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  • Today's Good News: Higher than Expected Jobless Claims, Benign Auction [Edit or Delete]0 comments
    May 26, 2011 1:36 PM
     Good News: More people applied for unemployment benefits

    Stocks are rallying this afternoon after being down earlier because job loss in the context of dyseconomics is good for the economy. Here’s a recap why:

    1.    Perhaps the most obvious explanation for today’s rally is that high unemployment gives the fed a good excuse to leave rates at 0% forever.  Reality check: Even Bernanke would confess that it makes no difference.  Rates have been at 0% for almost 2 years and unemployment is still very high. Low rates is great for profits & earnings, refinancing, exporting (due to falling dollar), M&A,  but NOT job creation (or at least not anymore).
    2. Unemployed people do contribute more to the economy by using Netflix, uploading pictures on facebook, priceline, apple products in contract to hurting employers’ bottom line while performing slow, redundant work.
    3. Job loss means more productivity because the remaining workers will work harder for fear of losing their jobs.
    4.  If Unemployment stays above 9% into 2012 it will increase the odds of a republican winning. In reality, globalization & technology means fewer jobs regardless of which party is in power. Republican economic policies that are good for multinationals won’t make them more inclined to hire when outsourcing and automation is cheaper.
    5. Stocks are also rallying because Obama keeps falling in the polls. Palin has a movie coming out that should galvanize the republican base.

    But what about falling consumption? If unemployment is very high won’t consumer spending (which is supposedly 70% of GDP) suffer? Apparently not.thanks to globalization. Companies like Tiffany are reporting a greater percentage off their sales overseas, reflecting a trend of lessening dependence on US consumers. You can have 9% unemployment and rising earnings due to foreign consumption.

    Here is the full story:

    Diamond and fine jewelry-retailer Tiffany reported a beat to its quarterly earnings expectations Thursday, saying that global sales increased 20% and earnings increased 26%, reflecting strengthening sales in the luxury industry.:

    Treasuries rallying after benign much for hyperinflation. Here is the chart of TLT:

    The DJIA is only 400 points from recent highs but TLT is already 10% off the lows. If the DJIA, silver, oil and gold were to make new highs I predict TLT would fall only slightly, indicating only mild projected inflation despite the big rally. This is the 'great moderation' in action and it's making the hyperineflation doom and gloomers very mad.

    Also read:

    Be Not Afraid, Pessimism Is Overdone: Jeff Kleintop - Matt Nesto Amidst cries of "sell in May," strife in Europe, doubts over China, mushy economic data, a collapse in
    commodities and unease over QE2 ending.




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