. 6, 2013.

Hrs wkd v retail price index chart 10-5-13

 

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Government Shut down – so what – “Be thankful we’re not getting all the government we’re paying for” – Will Rogers

Will Rogers had it right – less government is better.  The current federal government shutdown is a good thing.  I read recently there have been 17 government shutdowns since 1976. The current episode is not worrisome. See the following chart from Bespoke comparing today to 1995 – the last time there was a “government shutdown”. The market cruised right through the event.  The market didn’t miss a beat in 1995. 4Q 1995 saw a 5.4% gain in the S&P 500. 1Q 1996 saw a gain of 4.8% in the S&P 500.

1995 v 2013 SPX and Govt Shutdown 9-30-13

Earnings were rising in 1995 and they are rising now. Leading economic indicators were recovering from a soft patch then and are now. It would seem that once again, earnings and economics trumps concerns over government policy at least in the short run. In addition, Federal spending has been flat in dollar terms in recent quarters and the deficit is shrinking rapidly as can be seen below in a chart from Scott Grannis.

Fed spending v rev Sep 2013

I find it encouraging that the politicians are fighting over how they can spend less instead of more. The current argument is not a new bit of news and hence has a small surprise factor.  If the market behaves as it did in 1995 and also as it has in 80% of the other years when it is up 15% or more by the end of 3Q then the S&P 500 should finish the year higher than now.  Sounds good to me . . . Jeb B. Terry, Sr. Oct. 2, 2013

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