Market Slice: It’s All Politics Now


It’s All Politics Now

Well, okay, everything has been political for quite some time now. But the Biden administration took it to new highs this week, trumpeting a jobs report that smashed through the highest estimates, reporting 528,000 “new” jobs. “Today, the unemployment rate matches the lowest it’s been in more than 50 years: 3.5 percent,” the President asserted. “More people are working than at any point in American history.”

Peter Schiff quickly punctured this double lie, however, pointing out on his podcast that the measure used for the official unemployment rate today is different from the one used before 1990. By that standard, today’s unemployment would be 6.7%, not even close to a historic low. Further, the actual number of people working in July is lower than where it was in May, despite the increase in jobs. What this shows is that more Americans are being forced to take second (or third) jobs. This is a sure sign of economic weakness, not the strength the Administration is claiming.

Image courtesy of

As the buzz of pandemic helicopter money wears off and Wall Street Bets and crypto bros watch their paper gains evaporate, the so-called “Great Resignation” is reversing… the promise of “never working again” is proving empty, and folks are going back to the jobs they left – or were forced out of – two years ago.

Plus, a lot of these jobs are low-wage, part-time service jobs, with restaurants and bars, hotels and other leisure and hospitality-related businesses accounting for a significant share of the “jobs growth.”In other words, these aren’t “new jobs”… they are jobs that went away, and are now coming back. Until the stock market and Bitcoin crash, nobody wanted those jobs, and the big story was the labor shortage. Now, though, with the economy in recession (no matter what the politicians say) and inflation eating up household budgets, people simply must work. Meet the New Normal, same as the old normal.

Graham Summers of Phoenix Capital Research also posted a searing critique of the “bullish” jobs report. Summers explains how there are two official government reports that track employment, the Non-Farm Payrolls report which is used to calculate the bogus official unemployment rate, and the Household Survey.

Here’s Summers’ conclusion:

The Household Survey shows the economy has LOST 136,000 jobs over the same time period. This is the dark secret the bean-counters are trying to hide: that since at least May the economy is LOSING more jobs than it is creating.   There’s a word for this: it’s recession. Ignore Wall Street and the financial media. The real economy is already in a recession. And those investors who believe the official jobs numbers are being led like sheep to the slaughter.

In reality, none of this is about the economy… or if it is, it’s only tangential. The “real” issue for Biden and the Democrats is how to spin the present economic distress into a narrative of economic growth and expanding prosperity, to drum up support in the upcoming midterm elections. And Republicans, naturally, are far more interested in scoring points of their own, than in actually trying to tackle the immense problems we face as a nation.


A Top for the Bear Market Rally?

Back on July 8, Market Slice observed that a stock market rally was likely, after the prolonged, sharp decline of the preceding months. Here’s what we wrote then:


The argument for an extended downturn is strong. Considering the issues we’ve been talking about all year – inflation, rising interest rates, economic slowdown, supply chain problems, food and energy shortages, and geopolitical crisis – remain unresolved, there is little reason to expect a swift turnaround.

With that said, however, our contrarian nature inclines us to believe that, barring an unexpected “black swan,” the next leg down is not imminent. With the Fear and Greed Index still in “Extreme Fear,” we tend to expect the short-term direction is, if not up, at least sideways.

The S&P 500 was at 3,900 that day. Today (Tuesday) it closed at 4,122.

With July in the books as one of the strongest months in recent memory (coming off the cycle lows of the Recession of ’22), many commentators have been quick to proclaim the death of the bear. ”Not so fast,” we cautioned on July 22

Even with this week’s rally, the S&P, which closed Tuesday at 3,936, has a long way to go to take out the early June high of around 4,200. And even if it should continue to that point, we might note that “Rally #2,” back in March, moved past the resistance formed by “Rally #1” … but then declined by over 700 points through May.

Here’s the Year-to-Date S&P 500 chart:

Chart courtesy of

Note that the resistance we pointed out three weeks ago has not been broached… 4,200 remains a key level, and – despite the strong move through the downward trend line from the cycle high of March 29 — this week’s failure to sustain upward momentum is starting to look like the beginning of a new down leg.

Of course, the markets are incredibly mercurial right now, and any new factor, like this week’s Consumer Price Index number, due on Wednesday, or weekly unemployment claims – due Thursday, along with a Producer Price Index print – could drive the market into a new rally, or a swift selloff.

As we’ve said many times, unless you are a day trader you generally want to be on the same side as the general market move with your stock and options trades. So even though we are still significantly above the lows of June and July, it makes sense to carefully watch the down side.

Let’s revisit a chart we’ve looked at a few times already this year:

Chart courtesy of

The purple line is the 2008 Global Financial Crisis. The blue line is the Recession of ’22. Considering the unresolved issues in the domestic and global economy (we haven’t even talked about the crisis in Europe yet… maybe we can get to that next week), there is every reason to be concerned that we are far from out of the woods at this point.

Finally, let’s take a deep dive into CNN’s Fear and Greed Index. We’ve used this index before as a contrarian indicator… Extreme Fear means time to buy, Extreme Greed is a signal to sell. This week, the Index is right down the middle, a neutral 49. But what’s interesting is the “Jekyll and Hyde” nature of this neutral reading. Look at these sub-indicators that make up the overall index:

Stock market breadth shows that only a small handful of stocks are benefiting from the recent run-up in prices. That’s bearish. But the put and call ratio is the lowest it’s been since April. Options buyers are overwhelmingly long… and that’s a classic setup for a squeeze.

And the madness doesn’t end there. Stock price strength is in extreme greed, and market momentum is in extreme fear. The market doesn’t know if it’s coming or going. What all this tells us is that we are headed for a big showdown in the markets, probably very soon. While there are good technical reasons to believe that more sideways action is in order, the contradictions between these two sentimental extremes needs to resolve itself sooner than later. If this week’s economic numbers are weak, the major indexes are likely to say goodbye to their recent cycle highs. But whether it’s this week, next, or next month, we still expect another big leg down in this bear market.


More on the Jobs Report

We had hoped to fit in a discussion of Rep. Nancy Pelosi’s trip to Taiwan this week, but we don’t have the space to go into that. Watch next week’s issue for an article entitled “Ride the Tiger?”

For now, we want to close with this observation from Charles Hugh Smith.

Are Older Workers Propping Up the U.S. Economy?

Are 55 and older workers propping up the U.S. economy? The data is rather persuasive that the answer is yes. The chart of U.S. employment ages 25 to 54 years of age and 55 and older reveals a startling change. There are now 20 million more 55+ employed than there were in 2000, an equivalent of the entire workforce of Spain. This unprecedented demographic / employment transition is worth a closer look.

As the second chart shows, some of this increase is due to the rising population of Americans over 55 years of age–an increase of 42 million. In 2000, 30% of those 55 and older were employed. Today, over 37% are employed–a significant increase in the percentage of 55+ people who are working.

Charts courtesy Charles Hugh Smith

These numbers further expose the myth of a robust U.S. economy. If Biden’s “job growth” is coming on the backs of America’s seniors – who are much more likely to be working as greeters at Walmart or bank tellers than on a production line or construction site – what does it say about where we are as a nation?

Sadly, we find little hope that a change of Congressional majority in November is going to do anything to reverse this chronic, structural weakness. We are desperately mired in a seemingly endless bog of massive debt, distorted priorities, and narrow, self-serving political “leadership.” We wait – in vain, most likely – for some sign that something can turn this ship around before we hit the iceberg. What do you think? Is there still hope for America?


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