{"id":1188451,"date":"2020-06-03T14:14:18","date_gmt":"2020-06-03T19:14:18","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=109396"},"modified":"2020-06-03T14:14:18","modified_gmt":"2020-06-03T19:14:18","slug":"the-great-disconnect-between-america-and-the-market","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1188451","title":{"rendered":"The Great Disconnect Between America and the Market"},"content":{"rendered":"

This post The Great Disconnect Between America and the Market<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

America may be down with disease and disorder. But the stock market is up on faith and the Federal Reserve.<\/p>\n

Thus America gets pulled this way\u2026 while the stock market gets pushed that way.<\/p>\n

As a certain Marshall Gittler styles it, he who directs inves\u200ctment research at BDSwiss:<\/p>\n

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The disconnect between what the average person sees happening in the world and what they see happening in the financial markets is getting wider and wider.<\/i><\/p>\n<\/blockquote>\n

We hazard this disconnection may soon span so broad… the average person will see only the market\u2019s distant dust.<\/p>\n

The gap expanded today\u2026<\/p>\n

2.76 Million Private Sector Jobs Lost, the Stock Market Jumps<\/b><\/h2>\n

We learn the private sector dispensed 2.76 million pink slips of paper last month. This information comes by way of the May ADP National Employment Report.<\/p>\n

Yet while the American worker continues falling backward, the stock market raced further ahead today…<\/p>\n

The Dow Jones pulled ahead 742 points. The S&P jumped out another 27 points; the Nasdaq, 74.<\/p>\n

Gold, meantime, took a severe trouncing today \u2014 down nearly $31.<\/p>\n

And the 10-year Treasury yield surged nearly 12% today\u2026 to 0.081%.<\/p>\n

Why did bullish optimism win the day?<\/p>\n

A Massive Surprise<\/b><\/h2>\n

A survey of Refinitiv economists had projected 9 million lost private-sector positions.<\/p>\n

Thus they \u201cmissed\u201d dreadfully \u2014 to the downside.<\/p>\n

But is the 2.67 million a true figure? Or is it a statistical phantom, a false return?<\/p>\n

Even one of the president\u2019s economics henchmen \u2014 Mr. Kevin Hassett \u2014 scratches his scalp in wonder:<\/p>\n

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This number is so much below expectation, or what you would get if you built up from the claims number, that I wonder about it\u2026 The number is so good, it’s such good news, that I really have to dig deep into it and see if there’s not something funny going on, because it’s pretty far removed from what we’d get if we just added up the claims data and so on from the last survey.<\/i><\/p>\n<\/blockquote>\n

Our wager is on \u201csomething funny going on.\u201d<\/p>\n

\u201cMerely Because We Like the Devil\u2019s Chances Does Not Mean We Like the Devil\u201d<\/b><\/h2>\n

We could be mistaken of course. We would be pleasantly mistaken… if mistaken.<\/p>\n

Merely because we like the devil\u2019s chances does not mean we like the devil.<\/p>\n

Our hopes are rather with the angels. We are with them.<\/p>\n

Friday may nonetheless reveal a clearer image. That is when the United States Department of Labor issues its own, more comprehensive unemployment report.<\/p>\n

Economists as a body forecast 8 million total May pink slips.<\/p>\n

They further project the May unemployment rate to come in at 19.7% \u2014 a good stretch past April\u2019s 14.7% \u2014 and the worst since the Great Depression.<\/p>\n

A 19.6% reading would nonetheless defeat consensus. The stock market would likely declare a victory, run further ahead\u2026 and speed further from view.<\/p>\n

76 Months to Come Back?<\/b><\/h2>\n

The United States economy \u2014 meantime \u2014 may scratch, may claw to merely keep up.<\/p>\n

When may unemployment return to its pre-pandemic lows?<\/p>\n

To steal a possible glance into the future\u2026 let us first look back to the certain past\u2026 to the previous recession.<\/p>\n

Over six years lapsed before employment fully recovered \u2014 76 months.<\/p>\n

Assume a parallel projection.<\/p>\n

Pre-pandemic unemployment would come back in 2026.<\/p>\n

It could be sooner than 2026 of course. Yet it could be later than 2026.<\/p>\n

Later, because the pandemic may flatten multiple industries for years and years.<\/p>\n

These include the travel and hospitality industry, the restaurant industry, the entertainment industry, et cetera.<\/i><\/p>\n

Again we declare for the angels. We hope these industries emerge intact\u2026 and far sooner than we imagine.<\/p>\n

But we fear the angels face long odds.<\/p>\n

Each Recovery Recovers Less<\/b><\/h2>\n

Meantime, today\u2019s debt burden sits heavier on the economy than in 2008. And debt drags on an economy… as an anchor chain hung about a man\u2019s neck drags on the man.<\/p>\n

Total pre-pandemic debt levels ran to $75 trillion or some other enormity. And debt is coming on in heaps.<\/p>\n

Headway will therefore be limited, the sledding more difficult.<\/p>\n

Here Michael Lebowitz and Jack Scott of Real Inves\u200ctment Advice pencil an imaginary line. This line connects the 1990 recession, the 2001 recession, the 2008\u201309 recession\u2026 and the present recession.<\/p>\n

And the line forms a downward arc:<\/p>\n