Barron’s Alan Abelson notes what the Bears have observed and the Bulls take for granted: Bad news is good; Good news is good; In fact, its all good:
"WE’RE IN THE MIDST of one of those aberrational stock markets that treats everything that happens as bullish.
Good news, such as the revised employment data, is bullish because it signals a strong economy and more of the sparkling corporate earnings we’ve seen these past few years. Bad news, like the weakness in retail sales, is bullish because it will keep the Federal Reserve from lifting interest rates. It’s like being in a bar with a perpetual happy hour.
With their minds and sensibilities numbed to everything but the lure of capital gains, investors are impervious to the various and sundry calamities and eruptions wracking this old planet. The prospect that bloody Iraq may split into three even more bloody parts doesn’t rate a passing thought. News of North Korea’s nuclear bomb test had as much impact on the collective investment psyche as an autumn leaf settling ever so gently down to earth. Even the growing likelihood that the Democrats will take control of one, conceivably even both, houses of Congress and be in excellent position to commit all manner of mischief, evokes, at most, a so-what from the average man in the Street.
Mind you, we’re not complaining, but simply marveling at such admirable insouciance. And, who knows? Perhaps this cool philosophical attitude, a kind of postmodern stoicism, has something to be said for it. After all, bad things are always going on somewhere in the world — and the world, last time we checked, was still here. The most anyone ever gets pulling his hair out worrying about the way the world is spinning is bald."
Well said (of which, the modern equivalent is "True dat").
UP AND DOWN WALL STREET
Barron’s October 16, 2006
Another edition of our new series: Blog Spotlight.
We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
Next up in our Blogger Spotlight: James Picerno is the editor of The Capital Spectator (capitalspectator.com), a blog focused on economics and investment
strategy. He is also a senior writer for Wealth Manager, a trade
magazine for financial advisers to wealthy individuals. He has been a
financial journalist since the late-1980s.
Today’s focus commentary looks at:
The head of the self-proclaimed "authority on bonds" says the rate hikes are history. PIMCO’s Bill Gross wrote in his October Investment Outlook that "the Fed is done and ultimately will have to lower interest rates in order to restimulate an asset based/housing led economy that has been its primary growth hormone in recent years."
The underlying assumption in his projection is that inflation is "leveling off" and the economic growth rate is "moving towards a 2% real growth rate or less in the next year or so…." As such, the Fed "at some point in 2007 will be forced to cut short rates." Timing and magnitude are yet to be determined, he adds.
In fact, the future may be more complicated than it appears. Economist Robert Dieli of NoSpinForecast.com documents the finer points of this complexity by plotting the history of economic cycles against instances of inverted yield curves. As he illustrates in the chart below (which, alas, we’ve squeezed a bit from the original to fit into the confines of CS), there’s a lengthy history of yield-curve inversions accompanying economic contractions and a drop in the Fed funds rate shortly after the yield inversions arrived. But that doesn’t mean the past is prologue, at least not a prologue that’s clear and obvious.
Category: Blog Spotlight
This is another of our new features: Blogger’s Take. It is inspired by — a nice word for stolen — the WSJ’s Economist’s Take, which they post after major economic data releases.
We wanted to do something a bit more informal: Looking at different subjects a bit more in depth, and take in some perspectives from a broad variety of bloggers (as opposed to a narrow slice of Wall Street Dismal Scientists.
Here are our first half dozen responses to the question: "What Up With Employment?"
"A striking characteristic of the US non-farms job data since the trough of 2002 is that recovery growth is the weakest since records began in 1939 (uncertain BLS September revision notwithstanding). Even the brief and frail recovery between the 1980 and 1981 recessions was stronger. It may be that growth has not yet peaked – but that would make this jobs recovery the slowest to pan out on record.
Moreover, the latest non-farm payrolls data paints a picture of deterioration, particularly in construction and related industries. Whilst both the unemployment rate and hourly earnings data stuck out as good news, the fact is they are lagging indicators. The Fed has ammo to hold on this data; but should coming months show job losses (not outlandish) they might still choose to wait on clearer inflation (and BLS) data before contemplating the wisdom of cuts."
- Rawdon, Capital Chronicle