Dow Breaks 14,000 as 157,000 New Jobs Were Created in January

 
    After the surprise drop in GDP on Wednesday, some good news today:
   
    "An encouraging U.S. jobs report propelled blue-chip stock above the closely watched 14,000 bulwark on Friday, with investors momentarily downplaying fears about the economic recovery.
The government reported that nonfarm payrolls rose 157,000 in January, while the unemployment rate inched up by a tenth of a point, to 7.9 percent. The figures were broadly in line with Wall Street's expectations, and unlikely to change the Federal Reserve's plans to inject the economy with massive stimulus."

     http://www.cnbc.com/id/100426714

     A few thoughts about today's big move.

     1). It shows that those pundits who think that the small surprise GDP contraction of -.1% for the 4th quarter is going to hurt the President are all wet as are the GOPers who were openly celebrating it.
     http://diaryofarepublicanhater.blogspot.com/2013/02/the-division-between-economists-and.html

    2).This is the first time the Dow has crossed the 14,000 mark since October 2007-that was the height of the bull market. Does this give permabears some pause? There are some who even now still think we could retest the 2009 lows. I find this most unlikely but if we stay over 14,000 and go above 14,3000-the absolute high of 2007, this wil be another gauge that suggests this is very unlikely.

   3). As the GOP felt "validated" by the GDP number do they feel less so now? While the contraction was just a one off it's not clear why it should validate them. It's true that they have opposed the military cuts vehemntly. However, they now say they are willing to let them go into effect to "lock in" their "gains"-the domestic cuts.

   It's actually the Democrats who want to lighten the blow of the military cuts and the GOP who is not willing to negotiate. Their "offer" is for the Dems to unilaterally take the Pentagon cuts off the table while putting it all on the domestic cuts which hurt the middle class and the poor.

   In truth we can avoid the deep cuts right now. However, it has to be balanced. Right now the scheduled cuts are $600 billion for the military and $600 for the domestic government programs. A balanced program should be-to use Boehner's favorite phrase-"dollar to dollar" reductions to spending cuts.

   For example, if the GOP wanted to lower the bit on the Pentagon from $600 billion to $400 billion then the discretionary cuts must also come down the same amount to $400 billion. If they insist that the total number remain $1.2 trillion then we'd have to add $400 billion in new tax revenues from the rich-starting with the end of the big deduction for the oil companies.

  In any case, these numbers today are very encouraging. If any permabear wants to get in on a bet with me I'd take a bet all day that we won't return to the 2009 lows. Of course, one of their tricks is that they are so "long run" in Keynes' sense. Those who today say in 5 years we could get another bear market are really making it easy: after all, for every 5 years of a bull market we get about 3 years of a bear market.

   So there would have to be some time limit-say by 2015 or 2016-the year the President leaves office. Mind you I don't think we'll ever see 6500 on the Dow again. Just because I'm a Pollyana doesn't make me wrong anymore than you Cassandras are necessarily right.

   If anything permabears are right less often but eventually they will be-obviously. I'm kind of joking about calling myself a Pollyana, I was very bearish in 2008-and I was right and made some money, though I also didn't know when to say when.