In the Fed's interest rate decision, if there is a revision or deletion of the forward guidance, generally speaking, it will stimulate the market's change in the Fed's interest rate hike expectations, whether it is to delay or advance the rate hike. After that, the market will focus on the US data, hoping to obtain signs of accelerated recovery of the US economy from the data, so as to judge the Fed's next move.
We can often hear or see that after the release of important economic data in the United States, the market or certain institutions jump out to say that the economic recovery in the United States is accelerating or slowing down, which is actually too one-sided. Of course, those institutions must know whether these data really represent The U.S. economy is recovering, but because they are also market participants, it is not ruled out to put smoke bombs to confuse the market. So what exactly do these economic data mean?
On the surface, the economic data of the United States, such as the unemployment rate, has dropped below 5.0%, the non-agricultural employment data is also good, and the GDP of the United States is also performing well (for example, 5% in the third quarter of 2014). The stock market has also repeatedly hit new highs. According to the usual logic, we can conclude that the domestic economic situation in the United States is very good. In fact, it is not the case. Of course, these figures are not false, they are true, but how to interpret these data can cause major misleading. This is something that many people don't understand, and don't know how to look at it or how to analyze it.
For example, in the United States, if you are laid off by the company, you will be laid off. What's the first thing? You have to go to the government to fill out a form and apply for unemployment benefits. After that, I actively searched for a job every week. For example, I sent three resumes every week. You had to go to the government to make a record. Once you went to fill out the form, you could get a week of unemployment benefits. So how long can this unemployment benefit be taken? 27 weeks. In other words, the U.S. unemployment insurance system helps you to ensure that there will be no major problems in your life within 6 months. You have to go every week. This is the premise. What if after 27 weeks there is no job? Of course you will not receive unemployment benefits, and of course you will not go to the government to fill out the form. At this time, you will be kicked out of the unemployment statistics. Looking for a job, but sorry, unemployment statistics don't include you. This can be seriously misleading. In the U.S. recession before 2008, the degree of the crisis was not too deep. Generally, those who were laid off by the company could find a job within 6 months. After such a situation, use this method to calculate the unemployment rate , is more reliable. But the economic recession brought by the 2008 financial crisis to the United States was very deep. It should be said that it was the most serious one in 80 years. It can be compared with the Great Depression in the 1930s. It is very normal to not be able to find a job within a month. There are even many people who cannot find a job for a year, two years or even a few years. This will become the long-term unemployed population, and unemployment statistics do not count this part of the population. Yes, so what's the use of the 5.0% or 5.5% you gave in the end? I want to popularize it here. An unemployment rate of 5% means full employment for all people in the United States. What is the current unemployment rate? Below 5%, fluctuating around 4.9%, is it really full employment?
At this time, we have to look at a larger statistical method, which is called the employment participation rate in the market. What is the employment participation rate? That is, taking the entire population of the working-age population over 16 and under the age of 60 in a country as the base, among these people, how many people have jobs? Isn't this clear at a glance? Many statistical errors are avoided. When you use this data as a benchmark data, you look at the employment situation in the United States. In fact, the current employment participation rate in the United States has dropped to about 70%. What kind of concept is this? This is basically the worst data in 37 years, going back to 1977, and it has not been so bad since 1977. Not only is it far lower than in 2008, it is also far lower than in the 1990s, and it is also far lower than in the 1980s. If you look at it from this data, it is actually very poor. I have read a set of data. The United States now has a population of 320 million, of which 250 million are of working age. Among these 250 million people, 93 million people are unemployed. Can this be called full employment? Can this represent an unemployment rate below 5.0%? So from this perspective, the market is completely misled by the current unemployment rate of around 4.9%. The United States is close to full employment. In fact, a very large number of people are unemployed.
So the non-farm payrolls that we see every month was good last time, and it's not bad this time. In fact, these things are the subject of speculation by the news media, which are for stock and foreign exchange speculation. They don't care whether the data is true or not, they only care about whether it can bring volatility to the market.
The truth about the rising US stock market
Some people may say that the U.S. stock market was hitting new highs every day in the year before last. Isn’t the U.S. stock market bad? The U.S. stock market is quite good. The key is to understand the core driving force behind the rise of the U.S. stock market. It means that listed companies repurchase a large number of their own stocks (stock repurchase), with the purpose of raising the stock price . For example, on October 19, 1987, the New York stock market experienced a sharp drop in stock prices. Within two weeks, 650 companies issued a large number of repurchase orders. The company's stock plan reduces the stock circulation in the market and stimulates the stock price to rise. What good is that? For listed companies, high stock prices can obtain more financing through credit and other means. For shareholders, high stock prices can obtain more cash. In addition, stock repurchases can prevent mergers. As we all know, major shareholders are the company's voice. If the stock price is cheap and the cost of seizing the company's decision-making power is reduced, it will face the danger of losing power. If the original major shareholder does not want to lose the right to speak, he will buy back the stock to prevent being merged. So where did the repurchased shares end up? One way is to log out. Another way is to store the stock, which can then be converted into bonds, can also be issued to employees as incentives, or wait for an opportunity to resell. However, it should be noted that such cases are rare in China.
