WASHINGTON, May 8, 2013 — The Dow Jones Industrials ($DJI) blasted through another milestone Tuesday, closing above 15,000 for the first time only two months after recovering the last of its losses from the 2008 financial crisis.
Good economic reports, strong corporate earnings and fresh support from central banks helped ease investor concerns about another economic slowdown. Many had been on the lookout for signs that a spring swoon would derail the rally, as has happened in each of the past three years.
Instead, the Dow continued its epic ascent of 2013, which has seen it climb 1,952 points — almost 15 percent — since Jan. 1. However, futures are looking iffy this morning, and it’s possible that at least a little breather is in order. We continue to favor a strategy of selling profitable positions whenever the market spikes. Stock rotation, such as it is lately, seems to be moving from safe areas like utilities and consumer staples into riskier financials and industrials, but we’d be very cautious establishing new positions here.
Analysts have been attributing the stock market’s 2013 sharp-angle ascent to “investor confidence.” But, more likely, it’s due to the Federal reserve’s almost constant injection of money—part of its current QE (quantitative easing) infinity program.
Financial journalists are trumpeting the fact that the market’s record Tuesday close extends the its comeback from the depths of the financial crisis that began to surface in late 2007. Both the Dow and the S&P 500 reached all-time highs earlier this year, then kept rising, largely driven by optimism that the U.S. economy will keep gaining strength.
But the fact is that the market debacle of 2008-2009—including the massive crash of March 2009—has only now been erased offering a pyrrhic victory to the average American at best. After all, what this really means is that those who still have savings and jobs have just gotten back to even, more or less, in 2013. And that’s assuming they’ve met or beaten the averages. Stasis over a four to five year period, added to continuing though minimal inflation, means that everyone except Wall Street’s fat cats is still behind and still losing ground.
Judging from their performance this year, commodities, and most particularly metals and construction materials have been in the doldrums, price-wise, ample evidence that the U.S. and other Western economies—in addition to basket-case Japan—continue to flirt with deflation, as incredible as it may seem. Even though U.S. cost-of-living figures are more than a bit gamed, even figures that would include volatile food and fuel prices in the monthly averages would still look relatively tame.
As fun as this wobbly bull market has been thus far, seasonal patterns still look for a pre-summer downturn this month. But Helicopter Ben Bernanke and his endless moneybags raining down on Wall Street are keeping stocks up and forcing investors (or those who are left) to bail out of bonds, savings, CDs—whatever—and get into the riskier arena of the stock market lest they risk a zero or a negative return.
Employment news also remains troubling. For example, U.S. employers posted fewer job openings in March compared with February and slowed overall hiring, underscoring a weak month of job growth.
The Labor Department said Tuesday that job openings fell 1.4 percent to a seasonally adjusted 3.8 million jobs. Total hiring declined 4.3 percent to 4.3 million.
The unemployed faced heavy competition in March. There were 3.1 unemployed people, on average, for each job opening. That’s above the ratio of 2 to 1 that is typical in a healthy economy. On Friday the government reported that employers added just 138,000 net jobs in March, well below February’s 332,000. Tuesday’s report shows that the slowdown occurred because gross hiring fell and layoffs increased.
Job growth picked up almost not at all in April. The U.S. economy added 165,000 net jobs and the unemployment rate fell to 7.5 percent from 7.6 percent in March. The unemployment number, however, continues to be completely bogus, as it fails to report those who’ve fallen off unemployment rolls (they’re no longer counted as unemployed!), those who’ve simply given up looking for nonexistent work (and thus don’t count), and those who are trapped in part time or minimum wage jobs because they can no longer find work in their areas of expertise. That makes the real unemployment number in the country closer to 15-18% by current estimates. But that’s not the part of the accepted Democrat narrative, so never mind, nothing to see here folks.
The Government loves to tout its questionable unemployment and jobs numbers, but here’s something to think about: When the Bushies left office, economists and financial journalists alike trumpeted the accepted wisdom that once the massive job losses from Great Depression II had bottomed (circa 2009), it would take some 350,000 net new jobs a month for years to simply get the number of employed Americans even with what numbers had been in 2006-2007.
It’s funny how no one points this out any more.
–AP contributed to this story.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
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