My biggest beef is with the media, particularly media that covers the market. It is problematic to hear people that know better shower each piece of economic data with accolades that used to have to be earned with truly great news. I realize the media has the ability to sway elections, make groundhogs famous, and rev up a stock market rally, but that can set us up for letdowns down the road. More importantly, it creates a world where mediocrity is celebrated to the detriment of true achievement.
A quick glance back:
The GDP number was a huge disappointment, but the media told us to forget the bad parts, especially government spending, which couldn't tumble that much anymore. What they didn't say is 3Q12 GDP of 3.3% was driven by government spending that established records in certain areas. The release of that GDP report was coincidentally during the final stretch of the presidential election. I just don't remember anyone in the media saying government spending couldn't be sustained at that level or how curious the timing was.
We can't ignore the complete report, including the dramatic decline in exports. This actually pressures the Fed to keep pumping to get the dollar cheaper.
Consumer Confidence, or lack thereof, was also problematic as it points to the future, and while people may act differently than what they reply in surveys, there's no doubt this payroll tax hike has caught a lot of people off guard.
The fact that the revisions to the jobs report are being touted as more important than the sharp decrease in net gains from November to January is also a dangerous gambit. There is no doubt November was helped big time by post Sandy construction jobs. I even heard someone cheer about the fact the freefall in participation has stalled. Meanwhile this is the lowest level since September 1981 when Reagan came in and changed the nation by changing the economic conditions of all in a positive manner.
If the rate dips from here have more than eight million people drop out of the labor market, then we would be in a real depression and back to the 1970s. I would feel better if people began coming back in droves, even if it lifted the unemployment rate initially.
Beware the Shadow
I stand by my reasons for being optimistic about the stock market and continue to think the greatest risk is the US economy. There is also the risk beyond the stock market and that's Main Street. This is why I have disdain for the media, so eager to provide cover for the administration. In my town more businesses are closing and one Main Street merchant told us many more will after March when Obamacare rules kick in. If this is where the bar is set then many people, like those 4.7 million chronically unemployed, may never see their fortunes improve.
So, while the stock market should rally and new highs should be around the corner, if there isn't a greater sense of honesty the status quo will mean too many people watch all the action from the unemployment or food stamp line.
Punxsutawney Phil saw his shadow and that means it will be a short winter. But there is a different shadow we should all be concerned about and that's the shadow of real life. The media doesn't have to report it and could continue to gloss it over. That's great for the stock market but not America and Americans.
Let's not force the issue at the moment as the market looks to open much lower. Of course the media is blaming Europe.
Et Tu Punxsutawney Phil! Last week there were numerous opportunities for the stock market to pop on great economic news. That news never materialized, yet the market still edged higher. Simply put, the fix was in for a giant week that could have seen a new all-time high for the Dow Jones Industrial Average. I worry about the sanguine feel of the week.