The Water Glass Stock Market
We now have a water glass stock market. A market in which every empty glass is deemed half full, and every half full glass is viewed as brimming. Today’s market, up considerably at the time of this writing, illustrates the point.
It’s rise is linked to reports released in the last day or two. Retail sales, for example, rose a better than expected 1.4 percent in November — a surprising number because other reports from most retailers last month suggested a far less sanguine number. Then you look closely at this 1.4 percent monthly rise and discover that a goodly part of the increase was generated by bigger gasoline sales. Gas costs more, in other words, so overall retail sales rose more. Presumably if the price of the fuel jumped 300 percent this month retail gas sale figures would soar producing a great overall retail report that would kick the market into hyper-drive — though of course it would also make already struggling consumers struggle harder.
Then there was that jobs report for last month, which also (surprise!) beat analyst expectations. Paul Krugman had an excellent column in today’s Times that explains why this number was so terrible. He noted that there are 100,000 new people coming into the workforce each month who need jobs, and that 300,000 jobs a month for an extended period would be needed to get this country anywhere near full employment. But a “mere” 11,000 more jobs lost cheered the market causing it rise sharply on the news.
Then there’s today’s consumer confidence report which (you guessed it) also beat analyst expectations. To get the real lowdown on confidence I like to look at the Rasmussen Consumer Index, which also shows an improvement in recent days. It stood at 75 yesterday, up a solid 11 points since the start of the year. Good news? Not if you consider that this index’ record high in 2004 was 127, and its baseline is 100. Consumers are thus just three quarters as confident as in baseline normal times.
Here I must apologize. I predicted that the bubble market we were seeing this summer would soon fall to reflect the real state of the economy. I was wrong. The real state of the economy is curently irrelevant to stock markets, not only in this country but around the world. What makes markets move (usually upward) is the wrong guesses of analysts employed by people who benefit when markets rise.
Don’t jump on this three-wheeled cart just yet, however. Reality has a way of catching up sooner or later, even with best and brightest Wall Street market manipulators.