Thursday, November 4, 2010


Goldman Slashes Nonfarm Payroll Estimate

Goldman Sachs cuts its nonfarm payroll estimate for tomorrow to 25,000 jobs.

The firm is keeping its private payroll forecast at 75,000.

Amazing Action in Gold

Gold is now up by over $41 an ounce. This is truly amazing.

Mixed Retail Sales

Eleven companies beat expectations, two were in line with forecasts and 12 were worse than expected.

The Fed's monetary largesse will bring inflation and dollar weakness that will ultimately crimp economic growth.

But for now, the stock market seems to love it.

"In a famous Saturday Night Live skit, Christopher Walken plays a legendary rock music impresario whose advice, his only advice, to a young band is "more cowbell." The actor Will Ferrell furiously pounds away on a cowbell but it's never enough for Mr. Walken, who ultimately shouts, "I got a fever, and the only prescription is more cowbell!" Federal Reserve Chairman Ben Bernanke must be a fan of that skit because he is applying the same logic to monetary policy: The economy isn't growing fast enough, and the only prescription is more money."
-- Wall Street Journal Op-Ed

I remain concerned about the efficacy and the consequences of more quantitative easing. Judging by the market's reaction, few others are concerned, as cash is no longer perceived as a safe asset.

Rather, "stuff" is the new safe asset.

This morning the gold markets (+$24 an ounce) -- which I suggested yesterday would be the likely beneficiary of the election (and ensuing gridlock) as well as monetary easing -- continues to tell a story that the Federal Reserve will get what it wants with regard to inflation ... and maybe more (e.g., see the large overnight price rise in wheat, corn and oil).

I would argue that the its monetary largesse will not deliver economic growth and inflation in wages (what the Fed wants), but rather will result in the sort of inflationary pressures and drop in our currency that will, in the fullness of time, serve as a headwind to domestic economic growth.

Also surprising to me is the willingness of the world's stock markets to continue to discount an expected event (the election results and QE 2) on multiple occasions.

For now Mr. Market sides firmly on the side of David Tepper and disagrees (violently) with my views, as "mo' money" and "more cowbell" are seen as economic and stock market elixirs.

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