It’s another big day in the markets. Oil is up 5% on news that the Israelis hit a Russian ammo dump at the Russian Khmeimim Air Base in Syria after an Iranian plane unloaded its weapons bound for Hezbollah.
Russia responded by ordering its 1.5 million citizens in Israel to leave. It is also reported that Biden is talking to Israel regarding the potential bombing of oil assets in Iran.
Valero (VLO) is up about 6%. ExxonMobil (XOM) is hitting all-time highs of around $122 a share and Occidental Petroleum (OXY) (Buffett’s favorite oil stock) is up 2.56%.
Jobs Are Getting Hard to Come By
Initial claims for state unemployment benefits increased by 6,000 last week to a seasonally adjusted 225,000 for the week ended Sept. 28. This slightly beat expectations and the government propagandists in the press are spinning this as a win.
It’s not. First of all, the jobs being lost are white-collar jobs. We know that all new blue-collar jobs, post-COVID, were taken by immigrants who won’t file for jobless claims. White collar workers generally will get a severance and won’t bother filing for jobless claims at $300 a week. When the severance runs out they will hustle for Uber or some such.
We do know it is taking longer to find a job. According to Business Insider, 21% of workers are now taking more than 27 weeks to find a new job, up 3% from last year, per BI.
Quitting rates are down and ghost jobs are up. Ghost jobs are where a company posts a job and doesn’t take it down after a hire. Or posts a job to seem like they are growing.
Job posting companies like Indeed also benefit from more job listings as more people visit and then have hire clicks which benefits their numbers for advertisers. They don’t care if the listings aren’t real.
Furthermore, part-time jobs are up. The BLS records the number at 28.2 million, the highest level since the government began tracking this data in the 1960s.
Triggered
Unemployment is important because it moves in broad multi-year trends. When this trend turns from hiring to firing you can expect it to continue. There is something called the Sahm Rule which states that if unemployment claims rise more than 0.50% we will have a recession. The Sahm Rule has been triggered.
This falls in line with a host of other indicators screaming recession including the inverted yield curve reverting, the Shiller PE ratio (near all-time high), the Buffett Indicator (total market cap to GDP which is at an all-time high), and the fact that when the Fed cuts 50 basis points it is followed by a recession (yeah, yeah 1995).
All of this is going on while the U.S. government is growing debt as fast as Puff Daddy is losing friends. U.S. debt to GDP is around 120%. The rule of thumb is that when a country hits 130% debt to GDP there will be a currency crisis. The U.S. dollar is still the reserve currency but it’s nothing you want to play around with.
There are other warning signs like insider selling from the folks at Dell, NVDA, Amazon, Google, and a whole host of big names.
All of that might give you pause.
You might consider taking some money off the table after the massive runup of the past two years. But if you are like the rest of the American sheep you won’t. You will continue to buy hand over fist.
ETF inflows just hit new records.
In 2007, after the Fed cut rates 0.50% on September 28, the market peaked on October 10th. That is next Wednesday. The S&P500 fell from 1,549 to 666 over the next year and a half – a total loss of 56.78%.
We will see if this time is different.
All the best,
Christian DeHaemer
Outside Club
Bear markets:
https://en.wikipedia.org/wiki/United_States_bear_market_of_2007%E2%80%932009
Bad Hombres:
https://www.outsiderclub.com/oil-and-the-axis-of-a-holes/
Fracking Wells:
https://www.outsiderclub.com/tour-of-a-fracking-well/
