Can the Stocks Cross the River of 11,000 Today?

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Oct 08 2010
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Whether Dow Jones can close this week above 11,000 or tumbles into the red depends on the much-awaited jobs report. Dow closed Thursday at 10,948.58, inches away from the psychological 11,000 level. The U.S. Labor Department will issue the final monthly jobs report before the midterm congressional elections. And economists couldn’t find any reason that the jobs situation will improve anytime soon.

Analysts estimate private employers added a net total of 75,000 jobs in September, hardly sufficient to tackle the country’s unemployment estimated at 15 million. According to Thomson Reuters’ survey the unemployment rate is projected to rise to 9.7% from 9.6%. Some economists even predict the unemployment rate could easily reach 10% next year.

Obamanomics is set to take the blame with more to accuse the administration of feeding the fat cats while letting the hungry average-Joes on the street to take care of themselves. Obviously banks happily accepted the TARP (Troubled Asset Relief Program). But one can always argue that when the TARP was introduced, almost everyone was rejoicing with approval so why the finger-pointing now?

Dow Jones 11,000 

Larry Summers, the outgoing director of President Obama’s Council of Economic Advisers, was however upbeat about the economy despite high unemployment rate. Larry immediately invited indirect criticism from infamous George Soros who blames the government for not forcing the banks to write down toxic assets but instead allowed the banks to swap them for Treasuries or bought them in its $1.25 trillion asset-backed purchase program.

Somehow you have to agree with Soros’s argument simply because letting banks to enjoy “free-risk” privilege of borrowing at near-zero rates and re-uses the money investing in higher-yield Treasuries is totally nonsense. It was as good as using taxpayers’ money in bailing out banks’ own problem. And now these banks are not willing to lend the money which it took from the public in the first place, funny huh?

Nevertheless the stock markets could spring a surprise or two after Friday’s September jobs report. High-risk takers are betting that the government would throw in the donuts of quantitative easing thereafter. What this means is the Federal Reserves is going to “print money” and lots of them, mind you. And who’s going to scream that the monies are not backed by gold? Nobody cares and we’ll soon see mountains of dollars floating into the markets and everybody will be happy again.

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