September 30th, 2012
by Jeff Miller
Sometimes the political and economic streams converge to determine the agenda.
Prepare for a non-stop debate about jobs.
This week the major data all relate to employment. We also have the first of the Presidential debates, Wednesday night at 9:00 PM EDT. Moderator Jim Lehrer, whom I met when he got an honorary degree in my professor days, has released the topics for the debate and also devised an interesting format. There will be plenty of opportunity for discussion and following up. Neither candidate can expect to give a prepared answer and stick to the script while dodging the main points -- especially with Lehrer in charge!
The debate will start with a discussion of economic policy. Employment will be at the forefront. Both campaigns are engaged in driving down expectations. Two examples: "Obama is a great orator." "Romney has so much recent experience and won most of the primary debates."
It is a tricky game. You have to praise your opponent so much that any outcome seems good for your side. You must do so in a way that belittles debating skills as not relevant to the actual job. Check out The Hill's report for details.
I'll offer some of my own expectations in the conclusion, but first let us do our regular review of last week's news.
Background on "Weighing the Week Ahead"
There are many good sources for a list of upcoming events. One source I especially like is the weekly post from the WSJ's Market Beat blog.
In contrast, I highlight a smaller group of events. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.
This is unlike my other articles at "A Dash" where I develop a focused, logical argument with supporting data on a single theme. Here I am simply sharing my conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am putting the news in context.
Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!
Last Week's Data
Each week I break down events into good and bad. Often there is "ugly" and on rare occasion something really good. My working definition of "good" has two components:
- The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially -- no politics.
- It is better than expectations.
There were a few bright spots last week.
- Greece has a coalition proposal for a new austerity package (see The New Athenian). This is a good step. Next we must see whether it will pass muster with "the troika" in charge of bailout funding.
- Housing prices are stronger -- now on all indexes as reported by Bonddad. Calculated Risk looks at prices measured in several ways, with plenty of great charts. Here is the simple version, just using nominal prices:
- M2 growth has resumed. This is the foundation for economic improvement through expansionary Fed policy, so it deserves attention. Bonddad reports the y-o-y growth of 7.1% as well as positive readings from their valuable regular coverage of high frequency data.
- Spain made progress. This complex story was misinterpreted by many, especially because of the video coverage of demonstrations. The market wants Spain to agree to a bailout, get lower interest rates, and achieve some certainty. This is a difficult political step, so it is not happening as quickly as pundits would prefer.
- Initial jobless claims moved lower. The 359K report is back to July levels and much better than the more worrisome 380K range of recent weeks. The reported data does not include the survey period for this week's payroll report.
- Consumer confidence spiked higher. The Conference Board measure bounced to 70.3, much higher than expectations. This is encouraging as a coincident indicator of employment as well as possible future consumption. Here is Doug Short's chart, showing that levels are still below normal expectations: