There isn’t a need for us to have an economy in order to oversee higher stock prices. This much has been made indelibly clear by the recent market events. As we spin higher and Joker-dance to new highs, bear in mind the futility of thinking about business cycles and how they affect stock prices and just know that the Fed will always backstop markets and print more money than you ever thought was possible — and all dips should and will be bought indefinitely for there is an incessant need and desire to crush the spirits and pockets of those betting against America.
America shed 20 million jobs in April — new record, upping the unemployment rate to around 15%. Dow futures are roaring, up more than 300.
Let us now celebrate.
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I’m feeling AMC today. Popcorn anyone?
Hydroxychloroquine and Lemon Breeze Lysol for me.
So… not really sure if this is the White House at work, but I have NO idea where the 20.5m number is coming from. It’s not even smoke and mirrors, it’s simply WRONG
Acoording to BLS’s own table, the number of Employed fell from 155,772k to 133,403k, a difference of 22.3 million.
https://www.bls.gov/news.release/empsit.t01.htm
“Change in Employment Level: -22,369,000 in Apr 2020”
https://www.bls.gov/cps/
Does it really matter? When small business continue to shut down and Corps who are just starting their layoffs plans ramp up, it will be 40 mill!
There a lot of people on temparary layoffs. The assumption is that these people will get righth back to work if the business is allowed to re-open. Not sure how valid that assumption is, but here’s a good way to factor that in.
First of all, I never cared much for the Unemployment Ratio, as it ignores those “Not in the Workforce”. While there are legit reason for peoepl being out of the owrkforce (retirement and full-time students are 2), the economy doesn’t care: these people are still not contributing to the economy anymore than the unemployed are. For that reason, I always refernce the Employment Population ratio, whihc is the ratio of the Emplyed (same numerator as Unemployment) divided by the Civilian Non-Institutional Population (“Population”)
So back to the furloughed workers. Fortunately , the Household survey keeps trakc of them: “On temporary layoff” (OTL). Currently at 17.9M, whereas usually it < 1M.
https://www.bls.gov/news.release/empsit.t11.htm
So now, a good indicator is
(Employed + OTL)/Population
You can tweak that further if you want to account for the aging population.
In other words: “This time it’s different.”
Ditched the ES puts and went short the Russell instead from 1318.
I always admire your steel in shorting this market.
Thanks, but then I rarely aim for any home run. A one percent move of the underlying index is substantial enough for futures trading on 10x or even just 5x leverage.
As far as my trading is concerned, the Benjamins don’t have bulls or bears printed on them; I’m all about winning. There’s always money to be made on both sides as long as the trades are done right, to channel my inner Jesse.
It’s all about the probabilities (and the profits) after all.
Stayed long and went to work for about the 3900th trading day in a row.
“Went to work”? What kind of job lets you comment on a blog all day?
Good question. One that I hope doesn’t disappear in this terrible economy of ours.
Such a good point. People that actually matter to the economy are still working and watching their wealth grow. Layoffs are affecting people that could barely afford their bills, much less drive our economy through their spending. I feel like an asshole saying that, but it seems to be the cold truth. At some point we will hit a reset, but until then it’s the economy and stock market of the few.
I don’t think you are an @sshole, just out of touch. The unemployment rate for those with bacehlor degress is 8.6% now, which isn’t high at all considering that some are furloughed. I assume most of those that invest are either have BS degrees or are old enough that they didn’t need them. I think this is why many investors have been dismissing the unemployemnt figures for several weeks now.
However, while you could make a cold arguement that those that “matter” still have jobs, there are still a lot of essential people barely wokring minimum wage that drive the economy through their very jobs, (while i would argue that a lot of white-collar workers that “matter” even less also have jobs), Think meat-packer vs stock analyst, or sanitary worker vs many middle-managers.
Perhaps more important to your portfolio: poor people still buy things to. If the currently unemployed had no federal bacskstops, they wouldn’t be driving, wouldn’t be spendign on netflix, woudln’t be paying their rent, etc.
