Thursday, September 6, 2012

One Set of Measures Unambiguously "Better Than Four Years Ago" (September 6, 2012)

Today all three major U.S. stock market indices closed at their highest levels of the Obama Presidency...and nearly a dozen years in the case of the Nasdaq, which is comprised largely of technology stocks.

Dow-Jones  13,292 vs 7,949 on Obama's inaugeration day, +67%    (highest since 12/28/07)
S&P 500       1,432 vs  805 on Obama's inaugeration day, +78%    (highest since 1/3/08)
Nasdaq         3,136 vs 1,441 on  Obama's inaugeration day, +118%  (highest since 11/9/00)

Roughly 54% of Americans are invested in the stock market. 

Some good jobs data helped drive today's 245-point gain in the Dow.  Perhaps more importantly were strong indications from Mario Draghi, the head of the European Central Bank, that the ECB would buy the bonds of weak eurozone coun tries to lower their borrowing costs and ease the eurozone debt crisis.  The yields on Spain's bonds immediately fell. 

The U.S. economy is inextricably bound up in the world economy, and thus Obama's election chances are nearly as tied to Europe's fortunes as those of the U.S. alone.


  1. Unambiguous? Really? Let this economic observer cast some ambiguity all over your headline:

    Why is the stock market is up? Jobs news? huh?

    Your period neatly overlaps the now unprecedented FIFTH YEAR of 0% short term interest rates. Uncle Ben and now Super Mario have reluctantly come to the rescue of dysfunctional Obama/Washington (and Athens) with 2 rounds of easing and unprecedented expansion of the Fed balance sheet to $2 trillion+.

    The results? VERY AMBIGUOUS. Stock price increases reflect large-cap companies' big profit and cash balances. How did they get them - by slashing costs (read layoffs) and NO INTEREST COSTS. Corps have rushed past banks (how will they make money under Dodd-Frank - the next bubble??) to the market to refinance at unprecedented rates. They jacked profits by slashing payrolls against a stable rate of productivity - that's why the unemployment rate ticked down today. The denominator grew as more people gave up and went on disability (AKA federal benefits - growing the federal payroll). Unambiguous? And now the zero rate world spread to Europe.

    All of this has a very ugly, and truly unambiguous downside. Pension funds, depending on bonds, not supposed to be gambling their funds in the market (don't you object to that part of the Ryan plan?) are in the toilet, because they thought they were getting 8% returns, and now are chugging along at 2%. Watch your state budgets blow first, then cities, then a few old line corps. The PBGC will suddenly come front and center. Government Motors pushed their pension obligations off their balance sheet. Nice to have government cover to do that. California's already seeing it. New York next?

    Moreover, this unprecedented zero percent interest rate worldwide has transferred income from pensioners & the "widows & orphans" who counted on a nice normal 3-5% risk-less interest rate.... to the federal budget.

    Better than Four Years Ago? Maybe for the 1% (or 0.1%) with the personal wealth and risk profile who can ride the market!!

    Could we be seeing a Obama-bubble-in the making? Unambiguous? Think not!

    P.S. Please don't defend today's jobs report. It just unambiguously stunk.

    1. What, precisely, is your plan to increase jobs? Surely, you can't believe Cantor and Ryan have a realistic solution, do you? Ah, yes...cut taxes (again), reduce regulations. THAT will do it. (See Krugman today in the NY Times.) Laughable.

      I suppose you yearn for those glorious GOP days when the market went from 14,000 to 6,600? Yeah, let's do that again! As I said, 54% of Americans are in the market. Not 100%, but not 1%.

      But, I don't think too many "orphans" were counting on a nice 3-5% returns...I'll take you to Children's Village someday...not too many of the boys are into equities.

  2. Hey, I've got no plan. I'm just an anonymous blogger opining on headlines! hee-hee! just a humble traffic-creator, rowing downstream with a paddle, like the rest of the punditry - see today's NYT magazine


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