Duh....It's The Jobs, Stupid

The markets flail wildly in order to make some sense of the senseless. This week it's jobs. Last week it's the European mess. The market, while imperfect, is one of the only things that takes the economic temperature of the world on a daily basis. Sometimes fever spikes and markets go into steep decline. But over the long haul the the market has been pretty good at assessing the performance of companies, countries and economies.

The world is in a mess. The Arab spring uprising has produced few concrete results. Libya may be lurching toward a populist takeover. Syria is doing what it has always done best: kill its inhabitants (See: From Beirut to Jerusalem, Friedman). Dubai is stagnant and the oil producing nations are being paid in currencies that have been devaluing over the past several years (hence the price increases in fuel--the US dollar goes down, prices go up to compensate). The Palestinian and Israeli "peace" accord is anything but peaceful. India and Pakistan are at each other's throats. Europe and the Euro are in an economic mess as strong countries are increasingly asked to prop up weak countries. Canada is pretty much asleep. Any staying asleep seems like a pretty good strategy.

The US is between a rock and a hard place. The stimulus money has had little effect on jobs. Multinational companies are holding vast sums of money abroad. About 13 million Americans are jobless and 48 million are on food stamps. Foreclosed homes number in the millions. The American dream has become the American nightmare. Add to this the stalemate in Washington and the lunatic right wing of the Republic party and you have a receipe for disaster.

And, throughout this you expect the markets to be stable? The market is a mirror to our actions and, frankly, it does not like what it sees. Some of my money manager friends point to charts and bond yields and US treasuries and say that it's not as bad as I think. But it's as bad as I believe it to be. Maybe worse.

I am a great believer in tipping point theory. Things go along until they don't and then things unravel exponentially. The US economy is largely dependent on consumer consumption for it to survive. In the past year the consumers who were employed spent more on savings and paying down debt but kept the economy barely alive through purchases. Unemployed people don't buy; they are consumers of social welfare resources funded by bankrupt states. At some point the process has to run out of steam. The market sees this clearly. There is no political or fiscal help and sadly no leadership. Stay tuned.

Bernie