Thursday, October 23, 2014

Weekly Layoff Odds Approaching New Record Low: Time to Embrace Long-Term Risk?

This is my response to every financial expert on CNBC and Bloomberg TV who states that this is definitely an excellent time for long-term investors to embrace risk (a no-brainer so to speak).

The following chart shows weekly initial claims divided by total nonfarm employees.

Click to enlarge.

Excellent times to embrace long-term risk:

1. September 1982. The bad started getting better.
2. July 1992. We actually got through the early 1990s recession.
3. March 2009. We [barely] avoided Great Depression II.

Disastrous times to embrace long-term risk:

1. May 1969. We launched a man to the moon in July 1969.
2. April 2000. We launched dotcom stocks into orbit.
3. February 2006. We launched housing prices into the stratosphere.

September 2014?

Count me out! I know, big shocker. As seen in the chart, the 1980s and 1990s are over. In 2004 (when I turned permabearish on our economy), I debated a Capital One Financial bull on the Yahoo message boards on a regular basis. He kept saying that times were about as good as they'd ever been. I kept saying that it is much better to make long-term investments when they aren't.

October 22, 2014
Mish: Saxo Bank CIO Jakobsen Predicts Another "Shock Drop" in Markets; Addicted to Cheap Money

My view is that 1810 on the S&P would be only the beginning of the bear market that is to come. 1500 or even 1200 on the S&P would not shock me.

If we did revisit 1200, I would feel obliged to do another Rubicon post.

November 30, 2011
Crossing the S&P 500's Rubicon v.30 (Musical Tribute)

Here's a list of dates when the S&P 500 crossed above the 1200 level (at the close compared to the previous trading day's close).

We first crossed 1200 in 1998. We crossed it 29 more times since then. 2001? Yes. 2004? 2005? Yes, yes. 2008? Yes. 2010? 2011? Yes, yes. It's been nearly 3 years since we last crossed it to the upside. Would it shock me if it happens again? Not exactly.

This is not investment advice.

See Also:
Refining the Rubicon
Yahoo! Finance: Capital One Financial: Long-Term Chart

Source Data:
St. Louis Fed: Custom Chart

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