Whatever is going on in the daily stock market, you can't call it "price discovery" or even remotely rational.
In fact, it amounts to grinding in harms' way, and measures the degree to which the Fed and other central banks have turned the Wall Street casino into a giant litter of sick puppies who are bent on rolling the dice until they self-destruct.
Even MarketWatch has noted that the S&P 500 has climbed above 2100 on more than 30 occasions during the last 18 months, but has retreated each and every time.
So buying the dips in that context is based on eyes wide shut speculation; it essentially implies there is no material downside, and that one of these days the market will bust loose from its 2130 top of May 2015 and soar to spectacular new highs.
In other words, Yellen's Philadelphia speech was another ode to imaginary future economic gains based on the delusion that 90 months of ZIRP has actually "stimulated" the US economy. Yet the supposedly forgettable May jobs report is just one more reminder that it hasn't.
For example, the BLS reported 71,000 new jobs in the HES Complex (health, education and social services, including state and local education jobs) during May.
That's right. The purported number of new HES Complex jobs was actually almost double the net jobs gain of 38k for the entire nonfarm payroll!
After a few more monthly revisions and eventual re-benchmarkings, of course, that number will be significantly reduced. Yet regardless of the exact magnitude of the gain, it is just plain stupid to argue that ultra low interest rates or anything else the Fed is doing has anything to do with jobs growth in the HES complex.
That's entirely a function of the government sector's $3.5 trillion annual funding of medical entitlements and education, including the tax-driven provision of employer funded health benefits to 160 million Americans. These programs are all on statutory auto-pilot and their huge contribution to GDP cares not a wit whether interest rates are low, high or nothing at all.
In fact, just under 9 million or 67% of the 13 million new nonfarm payroll jobs in the US economy since the turn of the century were in the HES Complex. The mad money printers at the Fed had virtually nothing to do with them.
So what Yellen is counting as evidence that monetary stimulus actually works is simply the cycling of part-time leisure and hospitality, retail, temp agency and other low pay jobs. These jobs rise and fall between the serial financial booms and busts which stem from the Fed's monetary intrusions, and are evidence that it has destabilized and impaired the main street economy, not advanced it.
Indeed, you could even call it the bread and circuses economy and not be far from wrong. While jobs in bars, restaurants, hotels, sports stadiums, theme parks and the like comprise just 11% of the 143.9 million nonfarm payroll jobs reported by the BLS they accounted for 2 million or 35% of the total jobs gain since December 2007.
Yet even the Part-Time economy is beginning to cool by the BLS' own reckoning. The 39.946 million jobs reported for this sector in May represented zero gain from the prior month.
And it needs be recalled that these are 40% jobs in an economic sense. They average only 26 hours per week of paid work and generate annualized earnings of less than $20,000 at the $14 per hour average wage. That compares to an average of nearly $50,000 per year for full-time "breadwinner jobs".
In fact, there was a 33,000 drop in the number of full-time, full-pay "breadwinner jobs" in May. That Yellen has the audacity to insist that the labor market is strengthening and then gets away with it is surely proof that the financial commentariat is drinking the Fed's Cool-Aid in jumbo sized gulps.
Alas, they have been doing so during this entire so-called recovery. In the real world, in fact, there are still nearly 2 million fewer breadwinner jobs than there were the day Bill Clinton packed his bags to shuffle out of the White House.
Likewise, the share of the adult population actually employed still stands at just 48.6% or at the level which prevailed way back in the early 1980's when the female participation rate was far lower than it is today.
Yet the merry band of money printers who inhabit the Eccles Building ignore this powerful secular trend entirely. Instead, they persist in pretending they are stimulating an economic ether called "aggregate demand" when the underlying problem is self-evidently structural and unreachable with the primitive tools of central banking.
Yet in the face of the overwhelming evidence that the nation's stagnant economy is suffering from structural impediments and supply-side constraints, Yellen blathered on about how continued pegging of the money market rate near zero is warranted because the inflation-adjusted "neutral rate" of interest is exceedingly low.
Oh, c'mon. There is no such thing as the neutral rate of interest; it's a completely made up construct that Keynesian economists use to justify their relentless efforts to falsify the price of money. It's the equivalent of the parental admonition that something is valid "because I say so".
The irony is that the only valid rate is the market rate of interest set by the demand for funds and the supply of honest savings from current household income and business cash flow. And that we most definitely do not have because the Fed says so.
In the meanwhile, as Yellen made abundantly clear in today's speech, the Fed will stand pat on the zero bound until this imaginary outcome materializes. Long before that, of course, the on-coming recession will make its appearance.
Then the casino will break into full panic upon the realization that Yellen and her posse are exactly as clueless as they sound.