Sooner or later there was going to be some kind of rally and today was it, even though it wasn't anything to write home about.
After the Dow had been down for eight straight sessions and the S&P down seven in a row, the early morning trade looked to be more of the same with the major indices dropping to session lows around 10:45 am EDT. The Dow was down more than 160 points, officially touching down at 11,700, when the turnaround began. The S&P was sporting losses of nearly 20 points before heading higher and closing at the highs of the day.
It's not as though anything had changed at all. Italy is on the brink of default, following in the footsteps of neighboring EU nations, Ireland, Portugal and Greece. European-based banks are supposedly frozen with terror having exceeded all prudent boundaries for lending to highly-indebted nations.
And, here in the US, no change will come to the current jobs or housing situation as the congress has already embarked on a month-long vacation, after, of course, taking a few victory laps for their last-minute daring-do on raising the debt ceiling and putting forth a measure that cuts somewhere between $20 and $25 billion from the budget in 2012, less than 1/10th of one per cent of the entire budget, or, quite literally, a drop in the budget bucket.
The only thing moving stocks today - besides the obvious influence of the PPT - was the extremely oversold condition of the markets. The Dow is down 828 points since just July 21, exactly 10 trading sessions. There's a very realistic chance that this was only a knee-jerk reaction rally, based entirely upon the notion that stocks are cheap relative to where they were trading two weeks ago.
Dow 11,896.44, -29.82 (0.25%)
NASDAQ 2,693.07, -23.83 (0.89%)
S&P 500 1,260.34, -6.29 (0.50%)
NYSE Composite 7,853.20, -21.22 (0.27%)
Advancing issues finally took the edge over losers, 3737-2897. The NASDAQ posted 28 new highs, against 204 new lows, while the NYSE had just 14 new highs and 275 new lows, blowing the combined total up to 42 new highs and 479 new lows. This high gap indicates that stocks are on the verge of a severe, long-term breakdown, despite today's small gains. Volume was strong, but the buying seemed to be out of desperation and directed at short-term profit rather than long-term investment.
NASDAQ Volume 2,637,190,000
NYSE Volume 6,487,507,000
Two pieces of jobs-related data showed that the jobs market is still in quite the dodgy condition. The firm of Challenger, Gray and Christmas released their monthly survey of planned layoffs, which showed employers announcing 66,414 planned job cuts in July, up 60.3 percent from 41,432 in June. Meanwhile, the ADP monthly private payroll survey surged to 114,000 added jobs in July, a positive sign for Friday's non-farm payroll numbers from the BLS.
Commodities continued along their bifurcated path, with oil down $1.86, to $91.93, while gold surged to another record at $1,666.30, up a whopping $21.80 on the day. Silver rose $1.67, a gain of more than 4%, to $41.76, the highest close since May.
All of this sets up for an exciting end to the week. Thursday's initial unemployment claims will show the way on Thursday, while the non-farm payroll report - expected to show a gain of 100,000 jobs for July - should set the tone on Friday.
Showing posts with label BLS. Show all posts
Showing posts with label BLS. Show all posts
Wednesday, August 3, 2011
Friday, May 6, 2011
Snow Job in May
It is difficult to express just how warped US markets have become, though, from the movements of the past two trading days, a case can be made that the markets are being guided by forces that are distinctively not based on free market ideology nor statistics that can be trusted within any degree of accuracy.
Taking a look first on the massive downdraft in commodities - mostly silver and crude oil - from Thursday's trading, one should look no further than the CME (Chicago Mercantile Exchange), the overarching body that controls trade in futures, options and various other derivatives.
The CME raised margin requirements - the cost to buy a futures contract - on silver four times in the past two weeks. That resulted in many speculators - generally honest traders working with leverage via margin - to reduce their exposure, thereby taking the price of silver from close to $50/ounce on Friday, April 29, to under $35/ounce by Thursday, May 5.
This really doesn't require much thought. If it costs more to buy something - in this case a silver futures contract - you either buy less of it or don't buy at all, waiting until the price is more reasonable. In the case of silver futures contract, a highly inelastic entity (You can't buy a fraction on one; you must buy a full contract.), one is either in or out. When margin requirements (cost) rise rapidly, many legitimate buyers head for the hills. This is exactly what happened all week, culminating in the final thrust downward on Thursday, May 5, as there were also fewer short contract holders which would have provided some support, having to cover as prices fell. Alas, the shorts were also out of the market due to exorbitant margin costs.
