Pick your adjective in regards to this market. We have had three straight weeks of nothing but UP in the equity markets. It is unfathenable to consider after a 60+ month bull market that we have this protracted run to new highs every single day.
What news do we start with to show that there are some major problems out there that NO ONE cares about? How about starting with Mario Draghi (the European Central Bank chief)? On Thursday the ECB decided to bring interest rates down to 0.1%. The real kicker is that the savings rate in the banks is -0.1%. That’s right. If you hold money in the central bank, you have a negative interest rate. It costs 1/10th of 1% to house your money. This is meant as a method to stimulate spending and keep the Eurozone from deflation. The ECB is also poised to do the same as the US has done for the past 4 years. They are ready for their version of quantitative easing (QE). Time to flood the Eurozone with cheap money.
This past week we have seen ISM numbers contract, construction spending diminish, ADP employment drop by 36K jobs. productivity drop by 3.2%, the trade deficit increase to $47.2 billion per month, jobless claims higher by 8K claims from last week, household debt growing by 2.0%.
I guess people are really hanging their hat on the non farm payroll numbers coming out at 217K vs the estimate of 210K. The news agencies are all puffy chested saying that we have regained all the jobs lost in the great recession starting in 2007. That would be awesome if we did not have new workers entering the work force. But that is not the case. From estimates I have seen, we require 350K jobs created to keep up with the population entering the workforce.
Is everyone blind? Or am I? All time highs again??? Seriously!!!???
To help pile on the great news for the remaining bears, the volatility indexes are parked in the basement. The VIX (S&P500 volatility index) is sitting just above 11%. That is the lowest since just before the housing debacle. The /VX (the VIX futures) are sitting just above 12%. This means that no one thinks there are no problems in the near term that anyone can see by virtue of the VIX and no one can see any problems in the future with no real disparity on the /VX.
As I said last week. It is going to take an act of God to bring reality to this market. Because the reality of what is going on in the economic world is not what is reflected in the markets.
CNBC (CNBS in my vernacular) is already talking about S&P500 going to 2000 (currently 1948), and the DOW going to 17,000 (currently over 16,900).
If you were just entering this market, and looked at the past 5 years, would you buy this market? That is the question I ask myself every day!
Next week starts off with no reports on Monday.
Tuesday we have the NFIB small business index numbers due out. We know the current administration thinks of small business, since it has done everything to kill small business.
Wednesday we have the Federal budget for May. My guess is that we have blown our budget (sarcasm!)
Thursday we have the jobless claims. I don’t yet have the estimates, but my guess will be in the very low 300K’s.
The retail sales numbers that were so anemic last month with at 0.1% growth will be closely watched.
Friday we have the producer price index (PPI), and the University of Michigan consumer sentiment report. But with everything else going on, the numbers won’t matter…the market will still go up no matter what happens.
I will get more positive when we get some type of appreciable pull back in this ridiculous market.