Posted on 05/07/2013 6:41:42 AM PDT by blam
The US Economy Is The Envy Of The World Again, And Just Like That The Bears Have Been Annihilated
Joe Weisenthal
May 7, 2013, 4:44 AM
Just two and a half weeks ago, the bears were starting to feel good.
Markets around the world seemed to be rolling over. Commodities were falling. People were talking about deflation.
And then, the market turned, and then we got Friday's strong jobs report.
Now the market is back to making new highs again, and the market bears are crushed.
A new note from Olivier Korber at SocGen is titled "US payrolls annihilated 'sell in May.'" Basically, whatever temptation there was to dump risky assets starting in May (as the cliche goes) has been sapped.
Separately, Steven Englander of Citi wrote yesterday:
The implications of the payroll release for FX is that the US is back on track as an outperformer (admittedly modest, but still standing out) in a world of underperformance, From a Fed perspective labor market improvement since last year has been steady but clear, with household and payroll employment and aggregate hours converging to a 1.5% y/y gain (Figure 1, upper panel). This is probably at the low end of what the FOMC core would consider acceptable.
This idea of the US being the one country that you "must own" was a huge theme in markets during the first quarter. Everyone sensed that the US was going towards liftoff, and that regardless of whatever else, exposure to the US was a must.
The same takeaway was offered from trader Mark Dow, who tweeted yesterday.
For now, the US is back to being the envy of the world.
(Excerpt) Read more at businessinsider.com ...
Agree with that. Well put.
There was a recent IBD article highlighting how this recession's hitting the young harder than the old. Given voting trends of age groups I can understand how this would reflect in elections.
That's absolutely right and we do well to keep it in mind when we look into this stuff.
If the purpose of QE isn’t to inflate the market, then what is it?
Rush Limbaugh was saying that a while back so you're in good company. Looking at QE and equity values--
-- one time QE made equites go up, another they went down, and still another they stayed flat. So some of us are seeing QE goosing the market, and the rest of us don't.
QE doesn't ensure rising stock prices, just higher stock prices than where they would be otherwise. In short, the bottom of the dip is still propped up by QE.
Think of it like this. If another billion barrels of oil start getting purchased every year to go into a stockpile somewhere, that isn't going to ensure that oil prices never dip going forward, but it will mean that they remain higher at all points than they would have been otherwise.
This is where I get left behind.
For me, measuring things that exist is hard enough and pinning down could-have/should-have/would-have is just more trouble than it's worth. Let's all enjoy our own private cherished opinions knowing that no proof exists for or against.
If you don’t think QE is bolstering the market, can we then agree that it should be terminated post haste?
Yes, but there is not enough of those. Think of how Montana, which put its faith in high tech jobs, and forsake resource jobs, now has one of the highest unemployment rates.
If only.
Terminating QE can mean more than one thing.
There've been at least three different 'QE's not counting the 'twists'. One part of the first one had the Fed buying a bunch of private bonds and then later selling them. You can't mean we should say, 'un-sell' the bonds (buy them) and then proceed to 'un-buy' them (sell them). Same with the other parts of the other QE's. If what you mean is we should stop doing and more QE's right now then well, we're not doing and of them right now.
If what you're really saying we should abolish the entire federal reserve then please really say so in plain English.
$85 billion a month is being created by the Fed. The pure intent is to reduce the banks debts by dilluting the dollars value (ditto for the Treasury), provide the Federal government below market rates, and fluff up stocks. If that isn’t the intent/effect of the current influx, then what is?
Money supply is supposed to reflect wealth creation in order to support liquidity and prevent deflation. When money supply exceeds wealth creation, it is destructive to the value of the dollar.
Right now, money supply creation is vastly exceeding wealth creation.
Decreasing the value of the dollar can be expected to increase the price of stocks first (forecasting) and goods later. You and others appear to accept only half of that equation.
So what do you think would happen to the market tomorrow if the Fed stated “No more QE, starting today”? Would the market continue to rise? If its not based on QE, why not?
There are no free lunches and excessive money supply has an ugly price.
My thoughts too. If our economy is the envy, I hate to see the rest of the world.
5.56mm
For me, measuring things that exist is hard enough and pinning down could-have/should-have/would-have is just more trouble than it's worth. Let's all enjoy our own private cherished opinions knowing that no proof exists for or against.
I've been thinking about that reply for awhile, and I think you owe it to yourself to think harder. It isn't a difficult connect to make, just supply and demand.
1. The Fed has increased demand by increasing the money supply. If you disagree, where is the $85 billion a month going?
2. Increased demand leads to higher prices. I presume you will accept that premise without further argument.
3. Increased prices caused by increased demand are not linear, as many other variables come into play.
Real world example: Ethanol subsidies. The demand and price for corn per bushel is much higher now than it was before Ethanol subsidies due precisely to the extra demand created by those subsidies. No one questions this. But if you look at the price of corn since the beginning of subsidies, you'll find that it still goes up and down, just as it did before, but at a higher level. If congress announced tomorrow that all ethanol subsidies were to be halted immediately, the corn market would collapse.
QE is to the greater market just what ethanol subsidies are to the corn market. This is not a mysterious, incalculable effect. Subtract $2 trillion of buys out of the market and what does it look like?
The Fed has laundered Main Streets wealth via QE into the hands of Wall Street, and we're supposed to be happy about that.
Sounds like you're super unhappy with that.
Personally, I already got enough things I don't like thank you so my focus is on what makes me happy, and while I already like most things about America there are in fact a few changes I'm working toward. First tell me if there are any policy changes that you'd be happier with --things that you'd want more of or new things you'd want to see starting up.
Unhappy with government overreach and wealth redistribution? Yea, I'm unhappy with that.
Personally, I already got enough things I don't like thank you so my focus is on what makes me happy, and while I already like most things about America there are in fact a few changes I'm working toward. First tell me if there are any policy changes that you'd be happier with --things that you'd want more of or new things you'd want to see starting up.
I'm not sure I understand your point. Things I'd change? I would let free enterprise be free enterprise and stop trying to manage it from the top. The business cycle happens and should be allowed to happen. The government should not attempt to manage unemployment with the money supply. The money supply should be based on matching wealth creation, and the GDP should not include government deficit spending.
My focus goes well beyond, "what makes me happy".
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