Jake at Econompic points us to this chart of U3 versus U6:
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And here is an update of the chart we first ran back in February of this year (here, and here)
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via Calculated Risk
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
read more »
July 2nd, 2009 at 11:36 am
I don’t think even Evel himself could get up that slope.
July 2nd, 2009 at 11:37 am
So for trend analysis it really does not matter if you look at U3 or U6, but for realizing how many people are actually hurting (1 out 0f 6 rather than 1 out of 10) you should look at U6.
July 2nd, 2009 at 11:47 am
I find it interesting looking at the second chart that
1. So many people are calling for unemployment to hit a peak very soon. Why and based on what?
2. Look at the slope on the 2001 recovery and how weak it is compared to others and the length.
July 2nd, 2009 at 11:54 am
Looking at the second chart, since 1981, each recovery takes progressively longer.
Looking at the 2001 recovery, it really is a jobless recovery.
This recession is already far deeper than 2001.
So who in their right mind would expect this recovery to be shorter than 2001?
Oh, I know the stimulus is going to lift us right out.
My money is on the stimulus not coming close to the state and local government jobs being shed. And that job loss was not a factor in the 2001 recession.
Some thing new and different is underway.
July 2nd, 2009 at 11:55 am
@ben22
I think normally the unemployment would slow down with all this queasing but the money isn’t producing more jobs I assume it’s being used to shore up bank balance sheets. Maybe once stimulus gets down to the average worker via jobs and benefits we’ll see a change.
Barry – Can you show how the exhaustion rate is at all making this even worse? Is that in the U6 number?
July 2nd, 2009 at 11:56 am
Last year I pointed out how EW analysis works on things like Unemployment charts as well. Last year, the models predicted 10.5% unemployement on U-3. Looking at it again, I stand by that as a near term peak on this wave up….10.5% U-3, and 17.5% on U-6. The chart looks like its heading for 2.618*A=C extensions up from the 2000 lows.
It should be noted though, the move off the 2000 lows can become a “five wave” move up….so maybe we peak at 10.5/17.5 and then consolidate a bit…before taking that last little leg up where we finish with 12% U3 and near 20% U-6? That seems in line with a credit collapse and the only other close model, the G.D.
July 2nd, 2009 at 11:58 am
ah that must be the broader unemployed number above. my bad.
July 2nd, 2009 at 12:00 pm
alfred e:
Can you say we are f-cked!! We have gotten away from a manufacturing based economy. We are not a cubicle based economy. Which means that jobs are going to be very slow in coming back(if at all!!). You are seeing the slow decline of the American Empire.
July 2nd, 2009 at 12:13 pm
Yet another chart that is off the trend scale. The sooner we wake up that we have been in a bubble econ0my the better. Many jobs that existed in the bubble economy will never come back. New industries will need to be developed to create the jobs back.
For example, 2 million RE related jobs ware supposedly created from 2001-2007. That was a bubble that will never return in our lifetimes. Those 2 million jobs are not needed in a normal RE market, let alone a depression-type market. They are gone forever.
July 2nd, 2009 at 12:15 pm
How do we know for sure CNBC is a shameless pump network?
Here is how they analyzed the Dow just now:
Sue Herrera: “The Dow is down triple digits…all componenets are down, except Coca Cola has been up and down…look it is now up 20 cents…we’ll take it”
July 2nd, 2009 at 12:25 pm
SB: My old time favorite comment from CNBC anchors….”The markets are in the red today, but we’re off the lows…”
The always seem to say “…but we’re off the lows…” The friggin’ market can be 1 or 2 ticks from the lows….but we’re always just off the lows….funny stuff. Glad I don’t watch any more….Watching some of these D.Kneale clips has basically confirmed my view that CNBC has “jumped the shark.”
July 2nd, 2009 at 12:26 pm
Kotok: “technology stocks may do well as businesses will invest in technology instead of re-hiring.”
This does not sound right to me. Has he ever worked in a service company? Most employees have PCs with sowftware licenses on them, phones, LAN connections, maybe cellphones, blackberries, etc. Fire that person and all that stuff is not needed. You could force a customer into a voice response system, but those are mainly in place. How does this help technology firms?
July 2nd, 2009 at 12:27 pm
Andy:
Yes…I too am driven crazy by “off the lows”…that is the CNBC credo.
Where do I find these Kneale videos?
July 2nd, 2009 at 12:28 pm
“…we’ll take it”
It is rather pathetic, isn’t it? I mean we can all hope for better things to come while dealing with reality. They just come across as being sooo naive and, well, pathetic. And they lose all credibility as a result.
July 2nd, 2009 at 12:34 pm
SB: ZeroHedge blog has been running some clips showing the pissing match between Kneale and the “cowardly blogosphere.” Somewhat amusing…..
July 2nd, 2009 at 12:35 pm
SB @ 12:26
important observation- seems to be missed by many
also – it will be interesting how long it takes for this recession to recover the lost jobs- as a reference look at 2001-
a decade or two?
also- quote from Taleb-
“We’re in the middle of a crash . . . So if I’m going to forecast something, it is that it’s going to get worse, not better . . . The government needs to deleverage debt and not try stimulus packages that will inflate assets.”
July 2nd, 2009 at 12:40 pm
I agree that our current down turn is very very bad but I’m skeptical that the jagged lines represent actual shifts. I think the outlier here is 1948, it does not look anything like the others (i.e. too jagged).
July 2nd, 2009 at 12:40 pm
Andy;
Thanks….just saw that interview. Since everybody else has done a great job on Kneale, I have nothing to add…ok…I’ll add something.
Yesterday he said he didn’t think Tylenol should carry warnings just because “200 people die a year from it.” What a dickweed.
