Guest Post: The Risk-On Recovery Rolls Over

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Wages, private-sector employment and labor's share of the economy have all declined: no wonder the risk-on recovery is rolling over.

Did anyone seriously believe the global economy was expanding so robustly that corporate profits would loft ever higher? Based on what data? Laughably bogus data from China, where warehouses are bulging with stockpiles of aluminum and copper, and a diminishing-return housing/credit bubble is the only "engine of growth"?

Or was it the equally bogus unemployment rate in the U.S. that inspired such confidence? Did money managers really not notice that most of those new jobs are part-time, and that the rate is only low because millions of people have statistically been disappeared from the workforce by central planners?

It's like the old Soviet propaganda trick of airbrushing out the comrades who fell from favor or who'd been given a "tenner" in the gulag. Millions of American workers have been airbrushed out of the picture, and presto-magico, the unemployment rate is a mere 7.6%.

Did anyone seriously believe the risk-on trade, driven entirely by central bank intervention and currency wars, was sustainable? Didn't anyone notice that beneath the veneer of forward earnings growth and other happy-talk, the real driver of the stock, bond, real estate, bat guano, etc. markets was all intervention, all the time?

Did anyone seriously believe fundamentals no longer mattered? Or did everyone just do the Chuck Prince tango, where you keep dancing until the liquidity-financial repression music suddenly stops?

It was all bogus and doomed to roll over, because the only fundamentals that count are not the levers the Federal Reserve pulls but employment and wages. Pulling the interest rate lever, the liquidity lever, the bail-out-the-banks lever, the buy a trillion dollars of fetid stinking mortgages lever, the buy SPX futures contracts via proxies lever, the POMO lever--they've all failed to move the needle on the only fundamental that counts, full-time private-sector employment.

Pushing the risk-on trade rewarded the 5% who own enough stocks to matter, and the top 1/10th of 1% who reaped the trading profits, but it didn't do diddly-squat for the bottom 95%.

Take a look at these charts. (all charts courtesy of frequent contributor B.C.)

Ramping up money supply did not lead to higher wages--unless you count the bonuses on Wall Street, of course.

The Fed pulled all its levers to maximum, and the economy created a few million part-time jobs.

Subtract government employment and sickcare-cartel jobs, and private-sector employment is at multi-decade lows.

Employment for people ages 16 - 24 is abysmal.

Here is the Bureau of Labor Statistics on the labor participation trend for the 16-24 age cohort:


From 1948, when the series began, to 1989, the July labor force participation rate for young men showed no clear trend, ranging from 81 to 86 percent. Since 1989, however, their July participation rate has trended down, falling by about 20 percentage points. The July labor force participation rate for young women peaked in 1989 at 72.4 percent, following a long-term upward trend. The participation rate of young women has fallen by about 15 percentage points since 1989.

The most important labor cohort is ages 35-54, when workers' earnings peak. Both employment and personal consumption have been declining for well over a decade, and both have rolled over:

Labor's share of the economy has plummeted: what color lipstick would you like on your risk-on pig?

Wages, private-sector employment and labor's share of the economy have all declined: no wonder the risk-on recovery is rolling over.


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jubber's picture

the Dow is up 200 points and the S&P is up 30, maybe this piece is a day late.

ebworthen's picture

Ther markets are meaningless.

Racer's picture

But but but, who cares, the Dow is at all time highs so that's all you need.....


Flaming Ferrari's picture

Another pointless bit of fundamental yawn news. US equties only care about one thing. Liquidity.


kito's picture

yep....only the next rush of digital dollars coursing through the electronic veins of bens favored sons will placate them..............matters not that the junkie lives in an abandoned, burned out den that has collapsing walls.........only the fix matters......................

Cognitive Dissonance's picture

"Labor's share of the economy has plummeted: what color lipstick would you like on your risk-on pig?"

The Ben Bernanke Blues if you could manage it please. 

Cognitive Dissonance's picture

I was thinking more along these lines....but thanks for the depressing tune. :)


akarc's picture

Holy mother of................  am I missing something? Place that next to the non farm labor chart?  I will as I frequently do, send these charts to some friends. They in turn will not respond because they think I am some kind of wacko as they celebrate the oppourtunity to drive miles out of town for a lower paying job.

