Overstated Job Growth, Understated Inflation
They Dow is down ~250, Nasdaq down almost ~100 as I type this.
As the excuses and mea culpas roll out over the next few weeks, pay close attention to the following nonsense:
Its not our fault; We relied on BLS for NFP data, and its apparent now it was wrong. The CPI data out of the government was also incorrect, that was where we were led astray.
What bullshit.
We have been pounding the table -- here, in print, and on the tube -- for several years. There is no excuse for ignoring the obviously flawed data series. You had to be living in a different world of to buy into that.
There was an alternative universe where the Job growth was robust , inflation benign, the Housing bust irrelevant, and the credit contagion contained. This universe was populated with pollyannas, perma-bulls, overtly political economists, and Wall Street cheerleaders.
In this alt. universe, Retail is fine, the economic boom was caused by the 2003 tax cuts (not Fed cuts), and the core rate of inflation was all that mattered.
This was Goldilock's house -- only today, she got her foreclosure notice . . .
Friday, January 04, 2008 | 04:00 PM | Permalink
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"This universe was populated with pollyannas, perma-bulls, overtly political economists, and Wall Street cheerleaders."
They all bow to their leader...Larry Kudlow.
My prediction the other day that this will be the worst year in S&P history (-43% in 1931) is off to a good start. QID up 12% YTD. Understatment of the year by Dylan Ratigan..."sub-prime may be starting to affect tech stocks"...starting? QQQQ way underperformed every index today. Many top QQQQ stocks have short ratios of about 1/2!!!! Short of a lifetime.
Posted by: Steve Barry | Jan 4, 2008 4:12:34 PM
BRAVO BARRY!
You (WE) are now about to earn a healthy amount of respect!
Posted by: Donny | Jan 4, 2008 4:14:23 PM
Barry:
I find your blog useful, valuable, interesting and even funny (I like the cartoons). So, please allow me, a random reader, to wish you a Happy New Year and thanks for your work.
Now, regarding today. The market is beginning to sober up. I think the next 12 months are going to even more volatile than the last.
At this point, the big wildcard is the government. Will they raise the limits for the size of mortgages that Fannie and Freddie can buy? Will Bernanke find another way to force-feed liquidity into the market? Where will this liquidity squeeze out into?
My big personal goal for 2008 is this: find a way to protect my principal from the market and monetary inflation. I have yet to find a strategy that makes sense to me.
Posted by: Mr. Beach | Jan 4, 2008 4:18:06 PM
I'm sure Larry Kudlow will have a complete and convincing explanation, just as soon as he takes off his aluminum foil hat.
Posted by: Uncle Jeffy | Jan 4, 2008 4:18:16 PM
Yeah, Kudlow is on TV now telling investors to stay in for the long run. Well as least he didn't tell us for the 10,000 time he was in the Reagan administration. Well, here is Billy hawking Mighty Putty. Closed my shorts, smoking a cigar now. Amen
Posted by: Innocent Bystander | Jan 4, 2008 4:21:04 PM
Let's not get too carried away with the "I told you so's". As we've discussed at length, the NFP number blamed for today's wailing and gnashing of teeth is almost certain to be substantially revised.
Confirmation bias lurks. Buyer beware.
Posted by: Estragon | Jan 4, 2008 4:21:06 PM
Amen brother BR! Your readers know you rang the alarm; unfortunately too few listened.
And mega-lol@Goldilocks ... um, when is your next Kudlow&Co appearance?
Posted by: v | Jan 4, 2008 4:21:14 PM
Da pravda, I echo you disgust and salute you tovarisch!! UHRA.
Posted by: Ross | Jan 4, 2008 4:21:44 PM
BR,
Though the writing has been there on the wall for quite sometime, somehow the markets are not reflecting it. The Dow was in Mid 13Ks just last week. Repeatedly the market has defied the logic that is usually displayed on this blog.
I am just wondering if we are about to start the whole cycle yet again. You know some new phoney measures during the weekend, crude slipping back a little, the whole talk shifting to the next FED cut etc etc etc...
Would this time be different?
Posted by: pj | Jan 4, 2008 4:27:16 PM
Barry,
I hope you use that line on Kudlow!
"Today, Goldilock's got her foreclosure notice!"
Great Line
Posted by: jab | Jan 4, 2008 4:29:35 PM
Tremendous technical damage today...QQQQ below 200day EMA...Dow below the number they gave late Nov for Dow Theory Sell Signal. And the 10 day put/call actually fell to a bit today to .93!! No progress made to a sentiment bottom. This is just starting folks.
Posted by: Steve Barry | Jan 4, 2008 4:30:47 PM
Retest of the November lows with divergences.
Classic buying opportunity.
IMHO.
Posted by: muckdog | Jan 4, 2008 4:34:41 PM
come on guys, its too soon...we are supposed to get a oversold bounce on monday...
and maybe next week...there will be rumors that FED will cut 50 pts this time, and the markets will rally again.
but it will be great to sell to the 50 pt cut rally....i wish they go 10% higher.
after the FED rate reaches 2%, maybe then we will get a chance to short it, sit back and relax...
but does anyone know whats going to happen since the central banks are giving out unlimited credit to the banks to ease the credit market...
are the banks simply going to invest as they please and not lend to each other, defeating the primary purpose..
btw isnt credit freeze supposed to be improving??
