Everything is Fine, Despite Evidence to the Contrary

by JDH on October 9, 2010

You will be happy to know that I will keep my comments brief this week, for two reasons. First, this is Thanksgiving weekend here in Canada (I assume because our summer is shorter, so harvest time is now, as compared to the U.S. Thanksgiving towards the end of November). With great weather for this time of year descending on Ontario, I don’t plan to spend a lot of time in front of the computer.

Second, nothing has changed from what I have discussed in recent weeks. Want to know what’s happening? Read last week’s Don’t Worry, Be Happy commentary, or my thoughts from two weeks ago that Gold and the Markets to Pause, or Patience – Gold will shine, but a small pullback is probable from three weeks ago.

The short version of where we are at is this: everything is fine, despite evidence to the contrary.

For the first time since the first week of May, before the “Flash Crash”, the Dow traded over the 11,000 level. The Dow dropped to 10,933 at 10:30 am Eastern when the September jobs report was issued, but apparently after a few moments no-one cared that the report was bad, and it was on-ward and upward from there.

Was it a good jobs report? That depends on your perspective. My perspective is this: Interest rates are essentially zero, the government has spent a gazzillion on stimulus, and yet we are still stuck with high unemployment. Even after excluding the Census worker layoffs, jobs fell by 18,000. That’s the story. You can’t be in a recovery when jobs are falling, because at this stage in a recovery jobs should be growing fast, not contracting.

I assume the market has a different perspective than me. I assume the markets are thinking “great, poor job growth means another round of stimulus, which will buoy the markets.” Yup, that’s probably it, so we are probably looking at continued stock market strength, at least until the U.S. elections in the first week of November. The government has done a masterful job of pumping things up, in the hopes that voters will vote for the incumbents.

Remember the Obama victory in 2008? It set off a wave of parties and triumphant campaign stops, and the Inauguration was a party for the ages. Will we see the same level of celebration during the first week of November?


At least not with President Obama, since as soon as the elections are over, he will be immediately going to India for a 10 day visit. He was going to leave Washington on November 7, but now he will be leaving the night of November 4, as soon as the elections are ending. Strange, eh?

I guess he will miss out on all of the celebratory parties.

Although, if you want to believe the conspiracy theorists, he may be expecting bad things, and therefore wants to be out of the country when they happen. I’ll leave it to you to draw your own conclusions.

But back to the markets. The Dow was up, due to the impending QE2 stimulus, and not surprisingly gold was also up, also due to the impending QE2 stimulus.

I must admit that I am stunned by gold’s almost un-interrupted rise from the lows back at the end of July. It would appear that now a correction lasts for, at most, three days, and that’s it! I have been expecting a pullback so I can deploy more cash, but even Thursday’s one day correction was followed by another up day on Friday, so there was no chance to do any buying.

I will continue to stick to the game plan; I’ll ride the stocks I own, cover where appropriate, and hope that at some point I can deploy my cash, which it would appear may not happen now until November.

Oh well, the weather is great, it’s Canadian Thanksgiving, and Oktoberfest season, so all is good.

Happy Thanksgiving; see you next week.

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