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The Recent "New High" In Stocks Is As Bogus As The Unemployment Rate

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Submitted by Charles Hugh Smith from Of Two Minds

The Recent "New High" in Stocks Is as Bogus as the Unemployment Rate

This is what happens when the Status Quo is incapable of reforming itself or recognizing reality: propaganda and bogus statistics are substituted for actual solutions.

The most heavily touted statistical "proofs" that the U.S. economy is "recovering" and "growing" are the unemployment rate and the stock market. Both are completely bogus. Yes, bogus, as in phony, wrong, rigged, misleading, carefully crafted propaganda.

Earlier this month, we showed that In Terms of Real Stuff, the Dow's "New High" Is Pure Illusion (January 6, 2014). Another way of adjusting the nominal new high to reality is to adjust it for inflation, as measured by the producer price index (PPI) or the consumer price index (CPI). If we adjust for inflation, we find that the recent new highs are considerably lower than the stock market peak reached in 2000:

Simply put, "new highs" in the stock market are statistical sleight-of-hand. By any practical, real-world measure, the SPX is worth significantly less adjusted dollars in 2014 compared to the real peak in 2000.

Equally bogus is the unemployment rate, which has magically declined for years. You probably know this already, but it bears repeating: the unemployment rate is calculated by counting the labor force and those with a job of some sort--temporary, part-time, whatever.

If you slash the labor force down to the number of people with a job of any kind, presto-magico, the unemployment rate goes to zero. This is precisely what the Status Quo is doing: the number of people counted as in the labor force is plummeting. Even if the number of people with jobs is declining, as long as the number of people in the labor force is declining at a faster rate, eventually you get "full employment," i.e. zero unemployment.

Gamed in such a fashion, an economy in a full-blown depression can sport an unemployment rate of near-zero. That's precisely where we're heading. Here are the three charts that show this. I've drawn in trendlines so the future decline in the unemployment rate is easily predictable.

Here's the unemployment rate. If the downtrend continues (and it will, as long as the participation rate keeps going down), the unemployment rate will soon be 3%, regardless of how many people have full-time jobs they can live on.

The participation rate (percentage of the population in the labor force) will soon be at levels last seen when the typical household only had one employed adult:

Those not in the labor force will soon equal the number of people with full-time jobs (around 115 million):

This is what happens when the Status Quo is incapable of reforming itself or recognizing reality: propaganda and bogus statistics are substituted for actual solutions.

 

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Sat, 01/25/2014 - 13:22 | 4366784 B2u
B2u's picture

As long as CNBS and Bloomberg report this lie...people will believe it...

Sat, 01/25/2014 - 13:34 | 4366817 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

There are lies, damn lies then there are statistics.

Sat, 01/25/2014 - 14:15 | 4366904 Skateboarder
Skateboarder's picture

Extremely unlikely, but in case that does happen, I will never question anything from fringe blogs ever again.

Sat, 01/25/2014 - 17:47 | 4367289 Gankfest
Gankfest's picture

Everything is bogus when you think about it...

Sat, 01/25/2014 - 20:43 | 4367551 philipat
philipat's picture

"As long as CNBS and Bloomberg report this lie...people will believe it..."

You mean that there are still people who actually watch?

Sat, 01/25/2014 - 14:23 | 4366920 flacon
flacon's picture

What is "superbowl"? Men in tights?

Sat, 01/25/2014 - 22:36 | 4367695 elephant
elephant's picture

you're thinking of superballs

Sat, 01/25/2014 - 14:06 | 4366866 El Vaquero
El Vaquero's picture

One of my grandfather's favorite quotes.  Funny thing about that though.  He came down with brain cancer.  He was a tough SOB, being born in the territory of NM, and I got to watch him waste away from fucking brain cancer.  It's a terrible way to go, losing sense of when, where, and sometimes even who you are, and having your wife, kids and teenage grandkids have to help change your diaper after you shit yourself.  He didn't know what was going on for the last six or so months of his life, and, really, was a shell and not himself.  I remember the night I realized he was going to die, not too long before the cancer started affecting his personality. I cried and cried riding in the car as my dad drove away from the hospital on I-25 where he had been diagnosed, and was crushed that the guy who was invincible in my eyes, who would do anything to ensure my well being was beyond saving.  I did my mourning as his body was still alive, because he wasn't really there anymore.  When he finally passed, I was not that sad anymore.  I knew what was coming, had accepted it, and had already gone through the pain of losing a loved one before his shell of a body had expired.  The driver of the hearse probably though we were insane, being cheerful, telling jokes and laughing, but such is life. 

