Smart Money with Keith Springer Saturdays at 1PM and Sundays at 6AM on NewsRadio KFBK 93.1 FM and 1530 AM

Critical Economic and Market Commentary 08/27/10

Nice GDP #…Yikes!

Well the GDP revision #’s came in this morning and wow! 1.6%, how pathetic. (“Anemic” if you want to be pc). 2 years of recovery and a $gazillion in stimulus and this is the best we can do?

I pounded the table just weeks ago forecasting this in this newsletter, on CNBC, Bloomberg, etc. and people thought I was nuts. Now look at all the company I have.
It is amazing how the government lowered our expectations so much that the markets were pleasantly surprised and have rallied. Same story, different day: “bad news is good news and worse news is better”…for now!

For the Markets:

Short term: Regardless of the plethora of bad news, stocks are poised to go higher. At the moment, a “Bull” on Wall Street is scarcer than a Yankee fan at Fenway. Sentiment is so incredibly negative and the public is so turned off from the market, that it seems impossible for stocks to drop. Not until we see more complacency among investors, will the market let go.

Longer term: On paper, things couldn’t look much worse for the economy. Unemployment holding steady and likely rising, housing taking another turn for the worse, deflation seemingly inevitable and the country taking on enough debt to rival a banana republic.
So why isn’t the market getting hammered? Because corporate earnings are good. Companies continue to strengthen their balance sheets and are becoming more efficient. unfortunately this comes at the expense of workers. Eventually earnings will need to rise due to top-line growth (increased sales) and not just cost cutting, but currently investors seem content. Who could blame them with bond, CD and savings rates so low.

*I actually discussed this issue on what is being considered a “controversial” interview I gave just yesterday on CNBC. Take a look at the clip if you like – Video

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