DUBLIN – Last week ended on a high note:
“Stocks rally after jobless rate sinks to 3.9%,” said a headline at Bloomberg on Friday. “Jobless Rate at 17-Year Low,” added The Wall Street Journal front-page on Saturday.
“Solid,” was how analysts described the report from the U.S. Bureau of Labor Statistics. “U.S. Economy is Doing Fine,” another headline concluded.
Too bad. The high note was off-key. The news was fake.
We’re back in Ireland after a quick trip for a wedding in Virginia. Here, it’s about 40 degrees cooler… and raining.
And we’ve become homeless.
Yes, we should stand on the sidewalk on St. Stephen’s Green with a sign: “Unemployed. Homeless. Please help?”
When reporter John Stossel tried that, he collected $90 in an hour – tax-free, of course.
At that rate, working 40 hours per week and taking two weeks off for Christmas, he could earn $180,000 a year.
That’s more than most members of Congress make per year. But then, he probably deserves more than a congressman.
We’re homeless because our new house is being renovated. It is having its hair cut and its boots shined.
The scaffolding is up. The rough noise of saws, drills, crowbars, and men-at-work has replaced the singing of the birds.
The whole makeover will take about six months. In the meantime, we are refugees with no fixed address, staying in hotels and other short-term rentals…
…and of course, traveling.
Being homeless here in Ireland has its benefits. We get out. We meet people. We see more of the country and its people.
Richer Than Ever
But let’s not get distracted. There was good news oozing from every orifice last week; but all of it was phony… or misinterpreted.
For example, widespread was the news that people are richer than ever.
Household net worth is at an all-time high. Typically, families have a net worth of about five times their incomes. But as the feds pumped cheap money into the financial system, stocks climbed and household wealth took a leap.
In 1999, the net worth-to-income ratio hit an all-time high of over 6. That was the top of the dot-com bubble. The bubble popped in 2000, and the ratio went back down to its normal range.
But it didn’t stay there for long. Soon, the Fed was pumping in more cash and credit, and the ratio of net worth to income was jumping up to a new record – 6.4 in 2007.
That bubble, focused on housing, blew up in 2008. Again, the ratio crashed back down to normal.
Guess what has happened since. The feds went back to work with pumps and air hoses in 2009, injecting another $3 trillion (in bond purchases), and voilà – by 2015, the ratio was back up to 6.4.
And this year, it rose to over 6.5 – a new all-time high.
Here’s another bit of faux good news. It was only a few weeks ago when we reported the words of the Fed, claiming that the U.S. had reached “more than full employment.” And now comes news – on Friday – that now we have more than “more than full employment.”
The unemployment rate has sunk to 3.9%. If this keeps up, we will soon have negative unemployment. That is, we’ll have more people working than working people. So there will be more jobs splashing in the labor pool than people.
There are 148 million people with jobs in the U.S. today. If the feds’ math is right – if we could just add six million more jobs – there wouldn’t be a single unemployed person in the entire country.
Except, of course, for the 169 million people who still don’t have jobs, but who aren’t counted in the unemployment numbers because they aren’t actively looking for jobs.
That includes the 16.6 million people who “dropped out” of the labor force in the last eight years, and the 230,000 people that the Bureau of Labor Statistics took out of the “labor pool” last month – which is how they got the unemployment number down so low.
The U.S. Census Bureau also tells us that there are 46 million Americans living “in poverty,” which it describes as “lacking adequate food, shelter, and/or clothing.”
With so many people getting richer and richer… and with so many jobs… how could that be? Why are there still people shuffling up Charles Street in Baltimore asking for quarters?
The latest jobs report inadvertently revealed the truth.
First, the typical American worker is losing ground, not gaining it.
The official inflation rate is 2.4%. Meanwhile, wage growth is at 2.6%. That leaves a net gain of 0.2% – or 2 cents for every $10 of earnings.
But that’s a statistic. The price of gasoline was an average of $2.30 per gallon a year ago. Now, it’s 50 cents higher. That’s not a statistic. That’s an actual price hike.
And it means that people are paying 22% more for fuel.
If all costs had gone up a similar amount, the nominal 2.6% increase would work out to a 19.4% pay cut.
A few more pay raises like that and they’ll be broke!
The second thing it tells us is that all the numbers are baloney. If we really had full employment, the supply of workers would be topping out, while the demand would be high; under those conditions, the price of labor would rise and working people would be getting more money.
But they’re not… because the statistics are fake.