 

I grew up loving this country, and it feels the same way it did with my grandfather when he was wasting away in bed, shitting himself and sometimes being in Albuquerque, other times being in Aztec while still being in the same room.

Sat, 01/25/2014 - 14:27 | 4366930 Renewable Life
Renewable Life's picture

Beautifully Put!

I too, am afraid that all is left, is beautiful memories and wonderful stories of a time and place long gone! I hope I'm wrong, but we've seen what "hope" gets us the last 5 years!

Sat, 01/25/2014 - 14:37 | 4366949 El Vaquero
El Vaquero's picture

Here's the next shitty realization for you:

 

I grew up being bombarded with D.A.R.E. and "Just Say No."  Sure, drugs are bad for you, but it was in highschool that I realized that the war on drugs was not really compatible with "The Land of the Free."  There have been plenty of lies and attempts at control during and before my life that are the same way.  How much of what we remember is real?  How many of our liberties were simply tolerated because they didn't cause too many problems?  How much was an illusion?  Surely some of what we remember was an illusion.  I think that the real answer is that, with the exception of a few known illusions (the dollar, Vietnam, etc...) we'll probably never know what was real and what was just illusory. 

Sat, 01/25/2014 - 15:23 | 4367021 Skateboarder
Skateboarder's picture

Judas Priest (the greatest band of all time) put down a track on their '78 album Stained Class that that gave them grief through '90:

Better By You, Better Than Me

Then this happened in '85: (source Wiki)

In the summer of 1990, the band was involved in a civil action that alleged they were responsible for the self-inflicted gunshot wounds in 1985 of 20-year-old James Vance and 18-year-old Raymond Belknap in Sparks, Nevada. On 23 December 1985, Vance and Belknap, after hours of drinking beer, smoking marijuana and allegedly listening to Judas Priest, went to a playground at a church in Sparks with a 12-gauge shotgun to end their lives. Belknap was the first to place the shotgun under his chin. He died instantly after pulling the trigger. Vance then shot himself but survived, suffering severe facial injuries. Following numerous complications, Vance too passed away three years after the shooting.

The men's parents and their legal team alleged that a subliminal message of "do it" had been included in the Judas Priest song "Better By You, Better Than Me" from the Stained Class album (actually a cover of a Spooky Tooth number). They alleged the command in the song triggered the suicide attempt. The trial lasted from 16 July to 24 August 1990, when the suit was dismissed. One of the defense witnesses, Dr. Timothy E. Moore, wrote an article for Skeptical Inquirer chronicling the trial.

Rob Halford was called to American court. Notice how the lawyer can't even conduct herself with a proper sentence:

https://www.youtube.com/watch?v=wgKFJisceOw

Judas Priest won the case - there were no subliminal messages. In the same year, they released their most metal album ever, Painkiller. One of the notable tracks was Between The Hammer and the Anvil, purging themselves of this mess the legal system had made for them.

"Transgression - they prey on grief
Our mission - to purify belief
This altar gives power and light
They'll falter while we are shining bright
The burning sermons consecrate their sin between the hammer and the anvil"

Kind of captures the spirit of the spirit of the battle. First line is key.

Sat, 01/25/2014 - 15:41 | 4367067 Double.Eagle.Gold
Double.Eagle.Gold's picture

With you brother.

