February 01, 2013
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RELATED TICKERS: GE
Dow 14,000: What the Bulls Need to Consider
Indexes are rising as the dollar continues to be overprinted. As the article correctly states, fundamentals do not explain recent market strength.
The monthly Employment Situation headlines overstate the jobs recovery. +157,000 jobs from the establishment survey were reported, but the household survey that finds people who recently landed a job, only found +17,000. Even if the truth is somewhere in between, +87,000 jobs per month does not cover working population growth.
The unemployment rate ticked up by one tenth percent to 7.9%.
GDP was negative 0.1% for Q4. If you want to believe that was a year-end or weather-related fluke, look at the recent trend from Consumer Metrics Institute that coincides pretty well with an expected drag from increased (expired temporary break) Social Security withholding taxes.
Workers with stagnant wage increases have smaller take-home paychecks to work with than a year ago. Maybe lower health insurance premiums will make up the difference. /sarc
The U.S. is digitally creating over $86 billion of excess liquidity per month. That's nearly $300/mth for every man, woman, and child.
Since only adults with jobs can be tapped to cover this Keynesian largess, it would take over $1,500 of pre-tax monthly income to cover the past four years of printing over the next four years. That will never happen, so let's assume we take forty years to repair the printfest of the past four years. Now the bill is only $150/month, assuming the printing stops soon - which it won't.
The Fed rarely references "draining liquidity" as it did four years ago when this process began. As you can see from these simple calculations, the debt is not likely to be repaid, and if an attempt is ever made to do so, it will be a drain on the next generation's ability to raise a family in these United States.
It's no wonder Germany wants its gold back.
The headlines do not match the fundamentals. When that is the case, keep an eye on insider buying and selling as a clue to further potential after a significant market rise as we have seen.
There are always good buys in every market, but the closer we get to a top, the fewer long opportunities there will be.