Lee Adler: Jobless Claims Data Indicate 'Bubble to End All Bubbles'

You might think that the drop in seasonally-adjusted initial unemployment claims to a 41-year low in the week ended July 18 is a good thing. But think again, says Lee Adler, editor of The Wall Street Examiner newsletter.

First, he says the jobless claim data are actually stronger than it might appear.

"The mainstream media is reporting this as if the record low is something new. That’s because they look at the seasonally-adjusted fictitious data only," Adler writes. "The actual, not seasonally-finagled number has been at a record low relative to total employment since September 2013."

Still, the seasonally adjusted number is "remarkable," especially given that the workforce was much smaller 41 years ago, he says.

But here's the problem. "The current numbers are well beyond the bubble record lows of 1999-2000 and 2006-07," Adler states. "The implication is that this time really is different. It is the bubble to end all bubbles."

Recall that the stock market crashed both in 2000-01 and 2008-09.

"Employers in some sectors are hoarding workers," Adler says. "Similar behavior in the past has been associated with bubbles, and has led to massive retrenchment, usually within 18 months or so."

Elsewhere on the equities front, while U.S. stocks stand at historically high valuations, valuations in foreign markets are much lower, and that makes them attractive, says MarketWatch columnist John Coumarianos.

The S&P 500 index carried a trailing price-earnings ratio of 21.24 July 17, up from 19.54 a year earlier. And Robert Shiller's cyclically-adjusted price earnings ratio (CAPE) for the S&P 500, which includes 10 years of earnings, stands at 26.9. For months it has hovered at its highest levels excluding the pre-market crash periods of 1929, 2000 and 2007.

"If the current level of U.S. stock prices is concerning, consider leaving home. Other countries’ markets are offering compelling investment bargains," Coumarianos writes.

He includes data from Research Affiliates showing 24 markets that trade cheaper than the United States. That includes the United Kingdom, Japan, Germany, Hong Kong and India.

Coumarianos expressed particular enthusiasm for British stocks

"The U.K.'s current CAPE of 12.4 is low compared to the other countries and regions, and below its own median of 14.6 using data going back to 1969," he explains. Moreover, investors shouldn’t have to worry too much about currency exposure to the pound."

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