The Jobs Report; the Twitter Effect: Best of Kass

NEW YORK ( TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among the posts this past week were entries about the meaning of the payroll report and some Twitter nonsense.

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Parsing the Economic Data
Originally published on Friday, Nov. 8 at 10:17 a.m. EDT.

The October payroll report was much stronger than expected in terms of the establishment survey, up 204,000 vs. expectations of 120,000.

The household survey was weak, though, showing a drop of 735,000. This could have been distorted by the government shutdown.

The strong/stronger establishment payroll number for October has caused a selloff in Treasuries, a big lift in the U.S. dollar and, for a few minutes, a whoosh lower in S&P futures.

Though I still think the market could have a somewhat lower bias over the near term, I covered a lot of my market index shorts into that whoosh and have returned to a market-neutral mode.

If the consensus (before the numbers this a.m.) were for a March 2014 tapering, this report does slightly raise the idea of a January 2014 tapering.

But still the odds, to me for January are less than 50/50.

It is premature to draw any firm conclusions about growth from the October payroll report:
  1. The government shutdown could have distorted the data.
  2. One month's data should not importantly impact the Fed.
  3. The unemployment rate remains high/above Fed target.
  4. Inflation at 1.3% remains well below the Fed target.
  5. I think the Fed will need to see the November payroll report at a minimum, released in early December, before making any tapering decision, suggesting January as the soonest to start tapering.

The other reason I covered more index shorts is that the better numbers, if followed by improving economic data, would let the Fed exit quantitative easing without disturbing risk markets while keeping forward guidance dovish because of tame inflation.

As long as better economic growth means slightly better-than-2% real growth and not 3% or better, an improving economy will contain a market drop. That view is pushing me back to market-neutral.

So, we have some tentative signs of an improving domestic economy combined with a friendly Fed, occurring into a period of traditional seasonal market strength.

I still believe the Fed is in a tough spot and that is keeping me from moving to a net long position.

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