Thursday, March 04, 2004

Jobs Number Tomorrow

There will be lots of tossing and turning tonight as economists and politicos await the much-anticipated jobs number tomorrow. The ever-hopeful, ever-bullish Larry Kudlow predicts a strong number, citing (among other things) a "white-hot" commodities market indicating demand for raw materials and (eventually) the need for workers to fabricate them into goods. The question is whether China and the developing world represent more of the current demand for commodities than the U.S.

Interestingly, Kudlow's TV partner, Jim Cramer, cites evidence of Wall St. pros anticipating a poor number. For example, the stocks of home-builders like Centex (CTX) jumped today as hedge-fund managers "covering" their short positions bought back stock to repay loans. (A "short" position is when you borrow stock and sell it immediately, hoping for it to decline in the future when you will have to buy it back to repay the loan. You're "buying low and selling high;" you're just doing it in the reverse order.) Home-builders tend to suffer in rising interest rate environments, and rising interest rates tend to follow economic boom times. So the hedge-fund guys are waiting for a poor jobs number, keeping interest rates low and sending the stock prices of home-builders higher into the stratosphere.

We'll see who's right tomorrow morning. Until then, pleasant dreams.


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