I took some really bad acid many moons ago. Am thinking I never came down. Hmmmmm, maybe I can find some more. 

Dr. Engali's picture

"I took some really bad acid many moons ago. Am thinking I never came down. Hmmmmm, maybe I can find some more". 


I did the same thing at a Dead concert what seems like a lifetime ago and sometimes I still wonder if I'm tripping.

Panafrican Funktron Robot's picture

A friend of mine inadvertently consumed some strangely flavored mushrooms, what came out of that:

1.  We're all way the fuck more capable of awesome behaviors/actions/thoughts than we would even dare realize.  Just a few small examples, my friend previously had serious balance issues, yet could crouch on one leg with the other leg straight out for an entire fucking hour without even using his hands to balance, having never done this before).  He could also walk at a hilariously fast pace with perfect stride that would be the envy of an Olympian, yet feel no pain or exhaustion from this, in spite of being relatively unathletic.  My friend also instantly detected the absurdity in debating the merits of various movies, noting that they are merely vehicles of distracted entertainment and should be treated as mere trivialities, further noting the absurdity in not only awarding people in these movies, but upholding them as people worthy of global celebrity.  Just a small sample of realizations within an approximately 5 hour period of time.  

2.  There is a stream of thought infections constantly hitting us that rob us of our capabilities.

3.  We must constantly an actively fight to retain our personal sovereign self, so that we can combat those thought infections and reach those capabilities.

A banned writer named Leo realized the power of a very simple message written in the New Testament.

The whole passage is almost an exact retelling of the realizations of my friend during his "strangely flavored mushroom" experience, and while the whole passage is important for context, the following is fairly revolutionary:

20Being asked by the Pharisees when the Kingdom of God would come, he answered them, "The Kingdom of God doesn't come with observation; 21neither will they say, 'Look, here!' or, 'Look, there!' for behold, the Kingdom of God is within you."

All the power has always been within us, we just keep getting tricked by those thought infections.  

Iam Yue2's picture

It's just a delusion.

Inthemix96's picture

Do any of you lot know money aint everything?

We are just about entering complete collapse, the end of this shit show, the real deal?

I will say this, just once, some folk dont care about monetary value, inthemix is one of them rare cunts, and believe me on this if I can help anyone of you helpfull bitchez who have made me understand something I knew nothing of 5 years ago I will.

Life can and should be better than this, running around after something from thin air is insane.  WE fucking are better than this, ZH has shown me this, I wish you all well, I really do, and in the end, its gonna be us daft cunts that sort this out, lets fucking give it some, and be rest assured, we wont be alone in this, I know far too many people who would help their fellow man than those who wouldn't.

We aint done friends, not by a fucking long shot.

Lets give these cunts war.

Bearwagon's picture

We will not give in to their suppression, they shall NOT prevail! Listen to me, my dear brother, I tell you something good: Some day, this war is gonna end! And then, we will be free.

akarc's picture

Been waiting on it 45 years now. Same game. Faces change. Tactics change. But the "PLAN" does not change as the wealth gap grows ever wider.  There was a time to take out the enemy. Now am not so sure. A justice department that admits they can no longer hold the wealthy accountable while they fill private prisons with the proletariat that only wimpers signals ugly is destined to get unglier. 

enough depression for the day

DavidC's picture

Hang on in there.

Nothing lasts forever - when the Berlin Wall went up people thought it would be there forever. It wasn't. People thought the Roman Empire was unassailable. It wasn't.


HD's picture

I used to love the markets. The ebb and flow of it all. Rewarded for being diligent and having your ass kick when you got lazy and stupid.

On days like today I'm reminded that the market is dead, trust, fundamentals and actual investment are things of the past.

There are kids in the market now who have never traded a day without Ben at their back. Reality when it returns will separate the men from the boys.

If it seems to good to be true - it is.



Yen Cross's picture

   Ain't that the truth HD. Nice post. +1

HD's picture

Thanks Yen.  I make a point to read the comments when Krasting posts - I enjoy when you and Orly contribute. She seems to have pulled back from ZH of late.

