Last year was a rollercoaster ride for the stock market. In 2011, the Dow Jones Industrial Average raced to a high of 12,810 in April before skidding to 10,404 in October. Then, in the final three months of the year, the Dow surged more than Rick Santorum on the campaign trail – adding a record 1,304 points, or almost 12%.
Now it looks like we may be in for more of the same. Market guru David Rosenberg makes a persuasive case to his private clients that 2012 bears a striking — one might even say eerie — resemblance to 2011. “Just about everything is mapping out last year’s manic behavior,” writes Rosenberg, chief economist and strategist for investment manager Gluskin Sheff & Associates in Toronto.
(LIST: Top 10 Scared Stock Traders)
Rosenberg is a guy worth listening to: The former chief economist for North America at Bank of America-Merrill Lynch was named the most accurate forecaster by MSNBC and economist of the year by Fortune magazine in 2011. I’ve been reading his highly influential daily email, “Breakfast with Dave,” for years. Here are some of the most compelling reasons to think 2012 could be 2011 redux:
Extraordinary levels of central bank support: In 2011, the stock market was living off the “fumes” from a special Federal Reserve Treasury bond-buying program, known as QE2. Some of the money the Fed released into the economy ended up in the stock market. Similarly, in 2012, the European Central Bank lent gobs of money to the banks at yearend in its own special lending program (dubbed LTRO), fueling markets so far as well. Why is that problem? When the flood of money from the central bank spending spree ends, the stock market is likely to falter, just as it did last year.
(MORE: Is This Stock Market Rally For Real?)
Dow Transports are starting to sputter: Most people keep an eye on the Dow Jones Industrials. But those in the know also keep an eye on other Dow indexes like the Transports as an economic bellwether. It includes companies like Fedex, whose fates are closely tied to the health of the economy. Last year the Transports weakened before the broader stock market. Shades of 2011: The DJIA just embraced 13,000, but the Transports are down 4%.
Treasury bond yields are ultra-low: Then, as now, the 10-year note remains stubbornly below 2%, another indication investors are betting on a weak economy. Indeed, in his testimony before Congress yesterday, Fed Chairman Ben Bernanke said growth would be modest, hampered by the depressed housing market and turmoil in Europe. Modest growth does not typically translate into improving corporate earnings—or an exuberant stock market.
Stock volume is low: Both in 2011 and 2012 the trading volume in stocks has been thin, which means that not all that many people are saying, yes!, we love the market. When volume is thin, prices swing much more wildly, giving the market a rollercoaster feel.
(MORE: Warren Buffett on Succession, Stock Buybacks, and Why He Doesn’t Like Gold)
Oil prices are gaining: Early in 2011 the jobless picture began to improve only to get slapped with higher gas prices and political uncertainty. Sound familiar?
Confidence is suspiciously high: Ready for another encounter with déjà vu? In February 2012, the Conference Board measure of consumer confidence measure unexpectedly jumped to 70.8 from 61.5 in January. Ditto February 2011: The survey unexpectedly shot up to 72 from 64.8. If that isn’t uncanny enough, Rosenberg notes that bulls now outnumber bears two-to-one. Last year the bull-bear ratio was nearly identical early in the year and presaged the market peak. When bears finally outnumbered bulls in October, the market bottomed. Beware the wisdom of the crowds.
Markets, of course, never shoot up without some pullbacks. But if investors are expecting a smoother ride for stocks in 2012 the signposts Rosenberg is training his lights on are saying not so fast! A ticket to the stock market this year might feel like a ride on the Coney Island Cyclone. Get ready for some heady highs and stomach churning dips.
MORE: For Chinese Advertisers, Nostalgia is Their New Secret Weapon
Read more: http://business.time.com/2012/03/02/stock-market-deja-vu-why-it-feels-like-2011-all-over-again/#ixzz1oCIyAZ27
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Sunday, March 4, 2012
The Unemployment Paradox: Why the Conventional Wisdom About Job Seekers Is Wrong Read more: http://business.time.com/2012/03/02/the-unemployment-paradox-could-a-better-economy-make-jobless-rates-worse/#ixzz1oCICfwvS
American labor force participation — that is, the percentage of working-age persons who are employed or are looking for a job – has been down since the financial crisis in 2008, putting us on par with Europe, as I noted last year in my cover story on economic mobility. That’s been a big hit to the idea of America as a land of opportunity. Labor force participation in the U.S. now stands at only 63%. Lots of investors and economists believe that’s because so many job seekers out there during the Great Recession and the jobless recovery grew frustrated and gave up looking.
