Friday 2 October 2015

Top Tweets Today: 02/10/2015

Since the market is paying particular attention to labour market data today I thought I'd delve deeper into the numbers and perhaps find trends that stick out. Charlie Bilello CMT  has done a really good job of highlighting the fact that US labour force participation is sitting at a low last made in 1977.

What's interesting is tracking the uptrend up until 2000 which marked a major market top at the time with the IT bubble. It was in that year that labour participation rate had reached its highest. In the last 15 years we've seen the trend turning and reversing. Does this prove that in the age of computers man is being outmaneuvered by a machine. I believe so especially considering the US economy is a developed nation.

Karl Marx once argued that the downfall of man will be his own greed by inventing new machines to do the work of man. The problem being machines don't spend in an economy, they simply return profits to their owners which doesn't generate economic activity.

I think we may have got caught up in exactly this scenario if one thinks of the leap in innovation we have made since the dawn of computers. They control every aspect of our lives but most importantly they operate with high speed precision to deliver quantity of high quality products into our lives. What we don't realise is the adverse effects it has on any economy by having people, the true generators of economic value to participate in the process.
The much awaited jobs data came with a surprise of it's own...only 142 000 jobs created instead of an expected 200 000! This is making the likelihood of an interest rate non probable until next year. The market didn't seem to digest the numbers well at all suggesting that there may be darker days ahead before we get any clarity.
I always enjoy chartist Chris Kimble's humour when it comes to drawing his charts and found this one particularly intriguing. It's the Stock/Bonds ratio chart measuring the level of favour over either security. What we see is a nice uptrend that's headed straight into resistance and pulling back strongly but what does this all mean ?

Put simply investors are seeking out safer places to put their money with bonds being regarded as the safest. This would suggest that the market sentiment is turning bearish in the medium term. Heed the calls the markets are showing you, you never know what might happen.
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