Market Talk

Good thing the Miracle Mart stays open late.

The administration had to come right out the other day and squelch a rumor making the rounds, a real wild fire, that Fannie and Freddie were going to offer some loopy mortgage-forgiveness program, which would have the effect of a stealth sort of stimulus program, because all those grateful home owners would suddenly have, via a smaller mortgage nut, more discretionary money to spend.

“People make jokes about the U.S. turning into Argentinaville, and a gambit like this would push us close,” the Journal’s editorial page said (although they still managed to blame to administration for more or less fostering the rumors, never mind the fact that Wall Street never met a government handout it didn’t like, so long as it was attached to the hand taking the out.)

There is definitely a yearning out there for something new from the government, and it’s not necessarily being spread by the administration. It’s palpable. This is it. We’ve come to the end of our stimulatory rope, and we’ve found that indeed we were pushing on a string all along. If people want to say the stimulus saved 8.5 million jobs, well, fine; there’s no way to definitively prove that, but have at it. The stimulus was supposed to spark up and restart the business cycle, get companies hiring, people spending, everything humming again.

It hasn’t worked. The government — through two administrations of differing political parties and a purportedly independent central bank — has almost literally moved heaven and earth to try and get this economy firing again, and it’s gone just about nowhere.

Not totally nowhere, mind you. Wall Street was saved. Corporate America’s doing pretty good, judging by second-quarter profits. But the small-business is still struggling, and the average consumer is just out in nowheresville.

This morning’s lousy jobs report is just reinforcing the cry for somebody, somewhere to do something. Somebody, somewhere, may in fact try. But what makes you think anything, a stealth stimulus, or another round of quantitative easing, will be any more effective that the first rounds? Especially as these next efforts are almost certain to smaller in scope.

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- “It’s looking like more individual investors just can’t stand being on the sidelines anymore as the stock market continues to rally,” Tom Petruno writes.

- Bullish sentiment is on the rise in recent weeks. But keep in mind “as quick as [investors] have been to embrace rallies, they have been just as quick to abandon them,” Bespoke says.

- As good as recent economic data has been, high unemployment levels should keep investors “very hesitant to erupt in full-throated rejoicing at the turnaround in the American economy,” Free Exchange says.

- Is Newsweek’s cover story touting the economy’s “remarkable turnaround” a contrary indicator, or just plain contrary?

- Europe appears to be heading down a slippery slope.

- Initial jobless claims jumping for a second consecutive week shows the labor market hasn’t quite joined the recovery fiesta.

- Yesterday’s strong retail sales report shows the consumer is finally showing real signs of life. “Even a relative pessimist like me has to admit that recent trends look pretty good,” Tim Duy writes.

- Requiring commercial banks to separate derivatives operations from commercial banking activities looks nice on paper, but Yves Smith at naked capitalism remains skeptical it will solve the systemic risk posed by OTC businesses.

- AAR reports rail traffic rose 7.5% in March compared to a year earlier, which Calculated Risk notes is the first year-over-year increase since July 2008. Sure, it’s a step in the right direction, but recovery in rail traffic still has a long way to go.

- Harbinger Capital discloses it’s purchased 16M shares of Palm. “Somebody, somewhere is going to buy Palm. And they’ll end up paying more for it than the market thinks it’s worth today. That’s the thinking behind hedge fund Harbinger Capital’s bet,” Peter Kafka says.

- Here’s a new one. Obama administration approaches Microsoft (MSFT) about creating a video game about balancing US budget. Erskine Bowles, leader of Obama’s 18-member budget-balancing commission, says the game “would enable anyone with a computer to take a stab at balancing the budget” and would definitely “go viral.”

- Treasury’s Geithner and rest of Obama administration seem intent on praising financial bailouts for preventing the banking system from collapsing. But the government interventions weren’t ideal and involved some costly tradeoffs that need addressing, Economist’s Free Exchange blog says. “Geithner has put out the fire, but that’s not the end of the job.”

- Now that health-care reform has passed, it’s time for the reform ball to keep rolling and the White House to put an emphasis on reforming Wall Street and the banking sector, Barry Ritholtz notes.

- Stocks sidestep health care reform, showing the stock market may be ambivalent toward health-care reform, after all. “If Obamacare is such a disaster for the economy, where’s the market reaction,” Paul Krugman says.

