Well, that is just what this market didn't need. A huge miss - 199,000 actual jobs versus 406,000 consensus - on the headline nonfarm payrolls from the Establishment survey, and a still low 3.9% rate from the Household survey. But the capper of course was this little nugget towards the end of the release:
In December, average hourly earnings for all employees on private nonfarm payrolls increased by 19 cents to $31.31. Over the past 12 months, average hourly earnings have increased by 4.7 percent.
Corporate America just cannot handle these increasing wage increases. As I often do, I relied on the excellent work of Dr. Ed Yardeni for this column. Dr. Yardeni's charts show that the annualized percentage change in hourly earnings hasn't been sustainably above the "low 4s" since... wait for it... 1982. Corporates just cannot handle these wage pressures without raising prices, which their workers can't afford, so they have to pay them more and then to make up for that they have to raise prices. And so on. And so on.
It's a spiral.
What ends it? A very nasty recession. That's what ended the Carter-era deprivation that Reagan inherited in 1981. That recession was spurred by the actions of the cigar-chomping, inflation-fighting Fed Chief at the time, Paul Volcker. Pundits at the time referred to it as "shock treatment," and, from what I can vaguely remember from my days as a pre-teen, it was.
Today, we have replaced the cigar-chomping Volcker with the chardonnay-sipping Jerome Powell, and, man, are we in for a world of hurt. These unelected technocrats just have no idea what hurts the common person, but CEOs feel it. Did Jeff Bezos (OK, he's not CEO of Amazon (AMZN) anymore, but I like to use him as an example) know that Amazon would deliver a negative operating margin in 3Q21 from its core business - AWS saved the day on a corporate basis - to shareholders? You are damn right he did.
CEOs feel things weeks and months - decades likely in the incredibly feckless Powell's case - before government apparatchiks do. That also applies to the financial media, including a clueless Fin TV anchor who claimed that Elon Musk's sales of Tesla (TSLA) stock had "nothing to do with the fundamentals?" Who hires these people?
Corporate insider stock activity is an incredibly fundamental indication of how CEOs view the economy. If I had TSLA options that were struck at $6.42, would I exercise them and then sell some to pay the taxes? Yeah, I probably would. But don't miss the forest for the trees. Insiders are selling because they understand that valuations don't reflect the fundamentals.
From a CNBC article published December 1st:
- CEOs and corporate insiders have sold a record $69 billion in stock in 2021, as looming tax hikes and lofty share prices encourage many to take profits.
- As of Monday, sales by insiders are up 30% from 2020 to $69 billion, and up 79% versus a 10-year average, according to InsiderScore/Verity.
Cathie Wood seems to, but please note that my HOAX portfolio (link is here, Google will ask for my permission for you to view, I will grant that permission) is now beating (ARKK) by a full 20 percentage points since inception two weeks ago.
Listen. Pay attention. And trade accordingly.