GDP Today Jobs Tomorrow

by Larry Levin


The market received more news concerning the economy today, and it wasn't good. Yesterday's entire gain on the Dow Index was given back with today's reversal. Hopes are high, but fears are lofty as well. Will the market reverse yet again with tomorrow's monthly jobs data?

Today's latest economic revelation came by way of the GDP report. When the report was released, prospects for a quick economic recovery dimmed. The data tells us the economy grew at a slower-than-expected rate this spring despite the government's Income Redistribution Plan, aka stimulus checks. Moreover, GDP actually shrank late last year.

The gross domestic product (GDP) increased at a 1.9% annual rate, up from 0.9% in the first quarter but less than the 2.4% economists were looking for. Umm, do economists EVER get it right? Government revisions also showed the economy actually shrank at the end of last year at a 0.2% annual rate, which was the first quarterly dip for the GDP since the 2001 recession.

OK, those are the numbers the government wants you to follow like a lemming off the cliff. Although this data admittedly isn't very impressive, the truth is it's actually worse. The nominal GDP number was 3.0%. This number is the overall growth of the economy before subtracting inflation. The real GDP was said to have increased by 1.9%, which means the government subtracted a scant 1.1% for inflation at annual rate! I suppose if you believe that, you also believe the moon is made of cheese.

Tucked inside the government's own report we see that an inflation gauge tied to the GDP data showed all prices racing ahead at a rate of 4.2% in the second quarter, the fastest pace since the end of last year. However, once the statistical massage and happy ending are complete - you are left with a miniscule 1.1% inflation reading. If the 4.2% inflation data were used in the GDP, we would see our so-called growth shrink to a negative reading of -1.2% - and we just can't have that. Furthermore, the growth that is being reported is almost entirely made up of government spending and the aforementioned Income Redistribution Plan. Get used to it Comrade.

Another dismal report came by way of weekly unemployment data. The Labor Department said initial jobless claims soared by 44,000 to 448,000. This is awful - nuff said.

Standard & Poor's said today it cut the ratings of the Big-3 automakers and their respective financing units because of mounting losses and the deteriorating U.S. auto market. If their debt isn't at junk status yet, it's just a matter of time.

I can hear it now; am I in Washington DC , the Twilight Zone, or the ballpark? Bailouts here. Get your red-hot bailouts! While negotiating a golden parachute exit strategy on his new iPhone, a man seated in the private boxes of the 1st row behind the dugout raises his hand and shouts, I'll take one.

A woman who just lost her waitress job when Bennigan's went bankrupt is trying to put it behind her with some supportive friends and a baseball game. She is seated a few rows higher, next to a vendor offering bailouts. The vendor, Barney Frank, kindly asks the out-of-work woman, Miss, could you pass this multi-billion dollar bailout down the isle to the man from General Motors. Yes, he's the one in the $5,000-Armani suit. Thanks."

Real Time Trading Signals*for

Trade Date: 7/31/08

E-Mini S&P Trades*
(before fees and commissions):

1) VA sell @ 8:55am at 1279.75 = -2.00*2

2) Engf sell @ 9:00am at 1279.50 = b/e (1 lot)

3) OTF buy @ 10:25am at 1280.00 = -2.00*2

4) OTF sell @ 12:00pm at 1275.50 = -2.00 (1 lot)

5) VA buy @ 1:50pm at 1279.25 = +.50 & b/e

6) It was another choppy #4 day!

7) Algorithm trades (1)...combined total...-11.25


E-Mini Russell Trades*
(before fees and commissions):

1) Buy @ 1:17pm at 718.3 = +1.3...+$130


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