WASHINGTON, April 27, 2012 – Head fake yesterday. While I was away in the wilds of the western breakaway region of the People’s Republic of Maryland, the market, after dithering a bit, decided that things were just swell in spite of the lousy unemployment numbers. Consequently, it went up nicely once again. This morning’s futures paint a similar picture, with numbers only slightly up, indicating a mixed open. Given that it’s Friday, though, and that you can’t trade over the weekend (at least not the likes of you and me), we could be in for a downtick in the averages today.
Part of the reason is the unemployment figures from yesterday, specifically, new unemployment applications. We are told each week that this week’s numbers are “lower” than last week’s. But actually, that’s not really true. For roughly the last 10 weekly reporting periods, these new app numbers, reported on Thursdays, are actually initial estimates. The real numbers appear a week later, always revised up or down depending on the final counts.
Again, for the last 10 weeks, these numbers have been revised up—something you’re not told. Thus, the estimated numbers reported yesterday were quietly compared to the upwardly revised final numbers from last week and were touted as being “lower” when, in fact, they’re always higher than the original estimated number.
When you compare final weekly tallies (the revised numbers) back to back for the last 10 weeks, you’ll see that new unemployment applications have either risen each week or remained roughly the same. They haven’t gone down. But obviously, some people in Washington want you to think they’re going down. Confusing? Yeah, but it’s meant to be confusing. The government is painting a rosier employment picture by far than is actually the case. Employment is still lousy and not really improving, save in the energy industry which this administration hates. Go figure.
Speaking of the energy industry, the Obama Administration—whose oft-stated goal is actually to price fossil fuels so high that you’ll be forced to “go green”—is finding out again and again and again that the tax-dollar subsidies they’re wasting on the likes of the failed Solyndra are almost totally for naught. The so-called green energy industry is not ready for prime time by a long shot, and things are likely to get worse in Al Gore land. Investors Business Daily reports that:
“After a three-year boom, the outlook for wind, solar and other renewable energy companies has turned sharply negative. The tax credits, grants, loans and other subsidies that sparked the growth of these technologies are shrinking fast. It has been called a ‘subsidy cliff.’ The question now is who will fall and who will fly.”
Answer: They’ll all fall without more subsidies. Watch for it as electioneering heats up. If you and I wasted money like this, we, and our stuff, would be out on the curb.
Which gets us back to this schizoid market. Since last we met, Spain got double-downgraded by S&P. (How do you say quelle surprise in Spanish?) And this morning, we find the economy grew by a tepid 2.2% pace in the first quarter, which is pretty much like not growing at all, which all those underreported unemployment applicants will be the first to tell you.
The real story of this stock market is that the ongoing Great Recession (contrary to economists, it ain’t over) has taught businesses how to profit well and sometimes mightily on nearly zero labor compared to the olden days. So, paradoxically, the market remains a relative bargain as well-run companies are as profitable as they’ve ever been, having learned to survive and prosper by employing as few human beings as, umm, humanly possible.
It’s not that these corporate types are evil, as some folks in Washington would like you to think. It’s that they’re not going to go flat out on innovating and hiring until and unless the Obamacare flap is solved one way or another. It’s a liability to them that’s employee based, and until they can calculate the damages, there’s no point in bringing in more bodies that could substantially boost their costs.
Couple this hiring stasis with rising energy prices, whose cause is largely the administration’s obtuse and irrational hatred of fossil fuels—even if domestically produced, creating jobs—and you have economic and employment gridlock. Investors in the market simply can’t figure out this weird new paradigm. And there are less actual investors anyway, given that if you don’t have a job you can’t invest.
All of which makes market punditry really tricky these days, since there’s no real trend for you to hang your investing hat on.
All of which is neatly summed up by our graphic button which depicts Homer Simpson’s typical reaction to the latest stupefying development in his sorry, beleaguered life. It’s getting easier and easier to relate, isn’t it.
No sage recommendations today except stay out of the market’s way. And have a great weekend!
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington. For Terry’s investing and political insights, visit his Communities column, The Prudent Man, in Business.
Follow Terry on Twitter @terryp17
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