Weekly claims for unemployment last week fell to a new post-recession low. This could be due to seasonal adjustment factors, which play a strong role in January, but it's more likely just a continuation of the downward trend that has been in place for the past four years.
If there is any message here for the markets, it's that there is no sign of recession; the economy is improving, and it's doing better than the market has been expecting. Short-term interest rates, guided by a Fed that is trying very hard to goose the economy, are most likely too low to be consistent with a long-term, stable-price equilibrium.
If there is a message here for individuals, it's that you want to borrow money now before it gets more expensive, and you want to move any cash you have on the sidelines into the market.
The SA initial claims were manipulated. The triumvirate of the Fed, Treasury, and Wall St. really needed to not let the S&P fall below the short term up trend line and the horizontal resistance line from the previous recovery high in which the S&P was squeezed with nowhere to go but up or down. It was fascinating to watch the past five days as they tried to get rallies going towards the end of the day. Each out-of-the-blue initial jump in price was never accompanied by an increase in advancing issues and hardly budged the up volume. Prices may fall again but their goal was only to breach this barrier. They are not in that much of a rush to have the market rally to new highs. Later this year will be fine.
ReplyDeleteThe unadjusted numbers were disappointing. For the first two weeks of January the claims are only down 67,000 compared to a year ago. As I said, January sees employment drop off a cliff. We just want to see a significantly lower fall than last year.
The Fed’s involvement in the housing market showed real good results today. Few will complain that central planning is bad as real estate and stock prices rise. Let’s just hope that the real economy keeps pace with this attempt by the central planners to create a wealth effect.
...so you mean buy Apple on margin?
ReplyDeletelet it boom. then the crash comes again. rinse, repeat.
ReplyDeleteFoodstamps allocation at all time high and you say the economy is getting better. I think you need to try other figures to base your judgments on.
ReplyDeleteThe number of Food Stamp recipients being what they are has absolutely no predictive power of economic activity, or the future prices of shares of highly profitable companies.
ReplyDeleteThe comments of Joseph Constable, Gloeschi, marcusbalbus, and Jim are emblematic of the huge number of "doubting Thomas" among public investors.
ReplyDeleteBull Markets climb a Wall of Worry - as everyone "knows" - but when we are in very worrisome times most investors can't detach themselves from the huge worries / problems long enough to remember that this is how it is during the early years of a Bull Market.
Most public investors - and professionals - don't understand that the time to fear the Markets is when there doesn't appear to be a cloud in the sky - like late 1998 and 1999. It is from those apparently trouble free periods that markets enter serious Bear Markets.
I would bet a lot of money that years from now when this Bull Market grows old, Joseph Constable, Gloeschi, marcusbalbus, and Jim will be up to their ears in equities, perhaps even on margin, just before the next serious Bear Market unfolds.
william, easier said than done to measure a time when "worry" is low. pros have tried and failed for decades and it's only the benefit of hindsight that allows us to do so. and btw, 1998 was most certainly NOT a time of low worry. remember LCTM?
ReplyDeleteWilliam makes a good point. One I agree with. Last night I had dinner with a buy and hold friend who said, “I keep waiting for the bad things to happen that I keep reading about but my account keeps going up”. Here is one guy who didn’t outsmart himself. I was just saying the initial claims were manipulated to finally push the market above resistance. I am all in. Moreover, I am trying to understand the relationship of reserves, M2, deficit spending, to the economy. This later pursuit is related to the world of my friends and family in the real world and what I am going to do when the current game ends and a new one starts.
ReplyDeletesteve said...
ReplyDeletewilliam, easier said than done"
That IS true! Bull Markets go on longer than most believe. Greenspan was publicly speaking of "irrational exuberance" as early as 1996. Jim Rogers was calling for a top in technology in mid 1998 when Microsoft came out with Windows and was advocating commodities by 1999.
But when many of one's friends are speaking enthusiastically about the stocks they own and mentioning "buy the dip" and CNBC talking heads are celebrating each 1000 point advance in the DOW and NASDAQ....well ??
Quite a different "feeling" or atmosphere than what one hears from one's friends today or what is being spoken of on CNBC. There is very little faith in the present market compared with the abounding faith near a Bull Market top. Thus the frequently expressed concerns and worries.