Bernanke was appointed to head the biggest strongest central bank on earth, because of the fact we were going to go into a depression. Since that day, his approach to the problem was to print money. His approach to any problem is to print money. He's printed more of it than ever in history. Here's a man, at the helm of arguably the single most important "bank" on planet earth and guess what? He never worked at a bank before.
Another week has passed and like the previous ones there was no shortage of things that make you check your sanity with a dipstick. But this week in particular was "extra special" considering it was a week in which we'd get two of the more powerful information releases. First up were of course the Federal Reserve and their monetary policy stance. What would they be saying? What would they be doing? Then of course later in the week we had the "jobs" report. The non farm payroll report that everyone waits with baited breath for.
So first off let us take a peek into the world of Ben Bernanke. Well, Ben Bernanke is supposed to be an academic. He's supposedly very bright, and has the alphabet soup of letters behind his name to show you his achievements. He says that his area of expertise was the "Great Depression" and that after years of study, he figured out what they did wrong and if we ever had a depression he could fix it. Hmm, mighty lofty talk, no? Yes. So, Bernanke was appointed to head the biggest strongest central bank on earth, because of the fact we were going to go into a depression. Since that day, his approach to the problem was to print money. His approach to any problem is to print money. He's printed more of it than ever in history. Here's a man, at the helm of arguably the single most important "bank" on planet earth and guess what? He never worked at a bank before. As far as I can tell, he's never had a real "job" before. Just years of high education.
Unless you've been hiding on a remote Island, you probably know that the market has been flirting with all time historical highs. Considering the bulk of the economic reports show little if any true "growth" one is prompted to ask...how did we get to an all time market high?? The answer is both simple and now widely accepted. The Federal Reserve has been printing trillions of dollars and pushing it into the system. It has to go somewhere and it does...it ends up in the stock markets. Then of course we've learned that 23% of the world’s central banks are so desperate for something that resembles a return, that they are buying tens of billions worth of stocks right out on the open market. Thus it became obvious to anyone that could send electricity between two brain cells that if Bernanke and the Fed's slow down their money printing, the market rally would stop on a dime. The only reason a foreign central bank would buy US stocks is if Bernanke keeps shoveling money to the banks, which ultimately ends up in stocks and pushes them higher. So "Benji" is the most important cog in the machine.
Heading into the Wednesday release of the FOMC's statement, every one was on edge. Would he change the statement to show that they were getting ready to scale back their Quantitative easing? Markets were nervous, they'd heard that rumor before. Everyone knows that the second the monetary spigot is turned off, the markets crash. Notice I didn't say "pull back", because they won't pull back. They will outright crash. So, when the statement hit, everyone let out a sigh of relief. Why? Because although most of the statement read exactly like the one from last month, there was one small change. The statement also said they were willing to "do more" if conditions merited it. Well, "do more" means increasing their QE/stimulus if needed. Considering the lousy economic reports, it is clear that at some point it will be needed and Benji said he'd deliver. They liked that.
Thursday the market reacted to that statement and gained back all of Wednesday's losses. Once again we were at "all time highs". But there was that nagging non farm payroll report to deal with. After the ADP report suggested there were very few jobs created, would that put a wrench in the works? They were looking for 140K jobs to be created....would we get it? Well, Friday morning rolled around and guess what happened? Despite companies saying the future doesn't look so hot and they're not hiring, we supposedly created 165K jobs. That was considerably more than even the most bullish were looking for. How on earth did we do that??
Well, we took a look. The first thing we noticed was that the "hours worked" portion of the report fell by a whopping 2 points as it was 34.6 last month and just 32.4 this month. That is a huge fall. See what is supposed to happen is that companies are so busy, they force people to work more hours and when they can't squeeze out one more minute of their time they go hire more folks. So why would they be hiring if the work week is shrinking?? Then we noticed the part time portion of things. All in all, if the report could stand on its own feet, In sum, the April report describes a part time employment economy, with most new jobs being part time and in service sector. Wages/hours were declining. Is that a reason to soar higher? Not really. So if everyone's part time and wages are shrinking and hours are being lost...where'd we get the 165K from???
Welcome our magicians at the BLS. The inclusion of jobs via their "birth/death" model was an astounding 193K jobs. Do the math folks. The BLS "made up" 193K jobs and still the official report came in at 165. In other words, we LOST jobs in April, we didn't gain them. The 193K jobs the BLS included in the report don't really exist. Basically the Birth/Death model says "for every "X" amount of people that get laid off, "X" amount of them will go out and open new businesses and hire people. They report that phantom number as fact". Now do you really think that a bunch of folks that lost their jobs, or were sitting on couches collecting unemployment actually went out an opened businesses and hired almost 200K people? If you do, you need medication. Of course they didn't. The report was as bogus as a politicians speech.
But the market LOVED it. In seconds the futures soared. When the DOW opened it was up 100 and reaching for more. In a matter of moments the DOW was flirting with 15,000 and the S&P was clearly into all time highs again. All based on a bogus report created out of the twisted minds of a Government agency. Just to show the lunacy of what happened Friday morning, we were up to 14,994 as we headed into the next economic release which was the "Factory orders". Well guess what? It fell 4 points, an entire point below estimates. Following that the non manufacturing ISM hit. They expected a reading of 54.00. Nope, 53.1. Are you getting the picture here folks? The economy stinks. The job report was a lie and the portion that wasn't a lie shows we're nothing more than a part time society of 30 hour workers asking "would you like fries with that?"
Thus the single most important thing on the planet right now is Bernanke and his printing press. As long as he's willing to continue to violate the US dollar by creating trillions more of them this market can continue higher. We've never seen anything like it in history and when it ends it too will be a historical event. The crash that will follow this disaster is going to make the 2008 crash look lame. Considering that the UK, the European Central Bank, and now Japan have embarked on a currency "race to the bottom", the insanity we're going to see in the not too distant future is almost impossible to comprehend. Could we see DOW 18,000? Sure we could. Why not 20? We're flirting with 15K right this second, despite the fact we don't belong a penny over 9K. Just understand something here folks. We saw this movie in Japan in the 80's. Their stock market ran and ran to unbelievable incredible heights. From under 9000 it hit 40,000! But like all bubbles of insanity, it popped and they spent 10 years back under 9,000.
It doesn't matter where we go first, whether 17,000 or 24,000 we'll end up at 6000. Count on it.