It’s no wonder we find ourselves in this collective business environment of malaise and atrophy when people who are supposed to be informed, or anything else relating to business, use terms to describe the most recent jobs report as a “Goldilocks” print: i.e., “Not too bad – Not too good.”
This term was the moniker de jure of Friday’s cadre of financial media economists, analysts, and next in rotation fund manager. Nothing more than cheerleaders to stagflation is what they’ve all proven themselves to be in my opinion than anything else.
The actual print was that the economy created 223K new jobs vs expectations of 228K. Where the overall jobless rate now stands at 5.4 vs 5.5. The kicker? Not in the labor force: 93,194,000 up from 93,175,000. Let that last number sink in a moment.
We currently have over 93 Million able-bodied people without jobs – and growing. This is why it’s near incomprehensible, as well as outright disgusting to me that such a dismal showing in both the headline number as well as the onerous implications of such a downward revision to the month prior, coupled with the outright fallacy of suggesting the rate of unemployment has moved closer still to statistical “full employment” came with near giddiness and if not outright back slapping. i.e., “This is a Goldilocks print. Not too hot – not too cold. With a report like this – The Federal Reserve won’t dare raise rates and might actually have to contemplate instituting another round of QE if not outright QE4ever!” And yes; that was the reaction paraphrased across the financial media outlets. Again, personally – I found it all repulsive.
We now have the lowest participation rate since 1977 when Jimmy Carter was president. Although I was young during that period, I was around and working. (and when I wasn’t working, I was out looking daily) I will tell you this: one of the words never bandied about during that period when it came to describe any jobs or employment report was “Goldilocks.”
As a matter of fact it was during that period of time the term “stagflation” came into prominence. The difference? It was used to describe an abysmal economy while hoping at some point the winds would change and we could regain our bearings to move out from under such stifling economic conditions. Today?
As these conditions have once again reared their ugly head the difference is today: these conditions are celebrated by the so-called “smart crowd” as reason to JBTFD! (just buy the dip) For this malaise sends the “right” signals to the Federal Reserve they should dare not raise interest rates off the zero bound anytime soon, and instead prolong this economic atrophy with the possible infusion of yet another round of QE. After all with economic malaise like this – NASDAQ™ 10K here we come!
The best term I’ve heard yet to describe the current economic malaise, as well as market conditions, was coined by Bruno de Landevoisin: Stealthflation. The term says it all. Under the radar there’s deflation or the now less offensive “dis-inflation” happening everywhere.
Currently under the guise of “economic omnipotence” resulting from the outright adulterations of the capital markets, along with its cancerous effects metastasized within our economy; they’re spoon-feeding bogus “analysis” to an uninformed as well as ill-informed populace by a bunch of next in rotation “financial experts” that now have more in common with school cafeteria workers plopping out this weeks version of mystery meat. All while smiling and reciting: “Trust us, it’s good for you.” (My apologies to “lunch ladies” everywhere)
Scenes resembling the above can be seen daily when the next in rotation economist, fund manager, or big bank chief investing guru comes on to tout “how all this bad is just terrific for the markets.”
If you question the validity of the data? You’re either shouted down, talked over, or insulted with charges of: “You’re mad because you’ve been on the wrong side of the trade for X number of points, or months, or _________.”(fill in the blank)
Unless you stand in line like these roving bands of porridge seekers with bowls out pleading in their best Oliver Twist voice at the altar of the FOMC “Please, may I have another round of QE?” you’re the one who’s scolded or branded as some “economic heretic.”
It wouldn’t surprise me if CNBC™ in some desperate attempt to regain viewers might contemplate a reality segment where they actually “Put to the stake Live and On Air!” any who dare question their cafeteria “smart crowd.” Who knows, it can’t do worse than they are already. But I digress.
Again the economic stealth of all this malaise is that it seems that there are “economic benefits” as a result. There are – if the economy was only about “The Markets.”
The markets are vital when they are allowed to function according to the rules inherent within free market capitalism: where markets are allowed to clear through the true price discovery model. But that’s not what’s going on today.
People today look at these markets, or hear the latest prints touted as “proof” we’re on the right path. i.e., “The markets were up today near 300 points!” Or, “Employment figures show we created over 200K once again, and the UE figure dropped to 5.4%. Hooray!” However that porridge being spoon fed down the throats of the populace has more in common with the repulsive process for making Foie gras than anything else. And just like the goose – it’s just as harmful when used to evaluate the health of one’s financial future.
What doesn’t get near any of the attention that it should buried within these reports are the other figures that are hidden in plain sight as they are “reported” in a stealth like fashion. i.e,, “Oh, and the prior month’s numbers that were horrible? They were revised downward to – horrific. Nothing to see here, carry on, hope you enjoy your lunch.”
Unaware by many; the prior month’s abysmal report of 126K was revised lower to a pathetic 85K. That’s a reduction or “miss” of over 30%!
If we use the same revision or “miss” used to calculate last month’s report it’s entirely plausible today’s Goldilocks’ print of 223K could actually be closer to 153K. If so, what happens to Goldilocks?
Keep in mind – these are the stats of the BLS, and as such is it unreasonable to contemplate they would try to throw the best possible outcome or “look” to these reports? And even they felt the need to revise down last months figures from lackluster to abysmal! So what faith should one put into today’s report? That alone should send a shiver down one’s spine. But it doesn’t end there.
This financial meddling causes even greater distortions and malfeasance throughout the entire economic landscape.
Companies that should go out of business or downsize to better address their true economic health – don’t. They’re able to saddle their companies with burdensome debt prolonging their sclerotic endeavours leaving no room for the upstarts or level competitors that can beat them handily in both practice and ingenuity; for many will be unable to secure the financing needed because the “big boys” or “favored lobbied status” are allowed to continually operate and compete at “cash burn” rates with buy backs and more that would make a Silicon Valley startup jealous.
And speaking of “The Valley” here too the stealth of malfeasance plays out its onerous part just under the surface. Here companies that shouldn’t even be listened too, let alone funded, are able to burn through cash and subsequent rounds of funding in direct proportion to the availability of cheap and fast money made possible via the QE mechanism.
With so much “free cash” still sloshing around looking for anything with a possible “One out of Million” shot of making a penny. The game is still on as: to throw as many darts as possible. Rather, than take the time required to effectively sift through and gauge reality with fantasy. Because it’s still an “odds bet” rather than an “objective financial analysis” concern.
And it’s precisely in this type of environment startups that have real potential – for real profits – get lost in the quagmire of unicorn and rainbow pitch funding.
Today’s latest reincarnation of Oliver Twist by those of the so-called “smart crowd” with their bowls out pleading for another round of QE, are also the first to espouse their reasoning for why you, or I don’t get why all this putrid porridge is good for us. All they’ll say is, “It’s different this time.” Well maybe they have a point.
Back during those roaring days of screaming sideways into nowhere land known as the “Carter years,” then president Jimmy Carter gave what has been labeled as “The Malaise speech.” Actually the real name designated was “A Crisis of Confidence.”
That speech was an attempt in theory as to help bolster confidence that the economic conditions of poor employment, poor GDP growth, and a list of other economic measures could in fact be overcome if we regained our composure, and had faith and confidence, we could do better. The issue today?
The economic “smart crowd” is now confident (if not to a fault) that the malaise along with the deterioration in GDP as well as nearly every (if not all!) recent macro data point – is just the right mix of “not too hot – and not too cold” we need to stay right smack dab in it, waiting for the next meeting of the FOMC to see if the cafeteria will reopen so they can beg “Please…can they have another round?”
© 2015 Mark St.Cyr