Was the GDP good news or bad news? Is good news bad news now or everything simply not good enough news to maintain the delusional prices that many stocks are trading at? As I said in yesterday's morning post, I did not like the GDP report very much and almost all of our trade ideas in yesterday's Member Chat Room were for shorting the momentum stocks as they flew back up to their highs – as if the last week never happened.
Dave Fry agrees with my take on the GDP and I will quote his excellent morning take on the subject:
Consumer Metrics Institute summarizes the GDP data as follows:
-- The headline unemployment numbers mask a major deformation of the work force — with fewer people choosing to look for work and more being forced to accept multiple part time jobs. People on the street understand the difference between an increasing quantity of part-time work and the quality of full-time jobs.
-- Real per capita disposable income was down -0.85% during 2013. And to maintain the prior year's standard of living, the household savings rate plunged 2.3%.
-- For many households (and especially the 18-35 demographic) the Affordable Care Act (aka "ObamaCare") will result in increased net monthly outlays for health insurance.
-- The per capita numbers continue to mask an ongoing shift in income distribution: although the average per capita income data has grown some 3.3% since October 2008 (per the BEA), the median household income has shrunk some 7% over that same time span (per Sentier Research). The typical member of the electorate lives at the median, and they are not sharing the growth reported by the BEA.
On the surface these were nice numbers, enough to satisfy the Federal Reserve that more of the same lies ahead. Unfortunately, most households would probably prefer something far better than an extension of that "same."
Taken together economic data was a disaster. But equity markets rallied and surely you must wonder why. The truth of the matter is markets were short-term oversold, some earnings news was brighter (Facebook the standout) and it seems the previous meme “bad news is good” has resurfaced with those believing the Fed must still
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