Unemployment Claims Fall to 264,000, Lowest Since April, 2000; Markets Tank

     To me that says it all about this market. Have no doubt about this: this is a great Macro number. There was just an economist, Richard Bernstein, on CNBC who complained that this was a great number and a leading indicator to boot which shows that some very good things are coming.

     As an economist he knows what he's talking about and he is right that it's a great number and that claims are considered a leading indicator. However, what he doesn't get is that this doesn't matter for the market right now. He said that the number clearly shows that the economy is getting better and that's all the market cares about.

     He knows his economics but not necessarily his markets. The market doesn't care about that right now. It's not looking to weekly jobless claims. It's no surprise to me that it sold this. It ultimately sold 245,000 new jobs on nonfarm payrolls after initially rising.

      The market is worried about global growth-everything but the US economy. It's the drop in oil and the rest of the commodities, a Europe in danger of a triple dip and a slower China and disappointing Japan.

     It also doesn't help that this is the best number since April, 2000-as that was at the start of a sharp 2 year bear market correction after the Internet bubble. This is now the second time we've heard about a number being the best since 2000. Sumner was citing some such stat last week. Actually it looks like he may right:

     "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://diaryofarepublicanhater.blogspot.com/2014/10/can-you-have-bear-market-without.html

     He'll love that. However even if he's right-this number may have pushed the moving average beneath that, April 2000 is not a great reference point. That was the beginning of a sharp 3 year bear market. Dennis Cartman thinks this is the start of a prolonged bear market-defined as a drop of at least 20% from a market peak. Currently we're getting close to a S&P 'correction'-a 10% drop from the top. Cartman:

      "The selloff in global markets is set to continue as a bear market takes hold "for a long period of time," according to widely followed investor Dennis Gartman, who warned investors not to go long on stocks."

     "This is the start of a bear market," Gartman, the founder of the closely watched Gartman Letter, told CNBC Europe's "Squawk Box" on Thursday. 

      "You stay in cash and you stay in short term bonds and you don't move out, this is a very difficult period of time and I'm afraid - and I don't like to think about it – but this might be the very beginnings of a bear market that could last some period of time," he warned.

     http://www.cnbc.com/id/102092358

      I''m not going to predict how long this correction lasts. My sense is that it's going to go on at least for now-probably at least the rest of October as all the funds have their years finish October 31. Some argue that the market won't bottom until the election. I don't know if Cartman is right or wrong. I know that over the last 5 years the permabears have been permawrong. Still sometimes to quote Rogoff and Reinhart 'it's different this time.'

     I think we have to admit that bulls have become pretty spoiled. We had a terrible bear market in 2008 that saw the market drop from 14,000 on the Dow in November, 2007 to 6500 in March 2009. Yet, overall, since the 3 year bear market of 2000-2002, the market has been up 11 of the last 12 years since. Yet the minute we have 3 weeks of rough selling the bulls act like this is an absurd overreaction.

     However, I won't try to predict this .That's because I'm really not sure. I mean I take Bernstein's point. That claim number was great. Still is it a leading indicator? The last time we had a number like this-in April, 2000-it wasn't a leading but a lagging indicator. Right now the numbers show a preitty good US economy with a weakening global economy. I guess we again get a test of 'bifurcaton'-how long can we have a decent economy surrounded by a troubled world economy?

   Maybe we can continue. Maybe in time we can even save the world economy as has been hoped. On the other hand the US economy is hardly living in a vacuum these days. A weakened Europe and Asia hurts nultinationals which is a sizable part of the US economy. If oil keeps dropping maybe that kills of that nascent fracking industry-though you can argue that all the oil suddenly found in the US enables is a good supply side story that will bring down prices for good reasons-an oil price cut is said to be a 'tax cut.' 

    Time will tell. I know that for now if you're trying to make money, it's on the down side. My only bullish position is now in Alibaba. I believe in Jack Ma. I think this stock has performed very well. It's IPO may be sited as a top, maybe rightly, but just the same, it's performed very well itself since then falling just 7% from it's opening price. My guess is when the market does come back-could be a month, could be three months, could be six months, this will be something you'll be happy to be in.