 

  • Joe Paterno & Jerry Sanduskey (lived in SC)
  • Microsoft (quit when I could see Vista was the future)
  • My Church demanding background checks 4 Ushers, while Priests molested boys
  • My 401K after 2008 was a pale reflection.
  • Property taxes, now more than my original mortgage payment
Sat, 01/25/2014 - 13:44 | 4366840 thunderchief
thunderchief's picture

It stops revolutions and institutionalizes poverty.

Mission Accomplished.

Sun, 01/26/2014 - 09:18 | 4368141 Oracle 911
Oracle 911's picture

It stops revolutions and institutionalizes poverty.

 

...until its not. You can ignore the reality, but you can't ignore the consequences of ignoring the reality. (I don't remember the author of this quote, but I like this quote.)

Sat, 01/25/2014 - 13:47 | 4366846 qqqqtrader
qqqqtrader's picture

I really don't think it matters if people believe it. WTF will they do about it? I've known about the numbers game for many years and when I try to talk to others about it, they're not concerned.

Sat, 01/25/2014 - 14:00 | 4366870 Ass. Manager
Ass. Manager's picture

Don't forget our recently revised measure of GDP where technical innovations with future value are counted in this year's figure. More bogus statistics to keep shell game going.

Sat, 01/25/2014 - 18:24 | 4367350 stocktivity
stocktivity's picture

The most heavily touted statistical "proofs" that the U.S. economy is "recovering" and "growing" are the unemployment rate and the stock market. Both are completely bogus. Yes, bogus, as in phony, wrong, rigged, misleading, carefully crafted propaganda.

 

As in "It's all Bullshit!!!!  (which I've been saying the past year)

Sun, 01/26/2014 - 09:07 | 4368130 Cattender
Cattender's picture

i like to buy stock with my Credit Card (bank of America 0% interest for 6 months!)

Sat, 01/25/2014 - 13:24 | 4366788 Crash Overide
Crash Overide's picture

There is still a market?

Sat, 01/25/2014 - 13:34 | 4366815 Ignatius
Ignatius's picture

The lies really got going once they discovered the profession of 'public relations'.

Before that it was mostly a province of lawyers and kings, but probably mostly lawyers.

Why?  Experience.  Lying is usually a winning strategy.

Sat, 01/25/2014 - 13:55 | 4366858 Bearwagon
Bearwagon's picture

"The first thing we do - kill all the lawyers!"

Sat, 01/25/2014 - 14:03 | 4366877 negative rates
negative rates's picture

 Done deal, what do you do with a lawyer already buried up to his neck in sand? GET MORE SAND!

Sat, 01/25/2014 - 14:54 | 4366973 Professorlocknload
Professorlocknload's picture

I might also add to "Public Relations," the advent of "Political Science" as enhancing and accelerating the degradation of Liberty in this Nation-State, as well. Machiavelli, and such, considered.

Sat, 01/25/2014 - 13:41 | 4366794 blindman
blindman's picture

http://www.youtube.com/watch?v=V6nJZF0kGs0
.
"I can see clearly Now" Ray Charles Live in LA 1977
http://www.youtube.com/watch?v=a2RO7V-MPE0
song starts at 2:10

Sat, 01/25/2014 - 14:48 | 4366968 BigRedRider
BigRedRider's picture

Ray Charles...the only man other than Hank Williams that could sing "You Win Again" without distorting the shit out of the song.  He was an original.

Sat, 01/25/2014 - 19:32 | 4367440 blindman
blindman's picture

GEORGE JONES & TERRY GIBBS - You Win Again
http://www.youtube.com/watch?v=VnPGx80VwSA
.
http://www.youtube.com/watch?v=N5-YrXM-3Yk
van morrison and linda gail lewis

Sat, 01/25/2014 - 13:25 | 4366795 intotheblack
intotheblack's picture

Data is the new propaganda.

Sat, 01/25/2014 - 13:25 | 4366796 highly debtful
highly debtful's picture

Say what you will about Europe, but I think we're inclined to lie less about our unemployment rates (with the result that they are quite disastrous of course). Mind you, I'm talking about lying less, not telling the truth. 