DavidC's picture

Agree with Yen's comment.

As and when this all falls, trading is going to seem easy!

I was doing fine until the 9th of March 2009 when Gordon Brown and Obama et al came in with their fun and games at the O2 Arena in London. That's when it got REALLY difficult. Two of the things keeping me trying to trade these markets is 1) it WILL fall at some point and 2) if I can hold my own in these markets, with the skills I gain I'll be able to hold my own in any market moving forward.


HD's picture

CNBC still insists that Citi earnings turned it all around that day....laughable.

Yen Cross's picture

 I miss Orly. She's probably taking a well earned sabbatical. Thanks for your kind comment HD.

Bearwagon's picture

I Think, I remember the time you're talking of. In them days I didn't care about markets (back then, it were not "markets"), but I'd got a decent wage. Today, well, not so much, but I've learned a lot since.

HD's picture

If the markets ever return to normal - you'll probably enjoy them with all you've learned. Market used to reward intelligent people who were willing to think...

NoDebt's picture

I can even pin the day I stopped believing markets indicated anything- the day they announced QE (the orginal one in '09, before they started giving them numbers).  One government agency is buying the debt of another government agency?  I just couldn't make myself believe any more.  But that's OK, because I got on board with the idea of the Fed driving everything higher shortly afterward.  I still like the gains, I just don't have any illusion they're going to last.  It will all be taken away at the government's whim.

DavidC's picture

9th of March 2009.


Hedgetard55's picture

" Didn't anyone notice that beneath the veneer of forward earnings growth and other happy-talk, the real driver of the stock, bond, real estate, bat guano, etc. markets was all intervention, all the time?"


     Just about every poster here at ZH, except for a few trolls.

polo007's picture

The Internet has also made it possible for truth seekers to understand the complex policy of financial repression that explains the current historically low negative real interest rates, restrictions that appear to benefit government and banks at the expense of pensioners and savers and the desperate need to shake people out of gold and savings and into the stock markets. Financial repression is a policy that explains the "why" of this mystery. A thorough investigation of financial repression can be gleaned from such documents as the NBER working paper, The Liquidation of Government Debt by Carmen M. Reinhart and M. Belen Sbrancia or the exhaustive work of financial analyst Gordon T. Long.

Through such investigation we will find that, just as Cyprus revealed bank depositors are viewed as "unsecured creditors" by the central banks, financial repression teaches us that pensioners and savers are viewed as a direct source of funding for government debt and are the victims rather than the beneficiaries of such government policies. The global fiat- or debt-based model that has existed since President Nixon removed the U.S. dollar's final international peg with gold in 1971 is in many ways the polar opposite to the value-based model that exists when a currency is pegged in some way to gold. Although most pensioners were brought up to believe that debt is bad, that saving and living within one's means is virtuous, in the bizarre world of fiat debt-based finance, the opposite is true.

Mounting debts are becoming unsustainable at government, business and personal levels, and must be addressed. Yet the fiat reality has spoiled Western investors, and direct taxation and austerity measures are a Western politician's guarantee of removal from public office. Therefore, indirect taxation, rules that make assumption of government debt through mandatory Treasury purchases by large funds, and debt reduction through currency debasement are the preferred option for reducing debt. All of these policies rob taxpayers and punish savers.

Pairadimes's picture

The last few days have been a strong signal to the markets that the limits of morality or legality will not be allowed to interfere with the desired results of the current Fed bubble-blowing process in equities. So, here we go again for a while, until they destroy the currency.

polo007's picture

According to Bank of America Merrill Lynch:

The rally from March 2009 is the 6th best rally since 1929

The S&P 500 has rallied 127.85% from the 09 Mar 2009 low to the 06 March 2013 high. This is the sixth best rally or “bull market” for the S&P 500 since 1929. The rally from March 2009 is four years old and is the eight longest bull market. We are defining a bull market as a rally of at least 20% without a 20% correction using daily closing basis data. There are 25 of these bull markets going back to 1929 with an average return of 103.5% and a median return of 73.5% - see pages 2 and 3 for complete tables of bull and bear markets.