July 2nd, 2009 at 12:43 pm
“Yesterday he said he didn’t think Tylenol should carry warnings just because “200 people die a year from it”
wow- what a corporate lackey- who worships at the feet of corporate America
July 2nd, 2009 at 12:43 pm
I must post the funniest comment from one of my paid subscriptions, “Also keep in mind that September and October are just around the corner. October is an especially dangerous month for the stock market. The other dangerous months are January, February, March, April, May, June, July, August, September, November and December. That little tidbit is courtesy of Samuel Langhorne Clemens, a.k.a. Mark Twain.”
July 2nd, 2009 at 12:45 pm
@karen: LOL. That is too much. Very clever.
July 2nd, 2009 at 12:47 pm
@ahab:
Taleb is right that we need to delevearge the debt (375% GDP and rising). Problem is that it is so high that I don’t know how we can survive deleveraging and maintain our lifestyles…it could be worse than the GD, yet S&P trades at 130 times as reported earnings, and this number will be over 1500 next reporting period.
July 2nd, 2009 at 12:52 pm
State and local governments across the nation, who are unwittingly pulling the rug out from under the federal government and thwarting any chance for a sustainable recovery by 2010.
But it isn’t their fault. Tax revenues have fallen off a cliff, leaving states with a cumulative budget gap of more than $100 billion for fiscal ‘09.
To deal with these shortfalls, states have laid off or furloughed thousands of employees, raised taxes and fees, and slashed spending on education and other social programs – some, many times over. It was supposed to balance their ‘09 budgets. But it wasn’t nearly enough.
As it turns out, state officials were far too optimistic about the ‘09 revenue picture, and they are scrambling to deal with widening shortfalls before the end of the fiscal year (which, by the way, is tomorrow for all but a few states). At this stage in the game, there are only a couple of ways for states to balance their ‘09 budgets (it’s too late for more tax hikes and spending cuts). Most are expected to do one of two things: (1) tap rainy day funds or (2) use federal stimulus money.
Read more here:
http://neweconomicperspectives.blogspot.com/2009/06/why-stimulus-isnt-working.html
July 2nd, 2009 at 12:54 pm
The engineer in me is asking if anyone has measured the “area under the curve” for each of the lines in the second chart. Visually it seems that this might provide another interesting look at the data.
July 2nd, 2009 at 12:54 pm
SB-
it will be interesting to see the reaction to earnings when they come out- I am wondering if the bar has been set low enough- and earnings beat- that it will make any reaction- because it would seem that stock values have to represent predicted earnings- and if there not there and not coming back anytime soon- than the price has to go down to reflect this-
at least that’s the way I remember it working
July 2nd, 2009 at 12:56 pm
Krugman sticking with his end of summer prediction?
July 2nd, 2009 at 12:57 pm
Cramer sticking with his June RE bottom prediction?
July 2nd, 2009 at 12:58 pm
@ahab: Yes, that’s the way YOU (& I) remember it “working”, but I’m getting the feeling that’s not how it
“works” anymore.
July 2nd, 2009 at 12:58 pm
@jc: Of course he is. Cramer will just blame other outside factors/people when he’s eventually wrong and then will claim victory once the actual bottom hits.
July 2nd, 2009 at 1:00 pm
Will Bernanke lose his job too? Only 60% bet on his reappointment. If this unemployment situation doesn’t improve he may be joining the list!
July 2nd, 2009 at 1:02 pm
Karen – thanks for that! Again, I’m always amazed at how much commentary from the past applies to today.
July 2nd, 2009 at 1:03 pm
@SB,
I think Kneale is a dickwad, not a dickweed.
Karen,
BR had that quote on here sometime ago. I also thought it was funny.
July 2nd, 2009 at 1:03 pm
re: the 2nd chart…granted, i’m not seeing that red line showing much of a bottom but i find it interesting that bears typically find it very easy to see impending tops in charts but they can’t see a potential bottom in a chart like this…instead they see the red line continuing on down to Hell, even though it currently looks like a major outlier to me. I”d be much more comfortable betting on a reversal than a continuation.
July 2nd, 2009 at 1:05 pm
@karen, sounds inspired by Dick Cheney, there’s danger around every corner. I guess I’ll be shitting my pants all year around.
July 2nd, 2009 at 1:05 pm
Anybody hear Kudlow rationalize this bad news? Just a stat fluke, the new bull market is still in place, time to wake up and smell the green shoots?
July 2nd, 2009 at 1:06 pm
@ jc, krugman wants another stimulus plan.
July 2nd, 2009 at 1:07 pm
@Clem
Heh! I completely agree. As a bull, I see upward charts going up forever. Just try to get a bear to admit that they have the reverse bias, though. PS–Bring plenty of paint thinner, because you’ll be tarred and feathered for even suggesting that it’s possible for a growth to return.
July 2nd, 2009 at 1:07 pm
mannwich-
it would seem that there is heavy risk staying long into earnings- you know earnings will have to be pretty ugly- can’t be good- wouldn’t it make sense to-
take profits off the table- and ride out earnings?-
that’s what i would do
July 2nd, 2009 at 1:09 pm
with help from B/D a 800k new jobs!!
http://econompicdata.blogspot.com/2009/07/birth-death-model-has-added-1000000.html
July 2nd, 2009 at 1:09 pm
Clem Says:
I”d be much more comfortable betting on a reversal than a continuation.
So, you like to bet with the herd?
July 2nd, 2009 at 1:11 pm
@f411 & Clem: Then be MY GUEST and BET on it then! Put your freaking money where your mouth is like many of us are doing. Best of luck to you both.
July 2nd, 2009 at 1:14 pm
Franklin411 – Dude – seriously, are you so narrow minded that you think everyone on here is a bear? Is anyone not ascribing to your deluded optimism as unpatriotic and defeatist? Do you split your entire worldview into two camps? Bulls/Bears Liberal/Conservative Obama lover / Omaba hater?
Do you honestly think the posters on this blog, most of whom live in this country, WANT to see it go down the drain? Do you think we enjoy seeing millions of people lose their jobs? Do you think we take pleasure in watching the country we all love knocked to it’s knees? Do you think we’re all so stupid as to think that if the country collapses (which you appear to think we do) that we won’t be affected? That the people we love and care about won’t be affected?
