Why Are the Market Analysts So Happy?

On a day where it is announced that another 631,000 workers lost their jobs in a week's time, comes this headline at Bloomberg:

Job Cuts Avert Catastrophic Quarter as Profits Excel

Corporate earnings worldwide haven’t been the disaster analysts predicted as companies from Ford Motor Co. to Siemens AG beat earnings estimates through job cuts, factory consolidations and a dose of lowered expectations.

“It’s one of those things where you walk away from the car crash and think, ‘Well, that could’ve been a lot worse,’” said Andy Lynch, who helps manage about $5 billion at Schroder Investment Management Ltd. in London. “The first quarter is marginally less catastrophic than feared.”

Fantastic news! Let's throw a few million people out of work, close a bunch of factories, make those who still have jobs work a bit harder and make sure that we lower our forecasts so we look good at the next report.

This is further evidence of the disconnect between the elites of the world and the common people. Gee, everything must be fine because the Dow is rising, earnings weren't bad at all. It's a public relations game to the elites.

Outside, however, the losers of the game are not much consoled that the markets are rallying.

Dow Chemical Co., the largest U.S. chemical maker, today reported an unexpected profit excluding some items of 12 cents a share, instead of the 19-cent loss that was the average estimate in a Bloomberg survey. The Midland, Michigan-based company has said it’s firing 10,000 workers.

If you are one of the 10,000, I'm sure you're very proud of your former employers. Your job termination was a vital part of the company's unexpected profitability.

Look, I'm not naive. I understand that in tough times people lose jobs. It's part of the natural cycle of things. If left alone, the business cycle will reset itself and companies will start hiring again. Unfortunately, the federal government is not leaving things alone.

What I deplore is that today's bean-counting business culture too often looks for the quick fix instead of examining the systemic cause of a company's business woes. It's so easy just to let people go to make shareholders happy. They are so easily pleased.

Despite what you hear and read, we are not near the end of the bottom of this economic downturn. We are nowhere close to the end. As long as banking is not "fixed," the federal government still spending, the Fed operating the printing presses on "11," and Congress on the verge of regulating health care and energy, uncertainty rules. There will be no major investor push back into American business until that uncertainty is resolved in favor of stability, and the only game right now is to look for under-educated small investors to pluck for badly needed cash.