Housing, Jobs, And Why Nothing Stops the Stock Market

by: Economic Disconnect

The stock markets have been up so long I almost have to double check and make sure on the off day that the indices close in the red. Many have written about how volume on the upside has been lacking, but on down days it has been high. Maybe more folks like to sell once a month than spread it out!

I bring this up because the ability of the markets to ignore structural news that is bad is amazing. The stock market, which is supposed to be a gauge of the economy, continues its assault back to old highs. A day may come when we find out why. Until then, consider the following points that by themselves mean more to the economy than the stock market does.


The Positives: Home sales are moving up and prices have stopped a never ending collapse.
Caveats to this: Sales have been at the low end due to tax credits and FHA loan expansion. Government intervention has supported things artificially.

Macro Issues: Too many to cover in detail but shadow inventory is a big one and an increasing foreclosure rate is alarming.

From Wednesday:
Sorry Folks, The FHA Is Still Going To Meltdown
FHA loans going south in a hurry

Mortgage Delinquencies Pass 10%: LPS
National rate keeps climbing

Without Precedent in the Modern Era
Walking away gaining momentum

I would also add that when (IF?) the government ends their enormous support measures (MBS buys, ZIRP) there is a built in 10-20% price correction on tap. How will this affect the home sector? Badly I imagine. Nothing like jumping at a 8k tax credit only to be underwater by 50k in two years!


Word is that CNBC has a whole truckload of baseball caps with the slogan "Jobs Were Created Today!!!!" ready to pass out on Friday when the BLS releases the jobs number. Ok, I made that up.

Lost in the ether will be the enormous revisions coming to the 2009 job loss total because as you know, employment is a lagging indicator, until it goes up, then it is a leading indicator worth a 5% move to the upside.

Mish has harped on this all year and when the 820,000 additional job losses are announced for 2009 on Friday you will have been informed:
824,000 Jobs Will Disappear on February 5; BLS Admits Flawed Model but Plans No Changes
That is some revision.

Zero Hedge goes further down the rabbit hole:
Explaining The Government's 1.8 Million Job Overestimation In Pictures
Can Bernanke follow along with the pictures? Can anyone?

This year states and municipalities are going to start having serious issues and this is yet another aspect ignored by the markets. Sovereign debt risk is as high now as during the crisis apex, and this too seems unimportant. Lots of things have been deemed unimportant. The senate election result in Massachusetts is already unimportant and has lost any steam to influence CONgress as real financial reforms have been torpedoed out of existence before they even got a chance to have a debate.

At some point, something is going to matter!