Can You Feel It?

Scott Reamer
  MAR 27, 2006 2:03 PM

Get in touch with your visceral side and just feel.


Much time is spent on this site measuring things. You know: counting, analyzing, estimating, calculating, quantifying, computing. What’s that old saying: ‘If you can’t measure it, you can’t manage it?’ And generally speaking, that’s the right thing to do; our cortexes need numbers to make the rational decisions that we seek to make in managing investment assets.

But I’m going to ask you dear readers to suspend that instinct: forget for a moment about quantifying and measuring. Get in touch with your visceral side and just feel.

The gulf between the haves and have nots has never been wider this century, despite a three year bull market in stocks, an unprecedented bull market in real estate and a reported unemployment rate below 5%. But the unemployment rate is only low if you're over 55 (2.9%), have a formal education (2.2%), or are part of management (2.1%). For the young (16-19 years old), you face 15% unemployment. High-school dropout? 7.1% unemployment. Production line worker? Also 7.1% unemployment. And those are the government’s stats with those entirely suspect birth-death ‘adjustments.'

How about net worth? If you owned a home from ’01 to ’04, your net worth went up +5.1%, but if you had to rent, your net worth declined 7.5%. If you were in the top 10% of the income pool, your real net worth rose +6.5%. If you were in the last two quintiles (bottom 20%), your net worth dropped 1.5%. And it’s not just your bank account that suffered; so did your psyche. Conference board confidence measures from 2001 to 2005 for the highest-income households increased from 119.8 from 107.6. The lowest income households? You are less confident now (71) than then (71.8).

If your compensation was tied to hourly wages you have been losing ground against inflation – suffering real wage decreases – since October 2003. If you’ve been a stock owner, well, you’ve faired better. In 2005, corporate stock buybacks rose 77% and dividend payouts rose 12%, with buybacks accounting for 61% sixty one percent – of y/y EPS growth in Q4:05. Meanwhile, insider stock sales (Thomson) hovered around 20 to 1 (sell to buy) in 2005.

But maybe statistics lie. Maybe there isn’t any angst out there at all. Maybe the rich aren't getting richer and the poor poorer.  But read through this laundry list and tell me how you feel on the other side.

No way to trade any of the above. No way either to really 'measure' them. But on top of the weakest economic cycle since Hoover, these are salt in an already stinging wound in the American body politic. Meanwhile popular media palaver on and on about how great conditions are. Apparently freedom is on the march. The gulf between reality and perception is large and growing.

Can you feel it?

No positions in stocks mentioned.