Retail Sales Not Such a Big Deal; Debunking ‘Full’ Employment
It’s amazing how a bull market changes everything. Just two months ago there was actually speculation that Geithner would be removed. Now happy days may, in fact, be here again.
Shorts sellers, I’m afraid it’s too early to pop the champagne. Retail sales have dipped negative during bull markets, as was the case in 2003-2007. In addition, we’re talking about really tiny percentages here. A 1/10 percent decline is hardly anything.
This selloff is merely a blip considering that the S&P 500 is still 34% above its low. We’re seeing a massive recovery on a global scale after what was a brief shock to the financial system and stock market back in September/October. A bad retail sales number is hardly sufficient to derail it.
Is Full Employment Good?
Macroeconomics may by the gloomy science, but it’s also the most counterintuitive because what seems ‘good’ from a sociological standpoint is actually ‘bad’ from a macroeconomic one. Here is a post from the Seeking Alpha online investing community of someone who falls for the fallacy of full employment:
When companies cut jobs they are usually cutting the jobs that are inefficient, which is called structural unemployment. Those are the jobs that cost the company more money to too keep on the payroll than is produced in return by the employee. The person who lost his job has the option of either applying for a government handout, improving his technological proficiency (so he find find a job that is efficient), or starting a business to provide services that people need. The first choice hinders innovation and creates inflation. The later two options enable the advancement of society through the development of new technologies. This translates into a higher standard of living, and rise in GDP.
What about buying things? Those who are in the upper echelons of society such as entrepreneurs contribute the most to consumer spending. According to Tobias Levkovich, Citigroup’s chief U.S. equity strategist,
Twenty percent of the highest-earning Americans account for 42 percent of consumer spending, while 20 percent of people at the bottom of the pay scale account for just 8 percent…They buy more expensive versions of the same product,
It is in the government’s best interest to create an environment that benefits the highest earners because they not only create most of the efficient jobs, but consume the most, too. They also pay the most taxes. That’s why Obama should consider, for example, offering tax breaks for companies that ship jobs overseas.
A high job turnover rate gives people an incentive to seek or create employment that advances society. As humanity progresses to a type 1 civilization the baseline unemployment rate will steady rise from 4.5% to double digits. Currently unemployment stands at 9%. It will peak at around 10%, but as the economy recovers the unemployment rate will only fall to around 6-7%, where it will remain despite whining from the welfare liberals about ‘jobless recovery’. However, this high unemployment will not have a detrimental impact on GDP or the stock market.
980 Target on the S&P 500
The following economic data is due this morning:
7:00 MBA Mortgage Applications
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:30 EIA Petroleum Status
None of these will have a negative impact on stocks because it’s either not a big deal and or priced in. The only data point that could move the market is retail sales, but those would have to be absolutely god awful to see any substantial selloff. As written in more detail here retail sales aren’t a very reliable indicator of overall economic heath. All bad news will continue to be shrugged off as stocks scurry up a very high wall of worry.
The huge funds that move the market aren’t going to be selling anytime soon. They are loading up on Google, Apple, Rimm, Mastercard and other smartist, globalist stocks that benefit from a falling dollar and modest inflation.
The technicals are still very bullish. Stocks have been consolidating for the past two days on lighter volume, and are due for yet another break to the upside. The more these doom and gloomers try
Anti-Bailout Crybabies Make Me Go ROFL
The following econ events are due this morning:
7:45 ICSC Retail Store Sales
8:20 Fed’s Lockhart speaks at the Atlanta Fed’s Financial Markets Conference
8:30 International Trade
8:55 Redbook
2:00 PM Treasury Budget
5:00 PM ABC Consumer Confidence Index
None of these will have a negative impact on the stock market. Buy all dips.
A blogger who shall remain anonymous posted this rant a couple months ago when the DJIA reversed an intra-day 250 point loss on news of government intervention.
It’s contradictory how these short sellers cry socialist whenever their positions goes against them due to bailout and stimulus initiatives, but extol the virtues of free market capitalism when they are successful. So it’s called capitalism when you money, but socialism when you lose money? LOL that makes perfect sense. No wonder these fools have such a large following and Prozac is a $10 billion/year drug…
But what about these banana republic crybabies? Here is a amusing rant by a seeking alpha author:
Was that an exaggeration? We will find out, but Obama has gone a lot further than any of his predecessors toward making America a banana republic. I spent part of the late 1980s and early 1990s globe-trotting with the notion that the Reagan economic revolution could be exported. My then business partner, the late Jude Wanniski, had coined the phrase ?supply-side economics? to characterize Robert Mundell?s economic recovery plan.
Banana or no banana I can’t complain. My Google, Mastercard, and Potash stock have been on a phenomenal rally for the past two moths thanks to the stimulus & bailout efforts of Geithner, Bernanke, and Obama. The economy is turning around, and the fact that I and others are making money hand over fist in this bull market can be attributed to capitalism. So I choose to make money instead of pounding the pavement over forces that are outside of my control.
CNBC and Fox Business news says there are no problems with te economy, as well as many analysts. Why can’t people understand that there is another perspective outside of the doom and gloom blogosphere echo chamber? Some people want the US economy and the stock market to do well. It’s good to present a balanced view so you can see both sides of an issue.
Take the ISM Index With a Grain of Salt
Is the ISM manufacturing index a reliable economic indicator? Maybe not.
The ISM manufacturing index dipped periodically below 50 in 2003-2007 signaling contraction, but the stock market nearly doubled in that period. That’s because manufacturing isn’t important because the United States is no longer a manufacturing nation due to the thriving export based service and intellectual property sectors. Such companies that are prospering in this transitional phase include Apple, Google, Mastercard, Potash, WallMart, McDonalds; leaders of the last bull market.
In 2004 the ISM index plunged from 62 to 52, but the stock market still had a positive year and there was no recession. It dipped below 50 by the end of 2006, but the S&P 500 gained fifteen percent year over year, anyway. The economy, meanwhile, grew at a blistering pace thanks to exports, plunging personal savings rate, and robust consumer spending.
This is why welfare liberals and protectionist libertarians who rely on sociology and demographics for their investment decisions will loose money by shorting into bull markets. Or they will substantially underperform the market by sticking their money in some sort of dollar denominated ’safe haven’. They interpret the loss of manufacturing jobs as being indicative of economic weakness when, in fact, it isn’t.
Although the recent gains in the ISM index is evidence that the recession ended in March/April, it isn’t a reliable indicator for measuring overall economic health.
P.S.
Can we stop dwelling on job loss? On chat broads and blogs we keep hearing about unemployment such. Those jobs being lost aren’t important. The recession can end long before the jobs start coming back, and high employment results in inflation and stagnant technological progress, anyway.
Even if the government is lying and the real unemployment rate were 18% wouldn’t it already be reflected in the stock market? You think the huge funds that move the market rely on government released statistics? No, because they have their own proprietary data gathering models.