by Jesse
Today was filled with cross currents, as the Non-Farm Payrolls report came in light, and looked even worse if you peered into the details of it.
The unemployment rate is less meaningful now because of the large number of people who have been long term unemployed and are falling off the unemployment benefits rolls. Labor Participation Rate and average workweek are therefore a bit more important. And things are not looking good because the jobs that are being created tend to be low wage and often part time.
There is no real sustainable recovery, except for a few sectors that were ironically at the heart of the financial crisis five years ago: FIRE sector and the Beltway Elites. Except for some regional pockets of recovery, most everyone else is just getting by.
As you know the failure to reform a broken system is very high on the list of policy failures. Close behind are the Fed's trickle down stimulus approach, and the sequester and failure to act meaningfully on the fiscal side by the political class.
But the more jarring event today was Putin's strong stand on Syria. The case the US has been making is weak, and allies are few. It seems like the Obama Administration is listening to a few groups and advisers, and is tone deaf to what the mass of the public and the rest of the world is saying. This is not to say that Putin is right.
Rather, Putin is playing chess, and Washington is playing checkers, and also playing footsie under the table with the usual special interests, and ignoring the persuasion that must accompany any movement to military action. And the explanations and evidence that must accompany a grave decision were facing a high bar given the context of a war weary public that feels, with much justification, that their politicians are not listening to them, and are quite willing to say whatever it takes to get their way.
When a former US president, Jimmy Carter, says that the country no longer has a functioning democracy, it is hard to make a case that you just didn't know things were that bad. Well, they are, and they are getting worse with every week that passes and the political class continues to muddle through a credibility trap of their own making.
So in times of uncertainty and deception, when it is difficult to correctly price risk, people seek safety in certainty where they can obtain it, and that involves places a percentage of their wealth in things with less counterparty risk.
And so we saw a rally in gold and silver, although there is quite an effort behind the scenes to keep them from breaking out. They will break out, eventually, and the shorts are going to be hard pressed to deliver the bullion which has been rehypothecated many times. And when this does result in a market dislocation, the economists and the politicians and the regulators will stand open mouthed and say, 'who could have known?'
So let's see what happens. Things are not all that bad from an historical perspective, unless you have a somewhat romantic view of the past. My grandparents and parents faced things that were just as bad or worse, and I myself grew up during the Cold War, the Cuban missile crisis, and Vietnam, and riots that tore cities apart.
I remember as a young boy riding a public bus with an overhead advert of Khrushchev pounding a shoe on the table saying, "We will bury you." Now we have the Tea Party and would be demagogues, and then we had the Dixiecrats and Joe McCarthy. And three of our greatest lights for hope, John F. Kennedy, Martin Luther King, and Robert F. Kennedy, were all brutally killed by assassins bullets within a few years.
If you were not a part of it, it is hard to imagine what it was like. Some of my friends say that we are doomed, and things are much worse now than they ever were. Well, they are like this for most generations, that face difficult, almost seemingly insurmountable obstacles. And yet life goes on.
But certain times call for certain actions, and now is a good time to look to your portfolios, and to remain calm and discerning in your thoughts as you take whatever measures that you can to not become a part of the problem, and look to your families and friends.
Have a pleasant weekend.
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