Sat, 01/25/2014 - 13:30 | 4366805 Atomizer
Atomizer's picture

Just flip the charts and put on a pair of rose colored glasses. Oh, that looks so much better..

/sarc

 

Sat, 01/25/2014 - 13:32 | 4366814 q99x2
q99x2's picture

There are four people at the house that I'm at. which is actually about two small houses. One of us works.

Some people are of the type of person that signs up for the military or becomes a police officer. There are others that choose to work. Most of these types are mean people and very unhappy. The three people at the house that don't work are all fairly happy until that mean one comes home and hassles us.

I believe it is a good thing that not too many people in a society work. In the US there should be a better way to distribute the wealth so that more people do not have to work.

Sat, 01/25/2014 - 14:06 | 4366881 negative rates
negative rates's picture

I'll administrate that fer ya, it's called efficiency.

Sat, 01/25/2014 - 14:47 | 4366966 Professorlocknload
Professorlocknload's picture

...and if efficiency was allowed to proceed unencumbered, the cost of living would fall (deflation) and the standard of living would rise for all.

 

Sat, 01/25/2014 - 16:38 | 4367143 negative rates
negative rates's picture

Not quite genius, the cost of living and deflationary moneies are not directly related. The pain in the neck a juggling clown gets, can lead to your type of deflation, which once again Einstien, would lower the standard of living. All of which I am opposed to.

Sun, 01/26/2014 - 11:44 | 4368316 OceanX
OceanX's picture

I reckon, it all comes down to how you measure "quality of life"  when you build your "standard of living" index...

Personally, I see a lot of people driving, expensive cars, "rushing like mad" through traffic.  Literally, racing for the next red light.

I think, how impoverished must a body be,  to not even have an extra 90 seconds, to get where: work, home?

Don't get me wrong, I like to drive fast!  Yes, there is a mountain road I drive, (in summer)  30 miles of winding, twisting mountain road with lots of scenery and only one red light!

Sat, 01/25/2014 - 15:27 | 4367034 Mr Pink
Mr Pink's picture

Working is for suckers and more and more people are figuring that out.

I have been saving up, cutting back and very soon will be completely dropping out.

I call it "Extreme Galt"

Sat, 01/25/2014 - 16:03 | 4367098 Skateboarder
Skateboarder's picture

I just bought a Martin Backpacker travel guitar with a crack in it. Gonna have to learn how to luthier, and build a small repair toolkit for guitars (including different wood dusts).

Extreme Galt for me too. I'll join the fun in 2015 once I have sufficiently completed my responsibilities toward family, friends, and work.

Sat, 01/25/2014 - 13:34 | 4366816 I am Jobe
I am Jobe's picture

USSA Govt will keep the sheeples happy thru Programming, NFL, MLB, NBA , Bieber and crap. Nothing else matters. Keep the Zombies from thinking , give em a Smartphone and they will keep the inbreeding going for generations. 

Sat, 01/25/2014 - 13:38 | 4366825 Ignatius
Ignatius's picture

When you say "sheeple" you're using their  language.

Why would they need to waste timing disrespecting when you'll do it for them?

Just a thought.

Sat, 01/25/2014 - 14:05 | 4366884 Bearwagon
Bearwagon's picture

With the words also the thoughts vanish ... *sighs*

Sat, 01/25/2014 - 15:27 | 4367039 Pumpkin
Pumpkin's picture

Yep, just like the old days.  They didn't have TV then, but oh the fun they had at the Coliseum.

Sat, 01/25/2014 - 13:39 | 4366831 unrulian
unrulian's picture

Slight of hand is something you can't see... not something you don't want to see

Sat, 01/25/2014 - 13:42 | 4366836 thtmnbhndthecrtn
thtmnbhndthecrtn's picture

The trend line on the last chart is bent a little too high upward. By my eye, it should only be about 94,500 thousand Not in Labor Force by 2015.

Makes me feel like my tax dollar is going further that way.