Measuring “unemployment” properly, in terms of hours worked, colleague David Stockman found that the unemployment rate has gone up, not down. At the beginning of this century, 36.4% of available hours (the number of people of working age x 2,000 hours per year) was not being used. Currently, that figure is 40%.
That’s full employment?
The wage number tells us one more interesting thing. The tax cut didn’t work.
Remember, it wasn’t just supposed to put more cash in shareholders’ pockets. It was supposed to increase wages, too. It didn’t. Here’s Mark Whitehouse at Bloomberg:
When I checked a couple months ago, I found pretty much zero evidence that companies were increasing wages any more than they otherwise would have. Now that we have data from two more jobs reports, let’s take another look. Overall, wage gains do not appear to have accelerated. From December through April, average hourly earnings increased at an annualized pace of 2.3%, significantly slower than in 2017.
The good-news numbers are fake.
More to come.
P.S. It’s that time of the year again. Our little vineyard down in Argentina has produced another batch of Tacana Malbec. Readers who purchased a case last year will remember our deal. Try our wine. If you don’t like it, I’ll send you your money back. That’s it. No questions asked.
But remember, our little vineyard can only produce so much wine a year. And we’ve already sold more than half of our stock during the presale. If you miss it this year, you’ll have to wait until next harvest. Read on here for why our wine may be the healthiest in the world… and why our new Reserva may be the tastiest! Details here.
MARKET INSIGHT: OIL CONTINUES TO CLIMB
By Joe Withrow, Head of Research, Bonner & Partners
Oil prices are on the rise…
That’s the story of today’s chart, which tracks the price of U.S. crude oil from 2014 to today.
As you can see, U.S. crude oil bottomed at $26 per barrel in February 2016… and it just hit $70 per barrel for the first time since 2014.
That’s a 169% rise in just over two years. For comparison, the S&P 500 only gained 46% during that time.
– Joe Withrow
The Unemployment Rate Is Useless, Look at This Instead
As Bill just showed, the official unemployment figures are not giving the full picture. Now, there’s more evidence that the American economy is less than flush…
Inside the Most Exclusive Clubs in Finance
Your suspicion is right. In the world of finance, there are “insiders.” Here’s a look behind the scenes at one of the most exclusive clubs on Wall Street.
How to Profit When the Market Goes Nuts
Volatility is back, and it’s not going anywhere. But don’t panic. There are still ways to profit. Master trader Jeff Clark shows how…
In the mailbag, more discussion on myths and morality…
You said: “But morality is a kind of myth, too. There’s no way to prove that it is a bad idea to kill, for example, or that something bad will happen to you if you do.” You are wrong. One of the Ancient Greek philosophers already proved this using his morality criteria: Imagine that everyone kills all the time. Such a world would not be able to exist; therefore, killing is bad! There is your proof. So please stop spreading your “everything is relative” theories. Still like to read your Diary, though.
– Ryszard A.
One can be opposed to the murder of someone like Dominic Collins without being a Jesuit, without being Catholic or Protestant, without believing in the false myths of the Bible, without being an Englishman or Irishman, without being on any “plantations” of the natives or “outsiders,” and without believing that Raskolnikov is penitent and unredeemed. “A penny saved is a penny earned” is a common saying, not a myth.
Wealth is mostly destroyed – and not created – by a lying tongue. I also disagree with your definition of proverb. It seems that you’re doing quite the “indulgence” of semantics recently. You’re involving yourself in a kind of value trap of distortions and canards that are a win unto you, but probably lose-lose-lose-lose unto ad infinitum for others. That would be my judgment about this. May their sh*thole “public policy” be damned!
– Rex P.
Meanwhile, another reader considers America’s financial future…
At least with cash, it is known who controls the amount of money in circulation – thus controlling its purchasing power and value. Digital money, like government money, has no stored value. For the most part, the government regulates chaos… and the “Demoncrats” have abandoned the idea of government and rule of law in favor of political correctness.
I can’t see how private money, bitcoin, etc. has any advantage, since a person has no way of knowing who and for what reason XYZ starts their own cryptocurrency. Cash, at least, has an empirical reason to be – a medium of exchange until politicians realized they could just spend, spend, spend, and get elected, purchasing power be damned. Trillions more of national debt is ahead!
– Terry R.
IN CASE YOU MISSED IT…
We had a phone call with master trader Jeff Clark last Friday. And he didn’t mince words…
“Get used to high volatility. Because it’s here to stay.”
But rather than being worried, Jeff is actually excited. That’s because fortunes will be made in days – not years – by traders who know how to profit from high volatility. Here’s how you can do it, too.