“Bridges so old, if they were human they’d be on Medicare,” from the mouth of Labor Sec. Perez. I wish I was making this up. As you know, infrastructure has been an ongoing theme in this column. That’s where the good jobs really are. With that in mind, we had another jobs Friday.
The unemployment rate dropped to 7.3% while the number was an underwhelming 169,000. It’s not that bad, but there’s no government jobs getting created. Normally that wouldn’t be a cause to sweat other than the fact it’s a reminder of the sequestration and ongoing debt ceiling drama. But the unemployment rate is going down only because there are less people in the work force. Where are these people? What are all the people doing who have given up looking for work? I wish I had an answer to that.
The July number was revised down to 172K from 188K but June dropped all the way from 162K to 104K. That’s not good. If a president creates 8 million jobs in his term that’s decent. For that to happen we need bare bones what we are doing right now. On a bell curve, what the economy is doing right now is at the low end of the normal range.
The next headline dominated the G20 meeting in Russia. Instead of talking finance, the key subject was the impending complicated situation going on in the Middle East.
Folks, this is turning into the most serious setup I’ve seen since the Yom Kippur war in 1973. I really don’t like hyping or dramatizing situations, but this is serious. Whether Congress goes along with this or not and it’s starting to look more like not, the president is now on record as comparing public sentiment to U.S. military action in WWII. As you remember the public kept FDR out for a very long time as it was very unpopular. FDR said it was in the best interests of the country. He was right. Right now the situation is really not comparable to WWII but vitally important nevertheless.
Best I can see, there is only one interest of national security involved here. The Syrians have violated a rule of war agreed to by the nations not to use chemical weapons and it appears the US and France are the only folks not in the region willing to stand up to the situation. If the president doesn’t act he gets the reputation of being the modern day Neville Chamberlain. Aside from that we find it very distasteful to line up with rebels who might be Al Qaeda backed. Finally, this gets so convoluted and confusing there is the potential the Syrian government didn’t even use chemical weapons; they may have been used by rebels to make it look like it was the Syrian government just to get the US in the door. Don’t laugh, in a simpler time Hitler went across the border into Poland and made it look like the Poles actually attacked the Germans as his excuse to start WWII. If it were only destroying a stock of chemical weapons it would be one thing, but the potential for exponential expansion rises by the day.
The big report I heard is on a UK website called Mail Online where an Iranian diplomat said Obama’s daughter will come to serious harm if this war goes through. They said a family member of every US minister, ambassador and military commander will be abducted and tortured. Do these people have such capability? Probably not, but the case of US journalist Daniel Pearl comes to mind. Someone probably will pay with their life.
Now we look at how many nations will be involved. We have the US, France, Turkey, Saudi Arabia, Syria, Israel, Russia, China and Iran just to name a few. It’s starting to sound like a Who’s Who.
So this is the backdrop over which we view these markets 162 months off the Internet bubble peak and now 234 weeks off the 2009 bottom. Remember some of these markets have also peaked 1,619 calendar days off that same 2009 bottom. Because we are dealing with such huge cycle points we have to take the potential for disaster in the markets and the world very seriously.
Previously, one of our proxies was the DAX which a week ago at this time was challenging an overhead gap. Last week the needle barely moved. Once again it’s the CAC which is leading Europe to the upside. You can’t like that if you are a bull.
Another major condition I’m watching is a developing divergence between the tech sector which is at the high end of the range again and the SPX/Dow which appears light years away. The NDX in particular is at a virtual triple top. Why is the SPX so far away? The culprit is housing which is struggling to hold the low end of the range. Housing has held a 61 day low for the past 2 weeks by the skin of its teeth and is trying to avoid experiencing a 3rd of a 3rd wave to the downside.
Next page: What could damage the bull?