Who Cares About Economic Indicators?

With all of the horrific numbers coming out, it makes sense that our boy, Hank “Give-em-a-Trillion” Paulson, wants to do what he can to help out the situation. If you really think about it, the amount spent on the Citigroup (C) bailout was most of the remaining TARP that was pulled off the table the week before. Now it is has been made clear that there was reason for the move, the Sunday night cloak-and-dagger approach has not instilled confidence.

It is very reminiscent of the July 2008 distorted reality that we saw as fresh evidence of problems were starting to come from every direction. But, it still took a few months for the news to absorb into the markets as it was difficult to actually comprehend the magnitude of the problems.

Now I wonder if we are doing the same as the euphoria over a new President and a reckless spending spree by the Treasury and the Fed are becoming all too commonplace. How are we going to pay for the estimated $7.5 trillion? Maybe we shouldn’t care and just throw our money in too? Maybe it would be good to buy General Motors (GM) when they are the verge of collapse as it has become clear that failure is not an option and Hank and Gang (or their replacements) will come to the rescue.

Leading Indicators

But it does appear that the short covering rally that we have seen will abruptly end when the fear of the SEC coming in and altering the short-selling rules and the FED stops providing backstops to every failed business model. How long do we stay long into this mini-bubble? Good question, and one that is moving closer daily.

If for nothing else, the unemployment rate is a troublesome indicator. Massive layoffs will create a vacuum, no matter how much credit is out there. Falling home prices, not seeing any signs of abating and economic indicators mixed with earnings warnings, does not get me excited. I am staying neutral for a while for the core portfolio and trading into the powerful swings, long and short. I cannot trust this market. Do you?

Comments

[the weakono...:]

I clicked on this article before I knew it was Horowitz. The words are gold. I don't move my actual portofolio very much, but my fake one is sitting tight like you said.

The indicators are useless as actual measures. But like the Dow or even the BCS, they carry significance in most people's lives. I do the opposite of the Dow. The more it sinks, the longer I go.

2008 Nov 26 09:49 AM

[drbob66:]

The latest short-covering rally is a "mini-bubble"? Imo, the word bubble has become over-used recently. Let's give it a rest for a while...otherwise it'll lose its significance.

2008 Nov 26 10:41 AM

[Andrew Hor...:]

Before You knew it was Horowitz?? Huh?

A


On Nov 26 09:49 AM the weakonomist wrote:

> I clicked on this article before I knew it was Horowitz. The words
> are gold. I don't move my actual portofolio very much, but my fake
> one is sitting tight like you said.
>
> The indicators are useless as actual measures. But like the Dow
> or even the BCS, they carry significance in most people's lives.
> I do the opposite of the Dow. The more it sinks, the longer I go.

2008 Nov 26 06:56 PM

[Steven Hansen:]

hey dollar talk, i am tired of seeing the same statement in every post i read. say it once.

Andrew, unemployment is not a leading indicator - and on many occasions in the past the economy started improving before unemployment levels improved. However, i agree with the overall thrust of your piece that there is nothing out there that is good enough to get excited about. rallies based on increased government spending / debt should tell you the market is not understanding the future impact of these debt increasing actions.

2008 Nov 27 11:08 PM

[Andrew Hor...:]

Hand....

... Never said employment was leading. BUT, I do not believe employment problems have even nearly peaked.

Andrew


On Nov 27 11:08 PM The hand wrote:

> hey dollar talk, i am tired of seeing the same statement in every
> post i read. say it once.
>
> Andrew, unemployment is not a leading indicator - and on many occasions
> in the past the economy started improving before unemployment levels
> improved. However, i agree with the overall thrust of your piece
> that there is nothing out there that is good enough to get excited
> about. rallies based on increased government spending / debt should
> tell you the market is not understanding the future impact of these
> debt increasing actions.

2008 Nov 29 03:49 PM