Market Commentary

There is little I can write about yesterday’s market action.
November 11, 2009

There is little I can write about yesterday’s market action.  It was relatively quiet perhaps digesting Monday’s large gains that propelled the S & P 500 to a 13 month high.

As noted last week, today’s pervasive bearishness is about as dominant as the overwhelming bullishness 30 months ago.  If the market requires a “Wall of Worry” to move higher, a mountain is before us thus suggesting yet greater gains.

While I do believe equities are over extended, a view that I adopted over 1000 points ago, data is suggesting the economy is continuing to recover at a pace greater than most expect.  However many point to the 26 year high unemployment rate as a major hindrance to growth.

But is this an accurate opinion? Prior to the 1990-91 recession, hiring returned about two months after the recession’s end.   This trend changed following the two most recent recessions of 1990-91 and 2001-2002, recoveries that were deemed “jobless.” 

In fact the unemployment rate continued to rise for two years following the end of the 2001-2002 recession yet the economy expanded by an average annual of 3.4% during this period.  The economy’s growth rate for the next two years when hiring began was around 2.6%.  Incidentally  it took 55 months to recover the jobs lost during the 2001 recession.  [Bloomberg]

Will this recovery be jobless or were the two most recent recoveries the abnormal events?  Worker productivity has surged, partially the result of the massive firings that took place over the last 14 months to ensure survivability.  In my view American workers are now working at an unsustainable pace because of workplace insecurity.

 At some juncture work place productivity will decline not the result of the traditional forces but from worker exhaustion.  At some juncture corporations will be forced to hire to ensure high quality and timely products.

October’s employment data stated that temporary employment has risen for three consecutive months.  This increase typically precedes hiring.

As noted above the economic outlook is overwhelmingly bearish, a view that is probably a contributory factor to the lack of job creation.  I think once employers become more confident in tomorrow’s outlook, jobs growth will occur. The raw ingredients---huge productivity the result of massive panic firings and an increase in the number of temporary workers—are present.

Today is expected to be relatively quiet as it is Veterans Day.  Regardless of one’s political views, please say thank you to all those who have served, especially remembering those who gave the ultimate sacrifice.  Thank you!

Last night the foreign markets were up. London was up 1.24%, Paris up 1.27% and Frankfurt up 1.43%.  Japan was up 0.01% and Hang Sang up 1.61%.

The Dow should open moderately higher on the news that China’s industrial production and Japan’s machinery orders climbed.   The 10-year is off 3/32 at a 3.48% yield.