Juggling Dynamite

NY Times OP-Ed: How to end the great recession by Robert Reich: (Hat tip: Jerry B.)

“THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field.
In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs.
By contrast, little has been done since 2008 to widen the circle of prosperity”…

Reich gives viable ideas for re-directing tax revenues into lasting things like education rather than more cars and consumer goods.
Also Economist Peter Morici on Tech Ticker with a sober assessment of the latest jobs data last week:

Stocks rallied this week. In North American markets it was enough to erase what had been negative gains year to date as at the end of August. Now the S&P 500 is basically back at its longer-term resistance levels (again) around 1100. Coming into the fall, we had some significant bearish sentiment amass in August and negative returns for the first 8 months of the year. This could favour some better than expected price action in September.
That said the art here is to weigh the probable range of price action over the next couple of months. On the upside we have the possibility of a bear market rally retracing the S&P back to the 1150 area. On the downside we still have the possibility of a re-test of the 950 and then 800 level if (as) we get further disappointment on the economic front in the next few weeks. In other words, if we buy or hold here, we better have a clearly defined sell rule laid out in advance. At this point the risk/reward ratios still favour safety over risk. Anyone who is talking about holding stocks for the long-term is still a danger to financial health.
Barry Ritholtz reminds us of the forest over the trees in this Tech Ticker clip yesterday:

The US lost 54,000 jobs in August, which is 46,000 less than the consensus had expected. The all important private sector added 67,000 new jobs (27K more than expected) and the “official” unemployment rate edged up to 9.6%. It is great that the private sector found a reason to hire 67,000 people. We should not lose sight however of the big picture here. Three years after the 2007 recession started, the US economy is still losing (not adding) jobs.
Job creation in this “recovery” is tragically low. In fact 1 in 6 Americans are now receiving some form of financial assistance from the government to exist:

Bond markets are closing early at 1pm today, and so far the jobs euphoria is putting the long bond on offer. In truth long bonds rallied so far so fast over the past couple of weeks, there is breathing room for a pull back here without breaking the bond uptrend

We suspect this week's relief rally in risk assets, based on a couple of less bad reports, may not yet be durable. Stay tuned.