I used to defend you, but after reading your posts over the last few months I can see that you have a very narrow mind. As much as you blindly defend Obama you don’t at all see how you are no better than the people on the other side of the political spectrum who thought Bush was doing a bang up job and that things were A-OK in Iraq.
July 2nd, 2009 at 1:16 pm
@Thor: I GUARANTEE you if McCain or any other GOP were president, f411 would be all over him/them right now, but since his boy is in charge, it’s all green shoots. It’s all political with f411. The rest of us here try not to fall into that trap.
July 2nd, 2009 at 1:16 pm
Clem Says-
“instead they see the red line continuing on down to Hell, even though it currently looks like a major outlier to me. I”d be much more comfortable betting on a reversal than a continuation.”
elaborate on the reversal you speak of- and please reference the 2001 job loss and recovery as a guide-then ask yourself- a reversal will take how long to recover the lost jobs- a decade? two decades? and if you expect a quick reversal a la 1974- where are the jobs coming from?-
maybe you know somehthing that help the rest of us understand
July 2nd, 2009 at 1:17 pm
I think a more telling way of looking at it would be to forget about the 2007 line altogether…
Instead, take the 2001 line and draw it out 96 months…
You’d see the only, brief, ABOVE WATER area would be directly related to the housing farce & Americans spending counterfeit equity…
July 2nd, 2009 at 1:19 pm
@cvienne: Great point. It also amuses me that we compare this time period to others like it’s somehow applicable. It isn’t. Also, why would we even WANT compare this time period to the most recent ones if those were bubble-induced growth periods? Unless of course, the plan is to blow yet another bubble?
July 2nd, 2009 at 1:19 pm
“U.S. employers cut far more jobs than expected last month and the unemployment rate hit a nearly 26-year high of 9.5 percent, underscoring the likelihood of a long and slow recovery from recession.The loss of 467,000 jobs reported by the Labor Department on Thursday was 100,000 more than Wall Street economists had expected and was spread widely across economic sectors.”
It is really sad to learn that the economy has ‘lost 6.5 million nonfarm jobs since the recession began in December 2007′ and since then unfortunately the unemployment rate has nearly doubled. I believe this massive rate of unemployment is one of the key factors for bringing the housing market to such levels. I think the Federal Government it not good much to revive the unemployment scenario and should come up with PLANS to improve the situation.
I read an article on this premise. Government efforts are
not helping
July 2nd, 2009 at 1:21 pm
Mannwich – yes, exactly, and it absolutely drives me crazy to see that kind of blind faith. This guy is supposed to be a TEACHER for shit’s sake – I swear to god reading his posts are like listening to my 93 year old grandmother defend Bush. Where’s the critical thinking skills? Where’s the healthy skepticism? If this is what our universities are turning out to teach the young people of our nation we are truly fucked.
July 2nd, 2009 at 1:21 pm
Thor,
I already tried to explain that to Franklin. He doesn’t get it, you are wasting your time. Just let him live in happy land.
Franklin,
I’m curious, what do you think of this debt pickle we find ourselves in. You seem to never mention this. The size of the debt trumps every argument you or your beloved O have ever tried to make which is maybe why you never bring it up?
July 2nd, 2009 at 1:23 pm
The US government has consistently become more “liberal” in the way it counts job losses. It seems as each successive administration changes the formula to make things look less bad. Does this chart utilize a consistent technique in representing job losses? or is it just a summary of reportings from the time? If the latter, the chart is largely meaningless.
July 2nd, 2009 at 1:26 pm
And I thought I had gone too far when I said dissent would not be tolerated!
July 2nd, 2009 at 1:26 pm
ahab,
Clem won’t be able to do that. He doesn’t realize that in the last decade we’ve only created 1.1 million private sector jobs. More importantly, there is an outlier, as he says, but it sure as hell isn’t in the job market, no that’s to be expected given what we are going through. The outlier is the giant bubble of debt we have.
Mannwich,
Taleb made that point this morning that we shouldn’t be looking at history to predict how this will turn out or draw conclusions, this is different, there is no history for it.
Steve Barry said it best, we are in uncharted waters on almost every single chart you can find.
July 2nd, 2009 at 1:27 pm
@Manny
I appreciate your continued patronage
…
While we’re on that point, and to YOUR point ["Also, why would we even WANT compare this time period to the most recent ones if those were bubble-induced growth periods?]…
This is why I thoroughly wave off the people who are thinking that this is the bottom (or that we are just turning a corner)…Surely in the process we’ll turn A LOT of corners, but it will be awhile before we turn THE CORNER…
Ben attached a clip from Taleb earlier…That cat has it right…
Personally, I’m only a BEAR when it comes to how assets across the board are priced…When we can lift ourselves out of this debt burden, I’ll be the sunniest guy in the room…But we need DEFLATION to get us there…Otherwise we’ll spend the next 20 years turning corners…
July 2nd, 2009 at 1:29 pm
Um….
Employment is a lagging indicator.
July 2nd, 2009 at 1:29 pm
@f411: THOUGHTFUL dissent is more than tolerated. It’s welcome. What you’re offering lately doesn’t resemble that. It’s blind political faith.
July 2nd, 2009 at 1:30 pm
(ducks, runs for cover, here come the rotten tomatoes.)
July 2nd, 2009 at 1:32 pm
@cvienne & ben22: I really hope I’m wrong about this, but I can’t shake the nagging feeling that Taleb (and others, including Steve Barry) are dead right that this time period is a whole different animal and that too many supposed “smart” people are being far too complacent in blithely assuming that this period will merrily follow other recent periods. I just can’t see it, but then again, who am I? I’m not among the so-called “best & brightest”, so what do I know?
July 2nd, 2009 at 1:32 pm
@Publius: No rotten tomotoes, but you’re assuming that this is a normal recession. It’s not.