Remember that official unemployment rate calculations count people who are looking for work — but not those who have given up and stopped looking — as unemployed. As a result, when people give up looking for work, it can have the counter-intuitive effect of making the unemployment rate look better. And theoretically, the reverse can also be true — but here’s where the conventional wisdom goes astray: Now that the economy is truly expanding once again, many observers are predicting that formerly discouraged workers will flood back into the labor market and reverse the decline in unemployment that we’ve seen over the last few months.
(MORE: Why Manufacturing Can’t Solve The Jobs Problem)
Not so, says the macro-economic team at Barclays. They ran models showing that demographics, and especially retirement amongst baby boomers, has played a larger role in pushing the labor participation rate down than other factors have. “Only about a third of the drop in the labor force participation rate is accounted for by those who say they want a job, and only about 15% by those who want a job and are also of prime working age – i.e., between 25-54,” says the report issued Thursday. What’s more, historically, re-entrants into the labor force haven’t really played much of a role in changing the unemployment numbers.
(MORE: Like Microbreweries Before Them, Mini-distilleries are Sweeping the Nation)
That’s good news for President Obama, who needs the unemployment number to keep ticking down in order to ensure victory in November. What I wonder about, though, is this: If, as many economists predict, inflation rises, and if entitlements are eventually cut, how many of those 55 and older Americans will decide that they have to go back to work, whether they want a job or not.
I do think employment dynamics are changing in ways that are extremely hard to predict right now, thanks to a push for entitlement reform, a trend towards in-sourcing, and the increasing lifespan of people in wealthy countries. But I basically buy the Barclays idea that in the short term, at least, the idea of a surging labor force of formerly frustrated job seekers is an “urban legend.”
MORE: How a Fear of Foreigners Is Gripping Europe When Its Economy Needs Them Most
Read more: http://business.time.com/2012/03/02/the-unemployment-paradox-could-a-better-economy-make-jobless-rates-worse/#ixzz1oCIKSYmd
Remember that official unemployment rate calculations count people who are looking for work — but not those who have given up and stopped looking — as unemployed. As a result, when people give up looking for work, it can have the counter-intuitive effect of making the unemployment rate look better. And theoretically, the reverse can also be true — but here’s where the conventional wisdom goes astray: Now that the economy is truly expanding once again, many observers are predicting that formerly discouraged workers will flood back into the labor market and reverse the decline in unemployment that we’ve seen over the last few months.
(MORE: Why Manufacturing Can’t Solve The Jobs Problem)
Not so, says the macro-economic team at Barclays. They ran models showing that demographics, and especially retirement amongst baby boomers, has played a larger role in pushing the labor participation rate down than other factors have. “Only about a third of the drop in the labor force participation rate is accounted for by those who say they want a job, and only about 15% by those who want a job and are also of prime working age – i.e., between 25-54,” says the report issued Thursday. What’s more, historically, re-entrants into the labor force haven’t really played much of a role in changing the unemployment numbers.
(MORE: Like Microbreweries Before Them, Mini-distilleries are Sweeping the Nation)
That’s good news for President Obama, who needs the unemployment number to keep ticking down in order to ensure victory in November. What I wonder about, though, is this: If, as many economists predict, inflation rises, and if entitlements are eventually cut, how many of those 55 and older Americans will decide that they have to go back to work, whether they want a job or not.
I do think employment dynamics are changing in ways that are extremely hard to predict right now, thanks to a push for entitlement reform, a trend towards in-sourcing, and the increasing lifespan of people in wealthy countries. But I basically buy the Barclays idea that in the short term, at least, the idea of a surging labor force of formerly frustrated job seekers is an “urban legend.”
MORE: How a Fear of Foreigners Is Gripping Europe When Its Economy Needs Them Most
Read more: http://business.time.com/2012/03/02/the-unemployment-paradox-could-a-better-economy-make-jobless-rates-worse/#ixzz1oCIKSYmd
Mitch Daniels: Indiana Tornadoes As Serious As I've Seen As Governor
Indiana Gov. Mitch Daniels on Saturday morning toured the devastation unleashed by a swarm of tornadoes that killed 14 people in his state.
He spoke to CNN after viewing the wreckage in the town of Henryville.
"We're not unfamiliar with Mother Nature's wrath out here in Indiana," Daniels said. "This is about as serious as we've seen in the years that I've been in this job."
He spoke to CNN after viewing the wreckage in the town of Henryville.
