Better take a mental snapshot of yesterday’s glorious economic news, since it’s hard to imagine things will get much better. Retail sales for March were up a reported 1.6%, the service sector supposedly is rebounding nicely, and big-ticket items we starting to sell like it was 2006 all over again. Economists were ecstatic, of course, since the torrent of good news allowed them to upwardly revise their forecasts for 2010 and beyond. Nor were the sunny tidings confined to Main Street. Over on Wall Street, J.P. Morgan weighed in with a 55% gain in profits for the first quarter, amounting to a tidy $3.3 billion. Much of it came from their trading desk — and a good thing, too, since we’d have been gravely concerned if their best and brightest had somehow failed to make money betting the “pass” line on a stock market that has been rising on maybe eight days out of ten in recent months.
And rise once again the Dow did yesterday, surpassing yet another Hidden Pivot target with effortless aplomb. We’d been using 11077 as a minimum projection for the Industrial Average for the last several hundred points; yesterday the blue chip average hit 11125, exceeding our mark by 48 points. A companionable target in the E-Mini S&P gave way almost as easily, implying that buyers are not yet finished.
Cool Ben
With all the hoopla and hubris, leave it to Helicopter Ben to totally keep his cool. Here we have an economy that is going absolutely bonkers, and the guy insists there is little to fear at the moment from inflation. This obviously was music to Wall Street’s ears, since it means that no matter how strong the recovery gets, the Fed sees no great urgency about raising the federal funds rate. We love the way Bernanke’s amen corner at the Wall Street Journal put it: “His inflation assessment gives the Fed room to be patient about raising rates.” Is “patient” the perfect non-word here, or what? Easy Al Greenspan himself could not have come up with a more innocuous way to describe de facto easing in a financial system that is already glutted with government largesse.
So we now get to imagine GDP growth barreling along at 5%, but with 4% mortgages and even lower rates for the 10-Year Note. If these things should come to pass, the Dow Industrials will probably trading above 20,000. Isn’t it time to spend some of the anticipated gains at Best Buy? That would be pretty patriotic, actually.
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Hi Gary, thanks for your insights. So now, let’s disagree with “Consumer’s number one cost is their home. In that department they are treading water or under it.” and ask why? I’ve argued that the new demographic “America” is a new place of 180 million Americans within whose lives the economic conditions are in fact, comfy and warm for all of them, and for many millions, even richer and richer than ever. This sector IS the new America and that is why there seems to be a reasonable recovery. In other words, that the problem is mixing in the data of this group of screwed over 100 million Americans with the good data from the rest o f the economy. I dare to say that the 100 million Americans are socialist economy wards of the blossoming government state, ready to hit 40 million of them on food stamps! The “rest” of the economy is fine. Don’t we get it yet? Of course we do. The rich don’t care! THEY are fine. They are spending. Their lives are rosy and will continue to be until the entire monster finally starts to implode, which could be years away.
Please don’t misunderstand. I don’t suggest this state of affairs can last very long, as supporting 100 million people whose quality of life is in decline of flat at best is way too expensive. I am just suggesting it helps to explain the new demographic, the shift in seemingly disparate economic data. For example, luxury/retail spending is doing fine, how can that be? Because there are many millions of folks who are historically in this particularly unique and scary time frame in the right place at the right time, earning $70 to $200,000 per year and they are still out spending and enjoying their secure lives.
Cheers, Mario