There has been no post on the blog for more than a year and as I reflect on 2011 it almost looks like I didn't miss a thing. 2011 opened with the S&P index at 1257. As I write this the S&P index, approaching the end of the year is at.....1257. Rip Van Winkle wouldn't have missed a thing but had lots of crazy dreams in the interim. A lot like the investment year in equities has been.
Of course if you didn't sleep through it you didn't miss the breathless voices on CNBC alternating between orgasmic glee and catatonic despondency. In other words much of the year could have been spent in an alcohol induced coma both in celebratory cork popping and bleary eyed single malt sipping.
It has been a traders year with breathtaking volatility and profits for the quick opportunist. For the fundamental long term position a plodding marathon. When the headline news is set against a back of reality it makes me despair of the disingenuous nature of investment market reporting. Seemingly everyday the banner headline is one not merely of hope but of gleeful cheerleading. Without an awareness of both underlying expectation and the details behind the news the reportage is less than worthless.
Today is no exception.
Jobless Rate Falls to 8.6% reads the headline. The
lowest level in two and a half years, spouts the Labor Department. A lower jobless rate is good, right?
120,000 jobs created. What's not to like?
The labor force participation rate is falling at an unprecedented rate. For those who pine for the good old days when June Cleaver had perfect hair, a martini waiting for her dutiful husband and a roast in the oven, be patient. We're getting there. Statistics show that it is increasingly likely it won't be June fixing dinner and waiting for the breadwinner to come home, but husband, Ward
The participation rate began a long advance following the 1970's when women entered the work force in substantial numbers. The social changes of those years meant that women who were burning their bras were also beginning to collect a paycheck.
Behind the headline number of 120,000 new jobs is another number. 315,000 people stopped looking for work or otherwise fell off the labor force rolls. If you actually work the numbers reported backwards, it looks like about 3 million people have statistically disappeared.
The graphic below charts the average period of unemployment for those in the labor force and looking for work. Clearly there is a striking structural change. For the first time since the 1930's the U.S. labor picture is of significant long term, even permanent unemployment. Left unchanged the social implications are major both in terms of average standard of living and social polarization.
Our client portfolios remain decidedly cautious and hedged which means experiencing contrarian emotions. Earlier this week when every central bank in the world announced it was opening the spigots of liquidity to banks still wider I was not a happy camper. But in a market driven by headlines there will always be times when fundamentals will be overwhelmed by fleeting events. Surfing the tsunami is not for the meek; or even for those who hang on every word that comes across the wires. So much information, so little wisdom.