- China officials foreseeing “a record trade deficit” for March would undercut the US’s argument that the renminbi is undervalued, Yves Smith writes at naked capitalism. “If true, this may bear out the contention that domestic inflation is running at a high level. The effect, of repricing goods upwards in renminbi terms, would have the effect of making prices less competitive globally.”

- “Remember the scene in Goodfellas when Joe Pesci says, ‘One dog goes one way, the other dog goes the other way, and this guy’s sayin’, ‘Whadda want from me?’” Todd Harrison writes at Minyanville. “That’s what’s emerging in Europe; Germany is pointing to an IMF-package to aid Greece and France prefers a broader European solution.”

- There are about five times as many people looking for jobs as there are openings, but that problem won’t last forever, at least according to a new study from Northestern University. Study argues there will be more jobs than people to fill them by 2018, WSJ’s Real Time Economics blog notes.

- Maybe Citi (C) CEO Vikram Pandit deserves some credit. That’s the message Chairman Richard Parsons has for all the cynics out there.

- “Mr. Bernanke needs to face some unpleasant realities,” former IMF chief economist Simon Johnson says. “The cherished independence of the Fed is now called into question – and losing this could end up being a huge consequence of the irresponsible behavior and effective blackmail exercised by megabanks – who still say, implicitly, ‘bail us all out, personally and generously, or the world economy will suffer.’”

- What’s in store now that the House’s historic health care legislation has finally passed? “Today’s vote confirms our hope that we can have both strength and competence in Washington. It is an audacious hope, but we have no choice,” Robert Reich says.

- Cinderellas, buzzer beaters and busted brackets – what a weekend at the Big Dance.

- All the recent chatter concerning the Fed’s exit strategy is puzzling, Tim Iacono says. Maybe it’s “simply a way for policymakers to generate confidence that might not otherwise be there.”

- Keep an eye on cumulative breadth, number of stocks moving up and down on a given day, for clues about future market performance, Bespoke Investment Group says.

- Despite the aughts being a lost decade for the stock market, 401(k) savers did ok, at least according to Fidelity Investments. “But unless market performance picks up in this decade even dedicated 401(k) savers could come up short in their retirement savings,” LA Times’ Walter Hamilton says.

- Google’s (GOOG) $2 million donation to Wikipedia “cements a kind of symbiotic relationship” between the two companies, Mathew Ingram writes at GigaOm. “For better or worse, it sounds like Wikipedia and Google will be joined at the hip for some time to come — not just because of the money, but because the relationship benefits both sides equally.”

- Obama administration’s tolerance of AIG is just astounding, Yves Smith says.

- Backlash against Google Buzz has reached a new level. A class action law suit has been filed in San Jose (CA) federal court alleging Google (GOOG) acted illegally when its new social networking tool shared personal data without consent, according to SF Chronicle blog.

- Greece should approach the IMF, former IMF chief economist Simon Johnson says. “Our baseline view is still that the IMF’s role will be only ‘technical,’ but behind the scenes the prospect of greater IMF engagement (and even a standby loan) is a powerful card that Greece should threaten to play.”

- Wall Street’s bailout hustle – Taibbi’s latest missive.

- Chris Dodd plans to introduce a new bill next week to overhaul financial regulation.

- The pilot that crashed a small plane in Austin posted an anti-government manifesto and may have targeted IRS offices after a tax dispute.

US stocks rally, as EU officials try to talk the world into believing the Greeks can solve their own problems, and jobless claims take a dive.

DJIA jumps 106 (1.1%) to 10144, S&P 500 rises 10 (1%) to 1078, Nasdaq Comp surges 30 (1.4%) to 2177. The day’s low on the S&P was 1060.59, and there is still a terrific fight going on in the 1058-1063 arena, and the next couple of sessions could see the resolution.

EU comes out and says it’ll help Greece out “if needed.” The statement calm US stock investors, but other assets classes aren’t so mollified. The EU leaders obviously hope that the nation can save itself on its own. We hope that they’re not just spinning a new Greek myth.

It’s at least clear that the EU — and especially Germany, the strong neighbor that would give up the most — absolutely, without a doubt, does not want to get dragged into a situation where they’re bailing out the weaker members. Because if the EU bails out one struggling sovereign state, there’s no “too big to fail” argument for not bailing out another. It’s a perhaps the most slippery of the slippery slopes.

Jobless claims dive, as Obama administration claims 95,000 jobs a month will appear this year. WSJ survey say about 25% of jobs lost this recession are gone for good.  And, the Obama administration’s job projections border on a Jim Henson production, but I believe John is working up a post on that, so I’ll leave it there.