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Where To and Where From

August 31, 2011 – 4:51 pm

There was some less negative/slightly positive economic news released over the last couple days that the market seemed to find comforting. What is interesting is that the market is moving up even with some of the data being worse than last month. Obviously, the traders were thinking things were much more negative than the numbers demonstrate.

The ugliest data point was the August consumer confidence number at 44.5. That was the poorest showing in years. This tells you what the consumers feels not what he/she is doing and because of that I am not a big fan of this report. Of far more importance is jobs. The ADP job report for private sector jobs produced in August came in at 91,000 a little less than expected. The official number for both private and public jobs comes out on Friday. The expectation is for about 50,000 new jobs. Factory orders for July came in up 2.4% a little better than expected and much improved over June at -.8%.

The numbers are not great but they are drawing a picture of a slowly growing economy. That appears to be a little bit of a surprise to traders as the market has rallied somewhat. Still it is not that good. Put in context we would need to produce more than 200,000 new jobs per month for several years to put the unemployed back to work. If we get 100,000 for last month that is almost twice what is expected, but far less than what is needed. That is depressing.

However, the market is all about expectations and direction in the short term and that, at least, is in the right direction. For investors, those of us thinking longer term, many stock prices of the strongest and best run companies are cheap and it is a smart choice to own them. Add in the dividend that far exceeds money market and CD yields and the decision is pretty easy.

Good Trading
Steve Peasley

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