Now perhaps our economy could still run without a lot of them, but that is why stocks initially fell 30% and not 100%. Do you honestly think that a long term unemployment level of 14-20% is compatible with current stock prices?
I guess I feel like none of these facts exist in a vacuum and my tiny human brain is no match for the complexities of the market and economy. Not having an opinion nor imposing it on my portfolio has always served me well, which I recognize is a sample size of 1 and can’t necessarily be extrapolated into the future. Own a collection of relatively uncorrelated assets (if you can find them) and rebalance occasionally. On average, I think that will outperform someone who tries to buy and sell based on their reaction to news headlines and research that confirms their own biases
It has served you well so far, and you may even be right for a couple more years.
However, the FED’s Martingale startegy is no way to run an economy.
I’m curious: waht is you opnion on makign changes to Social Security? It’s essentailyl a similar problem. By not addressing the issue now, it will take more drastic cahnges in the future.
Investors are dismissing unemployment figures because they are backward looking. They offer zero surprise to the market. Remember March 2009? The start of the last bull? The recession didn’t end until June and unemployment didn’t peak until October.
Right now, the entire world already knows this is the deepest contraction since the Great Depression. All the bad economic data means nothing to the market. It was priced in over a month ago. In fact, it sets expectations really low, which is good for the market. Because “less bad” can result in stock gains. Currently, markets are pricing in a return to some semblance of economic growth in the back half of the year. Hell if we got back to flat, that would be fine considering the low base we would be bouncing back from.
So yeah more people could be laid off. And, in the near term, the economy can keep tanking. But the stock market can also continue its ascent.
That’s pretty bleak.
is it because these companies are just going to find a way to operate the same without the 20M people? a nice shedding of payroll expense, offset by improved labor productvity and tech?
Less overhead. More Xbox consumption. Consumers still consume, but now you don’t have to pay them.
To QE Infinity and Beyond
This is one of those times where the rumor is worth more than the deed. The rumor is the Fed cares about supporting equity prices even though their mandates are employment and price stability. And of course that they will buy stocks directly or indirectly even though that will never happen.
The Fed is not going to provide any backstop to equity and has more or less said so. They’ve already made it clear they can only provide loans and are considering things like asset value in those purchases.
Besides if the Fed ever did buy stocks, it would raise questions about why exactly the central bank is taking a position that comes attached with theoretically limitless financing to one firm against their competitors.
This is a can of worms that the Fed is not going to open. But just the rumor that they will is supporting PE multiples…for now.
https://fred.stlouisfed.org/series/WALCL
When the slope of that line goes negative things get ugly quick. Even if the slope is neutral, things can get ugly. Markets may only rise now when the slope is positive.
$2 Trillion added to the balance sheet in two months. With another $2T on deck over the next few months. And then another $2T after that.
Yes but since they’re loans, that only lets businesses stay open. It doesn’t help them make money.
$2T in debt just to keep the lights on is a terrible prospect for future earnings.
As long as fundign buybacks with debt is legal, the FED doesn’t nee to buy equities directly.
I doubt that companies are going to take their lifeline loans – which they have to pay back – and then plough it into their own stock while their own earnings decline.
That’s the corporate equivalent to drinking cyanide.
Why not?
Companies don’t make decisison – executives with stock options do.
The same reason Congress passes $2T bills costing $10,000 per adult without batting an eyelash and drop tax rates 10 years into a bull market.
I 100% agree that all of this will be a ceiling/drag on future earnings, but people just COVID-19, most peopel aren’t goign to understand beleive it until it slaps them in the face.
-20.5m NFP just got a yawn today because it wasn’t -22m
I assure you that no executive is going to borrow money from the Fed to buy their own stock. Companies are canceling stock buy backs constantly right now.
As long as earnings are positive, even if down 95%, buybacks on debt will be announced to ballon eps.
Also, it helps bulls that people are generally bad at math.
