Friday, May 6, 2016


Jobs came in at 160,000.  Damn near dead, solid perfect.  Janet doesn't have to do a thing, the politicos on the Board are over the moon and the equity boys are smiling.  Even labor Secretary Perez--a revolting little creature if there ever was one--had reason to smile.  While a bit lower than he would have like said he, the people who were now entering the labor market were the "long term unemployed" which means that the market is tightening and that bodes well for the future.

If anybody knows who the "long term unemployed" might be or how they are identified, would you let me know please?  Further, the unemployment rate held steady at 5% only because the labor participation rate fell below 73% again.  This number is becoming increasingly open to suspicion by more observers--you know where I stand--especially when you come out with crap as did Perez today in the face of declining labor participation.

The problem of course is that even this number is beginning to line up with the poor economic data we have being seeing reviving the recession concern which for a short period had dissipated.  There is a momentum to these things and surely there is going to be a heightened interest in the negative markers for this and the global economy next week.  Speaking of negatives, a figure which I found hard to comprehend was the level of total debt to GDP in the Chinese economy: 275%.  Can that be real?  And I thought that we were bad hitting up against 100% as we are.  In both cases it is all domestic currency but my word...275%!  Which brings me back to Janet.

The days of discrete markets are long past and since the U.S. is the biggest puddle of cash around, any action taken by the Fed will have affects felt all around the world.  I am even more convinced than ever that we are in for a protracted period of low to negative interest rates because with any appreciable rise the servicing of this world-wide massive debt will become impossible given the low level of economic activity, low profitability and declining productivity of global industries, particularly in the U.S. where productivity has taken a dramatic drop.

It is becoming clearer every day that the "Mr. fix-it" role of Central Banks has probably come to and end and may becoming counter productive.  For example, the ECB has announced that beginning in July, it will begin to purchase corporate debt directly.  With the Bund over 100 b.p. through Treasuries, where is the next great debt boom going to occur?  As though corporates need more debt.
But I digress.  The destruction of productivity which in these times is essential to continued well being, is a direct result of governmental interference in the free market both in finance and manufacturing.  In the past four years this has been particularly egregious in the western economies but there is no end in sight.  If it continues, we are, I am afraid, in for a very bad time.  The only good news is that more and more people are recognizing this.  The U.S. election will fuel this debate and the BREXIT vote is all about this issue.  But time is short and stuff happens.  Hopefully, there is enough time before it does.

Sunday is Mother's day.   For all of us there was--and is--no one more important.

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