Investors respond to good economic news
The headline unemployment figure released by the Bureau of Labor Statistics (BLS) yesterday was 10.2%. However, the broader U.6 measure of unemployment, capturing short-term discouraged workers (those that have quit looking for a job within the last year) rose to 17.5%.
Shadowstats.com's SGS-Alternative Unemployment Measure rose to 22.1% in October. John Williams, shadowstats' proprietor, includes the long-term discouraged workers in his meaurement.
But now the unemployed can collect an additional 14 weeks of unemployment checks.
Meanwhile, Freddie Mac lost $6.3 billion in the 3rd Qtr. Fannie Mae has asked the government for another $15 billion to stay afloat, and five more banks were seized by the FDIC.
With all of this good news, the DJIA ended up 17.46 for the day at 10,023.42.
Comments (17)
Fall in Dollar
No, they responded to a fall in the dollar.
Published: November 7, 2009 10:47 AM
Bogart
Just inflation:
1. As dollar value goes down, foreign investors can by more with the same amount of their currency.
2. Individuals and companies can pay off loans with something worth less than what the contract was agreed for.
3. Companies can make paper profits easier as non-variable and some variable costs are measured in old dollars but sales are in new dollars.
The results are typical:
1. Rampant asset price inflation.
2. Investment in domestic production continues to decline.
3. Banks hold more reserves and get paid for it.
Published: November 7, 2009 11:27 AM
Richie
Or, they may be responding to the bad news by believing that it is good news since they believe the bad news will keep the Fed from decreasing the money supply and increasing interest rates. That is usually the reason given by the talking heads.
Published: November 7, 2009 12:03 PM
fundamentalist
Many investors understand that Fed monetary policy is a main driver of the stock market. If unemployment looks bad, they know that the Feds won't raise interest rates. They'll keep pumping money and the stock market will rise. Good economic news in the future will be bad for the stock market because it will mean that the Feds will raise rates. This contrarian way of thinking might be considered Austrian in that it takes monetary policy very seriously.
Published: November 7, 2009 1:19 PM
Rick Ford
I am young but i figured out this economy thing,its easy, Life in America is like a big shik sandwitch,but,the more bread you have the less shik you have to eat.economics 101
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Published: November 7, 2009 2:11 PM
Core
*Sighs*
Is there any REAL hope or good thing to look forward to down the line? I know its my choice to read about stuff like this, but I am begging to feel hopeless.
Published: November 7, 2009 3:36 PM
Russ
@Core:
I know exactly what you mean. Reading articles here and on LewRockwell.com is like being on an airplane. There is a old man sitting next to you who is regaling you with how unsafe airplanes are. Then, when the airplane does start uncontrollably losing altitude, the old man starts laughing and says "See, I told you so!", taking great joy in the fact that he was proved right, and seemingly oblivious to the fact that he is on the same airplane that you are.
Published: November 7, 2009 6:01 PM
mpolzkill
Haha, that's actually quite funny, Russ, sincerely. We geezers in the know have to take our pleasures however we can find them.
Published: November 7, 2009 6:26 PM
newson
yeah, the flight is UA93, and we've realized the flight path is not the one we anticipated. maybe the austrians are like those passengers who did figure what was going on, and resisted. whilst their end must have seemed inevitable, there weren't passive in the face of almost certain defeat.
Published: November 7, 2009 6:56 PM
Seattle
Don't worry, after about 900 years civilization will rebuild itself. Hopefully this time there won't be a state to drag it back down, though I won't hold my breath.
Published: November 7, 2009 6:57 PM
Russ
@mpolzkill:
I know what you mean. I'm starting to understand how H.L. Mencken felt. He had to laugh at the absurdity of it all back then, because the only other option is to cry.
And now that the House has passed the Socialist Health Care bill, the airplane we are all on (those of us in the US, anyway) is really going to start diving. It seems more and more like the movie "Airplane!" Jive Man is in the pilot's seat, and I think I'm about to develop a severe drinking problem.
@Seattle:
If you can hold your breath for 900 years, I would be very impressed!
Published: November 7, 2009 11:55 PM
mpolzkill
Life's a tragedy for those who feel, a comedy for those who think. I vacillate, so I'm one step ahead of you on the drinking problem I'm afraid, Russ.
Published: November 8, 2009 3:27 AM
david janello
'The first sign of a hyperinflation is a rally in the stock market.'
Jens O. Parrson, 'Dying of Money: A History of the Great German and American Inflations'
Published: November 8, 2009 6:24 PM
Bruce Koerber
Unlike flights in the past where Austrian economics was just lost in the Bermuda triangle this time the plane will have its contents spread over all the land. And people will cherish the treasures and be inspired to make the skies safe to fly again! Of course that is only if the unConstitutional coup is destroyed.
Published: November 8, 2009 7:55 PM
Ralph Fucetola JD
My concern grows as the governing circles try to convince us the worst is behind us, even as their interventions have the usual "unintended" consequences.
Kitco gold price is $1,098.20 at this moment. Any moment it will be up above eleven hundred federal reserve notes per ounce of gold. I don't see it ever going below a thousand, on its way up to where ever...
Yes, the inflation ride may be about to get very rough.
Like many concerned with the looming collapse, we're seeking refuge away from potential urban area danger zones.
One way is to join an intentional community of the like-minded, planning to survive what could be several very rough years.
Take a look at http://www.NaturalSolutionsFoundation.org for one example, of which I am a Trustee.
Published: November 8, 2009 8:07 PM
Daniel
Shouldn't Cap-n-Trade be more troubling since it's our age's Smoot-Hawley?
Published: November 8, 2009 8:46 PM
K Ackermann
But there is nowhere else for the liquidity to go.
Make no mistake that the Fed is deliberately blowing asset bubbles in the hope that it induces real inflation in the economy.
In fact, I'm inclined to think it will keep pouring on the fuel until that does happen. It will only withdraw once the economy is clearly superheating.
The equity markets and commodity prices are decoupled from the economy, and from basic market principles. Commodity prices are way up, even though consumption is down. How does that work again? Tell me again how bubbles can't be detected while in the middle of them.
If the Fed succeeds, then how is it going to contain the ensuing bond market implosion. Watch bonds; they might even get ahead of the Fed.
Published: November 9, 2009 10:41 AM