July 2nd, 2009 at 1:36 pm
Hey Publius,
Thats right and real estate is only going down in Miami. lol.
this blog is getting filled with more InvesTools by the day, just as we said it would over 3 months ago as we got closer to the top of the countertrend rally. In the coming weeks/months they should get even louder and more bold with the predictions. I welcome it.
July 2nd, 2009 at 1:36 pm
All – I was more involved in following middle east news during the last recession. Was there this much disagreement from economists and market players during the last recession? Right now it seems like there are just as many voices saying we’re not out of the woods yet as there are saying we’re already on our way out. I don’t remember that in the last recession but as I mentioned, I wasn’t following financial news as closely then as I am now. . .
July 2nd, 2009 at 1:36 pm
@Franklin
I’ve been doing my part to help your boy Obama out…
Lately, I’ve been buying up the CALL rights to the TLT for the January ‘10 (105) strike…
Just before expiry, I’ll sell them to you…OK?
July 2nd, 2009 at 1:40 pm
@Thor
JMO – But I basically think that nobody REALLY thinks we’re out of the woods…
The only reason you hear the “positive” talk is because they’re scared shitless…A great deal of MM’s know their gig is up if Mom & Pop take their bat & balls & go home…They’ve got to try at all costs to keep them in the game…
July 2nd, 2009 at 1:42 pm
@cvienne: That’s it, I think. The elite are scared shitless and know it’s in their own best interests to spin the crap out of any “better than expected news” because without CON-fidence from/of the masses, this puppy is really going down hard. Here’s the thing – - that CON-fidence from “better than expected”, but still bad, news can only last so long before it falls apart again. Real, substantive change has to happen and then real confidence will follow. Until then, this is just wishful thinking.
July 2nd, 2009 at 1:43 pm
while we maybe spending to much. but i found this
Remarks of the Chair of the Council of Economic Advisers: …I very much appreciate the opportunity to speak with you today. I will take this time to discuss recent developments in the economy, and some of the challenges the nation faces going forward. I … also … want to discuss some larger issues about how fiscal policy should be evaluated…
I view the economy as experiencing something similar to a tug of war. … On the contraction end of the rope are the shocks that the U.S. economy has experienced… Pulling hard on the other end of the rope are the expansionary forces of monetary and fiscal policy—the Federal Reserve’s series of interest rate cuts and the Administration’s … stimulus package…
Monetary and fiscal policy – the two main levers of macroeconomic stabilization policy – are both actively engaged…, both leaning hard against the headwinds…I will not say much today about monetary policy. This is not to diminish in any way the crucial role of the Federal Reserve in helping to counter the adverse forces in this recession. But fiscal policy is my beat as CEA chair, so that will be the focus of my comments. …
[A]nalysis done within the Administration has shown … that … the … job market is not what we would like it to be right now, but it would have been worse without the Administration’s actions.
One can view the short-run effects [of our policies]… from a classic Keynesian perspective. … This … helps maintain the aggregate demand for goods and services. There is nothing novel about this. It is very conventional short-run stabilization policy: You can find it in all of the leading textbooks. …
The qualitative effects … on the short-run output gap … are not controversial. There is less agreement on quantifying these effects—how many jobs are created, how much growth is increased, and so on. To answer these questions, one would normally turn to a macroeconomic model such as those maintained by private forecasting firms, the Federal Reserve, and other institutions. I view such models as being very useful at relatively short time horizons such as one or two years. …
Of course, the expansionary effects … will be offset to some degree by the effects of the budget deficits that arise… Deficits can raise interest rates and crowd out of investment, although I should note that the magnitude of this effect is much debated in the economics literature. The main problem now facing the U.S. economy is not high interest rates…
The Administration would prefer not to have deficits, but deficit reduction is only one of many goals. … Deficits are worrisome, but not as worrisome as an economy that is not growing and is rapidly shedding jobs. …
The most important fiscal challenge facing the United States is not the current short-term deficits,… but instead the looming long-term deficits associated with the rise in entitlement spending …
We do not yet have all the answers to the problems posed by entitlement costs, but we are hard at work. … These longer-term issues, however, should not blind us to the immediate needs of the economy. The President came into office inheriting an economy …[in] a recession. He has responded vigorously to the challenges and, as a result, the current outlook for the U.S. economy is bright.
this was from 2003.
so its not just O or a B problem as far as spending in a down turn goes.
and to fix the problem in 29, we had to spend money or we wouldn’t have recovered from the great depression before 2010.
the problem today (like in 29-30s) was nobody was spending. which leads to unemployment. always
the fix was a credit bubble.
i hope we won’t do that again. as we see the result.
what we need are jobs. some thing we didn’t have before.
and today we are closing in on having the same total employment in 2000 with a bigger population
July 2nd, 2009 at 1:45 pm
I really have no idea what will turn that red line back up. I don’t spend my time pouring over economic data because i’ve always found it to be completely useless as a tool for making money. March 9th was a case in point.
This chart looks stretched to me, it’s as simple as that. I don’t even care what this chart is measuring. If there was a way to bet on the red line being higher one year from today i’d think about doing it, whereas i wouldn’t be caught dead betting on it being lower.
By the way, i’m no bull. I was born a bear and i’ll go to my grave a bear, but i’ve learned too many times that the system does not like bears and will do whatever it can to defeat them. It’s financial suicide to cling too heavily to the bearish viewpoint.
July 2nd, 2009 at 1:48 pm
Just to note: the temporary help services component of this employment report was awful. It reversed May’s moderation and lost 37m jobs, vs. the 6m in losses a month ago. That sub-component tends to lead the employment report. Additionally troubling was the drop in hours worked. And the only reason the unemployment rate *only* rose .1% was the drop in the labor force. All-in-all, a terrible report.
(InvestTools indeed!)
