Benny, The Naughty Easter Bunny

The size and frequency of the Fed's interventions are increasing with each passing day. I wonder how people can still call this a "free" market with a straight face. Let's call a spade for what it is: privatizing profits and socializing losses is crony capitalism, pure and simple.

Keeping with the spirit of the holidays, it's like the Easter Bunny lets a few chosen children eat all the good eggs, but feeds those tainted with salmonella to the children of a lesser God. Naughty bunny...

Naturally, the Fed's hoppity-hops injected shots of optimism to markets teetering on the edge of a nervous breakdown last week. Many speculators are apparently willing to go bottom fishing, projecting an economic rebound in six months. I think they are wrong; their optimism is just one more in a string of bad predictions that got progressively worse: robust growth, moderate growth, Goldilocks, slowdown, no recession, mild recession..

There are two main reasons for my negative prognosis, as far as timing of bottoms goes:

• The labor picture is still nowhere near as bad as it gets in even a typical recession. After 1950, recessions have resulted in year-over-year losses of 1.8 million jobs, on average. We are currently showing gains of 860.000 jobs versus the same month last year (see chart below, click to enlarge). If we are in a recession right now, we still have a long ways to go.
  

• Consumer spending accounts for three quarters of the economy. Despite real wages stagnating after 2000, households went on a shopping spree because they could borrow to their eyeballs, mostly against real estate equity.
  

Annual Change in Retail and Food Service Sales

With easy credit now turned off, growth in consumer spending must come from (a) more jobs (not in the cards, as we saw), or (b) significantly higher wages (not happening).

Conclusion: don't hold your breath waiting for an economic rebound. Oh, and I would stay off Benny's Easter eggs for now...