Goldilocks Delivers a Nonfarm Payroll

Does it get any better than this? First, the hometown San Francisco Giants win the World Series in a four game sweep. Then the San Francisco 49er’s play in the Super Bowl. Finally, I win the World Series/Super Bowl of investing by capturing an absolutely pyrotechnic 21% year to date performance, boosting me once again the top ranks of the hedge fund industry. Hey, two out of three is not bad. 31-34, ouch! Life is good.

Back in the real world, traders were humming the rhythms of Lauren Hill’s Doo Wop on Friday, the top selling hit of 1998. That was the last time that a January posted such a virile stock market performance. In London they were humming Donna Summer’s This Time I Know It’s for Real, who led the charts with this tune in 1989, the previous time the FTSE 100 delivered such robust numbers.

No, this is not a compilation of Golden Oldies. Not too hot, not too cold. That was the conclusion of the equity markets on Friday when the Dow blasted over 14,000 for the first time in 5 years. With many researchers expecting a January nonfarm payroll over 200,000, you would think traders would have dumped shares on a 157,000 print. The headline unemployment rate remained etched in stone at 7.9%. Instead, stocks gapped up at the opening and never looked back, closing at the highs, up 147.

The phone lines between Wall street and San Francisco burned up with portfolio managers and investment advisors trying to figure out why. It appears that the number was strong enough to maintain a tepid 2% GDP growth rate. But is was not so expansionary as to prompt the Federal Reserve to abandon is quantitative easing policy any time soon, on which risk assets everywhere have been richly feasting.

I can see a particular psychology taking hold on Wall Street. Good data is proof that our buying of shares with reckless abandon is justified. Bad data is written off as a backward looking, one time only, statistical anomaly, as we saw with the incredibly weak Q4, 2012 GDP report of -0.1%.

In this scenario, the market either goes up, or goes up more. A new, all time high for the Dow this week looks like a done deal. We could hit my 2013 target of a Standard and Poor’s (SPX) of 1,600 by March. Like my friend, hedge fund giant, David Tepper, says “When there’s a bubble, act bubbly.”

Our Course, I warned you all this was coming as far back as October (click here for “My 2012-2013 Stock Market Forecast” ). I followed up with my ambitious “Why My Shorts are Missing” in December, pressing the point home (click here ). Then, I really went out on a limb in my “2013 Annual Asset Review” (click here), arguing that we would see an unprecedented market multiple expansion in the face of weak earnings growth. That is exactly what we got.

It is a good thing that I put my money where my mouth was. That has earned followers of my Trade Alert Service a blistering year to date performance of 21%. If the latecomers, short coverers, and lemmings keep pouring into this market, I could double that by April.

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