The stock markets are being rigged by the Federal Reserve and European Central Bank and what is more, just about everybody knows that. My CNBC buddy Bob Pisani said today that kicking the can down the road, a euphemism for the rigged economies both here and in Europe, is an effective policy tool because it has worked, so far.
Compare today’s conventional wisdom that the market is rigged with the response to my year end 2009 appearances and early 2010 appearances on television. Back then I said that the stock market had to be rigged by someone, probably the Fed. I got booed, in essence, and was called a conspiracy theorist nut, wacko by some of your favorite bloggers.
Today the stock market does not go down for longer than a day or so. As we said earlier this week, the Fed has been flooding the economy with $5 trillion of no cost money since 2008. US public companies are using some of that free cash to buy back enough shares to payoff all those individuals selling US equities whether directly or through mutual, pension and hedge funds.
Think about it for a second, individuals are selling US equities, probably because they need to pay bills and stuff. How are they able to do that and get decent prices? Simple, the Federal Reserve prints money that boosts the value of US equities and therefore the sellers can get a good price. All of this is driving me even more nuts than I already am.
Today, the Bureau of Labor Statistics, stuck in a world of surveys overlaying historic data while ignoring real time data, guessed that 227,000 seasonal adjusted jobs were created in February. In the real world, each month on average about 4 million jobs are lost and added.
In February, a midwinter month historically, less people work on average primarily due to weather. The BLS current estimate is 1.53 million jobs need to be added to those actually working in February to come up with 227,000 new February jobs. Income tax collections say to us that the BLS guess is too high. But so what, who cares as long as the number reported looks good?
The US stock market is only about $3 trillion in market value below the all time high set October 2007. Yet the US job market has only recovered about 3 million of the 8 million jobs lost since the stock market peak. The five million lost jobs does not include those new job market entrants that resulted from the 10 million US population growth.
To summarize, the US economy is barely inching along and the stock market is roaring.
Let us not forget that this is a presidential election year. What would help President Obama the most would be if the US economy has a sustained recovery between now and election day. While that recovery is not occurring in reality, it certainly appears to be occurring in the minds of investors who are sitting on huge increases in stock market wealth.
Coincidence, or something more sinister, we have no idea. But it does make one think.
Here’s the video from Bloomberg Television recorded on January 19, 2010:
President & CEO TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)
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