Some would argue that a new source of jobs will rise up to replace this. But, in what industry? We know the IT tech industry is becoming massively streamlined and consolidated, with “cloud” tech. The office administration workspace is also becoming obsolete in many ways. The “business traveler” has no reason to return, with telepresence and document collaboration built into the cheapest computers .There is an entire global hotel and hospitality jobs industry built on the need for face to face meetings. Those meetings are now nothing but a quaint luxury option. What about the USA “factory renaissance”? Well, at present, manufacturing jobs represent less than 9% of employment in the US . And, how many of those jobs are within commuting distance of most of the country’s city based population? This is why shadowstats.com ‘s declaration of 23% “real” current unemployment is entirely realistic. And, it will go much higher.
The point is, there is no “next bubble” on the horizon: some industry which will appear , as it becomes a gathering point of capital and investing enthusiasm.The USA depended on the growth of “service industry” jobs to balance out the mass migration of manufacturing to south america and asia. Now that you can replace 70% of those jobs with a touchscreen phone or kiosk, they have no reason to return. At the rate these positions are vanishing, we would need to triple the amount of manufacturing jobs in the US . Unless we are willing to scrap the EPA , and pay people 2$ an hour, we aren’t about to see a 300% spike in manufacturing jobs anytime soon.
The problem is that all of us , including the fed, have become too entranced by the idea of cycles. That is, the idea that bad times always alternate with new periods of boom. But, as we saw through history, the bust can last a long time. I have been bullish into every major pullback in the last 4 years. However, I only felt safe doing so because I always knew China/Europe/US had a few more intervention bullets left in their gun. But, at present, they are “all in” . There was nothing easy about shorting in 2008. A random CNBC rumor could send us bouncing 500 dow points in minutes. You knew there was still so much the Fed/China/Europe Gov machines could do. But, now that they have pushed all their chips into the middle of the table, what will they do next? What we are likely looking at here is a multi -year pullback, which will be entirely devoid of “v bottom” bounces. They’ve emptied the fire extinguisher, and thrown it into the fire. They are truly cornered now. I cannot see a “safe” level of support in this market here. There is no more “magic phrase” that can be whispered on trading desks as the final intervention fix. QE4 would be literally laughed off at this point. It has taken full intervention , PLUS LEVERAGE, from every major government on earth to give us SPX 1500.
I saw many smart analysts get steamrolled from the 2009 lows. Dozens. They underestimated how much global invervention was still yet to be done. But, at this point, its done. I mean, there is no “second kitchen sink” to throw anymore! There are those that argue that we can have economic growth without employment, because of entitlement expansion. But, that is absurd. Someone making 600$ on social security disability may patronize the dollar store. They may even have 8$ for netflix. But, they are NOT a source of economic expansion. People on these entitlement programs live extremely marginal existences. And, that is only worsened by our decaying public transportation system. For all of europe’s problems, you can basically live without a car in most of europe. The elites in the US are fortunate we can’t all walk down to the local parliament office. In fact, high gas prices and declining public transport are the main reason we don’t have daily greek style riots, yet.
Where will the next wave of capital come from, for this market? It won’t be the baby boomers. They have lived through more stock bubble busts and scandals than any generation in history. There is nothing wall street can do to get their confidence back. The next two generations beneath them have been equally traumatized by what has happened over the past few years. Even if they had sufficient jobs to provide them the spare capital, they would not get back into this market. When’s the last time this market went more than 3 months without some major public flash crash or scandal? The rate of these public fiascos is increasing. Who is going to be the PR face of wall street, to bring back confidence? This is why the volume is so low right now. For all the bullish talk we here lately, everyone has one foot out the door. That is why we flash crashed 50 ES points in seconds, just a few weeks ago ( after hours). No stable market moves that fast, on no liquidity.
What people need to prepare for is what the democrats will unveil under dow 10k , this summer. They have been publicly working on a GRA ( guaranteed retirement account) plan for years. It would offer people a government backed bond alternative to 401k’s. Technically, the switch will be on an elective and voluntary basis. But, the effect on the market will be like a “Reverse TARP” . You see , wall street investment bankers have depended on automated inflows from 401k ‘s for years. But, if just a third of those people jump ship to the GRA system, that will be devastating . You could easily see us test dow 8000, as wall street throws a tantrum. But, the GRA is far too big of a win for obama and the unions for them to be shaken by the inevitable panic theatrics.
Personally, if I were forced to choose, i’d go with the GRA! Wall street has shown nothing but contempt for the public , since the unprecedented bailouts. They have shown that contempt in their actions: Corzine looting farmers accounts, high frequency trading, multiple IPO scandals, etc. It will not be hard, at all, for the democrat media machine to sell people on GRA ‘s. You will know when its about to be announced, when you see people like rachel maddow start using the phrase “wall street casino” . Just like bush leaked policy decisions to key right wing commentators, obama leaks policy info to the msnbc crowd ahead of time. So, weeks ahead of time, expect to see people asking “why did we ever create 401k’s to begin with?” . Honestly, its not a bad rhetorical question. But, the point is, obama has no motivation to “rig” the market higher here. Its only in times of crashes that the government has an excuse to barge in. There are no hasty midnight executive orders and congressional sessions on rallies. This GRA “option” will be presented and rammed through in a matter of weeks. And, for people to switch over from their existing 401k’s, it will be as simple as returning a postcard!
It won’t be hank paulson on his knees in front of pelosi this time. It will be jim cramer, literally on his knees, begging you to stay in your 401k. The problem with this coming drama is there is no “good guy”, or villain. The GRA system, and 401k’s, are equally corrupt methods of allowing others to manage your money to their own benefit. But, it is a reason to not look for a V bottom in this next crash. It is a crash that looks set to begin at any hour or minute. And, I don’t think we see a new uptrend for many years.
In terms of pure technicals, we have an interesting convergence setting up right now: There are giant bearish rising wedges on the monthly charts of XLY SPY DIA AMZN . All four are nearly 2 years long. And, they all look set to detonate downward simultaneously.This creates the potential for an unexpectedly explosive down move in the next few days or weeks. I will be posting a chart to stocktwits soon.