"What a fool believes he sees, no wise man has the power to reason away. What seems to be, is always better than nothing at all"
It's not my goal to "rain on the parade". I am merely pointing out that this parade is taking place in a torrential downpour on the way to biblical flood...
Unfortunately, facts and logic can't compete with a society in love with denial. Nevertheless, the slow arc of reality is coming in for the kill. We are witnessing the PEAK of everything in this cycle from profits, to speculation, to consumption.
Two cycles in a row (2000/2008) I changed jobs right at the end of the cycle. Why? Because my job satisfaction tank was empty and wages were rising. Also, because no one told me it was the end of the cycle. Like now.
We are currently seeing a level of turnover unprecedented in U.S. history. For a variety of factors - most significantly, the pandemic put the supply/demand equation in favor of employees for the first time in decades. Ironically, due to 20 million knee jerk mass layoffs at the beginning of the pandemic. Yes, you read that right. A DECADE worth of jobs got wiped out, even though the government promised to PAY employee wages during the shutdown. Now, employers are scrambling to fill empty positions, because THREE MILLION baby boomers chose early retirement, which just so happens to be the gap between pre-pandemic and post-pandemic payrolls. All of which means that higher wages are cutting into profit margins leading to PEAK profits for the cycle. The irony is quite ironic.
Number of Americans quitting their job, monthly (thousands):
Still, no one need be convinced this will continue indefinitely, since that's what they must believe anyways.
Yesterday the monthly ADP private jobs report was a total fiasco. -300k job LOSSES versus 200k expected job gains. This was a massive miss even by EconoDunce standards. It was off by more than a minus sign. It's hard to be that incompetent and still keep your job, but economists excel at it. If it's one thing their continuing employment proves is that none of their theories are credible.
I personally have long stopped guessing the monthly BLS jobs report which comes out tomorrow. There have been many pundits making excuses for why the January jobs number could be a disaster similar to ADP. However, we must bear in mind that this post-pandemic macro environment is a con man's paradise. All of these "unique" factors make it very easy to bury the end of the cycle in broad daylight.
Make no mistake, none of these "experts" want anyone to believe this is the end of the cycle. Does anyone on Wall Street want to tell people that recession is looming? No. So they don't.
This week, we are very likely witnessing peak earnings, although most analysts won't admit it. The key is not what happened in Q4 of last year, but what will happen THIS YEAR:
"The first quarter estimates declining reflects the reality of supply chain and inflationary problems, the second and third quarter numbers rising are wishful thinking”
there is increasing doubt that corporations will be able to keep raising prices to offset higher costs, particularly labor costs"
Got that? Up until now, profits have been rising faster than wages, but we've reached a point at which "consumers" will no longer accept higher prices, hence profit margins must come DOWN.
And along with all of this peak wishful thinking, we are also witnessing peak corruption.
"Movement on the issue comes after an Insider investigation found dozens of lawmakers violated laws around stock trading while in office"
We live in an era wherein the Fed is trading stocks AND Congress is trading stocks, far more freely than at any time in modern history. And we wonder why there is no financial regulation.
That will change. When it's way too late.
Social mood is turning down. We see it in consumer sentiment. We see it in Biden's tanking poll ratings. We see it in the market itself. People who don't understand the role of greed and fear in markets are the ones who are constantly surprised when they explode. Currently we are seeing less fear in these end of cycle markets than we've seen in any other cycle in history. Why? Because the Fed has convinced everyone they are expert stock pickers. Therefore even as the Fed removes stimulus, these morons remain over-confident as to their prospects for future gains due to their unique "skill". Little do they know that their only skill in life is getting serial conned by Wall Street.
Which gets us to the casino.
Today Facebook is imploding on 10x average volume due to "inflation" impacting advertising spend for their customers. That sounds a lot like a decline in overall economic activity to me. After the close today, we will hear from Amazon which is already expected to see a year over year -60% decline in profit. The stock is not waiting around to see what happens, as it's trading down in tandem with Facebook. What we notice below is that Amazon rocketed through the pandemic, but has been carving out a top for over a year and a half now. In other words, the pandemic brought about peak Amazon. The virtualization of the economy, which is inherently structurally deflationary.
Now, they are seeing slowing growth AND higher costs at the same time. Their business model, consisting of predatory competition the likes of which would have been broken up in any other era, is coming to an end.
Finally, Trump's election rally exploded in the February after his first year in office. Right after the January jobs report.
I'm sure everyone believes this time will be different.