"We're not unfamiliar with Mother Nature's wrath out here in Indiana," Daniels said. "This is about as serious as we've seen in the years that I've been in this job."
Newt To TPM: Never Mind Rush's Apology, How About Barack Obama's To Afghanistan?
TPM caught up with Newt Gingrich after a speech at Bowling Green University in Ohio and asked about Rush Limbaugh's apology to Sandra Fluke.
"I'm not paying attention," he responded.
Asked whether he thought he felt Limbaugh misspoke, Gingrich turned the question on President Obama.
"I'm not paying attention," he repeated."I'm paying attention to the president apologizing to people who killed Americans."
The line was a reference to Obama's apology to Hamid Karzai, president of Afghanistan for the burning of Korans by US troops, which he said was necessary to calm deadly violence against American troops that erupted over the incident.
"I'm not paying attention," he responded.
Asked whether he thought he felt Limbaugh misspoke, Gingrich turned the question on President Obama.
"I'm not paying attention," he repeated."I'm paying attention to the president apologizing to people who killed Americans."
The line was a reference to Obama's apology to Hamid Karzai, president of Afghanistan for the burning of Korans by US troops, which he said was necessary to calm deadly violence against American troops that erupted over the incident.
Romney Camp Says Santorum’s Ohio ‘Delegate Debacle’ Shows Major Problems
Mitt Romney may be running into trouble putting away Rick Santorum, but at least he’s running a fully functional campaign. That’s the argument his surrogates in Ohio made on Saturday at least, pointing to Santorum’s basic difficulties getting his delegates on the ballot as proof he’d wilt against President Obama’s elite re-election team.
According to Romney’s national counsel, Ben Ginsberg, Santorum’s ability to field a full delegate slate in competitive states ia “a true test, especially for Republican primary voters to look at, whether a candidate is ready for primetime.”
“What’s evident from what’s going to happen on Super Tuesday and beyond is that Rick Santourm flunks that test,” Ginsberg said in a conference call with reporters.
While several polls have shown Santorum leading Romney in Ohio, he failed to submit the necessary paperwork in three congressional districts needed to compete for their delegates, putting him at a serious disadvantage to Romney from the start. He also, like Newt Gingrich, failed to qualify for the ballot in Virginia entirely. All told, the Romney campaign estimates 16% of all Super Tuesday delegates are already out of play for Santorum. There may be some legal recourse for Santorum if he wants to try to claim those missing Ohio delegates later, but it will be complex and difficult.
“In the Fall, we know whoever the Republican nominee is will be going against one of the best, well-oiled political machines,” Hamilton County Commissioner Greg Hartmann, a Romney supporter in Ohio, told reporters. “This kind of ball drop at this stage of the campaign shows he’s not ready for primetime.”
Update: A spokesman for Santorum, Hogan Gidley, responded to TPM that the Romney campaign’s attack on their professionalism reflected an elitist effort to undermine their more grassroots campaign:
“The Romney campaign is just throwing another temper tantrum because they’re a little confused and frustrated as to why they can’t buy this election. I’m sure they thought that with all their Establishment friends and all the Establishment money and with the handpicked Establishment candidate, this campaign would really be a coronation for Mitt Romney. But they’ve just never understood that this election is not about who has the most money - or who has the most infrastructure. It’s about electing a President who inspires and believes in the American people instead of the government control. And on the biggest issues in this election, Mitt Romney sided with Barack Obama, and we just learned today, he actually encouraged Barack Obama to use Romney’s Massachusetts model for the government take over of healthcare. When a grassroots conservative Tea Party candidate like Rick Santorum threatens the Establishment with true conservatism and actual reform minded policies the Establishment resorts to namecalling and tearing down others.”
According to Romney’s national counsel, Ben Ginsberg, Santorum’s ability to field a full delegate slate in competitive states ia “a true test, especially for Republican primary voters to look at, whether a candidate is ready for primetime.”
“What’s evident from what’s going to happen on Super Tuesday and beyond is that Rick Santourm flunks that test,” Ginsberg said in a conference call with reporters.
While several polls have shown Santorum leading Romney in Ohio, he failed to submit the necessary paperwork in three congressional districts needed to compete for their delegates, putting him at a serious disadvantage to Romney from the start. He also, like Newt Gingrich, failed to qualify for the ballot in Virginia entirely. All told, the Romney campaign estimates 16% of all Super Tuesday delegates are already out of play for Santorum. There may be some legal recourse for Santorum if he wants to try to claim those missing Ohio delegates later, but it will be complex and difficult.