Posted by: techy2468 | Jan 4, 2008 4:37:08 PM
Also related On Topic discussion question (MS, Eric D, anyone):
It seems highly likely that as the bad news continues towards the end of the month, the probability is high that Bush&Co will make a push for a corporate tax cut. It will take some time to get done as the Dems will make sure they get what they want out of it as well (i.e. it won't be a complete corporate bail out), but it seems highly probable this will get major play in this election year.
So my question is (if a corporate tax cut does occur) how will this affect the market? Dollar takes a hit? Financials will likely get a sweet deal? Will a corporate tax cut truly spike corporate spending/capex? And won't any effect of something like this take at least months to see any real, significant results?
Posted by: v | Jan 4, 2008 4:38:18 PM
stve barry;
dont you have a blog. i am new into investing/trading, your insights look very interesting to me.
i was under the assumption that we may get a bounce on monday due to the oversold conditions?
particularly in darling of the masses stocks like Apple, google and RIMM
Posted by: techy2468 | Jan 4, 2008 4:48:26 PM
You tell 'em, Barry!
On your next TV gig, maybe you can inform the pundits about the 3-step program to cure Goldilock Syndrome:
1) Stop drinking the Kool-Aid.
2) Put down the glass of Kool-Aid.
3) Step away from the Kool-Aid.
Posted by: Will T | Jan 4, 2008 5:03:18 PM
Techy,
I may start a blog, thanks for the encouragement. Of course you could get a bounce anytime for any number of reasons. but as a new investor, I suggest you read this blog of course and John Hussman's site (his weekly commentary and hester's pieces). Hussman said last summer this was one of the worst times in history to be in stocks and I agree. If there is anything to shy you away form tech stocks, it is the fact that volume on down days has dwarfed volume on up days since last May. Volume , after price itself, is the surest technical measure. The other thing I have mentioned is short interest on names like GOOG, AAPL, INTC, CSCO, RIMM are at ridiculous lows...this indicates overly optimistic sentiment. Tech is NOT immune to this fopr reasons I gave the other day. On a macro level this chart is scariest of all...a debt bubble that dwarfs the 1920s.
http://www.comstockfunds.com/files/NLPP00000/292.pdf
Posted by: Steve Barry | Jan 4, 2008 5:04:19 PM
"There was an alternative universe where the Job growth was robust , inflation benign, the Housing bust irrelevant, and the credit contagion contained. This universe was populated with pollyannas, perma-bulls, overtly political economists, and Wall Street cheerleaders."
Good paragraph.
The tough question now is the appropriate degree of pessimism (a little or a lot).
Posted by: odograph | Jan 4, 2008 5:10:38 PM
Retest of the November lows with divergences.
Classic buying opportunity.
IMHO.
Broke 'em. Closed below. Sorry.
Posted by: Alex Khenkin | Jan 4, 2008 5:11:00 PM
As to an oversold bounce on Monday
We've already been to these levels 3x, if the DOW Bear confirmation is accurate shouldn't we see a route to the 12.5 /1380 level before any kind of relief rally commences.
Posted by: Stormrunner | Jan 4, 2008 5:13:43 PM
Thank you, Barry,
for being an internet pioneer of a different style of economic analysis.
Posted by: Paul Jones | Jan 4, 2008 5:17:04 PM
I mentioned in another entry about the President meeting with the PPT today. This from Comstock Funds yesterday:
As if to give emphasis to our negative outlook, it has been announced that tomorrow (Friday) President Bush will, for the first time, meet with members of the President’s Working Group on Financial Markets to discuss the current financial and economic situation. This is the formal name for the so-called Plunge Protection Team that was formed by President Reagan following the 1987 market crash. Its stated purpose was to prepare to deal with a serious credit or market crisis that could significantly impact financial institutions and the economy. While we understand that the team has met periodically with no announcement, we are unaware of any president ever meeting formally with the group. We think they view the current financial and economic situation with alarm—and so should you.
Posted by: Steve Barry | Jan 4, 2008 5:26:49 PM
To the poster above looking for a way to preserve capital and fight monetary inflation, check out JJA.
Posted by: Eric Sebille | Jan 4, 2008 5:30:28 PM
Great post Barry,
I'm ready for the big inflation
(as if we never had inflation) !!!
just don't be holding USD while Bernanke
gets ready to print more.
Posted by: rickrude | Jan 4, 2008 5:40:00 PM
Nicely put Barry. We all know this is bullshit. My 90 yo grand mammy and her cougar friends knew it was bullshit. The Pigmen know it's bullshit. Knowing that they know we know and yet they talk out their ass reminds me of Ken Lay or O.J. Simpson.
Let them talk their bullshit because all it does is make them look stupid like Paris Hilton or Jessica Simpson stupid. No one with any brains really takes Kudlow or Cramer seriously,...seriously??
Fact is this whole scenario has been baked in and the Pigmen have figured on a workout when the shit hits the fan. No doubt. Unfortunately we all know it never works out as planned and me being the J6P supermodel I am, I going to look for every opportunity to stck it to them. Fly in the ointment so to speak.
Party On Barry!
Posted by: ken h | Jan 4, 2008 5:56:35 PM
