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How’s the U.S. economy doing?
Although you couldn’t tell from the muted reaction of the stock market,
yesterday’s headlines were as discouraging as we’ve seen in a
while. For starters, the supposed recovery generated a feeble 119,000
private-sector jobs in April — less than half the number required to recoup positions lost during the worst years of the still-potent
Great Recession. The usual bunch of “experts” had
“expected” 175,000 new jobs, but even with seasonal adjustments
and some other statistical hocus-pocus, the Guvvamint’s
able spinmeisters failed to deliver the kind of
numbers that get incumbents re-elected. There was also news that factory
orders in March fell 1.5% from February. Although this datum reportedly was
in line with expectations, it hardly supports the Recovery drumbeat that has
been growing louder and louder with each passing week.
So loud, in fact, that it has prompted
speculation that the Fed might raise interest rates in, um…2014. This
is the kind of idiotic blather that gives the mainstream media its comic
appeal. We can understand why Bernanke and the White House would want to put
the story in play, and why a lazy, economically ignorant press would eagerly
swallow it like a fish tossed to a trained seal. The story is intended to
make all of us rubes think the Fed actually believes its own story that the
economy is recovering. If this were true, however, why would They wait until
2014 to put a lid on inflation? Managing expectations is all the bankers are
trying to do, of course, but sometimes the way in which they do it feels so
clumsy that we can be forgiven for thinking that Bernanke and The Powers That
Be take us all for fools. As for the notion that the Fed is planning to raise
interest rates: Yeah, sure. The idea that the Guvvamint
would subject a bazillion dollars of debt (and growing) owed by all of us
— and by itself — to higher interest charges is so outlandish it
doesn’t even warrant discussion. As Bernanke surely understands, a mere
25-basis-point tightening now, or in two years, could trigger a deflationary
collapse that would leave the financial system and global economy in ruins
for a generation.
Europe in the News!
Meanwhile, the stock market only wants
to go higher, and damn-the-torpedoes. Weighing on the broad averages
yesterday — although not on the U.S. dollar — were a slew of
despairing dispatches on Europe’s slow-motion crack-up. There are now
seven countries officially in recession, and unemployment throughout the
region has risen to a post-euro high of 10.9%. Unemployment is rising even in
Germany, which will find it increasingly difficult to avoid recession with
its main trading partners sinking into an economic quagmire. Needless to say,
anyone who began the day worried that such concerns might knock Wall Street
for a loop must have felt relieved by the close, since the stock market took
the news easily in stride. The Dow Industrials settled just 10.75 points
lower and were never down more than 75 points. One might infer that investors
are confident that the U.S. economy will keep chugging along even as all of
Europe and a growing swath of Asia slip into recession. In actual fact, with
the most spectacular credit expansion in the history of the world still in high
gear, stocks are unable to go down more than momentarily, so pumped are they
with the gaseous exhalations of the central banks. For all of you permabears whose hopes spring eternal, however,
here’s our rally target for the E-Mini S&P futures: 1439.50. Although
we can’t guarantee that’s where the Mother of All Bear Rallies
will end, we’ll be shorting there aggressively ourselves — albeit
with very tight stops – if the opportunity should present itself.
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