We arrived at the Oberoi Hotel in Mumbai after President Obama had left.
As we were leaving, President Sarkozy was arriving.
It is a Grand Hotel. They come. They go. Nothing ever changes.
One of the problems with traveling so much is that you spend much of your time in a jet-lag fog. It was hazy when we left Mumbai. It is hazy in Kuala Lumpur. Was it the weather…or us?
But when we read the news, our eyes opened wide. Friday’s jobless numbers were shocking.
The latest figures show unemployment increasing, not going down. Here’s the New York Times write-up:
The United States added a total of just 39,000 jobs last month, down from an upwardly revised gain of 172,000 in October, the Labor Department reported on Friday. With local governments shedding jobs, the additions in the private sector were too small to reduce the ranks of the unemployed or even to keep pace with people entering the work force.
The unemployment rate, which is based on a separate survey of households, rose to 9.8 percent in November. It was the highest jobless rate since April and up from 9.6 percent in October.
The outlook remains bleak. More than 15 million people are out of work, among them 6.3 million who have been jobless for six months or longer. Many are about to exhaust their unemployment benefits, which have been extended repeatedly by the government because of the severity of the downturn.
The latest snapshot of the labor market cast a pall over what had been a brightening picture of a steadying economy.
The stock markets shrugged off the report, which was well shy of the forecast for a gain of 150,000 jobs, as all the major indexes rose slightly on Friday.
Part of the surprise in the November report was that layoffs, which had subsided earlier this year, picked up again. The number of people who were unemployed because they had been laid off or had concluded a temporary assignment increased by 390,000.
We don’t want to rub it in. But “we told you so” springs to the lips like a cup of beer to a football fan.
Meanwhile, the housing market is weakening. The Case Shiller index shows prices in such hot-spots as Phoenix and Las Vegas, at the lower part of the market, down by more than 40% – and still dropping. Some of them are now below their levels of 10 years ago.
So how can you have a real recovery when…
A) Fewer people have jobs (less household income)?
B) The average household’s major asset is losing value?
But heck, this is fantasyland now. Anything can happen. The feds are bailing out the banks all over the world…and entire countries, too.
Investors actually bid up stocks slightly even after the employment news.
The Dow rose 19 points on Friday.
Gold rose $16.
“What would you recommend to our viewers,” asked a Bloomberg reporter in Mumbai yesterday.
“Well, I don’t make recommendations,” we replied. “Especially not to Indians.
“But there are some periods and some places when it makes sense to be positive and optimistic…and there are times and places when it doesn’t.
“If you’re an Indian investor, I think you can be generally positive about the financial future. Yes, there are bound to be more crises…more corruption scandals…and more disasters. But there’s a trend going on that is probably too big to stop. It’s regression to the mean. India is catching up with the West. Wages are growing at maybe 15% per year. The stock market goes up almost every year. And many companies – in terms of growth – are still very cheap.
“The population is growing fast. The economy is growing fast. There’s plenty of capital for investment. There is plenty of knowledge and skill. There is no reason why this growth can’t continue for many, many years…
“So, an Indian investor can be optimistic. He should be optimistic. He should want to own a piece of that growth…a piece of the future.
“Alas, the situation is very different in the developed world…especially in the USA…” Continued below…
And more thoughts…
“The US and Europe are struggling just to stay in the same place. They’re mature societies…with populations that are getting old and economies that are largely worn out. In Europe this year, for the first time ever, more people will retire than join the workforce. And in America, the Social Security fund, for the first time ever, will pay out more than it takes in. These are two major developments. They signal the beginning of the end.
“I saw in the paper that China just set a new record with a passenger train that goes 300 mph. But almost all records are being broken – and they’re being broken in China or another ’emerging’ market. The biggest, the most, the fastest…it’s all happening. But it’s not happening in the old, developed world.
“I think it was Karl Lagerfeld who noticed that Asia today is the New World. America and Europe are now part of the Old World.”
*** Meanwhile, in the Old World…no plausible plan to save the dollar…and the credit rating of the US…is at hand. Here’s Bloomberg with the story:
Dec. 3 (Bloomberg) – President Barack Obama’s debt commission rejected a $3.8 trillion budget-cutting plan as members from both parties opposed its mix of tax increases and spending cuts in programs such as Social Security and Medicare.
The rejected proposal would have reduced the annual deficit to about $400 billion in 2015, from this year’s $1.3 trillion, and begin reducing the debt.
The plan by Bowles and co-chairman Alan Simpson would have increased taxes by $1 trillion by 2020 by scaling back or eliminating hundreds of tax deductions, exclusions or credits such as those allowing homeowners to write off interest on their mortgage payments. It would also have cut individual and corporate income tax rates.
Social Security benefits would have been cut, the gas tax would have gone up by 15 cents, discretionary spending would have been reduced by $1.6 trillion and Medicare would have been pared by $400 billion.
*** An interesting feature of the rise of the “East” is that you don’t have to be in the East to participate. Latin America is one of the fastest growing regions.
This suggests that the phenomenon – regression to the mean – does not depend on any particular political or economic conditions. In other words, you don’t seem to have to worry about what party is in power, what they call themselves, or what policies they follow. Look at this, another report from Bloomberg:
Dec. 3 (Bloomberg) – Turkey is converging with the BRIC nations in the credit market as the country’s economic rebound sends the cost of insuring debt against default to the lowest in at least a year compared with Brazil, Russia, India and China.
Investors are becoming more confident in Turkey as its economy grows at the second fastest pace in the Group of 20 major economies after China and record-low interest rates help spur local consumer demand.
Turkey’s government plans to reduce public debt to 42.3 percent of gross domestic product this year, 40.6 percent next year and 38.8 percent in 2012, and bring the budget deficit down to 2.8 percent next year from 4 percent this year.
Turkey’s GDP grew an annual 10.3 percent in the second quarter, matching China’s as the fastest expansion the period among G-20 economies.
*** Foreigner often have funny ways of expressing themselves in English.
In today’s New Times of Kuala Lumpur is this headline:
“Probe into Teen Prostitutes.” It’s English. But we wouldn’t put it that way.
In Paris’s Orly Airport, we recall seeing a sign: “Retarded passengers’ waiting room.”
In the airport in Mumbai is a “Mishandled Luggage Depository.”
And on the airplane from London to Mumbai, a steward on the Lufthansa Airline made the following announcement:
“For the inconvenience of passengers, we have arranged for a bus to take them…”
for The Daily Reckoning Australia