Having said that, there are some mixed signals. Housing starts are bouncing off the bottom. Home prices rose in 8 of the 20 top MSAs in the latest Cash/Shiller report. Factory orders were up 1.2%. ISM Manufacturing was at 44.9. I’m not making those numbers up. It looks like the inventory liquidation has about run its course. To quote Stein’s law, if a trend cannot continue, it will stop. We cannot liquidate every inventory in the country. Auto scrappage is at 12mm / yr, while sales are at 9mm / yr.
I thought Barry held strong beliefs loosely. The data are mixed. It would not be a surprise to see a mid-summer bottom confirm a Dow Theory recovery. Then again, we could double-dip.
Markets are efficient, except when they aren’t.
July 2nd, 2009 at 1:54 pm
Mannwich,
I used to say that to myself “I’m not as smart as so and so” and I always used to think that way about WB especially. This downturn has changed my mind on all of that. Were these people super smart or was it just a long bull market they were operating in? Many very famous capital allocators got destroyed during the intial phase of this downturn, they were not prepared, so there is some question as to whether any special smarts are had by them at the end of the day. The goal of managing money is to make money and keep money. Maybe it’s just that the stocks that they were choosing simply moved more extremely than the market in both directions which is why they made more in bull markets and lost more in this bear. I put out a long list of fund managers on here a few weeks ago that got killed from 10/12/07 – 3/6/09 and there were lots of big names on that list: WB, Danoff, Pzena, Calamos, Heebner, Third Ave guy (can’t think of his name) Baron, Dreman, Bill Miller, Gabelli, etc.
“Beat the market” is a fallacy anyway. It’s well known that all you have to do in a bull market to beat the Dow or the S&P is pick stocks from a universe wider than those indexes.
I’m a huge follower of socionomics. This is why I’m always talking about sentiment and not so much about p/e or other data points so many use. Social mood leads markets, it’s also where deflation begins. Now look around, do you think there is more optimism or more worry among regular people? I think both Steve and Taleb will be proven exactly correct in the fullness of time. As I said on here the other day, social mood is already building the momentum to change. I believe that millions, perhaps even billions of people are still “hoping” for some change for the better and they still aren’t getting it, the longer that is delayed, well…..
July 2nd, 2009 at 1:54 pm
another way to look at employment
http://4.bp.blogspot.com/_pMscxxELHEg/SkzHV6nOv9I/AAAAAAAAFuk/MqcsiWBbceA/s1600-h/EmployPopJune2009.jpg
July 2nd, 2009 at 1:56 pm
@willid
You can print all the money you want…But there is no legislative means that I know about that forces people to spend the money that’s printed…
@Manny
To let you in on what I personally envision as a potential black swan…If you look at the charts, one might retrofit an assumption that the whole dive in the stock market last year was FEAR that was accelerated by the Lehman Collapse…
In a way, that’s kind of like a ONE OFF…the effects of which can be recovered rather quickly (as we have seen during the past 4 month rally)…
But the BLACK SWAN will occur during the next selloff because it won’t be loosely linked to some Lehman, or LTCM problem (remember in 1998, things rebounded quickly)…Instead, the realization will gain traction that we TRULY ARE SCREWED and that there is no amount of engineering or wizardry that can get us out of it save for asset deflation…
That moment of realization will be a BLACK SWAN indeed (and I predict it comes as early as next month – right about the 2 year anniversary of the August 2007 dump)…
July 2nd, 2009 at 1:58 pm
@Publius: I made that same point earlier. The temps job number is a huge red flag. If companies are still shedding temp help, we’re nowhere near a recovery.
July 2nd, 2009 at 1:58 pm
@willid3 — That chart is misleading, as it doesn’t account for secular changes in the size of the workforce or population changes. I also wonder about the impact of undocumented workers on this.
July 2nd, 2009 at 2:00 pm
Mannwich–
The Green Shooters would point to the fact that we are shedding temp help at a much slower rate. 37m losses last month are less than the 12m average of 54m /mo
July 2nd, 2009 at 2:02 pm
“I think Kneale is a dickwad, not a dickweed”
hmm . . . can’t he be both- for example-
Kneale is a total dickwad and was a total dickweed when he called the end of the recession
July 2nd, 2009 at 2:03 pm
@ben22
“Were these people super smart or was it just a long bull market they were operating in?”
Amen to that brother! Look at Warren Buffett…Berkshire Hathaway got rolling when? 1982? Beginning of the free credit era…
That was easy! Let’s see how you do for the next 30 years…
I’ll take all back if in 2039 there are 5 billion Chinese & 5 billion Indians all pulling equity out of their homes…But by that time, the resources to do all that would have jumped the temperature on the planet 10 degrees and Hong Kong, Tokyo, New York, & London will be underwater…So I’ll have to find the right exchange to trade it on…
July 2nd, 2009 at 2:03 pm
I seem to detect a common thread that “it’s different this time” and it’s hard not to agree given a lot of the stats, vis-a-vis ben22’s “uncharted waters on almost every single chart you can find,” e.g., Steve Barry’s mantra on the Total Debt.
What might jibe with the “it’s different this time” thesis is this: All the charts only cover the period in which the U.S. economy was on its ascendancy to being the largest world economy. What do charts look like when a #1 world economy passes the inflection point marking its descent from #1? Could anyone cobble together a chart of what the British Empire’s (or any other empire) stats looked like on its fall from pre-eminence? or is there an insufficiency of comparable data?
BTW FWIW – just received an email “sales flyer” from a machine tools distributor for an “Immediate Delivery Sale”: 40% off on machines usually retailing @ list prices from $100k- $300k
July 2nd, 2009 at 2:03 pm
Many have called President Obama’s stimulus plan a return to Keynesian policy. Some of us who like reading Keynes professionally or for leisure have already been scratching our heads. I have wondered in particular whether the plan isn’t set up to work in a manner completely backwards from what Keynes himself had in mind when he advocated economic stabilization by government.
There are two things to remember about Keynes’s fiscal policy proposals: 1) government spending was always linked to the goal of full employment (the absence of both cyclical and structural unemployment) and 2) to achieve macro-stability and full employment, the government had to employ the unemployed directly into public works.