“In the Fall, we know whoever the Republican nominee is will be going against one of the best, well-oiled political machines,” Hamilton County Commissioner Greg Hartmann, a Romney supporter in Ohio, told reporters. “This kind of ball drop at this stage of the campaign shows he’s not ready for primetime.”
Update: A spokesman for Santorum, Hogan Gidley, responded to TPM that the Romney campaign’s attack on their professionalism reflected an elitist effort to undermine their more grassroots campaign:
“The Romney campaign is just throwing another temper tantrum because they’re a little confused and frustrated as to why they can’t buy this election. I’m sure they thought that with all their Establishment friends and all the Establishment money and with the handpicked Establishment candidate, this campaign would really be a coronation for Mitt Romney. But they’ve just never understood that this election is not about who has the most money - or who has the most infrastructure. It’s about electing a President who inspires and believes in the American people instead of the government control. And on the biggest issues in this election, Mitt Romney sided with Barack Obama, and we just learned today, he actually encouraged Barack Obama to use Romney’s Massachusetts model for the government take over of healthcare. When a grassroots conservative Tea Party candidate like Rick Santorum threatens the Establishment with true conservatism and actual reform minded policies the Establishment resorts to namecalling and tearing down others.”
Romney Takes Washington Ahead Of Super Tuesday
Mitt Romney picked up another win Saturday night in Washington state, taking 36 percent of the vote with 77 percent of precincts reporting. The win gives Romney some much-needed momentum heading into a critical Super Tuesday contest.
The victory capped a week in which the former Massachusetts governor also won Arizona and a close contest in Michigan. It also provided the Romney camp a jolt of positive news after the candidate slipped up in an interview with a local Ohio reporter and was forced to spend multiple days clarifying his position on a controversial measure to limit birth control coverage.
“I’m heartened to have won the Washington caucuses, and I thank the voters for their support,” Romney said in a written statement shortly after the win. “Every day that passes with Barack Obama in the White House is a day in which America’s recovery from the economic crisis is delayed.”
At stake in Washington are 43 delegates, but the caucuses had no affect on their selection. That will be determined by other GOP events in the coming weeks.
Still, he results were a disappointment for Texas Rep. Ron Paul, who had staked his hopes on winning Washington and ended up competing for second place with about 25 percent, narrowly edging former Pennsylvania Sen. Rick Santorum. Paul has not won any states to date.
Paul was the only candidate to appear in Washington on Saturday, while the others focused their campaigns on Tuesday’s big event. He aggressively organized and recruited supporters in the lead up to the caucuses, hoping a win in Washington could propel him to the front of the pack nipping at Romney’s heels.
Saturday’s voting proved to be a big event for the Washington GOP. With some counting still to go, the party had already tallied the votes of more than 40,000 caucus goers. That put turnout far ahead of 2008 Republican caucuses, which saw about 12,000 people participate.
The boost appeared to cause problems in at least one part of the state, where it was reported that some 1,500 people were turned away from the caucuses on Saturday morning.
The victory capped a week in which the former Massachusetts governor also won Arizona and a close contest in Michigan. It also provided the Romney camp a jolt of positive news after the candidate slipped up in an interview with a local Ohio reporter and was forced to spend multiple days clarifying his position on a controversial measure to limit birth control coverage.
“I’m heartened to have won the Washington caucuses, and I thank the voters for their support,” Romney said in a written statement shortly after the win. “Every day that passes with Barack Obama in the White House is a day in which America’s recovery from the economic crisis is delayed.”
At stake in Washington are 43 delegates, but the caucuses had no affect on their selection. That will be determined by other GOP events in the coming weeks.
Still, he results were a disappointment for Texas Rep. Ron Paul, who had staked his hopes on winning Washington and ended up competing for second place with about 25 percent, narrowly edging former Pennsylvania Sen. Rick Santorum. Paul has not won any states to date.
Paul was the only candidate to appear in Washington on Saturday, while the others focused their campaigns on Tuesday’s big event. He aggressively organized and recruited supporters in the lead up to the caucuses, hoping a win in Washington could propel him to the front of the pack nipping at Romney’s heels.
Saturday’s voting proved to be a big event for the Washington GOP. With some counting still to go, the party had already tallied the votes of more than 40,000 caucus goers. That put turnout far ahead of 2008 Republican caucuses, which saw about 12,000 people participate.
The boost appeared to cause problems in at least one part of the state, where it was reported that some 1,500 people were turned away from the caucuses on Saturday morning.