Markets and EconomyWHEW!!

Finally (gasp, wheeze, cough) the jobs numbers have turned, at least for a month. It is important not to listen to any of the "noise" that pundits spout about them. Just look at the numbers. Unemployment is a lagging indicator, in this case it has lagged pretty badly, but along with the revision of the prior report, yesterday's jobs data is one more positive number in a list of positive numbers.

As a comment here, it is critical that we NOT listen to "interpretations" of these numbers. The methods used have been the same for years and they give the only picture we can rely on. The government contacts 400,000 companies by phone and gets their numbers and contacts about 150,000 individuals. That's it. Had you listened to the Left Wing PBS last night you would hear that "things are not that good", and various other negatives; nobody gets on PBS who actually favors Bush and free markets. While Kudlow/Cramer who are supply side market enthusiasts are excited and positive. Forget everyone. Watch your own numbers on your stocks.

A comment regarding the dollar. The dollar can't stay this weak for very long without some serious consequences for us. Yesterday you saw it soar upward as foreigners bought dollars so they could buy stocks. Sooner or later the Fed will have to act to boost it. When the dollar rises commodities we sell overseas like wheat and cotton fall in price. Gold dropped almost $15.

SHORT COVERING RALLY could have been a lot of the move yesterday. For those of you who don't get this, here it is in simple terms. When many sophisticated market people think something is over valued they will sell that "something" they don't own for ten dollars and buy it back later for $5, thus keeping the difference between ten dollars they "sold" it for and the five dollars they bought it back for, which is five dollars. This play is called "shorting" or going short. You are "betting" the value of the item will go down in price. BUT as the prices rise and rise the people from whom you borrowed the "something" demand more and more money so that your "stake" (margin) remains at fifty percent of the price. Eventually the person you "borrowed" from demands more than fifty percent and so on. Finally you have to abandon your position and "eat it". When you buy your positions back its called "short covering". When tons of people get caught "short" you have a short covering rally. You can bet a hell of a lot of shorts "covered" yesterday because unemployment finally dropped. Without going into this deeply, the government can also change the "margin requirements" the amount of money you need to maintain your "short position", and the exchange can also change the requirements if there is too much speculation. Yesterday tons of option writers bailed too.

Not to confuse you, but you can now play individual stock futures. This means you can short a stock without borrowing it, making it super easy to do. You can also short Indexes. This means there will be a lot more shorting of stocks than ever before, in fact the act of actually shorting a stock may be a thing of the past. Eventually this will smooth volatility because margin calls in the futures markets are automatic and futures players do NOT make margin calls, abandoning positions and taking small losses. By December this will be the way almost everyone will short the market.

Key Dow number is now 9682 to confirm this rally. $2 billion is still in money market funds, where really stupid or scared money sits. I don't know if it will ever come out because these people have missed the opportunity of the decade already.

Happy Days are here again. At least for this week. Remember, if Bush begins to look very weak come February or March, the tax Democrats will threaten the market and you will see a crash of thousands of points. Don't allow "irrational exuberance" cloud your judgement.