Monthly Archives: August 2013

It’s the future. Why don’t we have a 4-hour work week?

Posted on by
2

My friend Chris sent me a link to this provocative essay by David Graeber, “On the topic of bullshit jobs.” David raises the question of why we have so many paper-pushing service jobs that produce nothing tangible, and why we seemingly revile physical jobs that have clear benefits to society.

In the year 1930, John Maynard Keynes predicted that, by century’s end, technology would have advanced sufficiently that countries like Great Britain or the United States would have achieved a 15-hour work week. There’s every reason to believe he was right. In technological terms, we are quite capable of this. And yet it didn’t happen. Instead, technology has been marshaled, if anything, to figure out ways to make us all work more. In order to achieve this, jobs have had to be created that are, effectively, pointless. Huge swathes of people, in Europe and North America in particular, spend their entire working lives performing tasks they secretly believe do not really need to be performed. The moral and spiritual damage that comes from this situation is profound. It is a scar across our collective soul. Yet virtually no one talks about it.

 

Why did Keynes’ promised utopia – still being eagerly awaited in the ‘60s – never materialise? The standard line today is that he didn’t figure in the massive increase in consumerism. Given the choice between less hours and more toys and pleasures, we’ve collectively chosen the latter. This presents a nice morality tale, but even a moment’s reflection shows it can’t really be true. Yes, we have witnessed the creation of an endless variety of new jobs and industries since the ‘20s, but very few have anything to do with the production and distribution of sushi, iPhones, or fancy sneakers.

 

So what are these new jobs, precisely? A recent report comparing employment in the US between 1910 and 2000 gives us a clear picture (and I note, one pretty much exactly echoed in the UK). Over the course of the last century, the number of workers employed as domestic servants, in industry, and in the farm sector has collapsed dramatically. At the same time, “professional, managerial, clerical, sales, and service workers” tripled, growing “from one-quarter to three-quarters of total employment.” In other words, productive jobs have, just as predicted, been largely automated away (even if you count industrial workers globally, including the toiling masses in India and China, such workers are still not nearly so large a percentage of the world population as they used to be).

I believe David uses flawed logic when he argues that consumerism is not to blame because most new jobs are not related to the production of consumer gadgets, that consumerism is not the driving force. First of all, the production happens overseas, and secondly, production is much more efficient, requiring fewer workers.

My own thoughts on why we work so much relate to the innate competition for social status, which has not diminished despite our material advancement and a leveling of differences in the standard of living between classes. The differences between the lifestyle of a first-world billionaire and hourly worker are small compared to the difference between a 17th century king and peasant. Bentley vs. Honda is not the same as carriage vs. walking. Anyone can eat meat and imported fruit every day.

From an historical perspective, you can live extremely well on under 50k/year: strong and spacious shelter w/ modern utilities, great variety of fresh food from all over the world, fast & safe transport, empirically-based medicine, recreation, free time, etc.
However, try telling that to a prospective mate. It’s this impulse to move up the social ladder, driven by sexual selection, that keeps us striving for new ways to eek out greater income. Women are generally more classist than men, since they traditionally compete with one another for men and the resources they control, rather than cooperate to generate more resources (zero-sum vs non-zero).
Since our civilization is technically advanced and has this vast physical infrastructure in place (roads, airports, mines, factories, power plants), there is relatively little incremental need for more fixed-asset production. New enterprises tend to just make use of the existing physical plant. This means providing services, often services that are related to conspicuous consumption, or in our case as financial workers, re-arranging ownership of assets and taking little slices for ourselves.
 
I don’t agree that there is a contempt for physical jobs, aside from contempt for low pay. Most physical jobs today require little skill, since the physical plant already exists – they are operators’ jobs, not builders’. Builders (masons, carpenters, engineers) actually still get paid well.

Overbought, overvalued, overbullish, elevated bond yields: Hussman’s sell signal is active

Posted on by
Reply

In my book, the best long-term market statistician is mutual fund manager John Hussman, whose free weekly column is more valuable than any high-priced newsletter.

Using a century of data, there is a very strong pattern of declines from a simple set of conditions. I’ll let Hussman explain them:

 In the chart below, the bars indicate points in the past 20 years where the following conditions were true.

 

  1. NYSE 52-week highs and lows both greater than 2.5% of total issues traded (composite highs work better than equity-only, because dispersion of interest-sensitive issues is often meaningful);
  2. New highs no greater than twice the number of new lows;
  3. S&P 500 greater than its level of 10-weeks earlier (some versions use the NYSE composite, but our index of interest is generally the SPX, and we are less interested in signals that might occur when the market is already down substantially);
  4. McClellan Oscillator (the 19-day minus the 39-day smoothing of daily advances minus declines on the NYSE) below zero, which is another indication of dispersion;
  5. Two signals within 36 trading sessions, which is helpful for reducing one-off noise.

Ominous? Not necessarily. Worth considering in the context of a much more troubling syndrome of overvalued, overbought, overbullish, rising-yield conditions? Sure.

 

 

Furthermore, the extreme in valuation (Shiller PE over 23 on record margins – Shiller PE on normalized margins would be closer to 29) means that regardless of the near-term outcomes, the returns of future years have been cannibalized. Because earnings grow remarkably steadily over the long-term (6% nominal is the average) stock market returns depend overwhelmingly on the price paid for a claim on these earnings. With the brief exception of the mid 1990s, 10-year returns have never been favorable when the S&P500 trades over 20x 10-year average earnings.

Furthermore, the Shiller PE appears to still be correcting from the late-90s bubble. We should welcome this trend, since valuations have in the past overshot to the downside. By the way, the previous examples of seriously undervalued markets all occurred after high inflation during the later years of secular bears (1917-1920, 1940s, 1977-1982).

A Shiller PE of 10 within a few years would fit nicely in this chart, though it would not be a pleasant experience getting there. Today, Shiller earnings are about $70.

Shiller PE Ratio Chart