This Is Not 1982!

Click to enlarge.

Good grief. We've fallen out of the trend channel to the downside and yet we're repeatedly told that the future is so bright that we need to wear shades. I guess we can just pretty much assume that we'll never reenter the channel again? Seriously?

As seen in the chart, initial claims are just about as bright right now as they have ever been (perhaps even more so if the trend channel is any indicator). They were similarly bright in 2000 and 2007! They were not bright in 1982 though, and that's what made 1982 such a good year to swing for the fences. Things could only get brighter. In hindsight, the brightness increased enormously over the next 18 years!

For a full year, 0.7% of the covered workers were sent to the unemployment lines each week back in 1982. Each week! Now that was dim! Compounded over 52 weeks, that gave each worker roughly a 30% chance of becoming unemployed. Ouch! Think that could never happen again?

I have a reasonable concern that the trend channel in this chart will ultimately hold, and that's all it would take for me to shy away from risk taking. The channel is also very consistent with my long-term permabear attitude (since 2004). That's especially true if most investors start to believe that this economy can actually tolerate higher interest rates, as is continually repeated by the mainstream financial news.

See, in my line of work you got to keep repeating things over and over again for the truth to sink in... to kind of catapult the propaganda. - George W. Bush, May 24, 2005

Propaganda

Propaganda is a form of communication aimed towards influencing the attitude of the community toward some cause or position by presenting only one side of an argument. Propaganda statements may be partly false and partly true. Propaganda is usually repeated and dispersed over a wide variety of media in order to create the chosen result in audience attitudes.

April 19, 2013
"Way Too Bright" Supernova Eludes Astronomers

But what if the supernova was not actually as bright as it seemed?

"Way too bright" economy eludes economists too! Really bright things can get dimmer. Really dim things can get brighter.

This is neither rocket science nor investment advice.

Source Data:
St. Louis Fed: Custom Chart