Dow flirts with 12,000 while unemployment and consumption surprise negative
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(snip)[ Official U1 Unemployment Stat - sic ] Expectation of 405,000... Print: 454,000! Worst print in forever (well, October).
The BLS calls it a "weather related backlog." Read - snow. Call it what it is - Stagflation, baby.
Non-seasonally adjusted number came at 482,399, as 161,913 people fell off extended benefits.
Continuing claims: 3,991K on expectations of 3,873K.
And just to complete the stagflationary picture, durable goods decreased by 2.5% on expectations of plus 1.5%, down from -0.1%. "This decrease, down four of the last five months, followed a 0.1 percent November decrease. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders decreased 2.5 percent."
Note the level of deterioration: durables down from -0.1% to -2.5%, durables ex transportation to 0.5% from 4.5%; Orders non-defense ex aircraft: 1.4% from 3.1%... Bloodbath. (snip)
At the very same time this news is being released, the Dow is flirting above 12,000 . There isn't any rational explanation for this other than the fact that 'weak hands' are rotating from commodities to stock shares.
Re: Dow flirts with 12,000 while unemployment and consumption surprise negative
ahhh ... here's the 'rational' explanation ...
(snip)M2 Surges By Biggest Weekly Amount Since 2008 As It Hits Fresh All Time Record
Desperation kitchen sink anyone? The M2, which up until now was merely diagonal, is about to go parabolic. In the week ending 1/17/2011, Seasonally Adjusted M2 surged by $46.6 billion, the biggest weekly increase in the broadest tracked monetary aggregate (ever since the cost-cutting associated with discontinuing the M3) since 2008. One look at the chart below indicates precisely what is fueling the endless market ramp.
http://www.zerohedge.com/sites/defau....27.2011_0.jpg
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The obvious implication is that as the FED continues to print up brand new dollars out of thin air, and passes them to the primary dealer Wall St. banks, those banks in turn are choosing to invest at least a portion of those newly printed dollars via prop desk purchases of stock shares on the banks' own behalf ( instead of lending those newly printed dollars to private sector businesses and individuals ). This further implies that the banks consider the embedded loss risk of the shares in US companies they are buying to be significantly lower than the loss risk involved if that money had instead been lent to US small businesses and/or individuals.
This is actually a logical conclusion given that the valuation of stock shares in large US companies is buoyed by significant profits stemming from overseas vs domestic activities / earnings, while the repayment of small business loans and loans made to individuals are almost completely based on domestic activities / earnings alone. Additionally, as FED money printing drives down the international exchange rate of the US dollar, large US company foreign earnings denominated in euros or rubles or reals automatically 'grow larger' !
I guess the point of globalization has now arrived where the Dow companies index should be treated as a de-facto 'international' fund !
~
Re: Dow flirts with 12,000 while unemployment and consumption surprise negative
Quote:
Originally Posted by
Melonie
At the very same time this news is being released, the Dow is flirting above 12,000 . There isn't any rational explanation for this other than the fact that 'weak hands' are rotating from commodities to stock shares.
Bear market rally, happened even in the Great Depression. Google "The great depression and today" & "The Federal Reserve is not Federal" lots of reading, enjoy.
Buy gold & silver bullion coins, secure your wealth today. ;)
Re: Dow flirts with 12,000 while unemployment and consumption surprise negative
^^^ indeed bear market rallies do exist. The old adage 'the market can remain irrational longer than the investor can remain solvent' is as true today as it was in the 1930's.
Also, as you allude to, there are a number of other 'unconventional' market movers that play a part in such bear market rallies then and now. Among them are inflows of hastily liquidated foreign investments ( then Germany now Egypt ), 'carry trade' currency action ( then Marks now Euros ), the ever helpful devaluation of the US dollar ( then versus gold now versus damn near everything ) , FED 'injections' of freshly printed US dollars etc.