Friday, November 05, 2010

Wall Street mocks unemployed Main Street

Following on from the last two posts, Equal opportunity destroyer and Bernanke: Rising stockmarket = economic growth are a couple of data points on the day:

US weekly jobless claims rise more than expected
U.S. initial jobless claims rose more than expected for the the week ended Oct. 30, matching the levels reached at the end of 2009.

Jobless claims rise, but equities, metals shrug off losses
Commodities futures traders and brokers managed to shrug off a less-than-stellar jobless claims report on Wednesday morning, and both stock index futures and precious metals futures were looking bubbly.

For the week ending October 30, the advance seasonally adjusted unemployment claims figure rose 20,000 to 457,000, up from the previous week's revised figure of 437,000. That breaks a recent positive trend in the job market, where unemployment claims appeared to be falling - but with the Federal Reserve set to inject $600 billion into circulation by buying Treasury bonds, markets didn't appear to be bothered.

Jobless Claims up, Productivity Caps Inflation
New U.S. claims for jobless aid rose last week and a strong rebound in productivity in the third quarter showed employers wringing more output from current workers rather than hiring.

"The big picture is that firms are trying to squeeze every ounce out of the workers they have and this is one reason they feel no need to hire," said Cary Leahey, an economist at Decision Economics in New York.

Jobless Claims Cut Through the Noise
Lack of jobs is retarding consumer spending, helping to jeep housing the doldrums and creating great skepticism about the supposed recovery and the stock market.

The economy is in very weak shape; housing inventory equals eleven years of sales at their current pace and nine million mortgages are in default or in the process of foreclosure, about 28 years worth of inventory at the current pace of sales; the coming austerity in Europe and budget pull backs in the US guarantee a recession by mid year next year; corporate profits are going to hit a wall in 2011.

Traders, of course, are following a new mantra on Wall Street:

If economic data is bad, go long, the market will go up because Bernanke will keep the printing presses on. If economic data is strong, go long, the market will go up because corporate profits will be great in 2011.
Fed sparks world stocks buying binge
"What you achieve with quantitative easing is that you signal to investors not to buy U.S. government securities, take the money elsewhere, which in turn will weaken the dollar and spur economic growth," said Axel Merk, president and portfolio manager at Merk Investments in Palo Alto, California.

"The Fed in my view is trying to debase the dollar because printing all that money is not going to spur growth on its own. The risk is that the money doesn't stick and it doesn't go to where it's supposed to go," said Merk, who runs the company's $500 million currency mutual fund.

See, The Fed’s Big Gamble

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