Another Green Shoots Graph Not Looking So Green

October 6, 2009 by Keyser Söze | Filed under Bad Idea, Bad News, Bernanke, Economics, Financial Meltdown, Geithner, Investment Advice.

Keyser’s swamped with Super Tuesday shopping, salve headaches and various other blogging-obstructive maladies, view so look at this and consider what future earnings the stock market is “pricing in” to the 50% increase in prices since the lows of last winter (as always, recipe click for a bigger picture):

Durable.Goods

Whoa! That’s something like a 25% decline in the past year. This brought to mind a piece of idiocy Keyser came across last Friday, when the horrific unemployment statistics were released (the “official rate” up to 9.8%, but M6 – the figure including people who’ve given up, those who’ve settled for part-time employment and want full-time but can’t find it etc. – is 17%):

The employment situation has remained much weaker much longer than the overall economy. In September, the jobless rate rose to the highest level since 1983, total hours worked fell at a 5.9% annual rate, and wage gains were a soft 0.1%. Payrolls came in worse than anticipated, falling 263,000, although payrolls fell a smaller 210,000 in the private sector. There are two reasons for the disconnect between the economic recovery and the labor market. First, productivity growth has been rapid of late, part of the ongoing process of technological change that rivals (and may surpass) the industrial revolution. Second, corporate leaders still think the recent spurt in growth will be short-lived and so are being overly cautious. In the short term, productivity growth lets companies raise production even as they continue to cut jobs. Over time, though, higher output with lower labor costs mean more profits, which will help stimulate rapid job growth once companies become more confident about the staying power of the recovery. When the labor market eventually turns positive, it will do so with a vengeance. One interesting detail in today’s report is that the Labor Department now believes total payroll losses between March 2008 and March 2009 will be revised from 4.8 million to 5.6 million, with greater losses across the private sector. In turn, this means corporate profits last year and early this year may eventually be revised upward.

This idiocy comes from the “senior economist at First Trust Advisers (you have to follow the link and search for “today’s jobs reports”; seemingly there’s no independent link). Presumably, this clown was one of the types going on last year about how the “fundamentals” were just dandy, so buy, buy, buy! Here, the claim is implied without evidence that the massive job cuts are the result of increases in productivity, so when companies start hiring, it’s bee “to the moon, Alice!” (as Ralph Kramden used to say). But that’s just lunacy. Who’s going to buy all these supposedly cheaply produced goods, if there’s such high unemployment? Surely, the huge drop in durable goods orders reflected in the graph is a better indication of what the effect on the economy of reduced spending is.

But people like this guy (or at least those who follow his advice) are those who are taking all those dollars created ex nihilo by Bennie and Timmy and snapping up all those stocks. Because, after all, once things get going, they’ll “do so with a vengeance.”

The only question will, who will they take their vengeance on?


3 Responses to “Another Green Shoots Graph Not Looking So Green”

  1. snarkolepsy says:

    Truth be told – I don’t really think that many people are buying stocks outside of investment houses. And they are probably all swapping within each other. They have a vested interest in making it seem like the stock market is fine. They don’t want another run on their stocks. Do they? They are the ones with excess liquidity. Everyone else is barely a floater in their eye.

    But, people must not be hurting that bad. P. Moneys Bags poll numbers are improving.

    Of course – all the hotels in America are defaulting. But whatever. That can’t make much of a difference. Right?

  2. Keyser says:

    Can’t speak for anyone else, but Keyser’s planning on spending his money henceforth on wine women and song (or something similar). Provides a lot more entertainment than propping up the bonuses at Goldman Sachs. The boys on Wall Street can trade stocks back and forth between themselves all they want. And go to hell.

    Wonder how many other people feel the same? Maybe this will be like 1929, when it took more than a generation to pass until people started investing in the market again.

  3. snarkolepsy says:

    The thing about people – is they always find a shortcut to make money. Always. And, evolution depends on that desire. It’s hardcoded into us. Shortcuts have made us everything we are. Good and bad. Though, based on how easy life is – I’d say that it’s been more good.

    I’m guessing it will not be a generation. The only thing that stops people now is being shocked into reality. Then people go back to their same patterns. Finding shortcuts.

    I want to fault them. But, evolution – it has it’s own way about things. From it’s standpoint – it’s won.

    That’s not to say it doesn’t piss me off.

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