Well, kids, this is it. The Summer of Love +50 is in the books, and here’s hoping you made the most of it. Because, whatever (presumably mixed) blessings it bestowed upon us: a) they are now consigned to the past; and b) our affairs are likely to take on soberer complexion – starting tomorrow.
Meantime, it’s Labor Day. I truly hope you enjoy it. But I won’t lie: I never liked Labor Day. In fact, in a very real sense, Labor Day sucks. The origins of today’s holiday date back to the late 19th Century, when organized workers became force with which to be reckoned, and took to violence to obtain better terms from their bosses. Bravo to them, I say, for the Industrial Revolution had indeed dealt them a bad hand. Working conditions were abysmal, with unilaterally empowered corporations sending young children into mines for 12 hour shifts. The Labor Movement brought some much needed balance to the equation. But a great deal has changed since that era. Globalization, Automation and (it must be said) widespread, sustained corruption, diluted the leverage of the union paradigm. Members and (more particularly) their reps grew complacent. And they overplayed their hands. And the membership took notice. And they have voted with their feet:
But of course, there is a portion of the union-verse that is thriving, and that, as is well-known, is the organized segment of working stiffs on public payrolls. Their participation rate, according to the Bureau of Labor Statistics, is more than 5 times that of their private economy counterparts. A strong argument can be made that the only unions with any juice left are consortiums of government employees, who bargain aggressively against other government representatives to determine how deeply they will reach into taxpayers’ pockets. My vague recollections about the Supply/Demand curves I drew in college offer hints of an inefficiency here, and it’s no wonder we are plagued with the troubles we face.
Thus, whatever it’s noble origins, the organized labor movement is now only in it for themselves, and I have a hard time celebrating the patriotic triumphs of AFL-CIO, the American Federation of Teachers, the NFLPA or the Screen Actors Guild. For these reasons alone, I have always looked at Labor Day with something of a jaundiced eye. But my issues transverse my petty political perspective. Though many years have passed since I was sending my own darlings off to school, a part of me feels sad this time a year, when I drive by bus stops and see the backpacked little fellers with their long faces, trudging off to their essential but decidedly grim organized educational facilities.
And there’s more. Even for us grownups, the end of summer ritual brings about a feeling of both sadness and nausea. I work hard during the summer, as do, presumably, most of you. But as June melts into July, which melts into August, I will admit to allowing my mind to relax a bit. “It’s summer” I tells myself “take it a little bit easy”.
But that particular crutch expires today, and what lies beyond, on balance, every year but this year in particular, causes my blood pressure to rise. Both Management and Labor will have to resume their toils at full throttle, with outcomes that appear to be decidedly uncertain.
In a perverse turn of the calendar, the lead up to the holiday I’m abusing offered some insights into the condition of the latter, eponymous class. On Friday of all days, the BLS dropped the August Jobs Report, and presumably y’all know it was a yawner. Private Payrolls came in light. June and July were revised down. Hours worked and hourly earnings barely budged. The base rate actually ticked up a titch.
But our always-intrepid working stiffs continue to gather themselves on the spending side, more often than not, with funds sourced from origins other than their own personal wealth. According to the latest figures produced by the NY Fed, Consumer Credit hit an all-time high last month:
That’s a passel of debt to pay back, and it would therefore follow that Management and Labor alike should be highly motivated to knuckle down in the final trimester of ’17. But actually accomplishing anything may be easier said than done. Among other factors, while the rhetoric has cooled a bit in Washington, bond investors are showing increasing concern about the possibility of a government shut down this month, specifically by shedding obligations that will come due over the next few weeks:
In addition, there’s those pesky Northern Koreans, whose leader seems intent on sending what’s left of his long beleaguered country into Kingdom Come. I hesitate to weigh in professionally here, but it does strike me that: a) the presence of deployable ICBMs in the hands of L’il Kim will be deemed immediately unacceptable for the U.S. and its allies; and b) whatever steps are taken to eradicate this threat will be volatility enhancing and valuation dilutive.
Through it all, though, the Gallant 500, chugs on, half-a-league, half-a-league, half-a-league onward. Factoring in dividend/reinvestment, August marked the 18th month out of the last 19 where the index generated positive returns, and that, my friends, has only has happened one other time in history – in the heady days of ‘95/96: the infancy of the dot.com bubble. In putting up this performance, it stands in firm solidarity with the VIX, which again is bumping down against single digit thresholds:
VIX Vertigo:
Kind of strange from my perspective. I would’ve thought that investment pools might be marginal buyers of options going into the long weekend, but apparently they were otherwise occupied.
In general, I’d say we enter this last, performance-critical third of the year in something of a jump ball configuration. Risky assets appear to be nothing if not fully valued, but are they overvalued? I’m not prepared to state that they are. I will, as has been my habit, offer the following observation though: there’s nothing on the horizon which would particularly incline me to be short any asset class: not stocks, not bonds, not commodities and not credit.
I’d like to predict that volatility will normalize over the near term, but I’m not even sure on this score.
So about all I can offer on this sucky Labor Day is an admonishment to remain on your toes. Something’s likely to happen – sooner. Or later. Or never.
Come what may, I’m girding myself for battle. But all of that starts tomorrow. In the meantime, you must forgive me as I take my leave. The burgers need flipping, and that critical task devolves to me, and as I perform this vital task, I’ll be thinking, more in sorrow than in anger about Mother Jones.
TIMSHEL