It isnt always like this. I expect within the next 3-6 months when we are in the teeth of recession bad news will actually be bad for the markets.
That recession that’s been coming in the next 3-6 months has been 3-6 months away for 2 years though.
2 Likes
Fed is telling us that if we dont get it in 3-6 months then they’ll just tighten financial conditions so we get it in 6-12. Europe is already in recession. We could avoid one but seems like the game really set up with no way to avoid it.
Economy already kind sucks for the working class now. Real wage erosion and the pandemic safety net basically gone. The more well off still have savings to burn through but Fed seems determined to win the game of chicken and tighten enough to burn through those savings (9 months sort of the consensus estimate on whats left).
Because I’m an actuary I tend to think “demographically” so I may be biased here. But I think the main reason that even very smart people continue to be confounded by labor market patterns vs. economic conditions vs. market returns is that the boomer retirement tsunami is rendering a lot of “conventional” thought to be irrelevant. Practically 100% of people analyzing the economy and financial markets have spent their entire careers in one demographic environment dominated by boomers going through their careers. I really think that these people can’t get their heads wrapped around the impact of so many boomers exiting the labor market every single month to retire and what that does to the supply/demand of labor. Rules of thumb and accepted wisdom that made sense in 1990, 2000, and 2010 just don’t apply in the 2020s.
2 Likes
Yep, basically all of the people leaving the labor market are early retirees or Covid deaths.
That just means the Fed needs to work harder.
Also Long-COVID sufferers and I dont think women of all ages have recovered back to pre-COVID participation levels.
There’s probably some degree of a real psychological shift at play too.
For most of my career job switching was relatively rare and people generally bought into corporate bullshit/lies about “work as a family” or whatever. Post pandemic and especially among millennials and younger, basically nobody believes that shit and you’re really engaging in career negligence of you aren’t regularly testing the market.
We’re gonna need more layoffs
https://twitter.com/coldhealing/status/1598378863758872585?s=46&t=ak5bSCAL08uaW8ZpknQiiw
3 Likes
It seems to me that they’re pretty innovative in this department. Ranging from SPACs to Jim Cramer!
Is the blue line reinvesting the dividends?
The millenials and younger people definitely resist corporate propaganda and distrust their employers. This doesn’t always work out in their benefit. One of the most interesting findings in my job in the last couple of years (I run my company’s pension plans) is that when we polled our employees to try to figure out why the younger people weren’t contributing the the plan to get the employer match, we were expecting them to come back with economic reasons (i.e. they have to focus on student debt, they’re saving for a house down payment instead, etc.). But the actual number 1 reason provided was that they didn’t believe the company would actually give them a match. They thought that if the company was trying to get them to sign up for the pension plan then ipso facto the pension plan was a bad deal for them and the company was going to try to rip them off and steal all the money.
3 Likes
This is the scary thing. These bullshit stock market things happen in the regulated environment, so you can only imagine how bad it would be without the regulations. Kind of like looking at the results of a bunch of car crashed and then imagining a world without brakes. It can be even worse!
1 Like
In 2020 I was tracking COVID hospitalizations vs capacities regionally and identified that Houston was about to overflow their hospitals in a big way. I knew like 2-4 weeks in advance. So I go hunting for a company that’s going to take a hit. I’m looking for something that’s going to have to shut down, and what do I find? Rick’s Cabaret!
Strip Clubs and restaurants, and iirc it was like 80-90% in the Houston area. Score! Time to buy some puts!
Big brain stuff there, me torching some money betting on Texas men being more concerned about COVID than interested in naked women.
4 Likes
Yes, blue line assumes dividend reinvestment. Red line is just change in price (so obviously does not include the returns derived from dividends). Graphs like the original one usually focus on the Dow Jones index, which does not include the returns from dividends, so those graphs are often not great representations of investor performance.
1 Like
Especially because the Dow, being mature companies, will tend to pay more dividends than the broader market.
I still think it’s going to get weird. Like, what most people think of when they hear the word “recession” is high unemployment and lots of financial pain among the bottom 75-90% of earners. But what happens when we get a recession during a labor shortage?
The rate is going to have to go pretty high to force unemployment to go up, and it may cause more pain among the invested (wealthy) - at least for a while. A lot of the inflation is/was supply chain driven and trying to crush workers during a labor shortage is not easy.
I haven’t checked lately but we’re still having shortages of workers in like hospitality/service right? So what they really need to do is crush demand for hospitality/service. They have to make Boomers feel an awful lot of pain to do that, I think.
The funny thing is, IMO at least, the real fix to Corporate America’s current problem is pretty obvious: immigration. But Corporate America spent too many years funding RWNJs who would cut their taxes and deregulate them while screaming about the dangerous immigrants.
I mean is the thinking there are people not working and living off savings? That would surprise me. The well off are only burning through savings if they’re out of work, right?
Yup! I think I’ve posted about this before. It’s pretty confounding trying to figure out what it’s going to do to the housing market, for example. There’s going to be a ton of inventory in outdated homes in areas Boomers wanted to live in and tons of demand for more modern homes in areas Millennials want to live in.
This is incredible.
1 Like
This was a thing well before the pandemic. Having multiple careers feels like a routine thing for people my age and I’m not terribly young. I think I’m on # four or five depending on how you count.
How does the pension work if you leave the company? I know of pensions but they only seem to be a thing in the public sector down here.