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Thursday, October 9, 2014

Can You Have a Bear Market Without a Recession?

     I think so. Don't get me wrong-we're not in a bear market in equities, at least not yet, but you never know, it depends on how long this selloff goes one for. Sumner had some comments about today's unemployment claims number. The number was pretty good-only 281,000 claims compared with 294,000 expected.

     "The 4-week moving average of layoffs came out today at 287,750.  Total civilian employment in September was 146,600,000.  The ratio of the two, i.e. the chance of being laid [off---ouch that might have been my most embarrassing mistake ever] during a given week if you had a job, was below 2 in 1000.  That’s only happened once before in all of American history–April 2000.  (We don’t have data going all the way back, but the ratio was considerably higher in the booming 1960s, and I’m confident layoffs were much more common in earlier decades for which we don’t have data.  (“Gilded Age” bosses could lay off workers whenever they wanted.) And it seems very likely that we will soon break the April 2000 record, maybe this month."

     http://www.themoneyillusion.com/?p=27758

     If this is true it doesn't necessarily bode well. April, 2000 was the beginning of the Internet crash. This l4 week moving average correlates with what has proven to be a rather nasty market correction. How long will it go on for? I've debated this previously. You have to admit that the title of my post yesterday was rather prescient. 

    http://diaryofarepublicanhater.blogspot.com/2014/10/was-todays-275-point-dow-rally-another.html

     Yes, Yesterday's 275 point rally was another false flag just like last Friday's. I'm now convinced that we're in correction territory. Note that a 'market correction' is not necessarily a 'bear market', though a correction can lead to a full scaled bear market-a fall of at least 20% on the Dow or S&P-or NASDAQ or any market. 

     With the market in some at least short term trouble are we in danger of a recession? Based on numbers like the layoff number it would seem clearly not, ditto, the recent 4.6% GDP number or the 245,000 nonfarm payroll jobs added in September. Based on the numbers it would seem that-unlike when McCain said it in 2008-that 'the fundamentals of the US economy are strong.'

     What's worrying the market now though isn't the US economy but rather the rest of the world. The EU particularly. Meanwhile China is a lot weaker than it was in 2008 so it's much more squarely on us to save the world's economy than it was then. 

     As I said in my post last night, I take it very seriously that Jim Cramer is very bearish about the market right now. Today he said outright that the market won't get better until the pain in the commodity space ends. I've now decided not to take any more long positions in the market until then-except for Alibaba (BABA). It has really actually behaved very well since it's IPO. Yes, I like countless others made the mistake of buying at the open-I got in at $94.50, I find it very impressive that it bottom4d out at a little under $86. It's now been rallying the last 4 or 5 days and actually touched 90 briefly today. 

     I got to say I was really impressed by BABA's owner, Jack Ma. After listening to him I'm thinking that there might ne one stock you can hold for awhile. I like the idea that he's thinking of not just the next 5 or 10 year but the next 1000 years. That's kind of the Asian way I guess but I feel like this company is in very capable hands. 

    http://diaryofarepublicanhater.blogspot.com/2014/09/for-alibaba-jack-ma-is-feature-not-bug.html

     Other than that, short energy, short multinationals, short Caterpillar-which is a multinational. 

      Sumner is, quite out of character no doubt, knocking President Obama. 

       "President Obama may or may not be a good President.  I think he’s been above average on foreign policy.  I’m willing to concede the Obamacare (which I opposed as a missed opportunity) did some good things like the Cadillac tax on health plans and helping the uninsured.  I think the financial reform was a missed chance, but others disagree. I’m disappointed with his record on drugs and civil liberties."

     "But there can’t be any serious question about the fact that he did NOTHING effective to help the economy.  The US recovery is less than the old trend rate of growth.  Has that ever happened before?  The Fed’s been less inept than the ECB—that’s all."

    "And the supply-side?  Even his supporters would admit he did nothing there.  They might disagree with the view that a heavy dose of extra regulation, higher MTRs, and no Keystone pipeline slowed the recovery.  But no one claims those actionssped up the recovery.  And the fracking boom (“drill baby drill”) fell on his lap."

