Baby needs a new pair of shoes!
After I wrote my Sept. 21st write-up I flipped on the 'tele and they were interviewing an equity trader, he suggested that "10k was a foregone conclusion and traders on the floor were more focused on 11k"!
Hmm, easy money? I'm not worried about winning the lottery, I'm already spending my winnings!
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If Consumer Confidence = Jobs + Consumer spending, then confidence is rising. The jobs recovery continues to mirror the recession and recovery from 2000 - 2003.
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The chart below left shows the Federal Withholding taxes which are taken away from everyone's weekly paycheck. Have they hit bottom and are they rebounding? You can argue whether or not they are rebounding but you cannot argue the figures because they are actual numbers from the Treasury.
The chart below right compares those Federal Withholding taxes to the data compiled by the BLS via surveys or the Average hourly earnings. The BLS data lags the actual figures, upwards of 2 years as the chart show. We hear all the time how jobs data lags the economy, 'Not so fast my friend'. My vote is to watch the Treasury reports.
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But of course this week the top focus is on profits. Back in July we showed that the Dow Jones was lagging behind profit growth and it was a good buying opportunity. That opportunity is now gone. Markets have caught up and we will need quite a few upside surprises over the coming weeks to expect the equity rally to continue. The chart below right zooms in to show this:
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As we've pointed out a few times, jobs are recovering but obviously profits are needed to keep creating those jobs. The chart below right shows we've (or whomever) have dug ourselves a deeper hole this time around.
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One chart that I could show but did not because it is better seen on Bloomberg is the Jobless Claims. Take a multi year look and you'll see a nice head-and-shoulders pattern developing in the Jobless claims. If this holds then we'll see a nice drop in claims heading into year-end and lend some meat and potatoes to those Fed-hike discussions.
The charts below show that jobless claims have been a good indicator for the NFP report:
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To conclude, is the market richly priced right now? Yes. Do you sell? Soon enough, let that momentum exhaust itself before you fill the 2010 tax-man coffers.
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