Making Sense of the Markets

05 Jan
Its not Alive

Making Sense of the Markets

Gold Market Discussion

The Wild Ride in the Stock Market Continues… 

“Get the defibrillator!  Grab the paddles!”

The flatlining stock market was jolted into an appearance of life at the end of the week by two electro-cardio interventions:

The first jolt was the release of the employment numbers.  The Drudge Report shouted the news with this headline:  “JOBS UP BIG!  +312,000RECORD NUMBER WORKING.”

More voltage came from Federal Reserve Chairman Jerome Powell, who said the Fed is “listening closely to the markets.”  

Translation: “All those interest rate hikes we’ve been promising?  Well, we’re not that committed to them after all.”

You could almost hear the famous words of Ronald Reagan that tell you everything you need to know about political behavior: “When I feel the heat, I see the light.”   

Powell has been feeling a lot of heat, from both Wall Street and from the Oval Office.   

The Friday run up on the Dow of 746 points had traders sounding like Gene Wilder in Young Frankenstein:  “It’s alive!  It’s alive!”

Not so quick there, boys!

As usual, there is more to both of these stories than meets the eye.  For example, jobs may have been up 312,000, but the labor pool grew by even more.  It grew by 419,000.  

If the workforce increased faster than the number of jobs, unemployment must have grown.  And it did.  The unemployment rate actually rose in December 0.2 percent.  If you factor in all the people who have given up or dropped out of the labor force, the unemployment rate is much, much higher than the headline number.

As for Chairman Powell, slowing the pace of Fed interest rate hikes may cheer the floor traders and trigger some stock algorithms, but it can’t mask the real weakness in the economy.   It can’t mask the fact that Apple lost $463 billion in market capitalization since October.

That’s not just a little arrythmia; that’s a massive market coronary event. 

Powell’s shift amounts to a “so what?” That’s according to Michael Shedlock of Global Economic Trend Analysis.  He agrees that our “economic imbalances are staggering following decades of Fed officials blowing repetitive economic bubbles of increasing amplitude.”

For more on those staggering imbalances and the reasons we were able to alert you to the top of the stock market in the Fall, go here, here, and here.

One more thing:  Gold traded briefly above $1300 an ounce before it pulled back while the Young Frankenstein moment in the stock market played out.  As I noted in my latest radio commercial, gold is up more than 10 percent since August, while the stock market is in trouble.  In fact, the Nasdaq Composite is down almost 30 percent.

Take a listen to our latest commercial, although it’s nothing new to readers who have already been listening for the past several months…

RME :30 Commercial- January 2019