The motivation for this repurchase is the main reason for the stock to rise.What does this mean? Listed companies buy their own stocks on a large scale, resulting in a decrease in the number of tradable shares in the entire stock market. Three shares will become two shares, and two shares will become one share. This process will automatically increase the rate of return per share. Originally, the company had so much profit. I used to divide it into 1 million shares, but now I have merged it into 500,000 shares. Of course, I can greatly increase the rate of return per share without any change in business operations. In the stock market, investors always Seeing that the rate of return per share is high, it means that this stock is very good, so we will buy it. At this time, this stock will naturally rise. But everyone needs to understand why the CEOs of listed companies want to buy their own stocks, and how much did they buy? In February 2015, the S&P 500, these listed companies announced a repurchase scale of more than 100 billion US dollars. In other words, the listed company itself is the largest buyer. This is completely different from the Chinese stock market, because China’s listing No one in the company has ever spent money to buy back its own stock. why? These people all regard going public as a tool and method to make money, and after finally eating the meat in their mouths, you still let me spit it out, and spit it out to the stockholders, don't even think about it. This is a big difference between the Chinese and American stock markets. The reason for a large number of stock repurchases by listed companies in the United States is that the CEOs of listed companies are different from those of listed companies in China. Chinese listed companies are often founders, while the United States are professional managers. Their basic salaries are not very high (relatively speaking). What really makes a lot of money depends on stock options. When and how much these things will be cashed out for you depends on the stock price of the listed stocks of the entire company. As long as you can meet the standard and the stock price reaches this amount, you will get Heavy rewards, if you fail to reach this amount, you will be fined heavily. Under such an incentive mechanism, the CEO of a listed company is of course motivated to use the company’s money to buy back his own shares. Once the news of the buyback spreads In the market, the news alone will cause the stock price to rise, and then your company has sold, which is equivalent to building a bottom for your own stock. The more you buy the stock, the more it rises, so the stock market will rise soon, and the CEOs will come to the quarter. Once it's over, he can cash out bonuses of tens of millions or hundreds of millions of dollars. He has no reason not to do so. For the investor, it is very good, the stock he bought has risen. So, the investors are happy, the board is happy, and the CEOs are excited because a lot of cash has been cashed out. So it's a happy situation. So why can it work like this? The main reason is that the Federal Reserve has kept interest rates very low, and the cost of financing many corporate bonds is very low. Then why don’t these companies desperately issue bonds and repurchase their own stocks? , Don't your own stocks just go up? So what we see is that the monetary policy actually transfers the wealth of the whole society. Who benefits? Certainly the wealthy few benefited. Who lost it? Naturally, someone has lost money, and it must be the loss of most poor people.
During this process, some people will definitely ask, since these companies have issued so many bonds and raised a lot of funds, why don’t they use them for other things, such as improving productivity, engaging in technological research and development, and expanding production lines? These are all long-term projects, and the money will only be effective after many years. Can those CEOs stay in their positions for so long? Even if they can stay for such a long time, during this investment process, the performance of the company has no obvious performance, so the CEOs have to endure low wages and no bonuses, because the stock cannot rise so fast. So for those CEOs, as long as they can raise a large amount of money, they will never use the money for long-term plans, but will use it for repurchases. This is short, flat, and fast, and the effect is immediate.
Therefore, money will not flow to the industry as the interest rate drops. On the contrary, when the interest rate is low to a certain level, the money will not enter the industry, but will speculate on assets; the faster the asset rises, the less the industry will get. Funds will flow to the asset field faster and faster. So we should not think that the lower the interest rate, the better, but that is not the case. Former Federal Reserve Chairman Greenspan also mentioned in "Maps and Territories": Looking back at the 5,000-year history of human civilization, you will find that interest rates have fluctuated between 3% and 12% under normal circumstances for a long time, which is too high No, the financing cost is too high, which is not conducive to the formation of capital; it is also not good if it is too low. If it is lowered to a certain level, it will definitely stimulate asset bubbles and prevent the industry from getting the money. So, both extremes of high and low will destroy capital formation.
Therefore, after 6 years of quantitative easing in the United States, the employment situation is actually a mess. Although the media tells you that it is very good, it is actually a mess; and the stock market is very good. Who is rich in the end? 1%; who is poor? 99%. If you are interested, you can read "Capital in the 21st Century". Its background is who is more beneficial to quantitative easing.
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