SheepDog-One's picture

Yea it's all nothing but Shitropes....yet that apprently won't stop them from ramping all the garbage up to 15,000 or so by close. 

fiftybagger's picture

Silver and Bitcoin.  What's not to like?  We go up from here :-)


Silver For The People

The Bitcoin Channel

NoDebt's picture

"Or did everyone just do the Chuck Prince tango, where you keep dancing until the liquidity-financial repression music suddenly stops?"

Yeah, pretty much.

ArkansasAngie's picture

This sucks
I have money to invest but there is nothing I want to invest in
And now that cypress shows us that they will come for your cash too ... Well ... WTF are you supposed to do.
This has to stop

DavidC's picture

Do you mean Cyprus? Or am I missing irony?


Panafrican Funktron Robot's picture

Some stuff that will probably work o.k.:

Long physical gold, stored at home

Long GLD puts (long dated)

Long VXX puts (long dated)

This basically just mimics the CB/PD play.  The substantially more simple method (one not vulnerable to being Corizined) is just long phys.  If you have substantial enough assets to buy arable land with water rights, that doesn't hurt.  


Dr. Engali's picture

Off topic...desired effect achieved.:



Across the U.S., from Washington to Los Angeles, police stepped up security, monitoring landmarks, government buildings, transit hubs and sporting events. Security was especially tight in Boston, with bomb-sniffing dogs checking Amtrak passengers' luggage at South Station and transit police patrolling with rifles.

"They can give me a cavity search right now and I'd be perfectly happy," said Daniel Wood, a video producer from New York City who was waiting for a train"


Yen Cross's picture

  Lame Stream Media > I'll bet he was wearing one of these. Bend Over Stick Figures Mens Hoody | Super Stupid Tees

akarc's picture

"They can give me a cavity search right now and I'd be perfectly happy," said Daniel Wood, a video producer from New York City who was waiting for a train"

I keep saying it is soon to be over. I was wrong. It is over.
Abi Normal's picture

"They can give me a cavity search right now and I'd be perfectly happy," said Daniel Wood, a video producer from New York City who was waiting for a BRAIN"

Abi Normal's picture

Bottom up, top down, inside out...well played Obama.  Saul "lucifer" Alynski would be proud of you.  You have succeeded in taking America over, your transormation process is almost done, just the rest of that pesky middle class to go, and the last few days of this market have almost accomplished the goal.

Oblamo and Slimeball Ben knows full well what they are doing is generational theft, but it matters not for the means to an end strategy, to overwhelm the system with poverty (read govt dependence) and debase the currency to usher in the new world currency and order (read govt).  

At this point, I throw my hands up, capitulate to the monster of the Fed and DC, as not enough true Americans are left to fight it.  It really makes me sad to see what has become of a once great nation, for now it is a cesspool of immorality and greed.

The End.

Quinvarius's picture

I want gold colored lipstick on my pig.  Only then will it be appealing to me.

DavidC's picture

"...they've all failed to move the needle on the only fundamental that counts, full-time private-sector employment".

100% spot-on, Charles.


venturen's picture

Goldman loading dock...."What? Another truck load of money? Where are we going to put it?"

Don Levit's picture

Does anyone have any ideas as to who would be buying 30-year Treasuries at less than 3%?

Don Levit

Panafrican Funktron Robot's picture

There's this particularly virulent form of quantitative easing that started happening in January, they even call it "unsterilized".  $45 billion dollars a month in outright monetization by way of treasury bond purchases.  In addition, they are buying mortgage backed securities at a rate of up to $40 billion dollars a month, which tends to feedback loop the treasury bond prices (and vice versa).  The Fed doesn't give a shit what the yield is.  It is notable that 30 year treasuries only recently round tripped an actual drop in prices since January, in spite of this monetization.  

thismarketisrigged's picture

its like this market is not allowed to fall. its disgustingly criminal by these assholes.


whenever we have a huge up day (which is everyday) the market just continues to go up and up no matter what for months.


however, 1 decent selloff, and bernanke must fucking get back all the losses so that the dow and s&p do not finish lower for the week. so far hes getting back a good portion, i expect by the close he gets it all back, or close to.


fuck u obama, fuck u bernanke, fuck u wall st, fuck u fed members, die assholes.