     "Just a few months ago Obama called for an “emergency” unemployment benefit of up to 73 weeks, much longer than during the President Clinton recovery, all because the labor market was doing so poorly nearly 6 years after he was elected.  And now a few months later they are touting their success in creating jobs—unbelievable."

     "It will be interesting to see how many liberals agree with him."

      Well, I don't-I think we would have a much better economy if only we had elected Romney. Then we would not be less than the old trend of growth. So Sumner thinks that the trend of growth is decided by who the President is? I thought that he had bought into Tyler Cowen's Great Stagnation. 

      "The newest talking point of President Obama and his supporters, such as Paul Krugman, is that we are doing better at job creation than other developed countries.  I don’t think we are doing as well as Australia/New Zealand/Canada/Britain, but it’s surely true overall for one very obvious reason.  The eurozone."

     "Let’s examine that Obama/Krugman claim more closely.  Everyone seems to agree that since 2010 the US has done considerably more austerity than the eurozone.  No debate there.  And the huge divergence between the US and the eurozone has occurred since 2011.  The initial recession and initial recovery were quite similar in the US and eurozone."

      "The GOP Congress did exactly the opposite of what Obama wanted on austerity, and the result was that we grew dramatically faster than the eurozone.  That’s Obama’s success?  The big difference was of course monetary policy.  Obama’s comparing us to a region ruled by a central bank that is more incompetent that the central banks of the 1930s (Krugman has some graphs on that point.)"

      "So yes, we are doing better than the eurozone.  Does Obama deserve credit for the fact that our monetary policy was less incompetent than the ECB?  That doesn’t even pass the laugh test.  Even Obama supporter Matt Yglesias says he’s been horrible on monetary policy.  He left multiple seats empty, when he had 60 votes in the Senate in 2009.  He’s doing the same today.  He never appointed a single person to the board who favored the sort of expansionary monetary policy that I favor, that Yglesias favors, that DeLong favors, that Krugman favors, that Christina Romer favors, and that any progressive with half of brain favors.  He almost picked bubblephobe Summers to head the Fed, and had to be stopped by a storm of protest that began here and then spread through the progressive blogosphere.  (Yes, some progressives always opposed him for other reasons; I’m talking about his monetary policy views.)"

      So maybe the GOP doing the exact opposite of what Obama wanted has a little something to do with the slow recovery? As usual, Sumner talks about 'things we all agree on' that haven't really been agreed to by anyone except him-kind of like that bet he won with Krugman. Who actually agrees that we've done more austerity than the EU? Only one person I'm aware of-Sumner. Ok, Mark Sadowski, but he's just an extension of Sumner. 

       Obama deserves credit at the minimum for preventing even more austerity than we otherwise would have. I do think we would have done better with less austerity than we did have. 

     Right now the biggest problem isn't the US, it's the EU. As for the economy, why is it that everyone acts like the economy is owned by Obama alone. Everyone says 'if the economy is weak it hurts the Democrats'-what about the GOP who has occupied the House for 3 damnable years?

      P.S. I love the market but I've never had anywhere near the luck with it-so far, see, I'm always optimistic-I've had in the NFL in my first year betting on games. Tonight was the first night of Week 6 and I had the Colts favored by 3. They sure didn't let me celebrate early as they blew a 24-0 lead and just held off the Texans 33-28 thanks to a late int and a late fumble. 

        Still, with this win I'm now up $4,000 for the year, with 160% gains for the year. Where else are you going to find a yield like that? My record for the year is now 18-5 straight up and more importantly I'm 15-8 against the spread. 

        This weekend I'm taking Denver favored by 8 over the Jets. as well as the Bengals over Carolina by 7 at home over Carolina. Surely, they will come back strong this week after that loss.  Also the Packers by 3 and 1/2 over the Dolphins. If the Packers are the real deal they should be able to win here. I'm thinking about the Browns over the Steelers-in Week 1 the Browns came all the way back from a 24-3 deficit and took the Steelers to overtime before falling 27-24 and the Steelers have been very unimpressive against the two worst teams in the NFL-other than maybe the Raiders-the Bucs and Jaguars. In the two games the Steelers went 1-1 and outscored the opposition by 5 points. 

        The Ravens over Tampa should be a no brainer-amazing that the spread is only 3. Finally the Chargers giving 7 over the Raiders and the Seahawks by points over Dallas. 

     

         

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