Bustin' out

The Dow pumped up about 9000 this morning, thanks to a bunch of good earnings numbers. Ford, AT&T and EBay all look better than expected. Throw in some good home resales data and an apparently encouraging weekly jobs figure and the corks are popping all over Wall Street. Well, all over CNBC, anyhow.

To be fair to our cousins in Fort Lee, the news of the Dow's rise did raise a cheer at the Marketplace morning meeting (although I did detect some irony there - everyone still in bonds?). But it sparked a discussion about the psychological effect of numbers on investors.

Take those earnings numbers, for example. "Better than expected." Better, in other words, than analysts had predicted. But the last few quarters have been so brutal that most analysts have been particularly pessimistic when evaluating companies. That's the gist of what Juli Neimann of Smith, Moore and Company told Steve Chiotakis on the Morning Report earlier this week. And then there's the fact that most companies have been "managing investor expectations" aggressively. Letting them know early on that the numbers won't look good, in other words.

This means that when the earnings per share number arrives, it looks a lot better than the number predicted by the analyst. But that doesn't necessarily mean it's good.

Now what about those jobs numbers? The number of newly laid-off workers seeking jobless benefits rose last week to 554,000. Bad news. But here's a thing about those weekly jobs numbers. The government tweaks them to account for seasonal auto plant layoffs. Because of all the troubles in the auto sector, those tweaks have skewed the picture this time, making the number meaningless.

Some bankers are focusing on the the four-week average of claims, which smooths out fluctuations. It dropped, to 566,000, its lowest level since January. And the total jobless benefit rolls also fell - more than expected 88,000 to 6.2 million, the lowest level since mid-April.

So, good news, right?

Well, maybe. Unemployment's at 9.5 percent nationally, and economists still say it's still rising. Now, having digested all that jobs data - is it good or bad news? I still haven't worked it out myself. Certainly not to the point where I'd place a bet in the market.

As for those housing numbers, Bloomberg reports they were spurred by tax incentives, lower borrowing costs and foreclosure-driven declines in prices. But then there's this report, also from Bloomberg, that mortgage rates rose for the first time in four weeks.

So much for cheap money. Unless those borrowing costs come down, that increase in purchases is likely to fizzle.

So, short or long?

About the author

Paddy Hirsch is a Senior Editor at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
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It is a mere number dependent on the severity of inflation. But dollar is looking strong relative to other currencies. Therein lies the illusion. When all currencies simultaneously inflate, the inflation seems invisible. But if inflation from exuberant government meddling is rampart, why bonds are stagnant? Expectation of more meddling.

Only the lurking shadow knows.


Neither short nor long, but if I had to go one way or the other I'd go short.

While earnings are beating "expectations," revenues are not. And with unemployment looking like it will continue to rise, I'm not sure when those revenues are going to rebound. Will that cause further cost reductions (i.e. more job cuts)? We could get caught in a fairly vicious cycle.

Maybe the recent uptick in the stock market will give consumers more confidence and they'll stop spending, which could break the cycle. I'm not real confident in that given how we've become a "nation of savers."

long, but my investment horizon is about 10-30 years right now, so it's not hard to be bullish.

I am strongly considering switching from bearish to strong bull. Everything should go up until they reinstate the Mark to Market rule or the next bubble pops. The only reason the markets went down was because of the Mark to Market rule. If it was never put in in the first place, banks would have lied thier way out like they are doing now.

Before Mark to Market, lies and everything ran well. After Mark to Market, lies and we are pulling out! In the middle was the truth.

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