Friday, June 6, 2008

Put some lipstick on this pig

JP Morgan analyst Thomas Lee says to buy stocks on the unemployment numbers. He must have a following on Wall Street as the market came down 400 points.

The biggest rise in the unemployment rate since 1986 is an "aberration" and investors who sold equities today are "completely misreading" the outlook for economic growth, according to JPMorgan Chase & Co.

The Dow Jones Industrial Average fell as much as 412 points today after the Labor Department said the jobless rate increased by half a percentage point to 5.5 percent, the highest since October 2004, as an influx of students into the workforce drove the biggest jump in teenage unemployment since at least 1948.

"The surge in unemployment is probably an aberration," Thomas J. Lee, the New York-based chief U.S. equity strategist at JPMorgan, said in an interview. "It's not because there were fewer jobs, it's because there were more people looking for jobs. Stocks are completely misreading the situation."

Lee, 39, wrote in an e-mail that "stocks should be up" after the report, which also showed payrolls fell by 49,000 in May, a smaller decline than economists surveyed by Bloomberg News had forecast.

"Surges in unemployment happen at the end of the cycle," Lee said.

An opposing viewpoint came from Mish:

This was a once in a lifetime credit binge. To expect anything other than a once in a lifetime credit bust is being far too Pollyannaish. There was indeed an "aberration" today, an "aberration" in clear thinking by Thomas J. Lee, chief U.S. equity strategist at JPMorgan.