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Tuesday, March 19, 2024

Non-Farm Thursday – Is Good News Bad News?

We're waiting on the jobs report.  

Nothing really matters until we get that bit of data – certainly not these thrashing indexes that may or may not be in their death throes as the weather heats up and the Global Economy cools down.  The question is, do we want a lot of job growth – which will signal economic strength and drive up the Dollar in anticipation of eventual Fed rate hikes, or do we want bad news in weak jobs, that will stop the Dollar from kicking over the 95 line and keep the Fed hikes away for another quarter? 

Certainly given the choice between paying higher wages or getting MORE FREE MONEY, it's no choice at all for our Corporate Masters, who are also up to their eyeballs in debt that they've used to buy their own stock at record-high prices (what could possibly go wrong?).  We can only pray that they have done their part and refrained from hiring or, if hiring, haven't done anything too crazy like paying their workers more money.  

As we were discussing in Member Chat, Seattle has an $11 minimum wage since April 1st (gradually phasing to $15) and is already the fastest-growing part of our country for housing, according to the recent Case-Shiller Report.  Not only do higher wages provide an immediate boost to housing which, in turn, boosts the consumption of durable goods and adds construction and service jobs – but it has been a boon for the very businesses that feared the increase as their customers now have more money to spend (as well as their employees).  Los Angeles is next but starting at $10 this month.  

Lack of wage growth has been the unspoken plague that has been holding back our economy but, ironically, the Fed does everything it can to prevent wage inflation, which is also the kind of inflation that leads to all the rest.  That means, in 30 minutes, we're going to be more concerned with the change in hourly earnings, which popped 0.3% last month and sent the S&P down 20 points even though 280,000 jobs were created.  

Expectations for this report are running about 250,000 but it's how much we have to pay the slaves that matters, not whether or not we have more slaves…  As you can see from the chart, Corporate America has benefited from 6 years of exceptionally low wage growth that did not keep up with inflation while, at the same time, shredding benefits to drive the average cost per worker to lows not seen since Lincoln abolished slavery in 1864.  

This is why the current pace of market growth is unsustainable and why we're shorting the market at these lofty levels.  Corporations aren't making more money by selling more stuff to more people – they are making more money by paying people less money to do more work.  It's a great profit model in the short-run but, in the long run, you run out of customers for the things that you sell and, at some point, the workers begin to understand that it makes economic sense for the bottom 99% to kill the top 1% and redistribute their wealth.  

Where is that tipping point?  Well we already have the top 20% making 50% of the money, so, if the bottom 80% kill the top 20%, they would have twice as much.  If we were playing risk, then the bottom 80% would expect to lose 1/4 of their troops in the battle but, on the bright side, that would leave them with +130% more wealth, so maybe worth it.  But it's not because the top 20% are better armed and have the police and the military on their sides (for now – as both of them are in the bottom 80% too).  

Of course, it's misleading to talk about the top 20% because, if you drill down further, you see that the top 10% make 44.5% and, more importantly, have 74.5% of the wealth.  So now, if we kill all the masters and redistribute their wealth, we see that the people in the bottom 90%, who have 25% of the wealth, would have 3 TIMES MORE by simply taking it away from the top 10%.  Now a revolution is beginning to seem like a good business plan, right?  

When you take wealth distribution to such an extreme that the people you pass by on the streets have literally nothing to lose – your wealth is at risk.  America already has more of their population in prison than the rest of the World combined – it's one way we keep our poor people in line.  We also have a very high 400 policemen per 100,000 population vs 300 in Germany, 200 in Canada, 120 in China…  That's not including our National Guard, of course, who are at the Governor's beck and call.  You think it's ridiculous, you think it could never happen here but that's pretty much what every elitist class thinks right before they get their throats cut.  

8:30 Update: Just let me have Santelli when it all hits the fan!  He's on CNBC bloviating after a disappointing 223,000 jobs were added.  As I said, we don't care about that and neither does the market as the Dollar plunges (no Fed hike!) back to 96 and the Average Hourly Earnings went up 0% – 0!!!  More people working for less money and more free money from the Fed is just what we needed to hold things up into the Holiday Weekend but how does this help China?  

While keeping our workforce impoverished is great for Dollar Stores like: FD, DLTR and DG (but not so much the ritzy FIVE, with their high-ticket items), it's not enough to restart the export factories and fill up the ships with mid-priced Chinese goods.  Last night, again, the Shanghai Stock Exchange plunged another 3.5%, back to that -25% line at 3,900 we've been watching.  That's WITH expectations that the Government will do something over the weekend – things could get catastrophic if they don't

And then there's Greece, which is still the word and I'll give my man Yanis Varoufakis the last word going into the weekend and no, we will not be changing our very cautious (and slightly bearish) stance into the long weekend.  

 

Have a great weekend, 

– Phil

 

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