Welcome to bizarro world

This morning's jobs report from the Department of Labor was massively disappointing, as our economy was shown to have lost 95,000 jobs over the last month as a wave of cutbacks in the public sector (including schools, and part of a much larger issue surrounding government budgets) dwarfed increases in private sector hiring. Worse yet, the number of "discouraged" workers who stopped looking for jobs increased rapidly, as did the number of people accepting part-time and temporary work as a last resort. Bad news for the markets, right? Nope. Reuters explains.

The Dow closed above the 11,000 mark for the first time in five months on Friday as a surprisingly weak jobs report strengthened the case for more stimulus from the Federal Reserve.

While a loss of 95,000 jobs normally might be expected to hurt stocks, the market's desire for cheap money trumped concerns about the slow economy.

"It was almost as if the market was cheering for a bad report to try to solidify that the Fed would engage in quantitative easing," said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis.

This is all so backwards that it's frightening. A market rally on today's news is akin to a pain-med addict intentionally breaking his leg so that he can get more morphine. Our economy has become hopelessly addicted to stimulus (fiscal, monetary, whatever, it's all good), as politicians and laymen alike completely ignore the collapse in the dollar.

Today's rally (and the entire 11% rally from the August lows in the SPX index) has been completely on the back of a rapidly devaluing dollar. In real (dollar-adjusted) terms, the market has barely budged, and by some measures gone down. While the market has rallied 11%, the dollar has lost about 10% against the Euro (nearly 17% since June), as the dollar index has hit an 8-month low, revisiting levels last seen at the height of the financial crisis. Now, the Fed is widely expected to debase the dollar even further. All this, while we accuse China of being a currency manipulator. Hold your laughter.

This is all completely backwards, and frankly frightening. We have ourselves a smoke-and-mirrors market, and we need to focus not on further problem-masking stimulus, but rather on fixing the structural problems that still exist in our economy. Killing the dollar is not a long-term answer.

[Reuters]