In yesterday's post, I listed the bounce levels we were looking for and the markets took off right at the open and held the day's highs into the close with the NYSE (8,311) and the Russell (827) both making it over their strong bounce targets of 8,280 and 826 and the S&P falling just 4 points shy at 1,427.
So our plan to flip bullish was well-timed but we need a third index over that strong bounce line and then we need to see those 50 dmas taken back to confirm a bullish move. They NYSE is leading us there, well above it's 50 dma of 8,042 but we'll want to see the Russell (832) and S&P (1,434) join it – hopefully on some strong jobs numbers but, with the storm, it's very hard to say how the data will play out.
Speaking of data – the GOP has certainly jumped the shark and thrown off the thin facade of legitimacy they used to have by turning into essentially a Roman Inquisition, of the kind that forced Galileo to recant his teachings that the Earth was not the center of the Universe by pulling their own "Nonpartisan Tax Report" after the study failed to find negative correlation between higher tax rates and economic growth. What whipped Conservatives into a frenzy of denial were the reports' conclusions, which clearly stated:
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%.
There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.
The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.
“When their math doesn’t add up, Republicans claim that their vague version of economic growth will somehow magically make up the difference. And when that is refuted, they’re left with nothing more to lean on than charges of bias against nonpartisan experts,” said Representative Sander Levin of Michigan, ranking Democrat on the House Ways and Means Committee.
As Barry Ritholtz notes: Before making any knee-jerk partisan reaction to this, note that Bartlett — Like Stockman and others — are not trying to make a pro-Democrat argument; rather, they are acknowledging a major societal concern when one of the 2 major political parties have forsaken science and reality and facts when they disagree with their agenda. I am enormously concerned about any society that has half its governing officials driven by witchcraft and superstition and bad ideas, and no longer are concerned with facts, truth, reality.
The Government continued to shrink under the Obama administration, shedding 13,000 jobs in October but it was nicely offset by the addition of 184,000 Private Jobs and we're now averaging over 150,000 jobs per month added for the first 10 months of 2012. Average weekly earnings are $811.15 vs $798.77 last year so up 1.5% for the year indicates little inflationary pressure coming from wages. On the whole, it's a good but not great report but it continues to indicate the US is well on-track to a slow, steady recovery.
Will an extra 171,000 pay-checks get AAPL back over $600? The IPad Mini is out today but it's the wi-fi only version, which no one wants. If AAPL has a 30% market share then 171,000 new workers means about 55,000 new AAPL customers at about $500 each for IPhones or IPads but that's only $27.5M a month and AAPL already sells $16.25Bn worth of product per month so this is not a game-changer for them so we'll be leaving our short calls in place in the new Apple Money Portfolio as well as in our $25,000 Portfolio. It was interesting to see the Nasdaq make a big move up yesterday without AAPL's help – let's hope they can keep it going and let's hope our indexes can make their levels.
Have a nice weekend,
- Phil