Posts filed under “Contrary Indicators”

The Not So Golden Years, Revisited

Over the years, debate has waxed and waned over the effects of the minimum wage and/or immigration policy on employment, particularly teen/youth employment. When the issue flared up most recently, a couple of years ago, I posted a rebuttal to that argument here, my point being that it was – at least this time around – crappy demographics and a lousy economy that had older workers staying in – and re-entering the labor market to seek – jobs far longer than we’d seen previously:

What about demographics — an aging boomer population — and a crappy economy that has  the 55+ cohort postponing retirement and consequently crowding out the younger generation (parents keeping their own kids/grandkids out of the job market, as I put it a while back).  The data is there for all who choose to explore it.

A short while after that post appeared, BR got a request to reprint from the folks at Cengage Learning/Greenhaven Press, who asked if they could include the article in their academic Opposing Viewpoints series of books. I obviously consented to allow the piece to be reprinted, and the book was recently published (specific URL for the volume on Minimum Wage is here). I’m flattered that I’ve now had a piece published, a first for a me. I’m also very appreciative to BR – as he well knows – for his willingness to give me a little corner of his soapbox, and hope I provide some value-add to TBP readers. (My stipend for the piece went to a local humane society.)

That said, why not revisit the issue of youth employment and see where we now stand?

Here is how employment growth (or lack thereof) has evolved, by age cohort, since the beginning of the Great Recession:

(Source: St. Louis FRED, Series LNS12000012, LNS12000036, LNS12000089, LNS12000091, LNS12000093, LNS1202423)

And here’s a different look at the exact same data, an update of the chart I ran two years ago:

Very coincidentally, as I was working on this post, David Rosenberg commented on this very topic, including a variant of the chart immediately above. Rosie’s take on the situation (Breakfast with Dave, May 29, 2012):

Even if some of us dream about becoming a paid consultant in our golden years, the reality is the re-entry of boomers into the workforce is a case of having to, not wanting to. It is what is essential to retire with dignity, not some desirable lifestyle change. Employment for those 55 and up have risen to new all-time highs this cycle while everyone else is languishing nine million below the 2007 peak. [...] There are a few side effects from the bulge in employment for the 55-and-up segment of the population. One is that by not leaving the workforce as they have done in the past – going for early retirement – they have created a backlog of unemployment among the youth.

Precisely. With the benefit now of some hindsight – I made my original argument in real-time – I think it’s clear that it has been, in fact, demographics and a crappy economy that accounts, for the most part, for our youth unemployment problems. (Finally on this topic, Rosie notes that the older cohort “has not seen an erosion in its participation rate or in its employment-to-population ratios.”)

Shifting gears now to make sure I cover as much of the waterfront as I can, several unrelated tidbits:

I wish I had authored this brilliant piece by Mark Dow, which really resonated with me. As the old saying goes, “If the only tool you’ve got is a hammer…” Mr. Dow’s piece is spot-on in every regard.

With interest rates in many parts of the world hitting all-time record lows, I’d be remiss if I didn’t give a shout-out to the inflation hawks of the past few years. To those who foretold a spike in interest rates and hyper-inflation – Jerry Bowyer, Arthur Laffer, the Wall St. Journal, et. al., – here’s to you. An object lesson in putting ideology over analysis. (As an aside on bonds, rates, equities…well…this.)

There appears to be some tin foil hat commentary, to which I won’t link, to the effect that DOL is cooking the books because the weekly Unemployment Insurance Claims revisions are almost always higher in the hope of making the Obama economy look better than it is. The thinking appears to be:

  1. A better (lower) number is presented initially, then subsequently revised higher (in the dark of night) when no one is watching.
  2. If an initial 380K is followed by a subsequent 390K while the 380K is revised to, say, 395K, the latest 390K print looks like a decline (off the revised number).
  3. As one tin-hatter writes: “It’s getting ever more difficult to accept DOL’s ongoing underestimations, which now run to 60 of the 61 most recent weeks I’ve been able to track.”

