Friday, September 4, 2009

Since when does Wall Street care?

Does Wall Street really care about unemployment? The answer is no. When did Wall Street really care? Wasn't it after Lehman, Bear, and AIG imploded, and when Goldman and Morgan Stanley were on the ropes?

That's when they cared. When it affected them. And then Secretary Paulson went crying to Pelosi, on their behalf.

Because the world was only coming to an end, if they lost their job.

Not if you lost yours!

They could care less about the unemployment numbers now, because companies have adapted to it. Come on, we have over 9 million people working part time that want full time work! We have a U-6 rate of 16.8%. Does Wall Street care?

Not one iota, because employment is an expense.

And the only time they worry about employment is when they are about to get sacked. And then, they write about the coming Great Depression.

Because then, that expense is a cost they can quantify. Because its only quantified when it affects them!

But now that they have been bailed out by Main Street, Wall Street doesn't care one bit--and don't think otherwise.

Since when has Wall Street been altruistic?

Look at this Bloomberg story today:

U.S. Recovery Leaving Workers Jobless May Stoke Company Profits

Sept. 4 (Bloomberg) -- Employers kept Americans’ working hours near a record low in August, indicating that economic growth is poised to reward companies with added profits while postponing any recovery in the job market.

So throw that idea of altruism out of your head!

Wall Street will only sell stocks, when the job losses affect them. When it affects Main Street, it doesn't matter.

And that's why we go higher.

Because Wall Street has already gotten their bail-out.

And Main Street isn't.


Anonymous said...

That was a pretty profound article. Didn't think employment as an expense to the firms. My question is, if unemployment increases then where will the demand come to buy the products that these companies produce??

Palmoni said...

That's the part that is ugly--When close to 20% of the people in the economy don't have any discretionary income, and they're only buying th enecessities, you would think thatthe stock market would come down.

But think about the companies that were on the ropes.

They knew how bad their balance sheets were, and they knew they were insolvent.

Yet they could live and play for another day.

So if those that were insolvent were able to come back to life, then there must of been a whole lot of other companies, that were worth buying.

Being bullish on the stock market does not make me a Pollyanna on this economy. The job losses and stresses felt are way larger than what Wall Street recognizes, but I don't think it matters to stock prices, and that's what we are judged on.

Anonymous said...

I don't mean to be a nit-picker, but I do recall that in the past the market would use improved employment numbers as a reason to rally. Is it not playing both sides of the fence to then say the market doesn't care about job losses?

Palmoni said...

Heads I win, tails you lose!

You are right, but this time they are taking both sides, because the market is discounting a better tomorrow!

If we actually had a substantively positive employment number, the market would be up +3-4% that day!