Bad News is Good News

Stock markets rallied yesterday upon learning that US factory activity plunged to new lows.  The factory activity index reached a low of 49, where anything below 50 is considered a sign of economic contraction.  Three cheers!  Weak economic news means the Fed will continue its QE3 purchases of more than $ 80 billion of debt each month.

Stock market mavens no longer hope for good economic news.  That seems an unlikely prospect.  Instead weakness suggests more aggressive Fed activity, so market prognosticators stay tuned in to see how bad it can get.  The more the economy worsens the better.

Maybe the Obama Administration is long the stock market.  If so, that might explain policies that seem designed to prevent the economy from what should have been a strong economic recovery.

So, instead of jobs and economic growth, we get higher stock prices.  At least for a while.

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