Read more here:
http://neweconomicperspectives.blogspot.com/2009/07/message-to-president-obama-stop-priming.html
July 2nd, 2009 at 2:11 pm
Forgot to append my main speculation re the decline of a #1 economy; might the “recovery” of the current U.S. economy be a very long “L”, as in the foot of the L extending ad infinitum?
July 2nd, 2009 at 2:14 pm
@batmando: It’s never different. Eccles 1:9 — “What has been will be again, what has been done will be done again; there is nothing new under the sun.”
July 2nd, 2009 at 2:15 pm
@Publius: OK, not different. This one will rhyme with the first GD.
July 2nd, 2009 at 2:16 pm
CV, if i am not mistaken what I posted was not in the vein of advocating spending but tax cuts! It was the Bush administration ‘reasoning’ behind them after all
July 2nd, 2009 at 2:16 pm
batmando,
someone on here asked the other day if there were charts available for Rome’s market and I can’t find them anywhere. I wish MEH was around b/c I bet he would know where to look. The only time I see any similarity in the charts are when I look at ultra-long term charts on the indexes that track all the way back to 1900 or you can see a lot of similarities also if you price markets in gold instead of dollars.
July 2nd, 2009 at 2:18 pm
Publis,
great passage, it should be applied to social mood.
And, by that logic, we will not follow the path of Japan…
It was done by them, it will be done again by us?
July 2nd, 2009 at 2:19 pm
I meant we will now follow the path of japan,
July 2nd, 2009 at 2:20 pm
batmando @ 2:03-
good observation
July 2nd, 2009 at 2:25 pm
I like Taleb’s analysis, but hate the term “Black Swan”…a black swan in nature, given all other swans are white, is a function of statistics…a rare, random event that occurred because there is some very small probability it eventually would.
This “crisis” is not some fluke, random event that happened by chance. It is the necessary result of a 25 year drunken debt binge. that simply could not continue. It hasn’t even started to heal yet, given total credit is still rising relative to GDP.
July 2nd, 2009 at 2:29 pm
@ben22:
Don’t know if you can find charts from the Roman Empire…but the key to this all is that human nature never changes. Every 70-80 years, there is an investment mania…another one cannot arise untill everyone alive from the last one is about gone. In terms of empires, there must be a longer cycle, where the empire loses its grounding and starts to decline. Look into the cycles of empires.
July 2nd, 2009 at 2:29 pm
Japan followed the path of Great Britain post WW 1. The emphasized integrity of money at the expense of the economy. Not sure that Ben & Co. are going down that route.
Japan also incurred massive debt for stupid things. It’s okay to borrow if you’re borrowing against an asset that increases productivity. Like nationwide broadband wireless access. Then I could blog and post all day and night, no matter where I was. That would make me more productive.
But Gutenburg.org also makes me more productive. Having the text of Federalist 51 continually before me makes me productive. Or Ecclesiastes. If we borrow and spend, it should be to improve productivity. Unfortunately, we keep borrowing to subsidize and reward failure. Thank God the continuing claims are falling now that people are falling off the benefits ride. That should shrink the labor pool and reduce the UR. Unless Congress expands it and rewards failure again.
July 2nd, 2009 at 2:35 pm
Steve – good points – what’s not being mentioned is how Empires rise and fall and then rise again. Let’s not constantly compare the US to the British and Roman Empires when it might more sense to compare ourselves to China and Japan, both of which have risen and fallen many times throughout history.
July 2nd, 2009 at 2:37 pm
@Publius
“Unless Congress expands it and rewards failure again”
That’ll be coming just about when the 2010 mid term elections are getting near…
On the fancier Swiss watches, they have a feature for it…
July 2nd, 2009 at 2:38 pm
Steve,
I’ll start over there (cycles of empires) and see if I can come up with some good links over the weekend. I’ll post them here if I do.
July 2nd, 2009 at 2:38 pm
This one chart shows you how broken this birth/death model is and how badly it is spinning the data. Disclosure: I for one do not believe this is simple model bias by ill-informed bureaucrats. This model is deliberately spinning positive influence by those who wish it so.
http://content.glidesociety.com/image.aspx?id=55955f82-084e-41cf-b3ed-8fbb3247c0d7
July 2nd, 2009 at 2:40 pm
Thor,
I met a clients brother that lives in Orange last night. He’s so screwed on his property/finances. I told him I couldn’t even help him. Got my first real life taste of what people are dealing with out there. It wasn’t pretty.
July 2nd, 2009 at 2:40 pm
@Thor
“Empires rise and fall and then rise again”
Good point – the problem with America right now though is that it’s living in DENIAL & not letting itself fail…
We’re in some kind of kooky state of suspended animation…
July 2nd, 2009 at 2:42 pm
@Sturt:
Nice chart…has the B/D model ever entered a loss? I don’t think so…there is your answer. It is bogus.
July 2nd, 2009 at 2:44 pm
publius, just not being on employment will not help shrink the labor pool. about the only ways to do that are: war (send them off to battle say?) or famine (every body dies because there less to eat. at any price) or pestilence (a killer bug gets loose and kills a lot of people) or drought (sort of fits in with famine)
down side to reduced benefits.
lots more crime
or political unrest.
ex. there has been a lot written of late that one of the main cause of the fall of the Roman empire was drought. researchers noticed that trees (best judge of weather patterns long term) indicate there was drastic drought. and they didn’t have the technology to deal with it
July 2nd, 2009 at 2:45 pm
Also, I’m not a firm believer in the theory that the American Empire is in decline. I think what’s been going on the last 50 years is not that we are in decline, it’s that the rest of the world is catching up. Contrary to popular belief, we are still the worlds leading manufacturer, we are still, by far, the worlds wealthiest nation. Whether we can hold on to these positions is debatable, but our demise is by no means a foregone conclusion.
