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The Good and The Bad

September 1, 2009 – 11:31 am

It’s that time again – Payroll numbers. This time it will be for August. The numbers will be released this Friday and will likely be a market mover. There will be more job losses but the experts expect less than last month. If true that will mean that we have had several months in a row where the number of lost jobs has gone down. Everyone is trying to determine when we might see some job creation rather than losses. It won’t happen anytime soon, and most likely it will be next year.

Jobs are a lagging indicator. The indicators to watch are leading economic indicators and the most reliable is the stock market itself. There is also the report entitled “Leading Economic Indicators” which has been positive for several months and finally, watch the weekly unemployment claims. That number has been going down for a couple months.

The economy is on the mend. It won’t be pretty and the recovery may initially look strong especially as the FED keeps its foot on the gas pedal – easy money at very low rates. Add that easy money to a government that is bent on massive spending the result will be a stronger economy.

For investors stock prices will continue to rise. There will be pauses and pullbacks but those events should be times of putting on positions, not exiting the market.

It’s the longer term effects of easy money and unrestrained spending that poses real danger for a sustained recovery. Can the FED take its foot off the pedal fast enough and can our government control the deficit spending? These are the two gorillas in the room that are hard to ignore.

Good Trading
Steve Peasley

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