Jeckyll, Hyde, Drugs, Delusion, and Hangovers

April 15, 2011

A trifecta of recent articles—a guest post on zerohedge and back-to-back pieces by Mish—reveals a Dr. Jeckyll and Mr. Hyde personality of economic optimists driven by demographics.
Dr. Jeckyll works in the financial industry and is bullish:
• Newsletter advisors (I.I. poll 20-week average)—most bullish in seven years
• Futures traders (trade-futures.com poll)—most bullish in four years
• Mutual fund managers (% cash)—most bullish ever
• Hedge fund managers (BoAML survey)—most bullish ever
• Economists (news-org polls)—unanimously bullish
 
• Top global strategists (three national year-ahead panels)—unanimously bullish
 
 
Dr. Jeckyll is bullish because he’s getting paid big bucks for playing the stock market, which is up damn near 100% from the March 2009 S&P 500 low of 666. That was when Obama, who has no training in economics or finance, prophetically claimed that it was okay to go back into a market dominated by high-frequency computer trading.
 
Mr. Hyde is also bullish on the economy, but his opinion is based entirely on the fat honker of bromo-mescalin he ingested while sloshing around his own economic open grave with a martini tumbler. 
 
Mr. Hyde is very young, you see:
 
• “Economically speaking, while those in the 18-29 group are most optimistic, that is the age group least able to afford to buy things.”
 
 
Mr. Hyde is also very unemployed. The 18-29 demographic has been hit hardest by the tsunami of joblessness unleashed since Wall Street was bailed out in October 2008.  With the U-3 unemployment rate is supposedly 8.8% generally, the Bureau of Labor Statistics’ granular breakdown of data depicts the bloodbath youthful workers are drowning in:
 
Age group U-3 unemployment rate
16-17 29.0%
18-19 22.5%
20-24 15.0%
25-34 9.1%
 
See Table A-10 here
 
Seeing the unemployment rate drop off markedly as workers enter their college-age years, you might be inclined to believe that “education is the answer.”
 
It isn’t, unless the question is “what can I do to inflict more economic pain on myself?” While higher education levels correlate to lower unemployment rates, higher education has a second corollary that’s not talked about as much: debt levels that are so staggeringly high as to be virtually unserviceable.
 
What can a young person today expect from a college education today in the United States? Charles Hugh Smith answers candidly in “Students—You are debt serfs:” “You may not get any useful skills or a meaningful diploma, but you will end up with $100,000 in debt that can never be written off.”
 
So the youthful Mr. Hyde is screwed either way: forego a formal education and you’ll face significantly higher unemployment rates, or get your degree (and likely forego wages while you do) and incur unserviceable levels of debt.
 
This is a relatively recent phenomenon. Last year, for instance, student loan debt ($850 billion and counting) eclipsed credit card debt ($828 billion) in a blunt demonstration that education simply ain’t worth it any more.
 
 
So circling back to youthful Mr. Hyde’s wildly misplaced optimism, what gives? One hint, we think, lies in the demographics of hard-core econ blogs readership: it’s old, not young.
 
To take just two examples, the 34-and-under crowd accounts for just 16% of dailybail.com’s readership; at zerohedge.com, that number is 15%.
 
See http://www.quantcast.com/dailybail.com and http://www.quantcast.com/zerohedge.com.
 
Wherever Mr. Hyde is getting his daily hopium hits, it isn’t from websites that take the economy seriously. Hell, Hyde probably hasn’t thought much about the economy at all.
 
Or is that changing? Is it possible that young people in America are waking up to their plight?  Turning back to Mish, we wonder. Check out Mr. Hyde’s recent sentiment trend.

 
In the short foul months of the New Year, Mr. Hyde’s optimism took a big hit—from 52% to 43%. In other words, Mr. Hyde’s optimism now matches that of the 30-49 crowd at the start of the year.
 
Note too that if the downward trend among all age groups continues, optimism will dip below what it was when the entirely suspicious stock market rally began back in March 2009.
 
Don’t look now, but it looks like Ben Bernanke’s favorite economic recovery indicator—a surging stock market—is wearing off as the entire nation’s mood sours.
 
Except for the financial industry. They’re as bullish as ever. But remember, they get paid for doing drugs. For everyone else, it’s hangover time.