July 2nd, 2009 at 2:52 pm
Ben22 – I’m not really sure how things are down in OC, even though it’s technically about 20 miles south of where I work, with traffic, it may as well be in another state. – Karen can probably speak to conditions there more than I can.
I live smack dab in the middle of Central LA and things don’t seem to have changed all that much in my neighborhood. I’m a half block from Sunset Blvd. and I haven’t noticed many stores around me closing down. I do, however, drive up La Brea and Santa Monica Blvd on my way home and I’ve noticed more and more closed stores and “for lease” signs going up all the time. There are entire blocks on part of La Brea where every store, on either side is closed. I went to both Target and Home Depot this last weekend though, something I rarely do because the lines are usually so long, I didn’t have to wait in line in either place.
Remind your client, if you haven’t already, that his property taxes should be going down every year, not sure about OC but LA County has been very good about that. I know it’s a small thing, but in situations like his even a little bit of positive news might make him feel just a little bit better.
July 2nd, 2009 at 3:09 pm
@Steve Barry, no I don’t believe it has either. I note on this graph that even though job losses accelerated to the downside the actual birth/death model adjustment has actually INCREASED this year. Astounding. It’s not even directionally consistent with actual job losses.
July 2nd, 2009 at 3:15 pm
@Thor
That La Brea area always seems to be the first to go…Especially the area between Beverly & Wilshire…
It was like that during the 1982 recession…& also in 1990…
July 2nd, 2009 at 3:19 pm
@ Thor and cvienne – you’ll know we’ve hit the bottom when there’s no one waiting in line at Pink’s.
July 2nd, 2009 at 3:21 pm
Wow….almost 4 hours in a 3 pt range on the SP500…clearly the bulls and bears declared somewhat of a ceasefire pre-weekend….
This looks like an initial leg down nearly completed so I’m expecting some sort of bounce as new dollars come rushing in after the weekend…looking to “put money to work.” After the bounce on Monday, we could see quite a wicked decline….
July 2nd, 2009 at 3:25 pm
@AT: A little dump there (no, not mine) just after your post. I hope you’re right about a bounce on Monday. I just sold some of my short ETF’s and am hoping for a chance to reload.
July 2nd, 2009 at 3:34 pm
@AT ‘initial leg down nearly completed so I’m expecting some sort of bounce as new dollars come rushing in after the weekend
I think both leftback and cvienne have alluded/predicted as much, about holiday weekends in general and this one in particular. I now think of ‘Brian the Broker’ talking things up over bbq.
July 2nd, 2009 at 3:35 pm
@Manwich
I’m still waiting to find out which bank had to borrow at 7% at the discount window on 6/30/09? Probably will come out Friday night when no one is paying attention.
July 2nd, 2009 at 3:40 pm
thor-
China and Japan are not empires- Japan was an empire- but alas- it was lost after WWII, the British Empire- lost after WWII, German Reich- lost after WWII, USSR- dissolved after failed coup and seccesion of member countries and realignment of Eastern Europe to the West-
the only country with a global footprint is the USA which projects its strength with military bases around the world as well as the export of our culture and lifestyle to other countries.
July 2nd, 2009 at 3:44 pm
Cvienne – very good call, that’s exactly the area I was referring to as empty on both sides of the street.
July 2nd, 2009 at 3:48 pm
Ahab- I think the people of Tibet and Inner Mongolia might disagree with you on China not being an Empire
July 2nd, 2009 at 3:52 pm
brian the broker and all the new stock xperts that just made a money on Citi will be out in full force this weekend no doubt.
July 2nd, 2009 at 3:55 pm
I spoke a little too soon….I almost forgot that tried and true: “Run stops lower, shake out a bunch of bottom pickers, then ram into the close.” After a range gets developed, like the one we saw for almost 4 hours today….there develops a goodly number of buy and sell stops located just below and above the range…so of course Mr. Market seeks out where the greatest number of stops are located and then after stops are released, you scoop up and go the other way with it….and least that’s way it has been working for decades now….sort of classic intraday dynamics….love it!
July 2nd, 2009 at 3:59 pm
The NYSE is extending equity trading until 4:15. Guess someone didn’t have enough time to get out of all of their positions.
July 2nd, 2009 at 4:02 pm
Wow. That was a horrible close for bulls…..I’m genuinely surprised to not see even a little bounce….that was UGLY.
July 2nd, 2009 at 4:03 pm
@Amen: Saved by the bell. Monday’s going to be interesting. Am rooting for a bounce so I can reload. That tells me we probably won’t get one!
July 2nd, 2009 at 4:05 pm
@AT: The “heard” (hat tip BR) starting to run for the exits already? Are you still sure about the forecasted bounce on Monday? I respect your calls but I’m not so sure about that one. FUGLY close for the bulls is right. Not exactly making Joe & Johnny Retail feel all warm & fuzzy heading into the holiday weekend.
July 2nd, 2009 at 4:08 pm
NYSE extends trading 15 mins due to “glitch”. Time for a good conspiracy theory. How about orders jammed up going into long w/e? Strang, lets see what is wrought in the overtime.
July 2nd, 2009 at 4:09 pm
On the line on close daily, it looks like it closed right on the neckline of that upward sloping neckline of the H&S….
Here’s hoping Brian the Broker that can talk some clients into buying over the weekend….so that we can all get short at a higher level. I almost get the feeling some of the most ardent bears aren’t really that short. Maybe too many of us expecting some sort of bounce on Monday….what if we just get a break away lower on the open? Next week should be loads of fun.
July 2nd, 2009 at 4:10 pm
Is Kudlow on CNBC or did he start his lost weekend early? We need someone to counter all this negativity.
http://online.wsj.com/article/SB124655897935187501.html?mod=djemheard#articleTabs%3Darticle
July 2nd, 2009 at 4:13 pm
thor-
don’t disagree that Tibet would prefer to be independent – not up to snuff on Inner Mongolia- however- my thinking is more along the lines of a global projection of power- not saying that China does not have influence in Asia- they do- but they are not the protector of Asia- in fact- for much of Asia- we are
July 2nd, 2009 at 4:13 pm
I’m wondering if this has anything to do with the FDIC. Which bank is on the hit list? Was it the one who had to borrow at 7% in the discount window?
