Part One: Editors Roundtable - December 2014
Alex Green: Alex Green, Chief Investment Strategist of The Oxford Club.
Joel Bowman: Joel Bowman, Co-Founder and Editor of Free Market Café.
Matthew Carr: Matthew Carr, Emerging Trends Strategist.
Marc Lichtenfeld: Marc Lichtenfeld, Chief Income Strategist.
Steve McDonald: Great. The topic this month, the great deceit, or the misinformation campaign in the business media or business news. We're going to start with our very own token Aussie. Where are you on the great deceit?
Joel Bowman: Oh, well, we just go to the most recent news tidbit, I guess, 321,000 was the number quoted by the media last week, and I'm going to be a little honoree since I'm the only one without a jacket and I'm going to go against the consensus and say I don't think that this was a particularly good number. It had all the odor to me of a statistic that had been subjected to the government's enhanced interrogation tactics. If you go and look at the hard data, I think that there's a lot of cyclical and seasonal hires here in the service industry and hospitality that may or may not have particular value to the economy. The longer numbers, like the labor force participation rate, is in continued and precipitous decline at about 63%, or 66% in 2008. It's not going anywhere special, and I think these numbers aren't anything to be cheery about.
Marc Lichtenfeld: So do you think, then, that all of the job numbers, you know, not just this month, have been deceitful? Because if you listen to the – at least what kind of the trend has been, I mean, they're saying that this has been the biggest year for job creation since 1999. So basically are you saying, like, all these months of 200,000-plus are also –
Joel Bowman: Well, 200,000-plus – 200,000 is about what economists think we have to add just to adjust for population growth. So above 200,000 is what we have to be looking at. So we have 121,000 last month. I think we have to look at the quality of the jobs. So a lot of kids coming out of college are told by their law faculty that they're going to graduate as barristers and they end up as baristas. I don't know that that's a particularly – I mean, we can argue about the value of a barista to a healthy economy, and maybe that's more than a barrister, but the type of jobs that are being created is something up for debate.
Alex Green: Right. Yeah, actually the media is probably correct that there are more jobs being created, but the distortion is the idea that unemployment is going down, down, down, down, down because it's not even a hidden fact that the government simply doesn't count the people who've given up looking for a job. So if you counted all the people who've dropped out of the economy, in addition to the people who are actively seeking a job and not finding one, then the unemployment rate would be much higher than it is. But the economy is gaining some traction and there are jobs being created, but as Joel points out, the question is are there enough high-paying jobs to really provide a boost to the economy?
Steve McDonald: Marc, I've been reading numbers recently that one of the reasons that the unemployment numbers look as good as they do is because so many baby boomers are retiring and there aren't as many new people coming into the market. I guess my question for you guys is, is this intentional? Is the media doing this intentionally for any purpose?
Alex Green: No, I don't think that the media is so much trying to distort the news. It's partly the nature of the media. No one wants to hear about the buildings that don't burn and the planes that don't crash and the people who aren't murdered in the streets. And so everything comes to sort of a dark prism of exceptions. If a company lays 400 people off, that might be news. If they hire 400 people, it's not going to be news at all. So you have this sort of negative slant to the news, and all of us are consumers of media. Nobody knows what's going on in Pakistan or how the European economy is performing based on personal experience. We're all getting it through the media, and yet, the media has a tendency to accentuate the negative, the corrupt, the criminal, war, pollution, et cetera. I mean, it's all – it all has sort of a negative spin to it, and that affects people's perceptions of the world and also affects their perception as to whether they feel like risking their money in the financial markets.
Marc Lichtenfeld: And that's very dangerous because if you go back, you know, to the Great Recession, 2008, 2009, where granted things were very, very bad, but as we started to pull out of that, the vast majority of investors, especially, didn't recognize that there was an opportunity. They were too busy being, you know, terrified of still the possibility that we could go over that precipice, that any rebound in the economy was not for real, and they missed out on perhaps a – you know, a once-in-a-generation opportunity to invest. I mean, if you got into the market in 2009 or even early 2010, you did extremely well. So all this fear in the media really does impact people's investments and net worth.
Matthew Carr: Yeah, in 2009, I wasn't with The Oxford Club. The company I was with, our account manager, like, the accountant was going around screaming at everybody, like, don’t you dare start lowering down those 401(k) contributions. Don't you stop doing it. He's, like, you've got to start pumping that up. You know, put it as high as you possibly can because we're going to match this, and he's, like, it's not going to go to zero.
Steve McDonald: Yeah, but you know, that brings up an interesting point. Most small investors did miss this huge run-up, as we know they will. They've always missed a big run-up because of what Alex said, and I don't know that it's intentional by the media, but the media seems to have people convinced and scares them into selling at the bottom and buying at the top, and I think that's the most damaging thing that's happening in the investment world. I think that's one of the reasons why most people don't have any money put aside for retirement. It isn't that they aren't saving. They're putting money into mutual funds when the news is telling them everything's great and rosy, and as soon as they scare the life out of them, or scare them to death, they sell their mutual funds, go back into a money market, wait until the market goes back up and then buy – and, you know, the end result has to be.
And something has to change because the latest statistics that I've seen says that between the age of 24 and 74, in this country, the average person has $10,000 or less put aside in savings of any kind, retirement or otherwise. And we're looking at 30 years of unemployment. Now, whether it's intentional or not, something has to give here. We've got to start getting the type of information that Marc shared. It's, like, look, this is the opportunity of a lifetime. I wrote an article in February 2009 in which I said if you don't buy into this market, go to Wal-Mart and buy a good pair of boots because you're going to be kicking yourself in the ass in five years when you see what's going to happen. And I said then, I said this is the type of market that makes millionaires. Nobody did it because, you know, we're five voices out of how many millions.
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