Ouch – the GDP came in lower than expected at 1.9%.
1.9% would be good but not when the government gave away $168Bn to get it there. Q1 GDP was revised down to 0.9%, down 0.1% from what was previously reported. The personal consumption price index was up 4.2%, increasing from 3.6% last quarter but the PCE, excluding food and energy (which no one who matters needs) fell to just 2.1% from 2.3% last quarter so mission accomplished boys!
Of course, with this government, it’s always worse than you think and the Commerce Department is NOW ready to admit that Q4 GDP was ACTUALLY MINUS 0.2%, not the plus 0.6% previously reported. Revisions like that damage the credibility of our government and cause foreign investors to lose faith in our economy and our currency. You cannot play games with facts for political ends! Forecasts for this quarter were for a 2.3% GDP, that would be 2.1% higher than Q4 and would have been a big relief but, because the government lied about the fourth quarter (or were they just off by 400%?), the 2.5% jump in GDP from -0.2% (which is more than the 1.5% jump forecast from 0.6%) is being seen as a failure.
You can fool all of the people some of the time (2000 elections) and you can fool some of the people all of the time (hard-core Republican voters) but you can’t fool all of the people all of the time (record low approval ratings). Economic data is certainly no place to fool around, especially by an administration that likes to play doctor with the economy when the data we’re working with is statistically worse than what you would expect from a random number generator.
Speaking of random numbers, 448,000 jobless claims is the real damage this morning, up 10% from last week and clearly in recessionary territory. Now this number is OVER stated as the government moved to enroll workers in a new extended Federal benefits program and found a percentage of those people qualified for regular benefits and added them to the rolls. The 4-week moving average of claims rose 11,000 to 393,000, just a touch under the 400,000 panic level. State unemployment, a better indicator, rose 0.6% to 3.28M and the 4-week average of continuing claims rose 42,750 to 3.17M.
Just because we think it’s an over-reaction doesn’t mean we shouldn’t react. We uncovered callers yesterday with the Dow down at 11,400 and we need that level to hold on the morning dip or we’re going to have to re-cover with lower calls. The financials will take a big hit but we’re still over covered there as those callers were certainly not the ones we were ahead on! Oil is, amazingly up as XOM et al celebrate the Billions of dollars they are making off the suffering of the American people but at least that indicates that they see that the economy is stronger than the numbers are indicating today.
Asia was flat this morning, not knowing what to make of our day yesterday and Europe had been up nicely until our GDP and jobless numbers came out and now they are diving too. Most of oils gains at the moment can be attributed to a sharp drop in the dollar.
The only thing I know for sure is I’m buying GOOG $480s this morning. I don’t think I will buy any index puts unless we break below 11,400, in which case I’ll probably grab in the money DIA puts ($117s?) as momentum plays but I’m not particularly freaked out by these numbers and the only thing that can really break my spirit is $130 oil again – let’s hope that doesn’t happen…