Bloomberg reported that it was a computer glitch. Yeah right. More like they froze the computer by hitting the sell button too fast.
July 2nd, 2009 at 4:13 pm
Jeff (mannwich)….I think we might get a bounce on Monday…but let’s be clear…I’m short. But, I’m not as short as I want to be, cause I think we may get a little rush to start the week. 931 was my key resistance on the last report I sent out (6/24/09), and the market reversed hard from that level, so bulls are facing some serious problems right now….
July 2nd, 2009 at 4:14 pm
Ahab – I see your point, and China has traditionally not been very much involved in projecting their influence much beyond their borders
July 2nd, 2009 at 4:14 pm
So when is BR going to come clean on his post yesterday re: 80/20 allocation? Not that he owes any of his non-clients anything but it was a bit of a tease to his loyal followers here.
I’ve been noodling around with the wording he used to try to figure out what he was getting at.
Maybe his equity figure wasn’t all long? Maybe he’s playing with the meaning of the words somehow.
Took a bath today anyway, if not. Time will tell.
July 2nd, 2009 at 4:16 pm
@AT: I hear you. Join the club. I’m not as short as I want to be either. Am getting close to loading up though. I just want the chance to do it at a better level. So do many others, I’m guessing, which means we may not get that chance?
July 2nd, 2009 at 4:17 pm
Andy-
not much in the way of economic reports or earnings next week- not sure what catalyst there would be to get the markets go in any particular direction
July 2nd, 2009 at 4:18 pm
Long holiday w/e, pretty much coincides with the close of the Q. Perfect bank closing conditions I think. We’re going to start getting impressive bank closing numbers soon, the drecession is too long & deep to save even prudent banks who aren’t TBTF
July 2nd, 2009 at 4:21 pm
@ahab: I don’t think you necessarily need a catalyst for a sell off at this point. It could just “happen”. It feels to me like the tide is turning, meaning sentiment is turning negative again.
July 2nd, 2009 at 4:21 pm
onlooker-
he did indicate large cap tech and tight stops
July 2nd, 2009 at 4:22 pm
Mannwich…..exactly the thought going through my mind on that close….
“I just want the chance to do it at a better level. So do many others, I’m guessing, which means we may not get that chance?”
Ahab: The fact that there is no economic report for bulls to hang their hat on next week, or “hope” for, may be why we head lower. Everyone will just have “stew” on this latest stinkbomb…there is no V-shape…there is no second derivative improvement in employment…it’s just all shitty.
Maybe we get some congress/Pres. talking CA bailout that gives things a temporary lift to start the week….let’s hope so…we all know how well those government interventions workout at juicing the market short term….
July 2nd, 2009 at 4:23 pm
ahab
If the big money decides it’s time to get out there doesn’t have to be a catalyst, IMO. And if they already decided to get out the process takes a while and they do it stealthily to avoid dropping things too fast and reducing their harvest. They can’t move very fast and they move the markets when they do.
The big down days lately (today, and the last two Mondays) with large negative A/D volume are evidence of that (so-called “distribution days”), IMO. They let the market get bid up a little in between to get prices back up then reap a bit more. Eventually the market falls under it’s own weight of selling pressure.
That’s my amateur take on it.
July 2nd, 2009 at 4:35 pm
andy/onlooker-
good points- I am wondering if it might be more of a meandering market within a range- let’s say 880 to 940 or so- until earnings confirm or deny the valuations-
plausible?
July 2nd, 2009 at 4:46 pm
ahab. I guess almost anything is possible, but if the SP500 breaks 888, it’ll look very, very bad from my technical perspective. It already looks bad, but for me a break of 888 would cement the case for a trip to 750-800 zone. There are a few commenters/readers here who get my occasional technical commentary on markets. If you have any interest, just send me a note to AndysTechnicals@gmail.com and I’ll put you on…
July 2nd, 2009 at 4:51 pm
ahab
And remember, we’re still in a bear market so unless there’s something real substantial to grab onto after this big rally the tendency is for the market to “retest” the lows to pick up more committed buyers at lower levels and give the economy some more time to heal and start giving some positive signs again. It seems that the market doesn’t like to grind sideways in a such a tight range for very long, especially in such uncertain times.
July 2nd, 2009 at 4:55 pm
andy-
I am already a fan- and a subscriber-
I was throwing out a possible range- but let’s say the range then is 890- 940- more plausible?- also-i am getting the impression that you are expecting a selloff sooner rather then later?
July 2nd, 2009 at 5:03 pm
onlooker-
I opined earlier- that if I was a money manager- I would sell now- and lock in my profits- ahead of earnings which are bound to be less than pretty-
however- I still wonder if there will be hesitancy to sell with earnings in the next few weeks-
July 2nd, 2009 at 5:46 pm
ahab
Besides it would be much too easy if we just stayed in a predictable range so traders could buy the bottom and sell the top. It’s never that easy for very long.
July 2nd, 2009 at 6:36 pm
“raft” of bank closures takes total over 50…still awaiting more from the western timezones – didn’t see a final body count yet
July 2nd, 2009 at 6:58 pm
I think I saw a gingham swan at the lake today.
http://www.youtube.com/watch?v=KhrqBOSazzA
July 2nd, 2009 at 8:12 pm
The FDIC took over 7 (that’s right SEVEN) banks today. Sheesh.
July 2nd, 2009 at 10:17 pm
These graphs could really use the ‘29 crash for comparison, to show that things are -in some ways- completely different now.
July 5th, 2009 at 10:10 pm
[...] following chart: The chart is compliments of Chart of the Day. There is another graphic on a post by Barry Ritholtz (The Big Picture) which is not nearly as pretty, but shows that the current [...]