The S&P500 resumed its slide last week, dropping almost 3%. Volume was moderate. And volatility eased, suggesting that traders were growing complacent even as prices edged lower. So traders reduced downside insurance protection. The problem is that this leaves the stock market more vulnerable to sharp price drops, should some catalyst for selling emerge.
Macro results were mixed to weak. Retail sales started out the week with a big disappointment. It seems that despite the Black Friday hype, the total sales tallies were not as strong as hoped for, both with and without auto sales. Producer prices were basically in line with expectations, as were consumer prices. Inflation isn’t becoming a problem, which makes sense in an economy that has never really recovered. The Empire State manufacturing survey beat expectations, but industrial production missed badly. And initial claims have now dropped below the recessionary 400,000 mark, more likely because the unemployed are running out of benefits, less so because they found jobs.
Technically, the short-term (daily) charts have returned to a bearish bias, after last week’s losses. On the weekly charts, the downturn that began in late April (which was officially the high point of the year) is still in full effect. The bearish argument is that the subsequent peaks formed since late April have each been lower and lower. The bullish argument is that the early October low has held, and that the subsequent lows have been higher. Very soon, this tug-of-war will resolve itself; technically, there’s very little room left in this multi-month triangle than should lead to s breakout, either to the upside or the downside.
Last week, as the years winds down, the blog ZeroHedge featured a post that assembled a list of “50 economic numbers about the US that are almost too crazy to believe”.
The main point, obviously, was to use some basic (hard to dispute) data to build a case that the US economy not only hasn’t really recovered from the Great Recession, but that it’s still in a recession, or more likely the Lesser Depression, as Nobel prize-winning economist Paul Krugman describes it.
Here are some highlights:
A staggering 48 percent of all Americans are either considered to be “low-income” or are living in poverty.
The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.
There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.
One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.
19 percent of all American men between the ages of 25 and 34 are now living with their parents.
The retirement crisis in the United States just continues to get worse. According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.
Child homelessness in the United States is now 33 percent higher than it was back in 2007.
Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.
A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.
During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.
Another point important point has nothing to do with the economy and the effects on markets, the subject matter that most often dominates blogs like this one.
Instead, the takeaway is more fundamental. It goes to the heart of our social and political system. While horrific economic numbers like these certainly could lead to lower stock prices, these trends could also lead to something far more dire. More and more astute observers are pointing to the parallels between these trends—in prior eras—and complete social breakdown. And such breakdowns rarely occur peacefully; instead, they often lead to civil war and broader interstate war.
If these economic trends continue, a collapse in the stock market could be the least of our worries.