Friday, October 5, 2007

Today's Jobs Number

Posted by TraderMark at 10:37 AM TweetThis
Personally I am a bit confused why the market, which was (in large part) rallying on continued future Fed cuts is so happy with a jobs number (along with massive upward revisions to previous numbers), that in theory should help build the case that more rate cuts are not needed. But I have stopped trying to figure it out as this is a market that just wants to go up on any news.

I guess this might mean that whatever the economic data the smart money is betting the Fed will keep cutting rates and find some justification for doing so - if not jobs numbers they will find something else. Strange, but applying logic to an emotional beast is many times fruitless.

What worries me is there appears to be no fear in buying anything anymore (i.e. the market is 'destined' to go higher)... the contrarian in me continue to whisper that this cannot be good, but a trend can remain a trend until it no longer is one, and if one just came off the street without knowing anything else and just looked at the stock charts of the indexes you'd be pretty bullish. So I am taking that tact for now... and the market is climbing my wall of worry ;)

Posted by TraderMark at 10:37 AM Comments (6) | Edit This Post | Create A New Post

6 comments:

msb said...

Well, the number of new jobs was slightly higher than expected, but overall unemployment is up. Good headline news while at the same time, still possibility for cuts.

October 5, 2007 11:25 AM  
msb said...

Did you see the Fed vice-chairman's comments today?

"Pending further evidence, a 50 basis point easing was not an unreasonable first approximation of what might be required to keep the economy on a sustainable growth path.

With the news on inflation relatively favorable of late and with inflation expectations seemingly well anchored, I believed that we would be able to offset the cut in the federal funds rate--if it turned out to be larger than needed--in time to preserve price stability"

Articles commenting on this statement are highlighting that he's suggesting a rate reversal is possible, which is interesting to read in this environment.

So, will the job report be a case of 'good news = bad news' or will 'any news = good news' be the prevalent sentiment now?

October 5, 2007 3:21 PM  
TraderMark said...

No I missed that msb. That is why you are here, you are part of my pseudo analyst team hah.

So he is implying a switch to take back the 50? I have said this will need to be done if they ever get their butt out of the CPI data to see the real economy. I.e. slash rates, do the bailouts, steady housing for a year, than a quick reversal and take rates back up in the face of rising inflation but I thought this would play out over say 12-24 months depending on things. My worry with this scenario is if the Fed is truly married to CPI they will "never" see inflation as rising.

If this governor is signaling this type of reversal could be sooner I'd think thats very bearish for the market? But one could argue, well the Fed thinks the economy is so strong it can now reverse the decision and go back to tightening. However to base all that on 3 weeks of data would be a big stretch by investors. After all things were so dire in mid Sept we needed a 50 basis point cut. How could a mammoth economy like the US turn on a dime?

Now don't call me a conspirisy theorist but doesnt it seem too convenient that we had a 4k loss of jobs causing a panic and a 'need' to provide cover to cut rates drastically, and then once the deed is done, we reverse that -4k to +80 K not 4 weeks later? Hmmm...

Anyhow 1 report doesnt mean anything and who knows what *THIS* number will be revised to in 4 weeks. All these govt reports are pretty useless. I will stick to what the companies are saying, i.e. same store sales and such to get a true read. Target and Lowes didnt come out today and say everything is cool did they? ;)

October 5, 2007 3:41 PM  
TraderMark said...

one more thing
didnt the fed governors signal a strong economy and at most a 25 basis point cut going into the last meeting? for the 2 weeks going into it? Didnt they set up the shorts really badly - talk down expectations and then a surprise magnitude cut. At this point I don't trust the 'words' of this Fed anymore with their recent history. They seem more interested in goosing the market than anything else. 2 surprise moves back to back to demolish shorts. Who knows what the agenda is. All I know is inflation is there and its real. If the Fed cares anymore who knows.

October 5, 2007 3:43 PM  
msb said...

You should read his comments in full, reasonable I think. He says inflation appears tame but they are concerned about continuing pressures. It's a good read.

Also, the Dallas Fed head today said (how's that rhyme) that energy and food prices could be a sustained increase not just a blip. "increases in food and energy prices over recent years could represent “longer-lived trends rather than transitory blips”. If this was the case “the arguments made for excluding food and energy prices” from core inflation, the Fed’s traditionally preferred measure, “would be on shaky ground”." Of course, he's pushing his own measurement metric, but he's making a good point at least.

October 5, 2007 3:54 PM  
TraderMark said...

Hopefully he is a voting member ;)
Again Greenspan even said it in his book so its not like they are not aware of the long run issues here. We do not have enough natural resources for a modernized urban globe. We had enough for 25-30% of it to be urban and modernized. We are moving to 60%+ (more?) in the next 10-20 years.

Hopefully we have some major technological breakthroughs to ease some of these strains - my worry is since man has been man one thing they have always fought over is resources and territory. And in a world where resources become even more valuable... hmmm... again looking out 15-20 years on those topics. We can get rich in the meantime so we can build our fallout shelter ;)

October 5, 2007 4:30 PM  

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