A few comments:

  1. The string of almost-exclusively-up revisions dates back quite some time, and most certainly to the previous administration. So the DOL clearly must have been fudging for him, too.
  2. It’s a virtual certainty that the DOL does not massage the UI numbers for one simple reason: they don’t even produce the UI numbers. All they do is act as an aggregator for 53 areas (50 states plus D.C., Puerto Rico and Virgin Islands) that electronically submit their data twice weekly (an initial pass followed by a revision). Anyone who wants to could check the 53 separate inputs vs what the DOL reports out; they should sum to what the DOL releases. [NOTE: This would actually require doing a bit of legwork.]
  3. There are myriad reasons for the revisions, and almost all of them lead to a higher revised number. This was explained to me in painstaking detail by one of the folks running the program on a lengthy phone call that none of the conspiracy theorists apparently ever felt like making. Why get the facts when you can spread a rumor?
  4. In any event, the revisions are typically less than 1% up or down (look to be around 2,500 or so on around 370,000, or 0.7%), which should be acceptable to most.
  5. It’s likely the DOL will issue some explanatory commentary on the matter in the weeks to come. Hopefully that will put this idiocy to rest, but I won’t hold my breath on that front.

Finally, I highly recommend to all It’s Even Worse Than It Looks by Thomas Mann & Norman Ornstein, two long-time congressional scholars, on the roots and current status of our calamitous dysfunction in Washington. See their April WaPo op-ed piece here. You may not have heard of their new book because, sadly, as Greg Sargent points out, the duo are being totally ignored by the Sunday talk shows.




Category: Contrary Indicators, Cycles, Data Analysis, Economy, Employment, Inflation, Really, really bad calls

MIA: Bond Vigilantes

Following up on a previous matter, Karl Denninger  posted what is supposed to pass for a rebuttal to my recent post on government spending. To my eyes, as Jay Bookman so aptly put it, it looks like “the octopus trick, squirting black ink to cloud your retreat.” True enough. Anyway, done with that discussion. Paul…Read More

Category: Contrary Indicators, Data Analysis, Economy, Inflation, Markets, Really, really bad calls

Safest Best Investment According to the Public? Gold

>; Update: the Gallup poll used the word “Best” not “Safest”. Jordan Weissmann has a fascinating discussion going on at the Atlantic about a recent Gallup poll regarding “safe investments.” (The full discussion is well worth your time). Its appears that a plurality of “Americans believe Gold is the single safest long term investment option.”…Read More

Category: Contrary Indicators, Gold & Precious Metals

Uh-Oh: Greenspan Says U.S. Stocks Very Cheap

Category: Contrary Indicators, Video

I’ve been meaning to address this for some time, and today is as a good a time as any. Over the years, I  have participated in interviews at Yahoo Finance — its always a fun time, Aaron Task, Jeff Macke, Henry Blodget, Dan Gross & Co. are very sharp guys. Its usually a short, smart…Read More

Category: Contrary Indicators, Psychology, Really, really bad calls, Web/Tech

Seen This Movie Before

Among the exercises I occasionally undertake is to dig into the history books and see, in retrospect, how things have played out relative to what the punditocracy had proclaimed (works with punditry on politics, markets, economics, sports, etc.) . With Barron’s releasing its semi-annual “big money” survey, there’s really no better opportunity to page back through history. As we went through the worst economic near-collapse in generations, I always find it most instructive to start my analysis in the summer/fall of 2007 and take it from there. (I will never, ever forget attending a very small dinner on the evening of October 2, 2007 (at Casa Lever, then Lever House), at which David Rosenberg was the speaker. He laid out his assessment of what was happening – and what was going to happen – in the economy, and the group of 12 or so (most unfamiliar with his work or world view) looked at him as if he were a Klingon. Total disbelief. The S&P500 peaked one week later to the day – October 9, 2007.)

The current big money poll (Reason To Cheer), brings us this (S&P500 = ~1380):

America’s portfolio managers see more gains for stocks in our latest Big Money poll. They are wary of bonds, hopeful about the economy and predict that President Obama will be re-elected.

On that note, let’s have a look at where the Barron’s big money participants stood in early November 2007 (S&P500 = ~1520):

Although U.S. money managers are less optimistic than in the spring, bulls still outnumber bears by more than 2-to-1. Some even say the Dow will top 16,000 by mid-2008. Insights into bonds, politics, the Fed and more.

Can you see where this is going? We were on the cusp of the worst recession in 70+ years and a market that would lose 50+ percent peak-to-trough. The writing was on the wall in a huge, bold font.

