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The stock market
shrugged off appalling jobs data on Friday to close higher, much as we might
have expected. Although Beadledom’s best and brightest had
been looking for unemployment to remain unchanged at 9.6% for November, it
actually jumped to 9.8%, at least according to the official tally. (Shadowstats’ John Williams has offered convincing
evidence that the true unemployment number is above 20%.)
It was also announced that employers created just 39,000 jobs in
November, down sharply from the previous month. Stocks initially fell on the
news, but bears were easily repelled by the so-far invincible OPM/QE2
juggernaut in the opening minutes of the session. At their most fearful,
sellers managed to push the Dow down only 43 points. The broad averages
oscillated tediously for the next six hours, presumably until there was not a
single seller left; then, they lurched higher to finish with the best rally
of the session, achieving all of the
day’s gains in the final fifteen minutes of the trading week.
Over the weekend,
pundits would undoubtedly focus on the stock market’s amazing
resilience in the face of such awful news. No doubt similar behavior was in
evidence in the staterooms and parlors of the Titanic when it was first
learned that the ship had struck an iceberg. Statistically-minded bulls may want
to make note of the fact that the Dow would hit 35000 sometime around August
2014 if it continues to rise at Friday’s pace.
More immediately, as we
implied here in an earlier commentary, stocks are almost certain to continue
higher for the remainder of the year. Short-covering opportunities are
becoming increasingly scarce and may have dried up altogether on Friday with
the revelation that beastly unemployment data is not enough to lessen the
relentless flow of OPM/QE2 into shares.
What
If…?
If there was any chance
of a respite for bears, it was thought to lie in the fate of tax breaks
originally enacted under President George W. Bush. Some pundits said that if
the abatements were not extended beyond December 31, when they are due to
expire, the stock market would crash. To be sure, if an extension is not
enacted, that would automatically usher in the biggest tax hike in U.S.
history – just the thing to power us out of the Great Recession.
However, much as we’d like to believe that such fears might impel
Congress to extend the tax breaks, including for the alleged
“rich” with incomes exceeding $250,000, we doubt that anything
short of a global nuclear conflagration or an eruption of the Yellowstone
caldera will discourage institutional buying of U.S. stocks. Although we
don’t foresee much of a rally, the likelihood that the Dow, which ended
the week at 11382, will finish the year above 11000 seems almost beyond
conjecture. We expect the blue chip average to trade as high as 11600 in the
meantime, but to finish somewhere in the range 11250-11350. If so, it would
represent a gain for the year of a little more than eight percent. Not
bad, considering the economy remains hopelessly mired in the worst
recession since the 1930.
Rick Ackerman
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