Sat, 01/25/2014 - 14:05 | 4366879 T-NUTZ
T-NUTZ's picture

there is arithmetic and geometric progression.  i believe the point is that this is a geometric progression

Sat, 01/25/2014 - 13:57 | 4366864 Kirk2NCC1701
Kirk2NCC1701's picture

Yeah, well, "An honest liar is hard to find"

Sat, 01/25/2014 - 14:11 | 4366893 verbot
verbot's picture

Verbot..exe...load humanity.dll

So what is the reason for letting folks suffer if money is a fantastical mental invention? Live and die over some junk paper or pure metal because of why???

Go with the "bernake levitation" (hft, full captial controls, many many violations etc..) why charge anyone to live?

Work on being smarter humans or more artistic. Raise up folks for once and see the potential for a galactic human race in our future.

The idea mrs johnson will die because she has no fiat is absurd and is as fucktard as Mayans killing victims for more rainfall.. at least the mayans had ignorance on their side...we got plain ole' "f7ckyou cuz it too hard to maka me monies so ima keepa alla dat dollarb8llszz even if grandma has to die..." kind of vulture culture

Hmmm..vulture culture...nice tag line eh?... 

So little wonder why humans wont make it off this dying ball of dirt. This precious tiny blue dot where all of our lives and all of everything came to be will watch silent witness as with all the. Cyber  creatures we made as we desend into nothing..hot radioactive nothing..

Well you humans will....

Sat, 01/25/2014 - 14:36 | 4366948 Skateboarder
Skateboarder's picture

Not only inventing, but living our own nightmares. Wonderful stuff.

Sat, 01/25/2014 - 14:18 | 4366913 verbot
verbot's picture

Kill all humans...thats for you bender rodriguez!

Sat, 01/25/2014 - 14:28 | 4366933 ironymonger
ironymonger's picture

Because, nihilism.

Sat, 01/25/2014 - 15:05 | 4366988 katchum
katchum's picture

The graphs are not quite right. If the unemployment rate goes from 8% to 3%, the labor force participation rate would go from 65% to only 62%. So if the unemployment rate falls 5%, the labor force participation rate falls 3%.

 

I the unemployment rate goes from 8% to 0%, the labor force participation rate goes from 65% to 60%. So the unemployment graph should point to 0% at 2020.

Sat, 01/25/2014 - 15:11 | 4366998 Greenskeeper_Carl
Greenskeeper_Carl's picture

They have to keep it up at this point. If the masses came to a realization that all of these numbers are lies, they will demand action, demand Te fed and congress 'do something'. And there really isnt a good solution anymore. Had all these institutions been allowed to go under 5 years ago, along with elimination of the federal reserve system, there would have been some tough times, but we would probably be well o our way to actual growth by now. They are out of ammo, and can only do more of the same, which is yeilding diminishing results. They could probably increase QE and have another brief surge in the markets and housing, bonds, but to what end? At this point extend and pretend is the only option left

Sat, 01/25/2014 - 15:58 | 4367089 Never One Roach
Never One Roach's picture
Caterpillar's retail machinery sales fall 9%

 

http://www.marketwatch.com/story/caterpillars-retail-machinery-sales-fal...

Sat, 01/25/2014 - 20:49 | 4367557 Atomizer
Atomizer's picture

Don’t worry. When someone blows up a city/ country. CAT stock prices will outshine.

Sun, 01/26/2014 - 04:44 | 4367988 HulkHogan
HulkHogan's picture

83% bearish. I'll take the other side of the trade, CAT is going up.

Sun, 01/26/2014 - 15:30 | 4368812 EuropeanBankster
EuropeanBankster's picture

Just hope that Deutsche Bank will be able to pay out my profit after the meltdown next week.. shorted EVERYTHING related to equities in europe...

Sun, 01/26/2014 - 15:30 | 4368813 EuropeanBankster
EuropeanBankster's picture

Just hope that Deutsche Bank will be able to pay out my profit after the meltdown next week.. shorted EVERYTHING related to equities in europe...

Sun, 01/26/2014 - 17:53 | 4369132 highwaytoserfdom
highwaytoserfdom's picture

nasdaq 2000     2.0  cloud social  comming to a casino near you.

 

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