That article contained this graphic:

Suffice to say that following the Barron’s big money poll in November 2007 was a money-loser.

Fast forward to April 2008 (S&P500 = ~1400)

The professional investors surveyed in our latest Big Money Poll are getting set to jump back into stocks. What they like, and why.

That poll contained this graphic:

Moving on to November 2008, the Barron’s big money poll was titled A Sunnier Season, and teased with this (S&P500 = ~970):

Barron’s latest Big Money poll reveals unrelenting bullishness among many money managers, despite their pronostications [sic] for a “contagious” recession and punk profits through 2009.

The article contained this gem: “The managers also cast their votes for BlackBerry maker Research in Motion (RIMM), whose shares have been decimated this year…” RIMM was mid-50s at the time.

In April 2009, when it was, literally, time to margin your account to the hilt and throw it all into equities, the Barron’s big money participants were cautious (S&P500 = ~855):

The pros in our latest Big Money poll say they’re bullish or very bullish about the stock market. But they have good reason not to jump in with both feet yet.

They were, of course, wary at exactly the wrong time:

For one, just 56% of today’s poll participants think the stock market is undervalued, down from 62% last fall. Thirteen percent say stocks are overvalued, up from a prior 7%. And an alarming 58% say the market hasn’t bottomed yet, even though the Dow Jones industrials hit a low of 6469 in March, before recovering to a recent 8100.

The bear market had clearly taken its toll on the psyche of the managers who participated:

In November 2009, Barron’s titled its big money poll Treading Carefully, and teased with this (S&P500 = ~1050):

The bull is still in charge, say America’s money managers in our latest Big Money Poll. But it pays to be cautious, as bargains are getting harder to find. The case for Microsoft.

April 2010 brought Be Very Careful (S&P500 = ~1190):

The bulls in our Big Money poll pulled in their horns a bit and see only tepid gains for stocks between now and year’s end. Stay away from bonds.

The S&P500 closed the year at 1257, up an admittedly “tepid” 5.6% on a price-only basis. The 10-year US Treasury went from about 3.80 to end the year at about 3.31 after hitting about 2.40 in October and then selling off – there was no reason to “stay away” from them.

November 201o brought us Bears, Beware! (S&P500 = ~1190)

America’s money managers say stocks are cheap and the economy will keep growing. Why they’re bullish on tech, bearish on Congress.

The November 2010 poll showed continued caution regarding the bond market, and offered up another majority opinion about a “bond bubble” which has yet to materialize (count me among those who’s not been in the bubble camp):

On we go to April 2011, in which the big money poll was titled Watch Your Step (S&P500 = ~1340):

America’s money managers are bullish in Barron’s latest Big Money poll, but picking their spots with care. The crowd is seeking safety in big, defensive stocks.

Read More

Category: Contrary Indicators, Economy, Finance, Financial Press, Investing, Markets

Market Corrections of 4% or More

> Whenever we have a very red or green day, I like to find the most persuasive piece I can arguing for the contrary position. Today, that would be something bullish. What is rather surprising is that I found just such an upbeat contrary take in the usually skeptical Alan Abelson’s column. Abelson notes that…Read More

Category: Contrary Indicators, Markets, Psychology

Skyscraper Index

Back in February, we looked at the Skyscraper Index Building Bubble. This is the money shot from that report:   >   Note I posted a small low res shot so as to not overload the servers; if you want to see the full report, click here — otherwise, to see the larger version of…Read More

Category: Contrary Indicators, Digital Media, Psychology, Valuation

Uh-Oh: Economist Cover “Can it be…the recovery?”

We have many rules of thumb for Contrary Indicators. When it comes to magazine covers, we look for a mainstream (not business) outlet joining a trend in progress as it reaches a cathartic moment. Media jumping on a bandwagon can augur a top or bottom just as a major trend reaches a climax. Yesterday, we…Read More

Category: Contrary Indicators, Economy

Barron’s: Home Prices Are About to Bottom (take 2)

If this week’s cover story in Barron’s cover article on a housing bottom looks vaguely familiar, its because it is familiar. Almost 4 years ago, the magazine published pretty much the same article saying mostly the same things. In the July 14, 2008 edition, Jonathan R. Laing wrote “Bottom’s Up: This Real-Estate Rout May Be…Read More

Category: Contrary Indicators, Psychology, Real Estate