It’s one thing to load up on chaep debt, but it’s a whole differnt ballgame to use that cash to buy yourcompany’s stock. What people seem to forget, is that cash is an asset, so stock buybacks mean there are less shares of a less valuable company. Boeing is the most obvious example of this.
Borrowing a dime to buy a nickel.
The actual numbers involved should make it clear that no, this isn’t going to happen.
Companies are buying their own stock with real earnings, not debt.
“Apple Sells $8.5 Billion in Bonds to Fuel Share Buybacks”
https://www.fool.com/investing/2020/05/05/apple-sells-85-billion-in-bonds-to-fuel-share-buyb.aspx
This was only 3 days ago.
Keep pumping the economy and markets or we crash.
No limits in sight.
Would you have once said the same thing about their buying shitty bonds? I doubt they’d buy stocks directly, but I wouldn’t bet my life on it. They’ll do whatever they need to do to support their employers.
I know that they can’t legally buy stocks or stock ETFs now (without a Congressional bill), but I don’t know the rules on Specail Purpose Vehicles (SPV).
SPVs
1) create a shell comapny
2) lend to the shell company
3) shell company buys bonds, stocks or whatever.
https://en.wikipedia.org/wiki/Maiden_Lane_Transactions
FLWS, AMRK, TEAM, DOCU, EBAY, ETSY, LAND, HAIN, LOGI, MRNA, PZZA, SORL, SFM, STMP, PRTS, WING, WIX. What do they all have in common?
Momomomomomo/tech/gains
And not showtime
Most economic data is lagging by months and has been fully digested before we see it, and might have been misleading in the first place. One needn’t wait for a jobs number to rationalize how an event will affect company earnings in a specific industry.
S&P 3000 looks doable. 2930 first. Then a gap fill.
3000 is a very shiny object but after that?
You would think that people would lose confidence, considering what it took to make the economy grow since the great recession. It was pretty great for a few.
With small businesses folding up it may be pretty great again for them. Hmmm. It won’t take much profit to beat a negative bond return.
The corporate tax hikes will bite into the more meager profits too. There’s a lot going on but the question is when will it crash?
Yestreday: Trump’s valet tests positive
Today: “Aide To Mike Pence Tests Positive For COVID-19”
https://www.zerohedge.com/political/aide-mike-pence-tests-positive-covid-19
You know who is third-in-line if those two kick the bucket, right?
She needs to be sealed in a bubble…she MUST survive.
If Congress won’t enact term limits, I have no probelm with nature doing it for them.
Limiting Congress to 12 years + ranked voting would solve a lot of problems.
*ranked voting for political office elections
Bah, the problem is stupid clueless people and the media that manipulates them. Citizens should have to pass a test (questions by me) before earning the right to vote.
For example: Lil Bush would not have gotten a second term were it not for voters who still thought that Sadaam attacked us on 9/11. And maybe even Teflon O would have been voted out if only people who were aware of his horrendous war crimes could vote.
Tip of the day to avoid trading midday courtesy of Bruce Kovner. Turn the Kardashians on the tee vee and touch your pee pee.
I WANT MORE CONTRIBUTION FROM YOU LITTLE BOY!!!!!!!!!!!!!!!! http://www.shadowstats.com/alternate_data/unemployment-charts
The most hilarious thing about Shadowstats is that they *still* rely on Federal government agencies for their data, but they just cahnge which ones they use.
Also, they don’t explain their methodologies unless you pay them, so instead you are left scracthing you head on how they could think that GDP has been falling every year since 2006.
Everyone is bearish and skeptical of this rally. Thus, we will keep rallying. Don’t be the consensus.
No, not everyone. Some countertrend rallies can and did last for several months (e.g., that post-Bear Stearns rally).
Lol as opposed to 2019 when…everyone was bullish and we rallied like crazy.
Cold snap here. Can’t get garden in. Need to get back to driving and burning coal ASAP. Save our CO2 comforter.
With our very best regards, enjoy.