February 6, 2009
Composite gained 45.47
to close at 1,592,
the Dow added 217.52
to end at 8,261,
and the S&P
to land at 869.
settled at $40.17,
I mentioned that the financial media are egging investors on to buy
stocks. I was tempted to add the observation that from a contrarian point
of view, this might not be a good thing. Markets usually do the opposite
of what the financial media expect them to do. (By the time the financial
media focus on a trend, it has usually already run its course.) But I
didn't, and now, Mark Hulbert has endorsed this contrarian interpretation: Market
bottom not yet in sight. Sentiment is significantly too positive for
any kind of market bottom. On the other hand, there will probably be
enthusiasm and a market pop (Bulls set sights on stimulus)
when Congress passes a fiscal stimulus
package: Senate gets $780 billion deal.
(The Senate will probably sign this legislation over the weekend, at which
point, it will go back to the House, where Republicans have promised to
put up a spirited fight.) Also, the Treasury Secretary has promised to release a
financial market revitalization plan on Monday: Geithner to unveil new plan.
On the downside, non-farm payrolls were expected to
have shrunk by 525,000, or about the same as the past two months (November
and December, 2008). In fact, they fell by 598,000: Payrolls plunge by 598,000, the most in 34 years,
boosting the unemployment rate to 7.6% rather than the forecast 7.5%. This
breaks somewhat the flattening trend cited in Example #1: The Unemployment
Rate in With
the economy sinking like a stone, how can anyone seriously claim that a
new bull market is about to start? Of course, it's not a huge break,
and it's still the case that January is the worst month for job cuts, and
that this downward trend might be reversed in
February. On the other hand, Paul Krugman's latest article, On the Edge,
paints a gloomy picture of what's happening and of what may happen next.
"Washington has lost any sense of the reality that we may well be
falling into an economic abyss, and that if we do, it will be very hard to
get out again.
" In Permanent Link to Sixteen years,
below, he illustrates just how bad our current layoff situation
really is. Note that this U. S. Department of Labor plot is listed in
percentages rather than in absolute numbers.
In another of today's
articles, Permanent Link to Appeasing the centrists,
he chides the new administration for trying to appease the unappeasable.
get an idea concerning what's going on, let's take a look at Tommie's and
Tommie and I are retired from federal and state
agencies. As such, we have federal retirement incomes (Civil Service
and Social Security) that are inflation-protected, and retirement
incomes from the states of Georgia and Alabama that are partially
inflation-protected. We're debt-free, with no mortgages, and we don't need
to draw on savings and investments to live comfortably. We own
two older but very reliable cars. We have money left over each month that
we save. We have "rainy day" money in IRA's that we
shouldn't ever need to use. This would seem to put us in relatively good
shape for the economic hurricane that's passing over all of us right now.
Nevertheless, we've been avoiding purchasing big-ticket items for the past
year, and we put last year's tax refund in the bank to enlarge our cash
stash. And we'll continue to save rather than spend until we're sure that
this mortal storm has passed its peak.
One positive aspect to this is that we retired seniors
may be able to help provide financial security for our children and
grandchildren. Of course, if they own outsized mortgages or we have to
support more than one other family at a time, we might face some problems.
Still, we won't let them go hungry or without clothing and shelter. We're
still fathers and mothers, and we'll do what fathers and mothers have
always done for their children and grandchildren.
If I were still working and I weren't old enough or
well-enough funded to be retirement-eligible, I would be much more worried
than I am. If I worked for the federal government, I wouldn't be as antsy
as I would be if I worked for a private company, because I'm thinking that
in this kind of crunch, the federal government is going to be trying extra
hard to keep people employed. If I worked for a state or city government, I
would be concerned about seniority and equal opportunity rules that might
affect the layoff process, even if the organization wanted to keep me. And
if I worked for a company that were laying off employees, I would probably
be worried even more. In the real world, things aren't always done
logically but are psychologically influenced . If I worked for a boss who
didn't like me, or there were another employee who coveted my job and
spread false rumors about me, I might be put out the door through no fault
of my own Or I might be a hapless pawn in a whole department that
was abolished, or trimmed back to a skeleton workforce. Or there could be
seniority rules or discriminatory "anti-discriminatory" policies
that led to my being let go rather than someone else who was protected
under an equal opportunity clause. And then think of the difficulties of
my finding a new job in this job market! And what would I do without my
group health insurance? Under this kind of stress, marriages explode like
Of course, it's comforting to know that so far, most
workers are still employed.
From an economic standpoint, what's important about
this is the frugal mind-set it encourages and the fear it engenders. I
would imagine that's what's uppermost in most people's minds right now is
financial security. To this end, we need a fiscal stimulus plan that will
make people feel confidant and secure. For openers, extended unemployment
benefits, a health insurance safety net, and protection from mortgage
foreclosure would be moves in the right direction. However, what's really
needed are jobs, and this is what the government is trying to do. It
won't be easy: Mark
Hulbert: "Yes We Can" expect too much. Today, the number of jobs lost
last year was readjusted from 2.6 million to 2.9 million. Now, January has
added another 600,000 jobs to that count, bringing it to 3.5 million, and
before this stallion can be tamed, the numbers may go higher than that.
That's a lot of jobs to replace.
Jobs would also help quell social unrest. Gainful
employment impedes gossip, tirades, and bomb-making.