This makes a great deal of sense from a banker's perspective. Money flowing into either physical silver or gold is money out of circulation, and, more dangerously, into a competing currency. Precious metals compete with all fiat (paper) currencies, insofar as they are considered stores of wealth and mediums of exchange. Thus, when one buys Silver Eagles, silver bars, etc., bankers get worried because the buyer exchanged paper dollars (or Euros or Yen or Reals) for physical metal. And if the price of physical metal and the amount in circulation gets too high, the need for paper dollars is diminished.
Silver, being the "coin of gentlemen," as opposed to gold, "the coin of the realm (or, kings), is a very dangerous commodity to the banker line of thought. If more and more ordinary people - the "little guys" upon whom the banker depends - conduct transactions in silver - the utility of paper money declines, velocity decreases and all of a sudden there's a liquidity crisis.
This is exactly what the global (mostly in the USA) banking cartel feared as silver approached all-time highs, thus the need for margin hikes to kill the competing currency before it became a real threat.
The same is true for gold, to a lesser degree, as central banks hold gold as a final backstop to their paper currencies, though it is leased out, levered 100-1, and therefore, being a useful conduit for the bankers, not as volatile as silver.
As for oil, what caused Thursday's sell-off is a little less clear, but again, the CME, which owns the NYMEX, where West Texas Intermediate oil futures (the most popular and widely held) are traded, extended trading range limits from $10 to $20, exacerbating an already decisive decline.
In simple terms, the CME allowed oil to fall though the floor simply by changing the rules in the middle of the day. There's less concern in the price of oil declining, because lower oil prices are generally good for everybody outside of oil companies and Middle East sovereigns, so less attention was paid to the CMEs quick decision, but it still underscores the levels at which rules will be either broken or amended to accommodate the needs of the powers behind the money (read: the too big to fail banks, the Fed and Treasury Department).
Now to Friday's fiasco in the Bureau of labor Standards (BLS) non-farm payroll data for April (the establishment survey). While the consensus opinion had been trending toward lowered expectations, the BLS surprised everybody with the announcement of 244,000 new jobs created during the month, 268,000 in the private sector, offset by a loss of 24,000 public sector jobs - mostly municipal and state employees being furloughed.
What's intriguing about the non-farm payroll data is how the numbers are created, and the use of the word "created" is no accident, because the BLS employs such such extreme and convoluted data manipulation that pure statistics become rather murky. It's easy to say that our monthly "jobs data" is more a political process than an actual statistical survey with a margin of error in the low single digits. It's guided by a smallish sample and then amplified by what's known as the "birth/death model," a number created to reflect the number of businesses opening (birth) and closing down (death).
Does the BLS actually sample bankruptcy and new corporation filings in selected communities and states? No. Does the BLS ever adjust the number for seasonality. No. For accuracy, yes, but not in the month-to-month survey numbers.
So, from where did the 244,000 net new jobs in April come? 175,000 came from the birth/death model. And while some are contending that roughly 62,000 came from the widely-published McDonald's hiring, the Wall Street Journal begs to differ, stating that McDonald's hire date was April 19, a week after the BLS survey period.
Taking just the raw data, subtracting out the birth/death figures, the US economy consisting of existing businesses created 69,000 net new jobs - not so hot. If we can believe that a couple hundred thousand newly-minted entrepreneurs joined the business fray and 30 to 40,000 businesses went belly up in the same time frame, we could believe this figure. However, like the missing photo of a dead Osama bin Laden, there's no proof of these "births" and "deaths," only trust in the BLS, which, by the way, stretched credulity again by proclaiming the official unemployment rate to have risen, up to nine per cent (9%).
That rise correlated to the other side of the BLS coin, the household survey, which showed the number of employed persons to have fallen by 190,000 from the March reporting period to April.
Is it a gain of 244,000 jobs or a loss of 190,000? Who knows? The point is that many decisions are made based upon the BLS data, which, as shown, is more guesswork and massaging of data than trustworthy data, but one wonders if these decisions are based on reality, a perception of reality, or if the reality is being superimposed upon the American public to suit the current narrative of "recovery."
Whatever the case, it seems a shoddy way to run a country's economy, with dodgy data and questionable maneuvers by those running the exchanges.
It doesn't snow much in the USA in May, but that surely doesn't preclude a massive snow job by Wall Street and the federal government and their extensions.
Taking a look first on the massive downdraft in commodities - mostly silver and crude oil - from Thursday's trading, one should look no further than the CME (Chicago Mercantile Exchange), the overarching body that controls trade in futures, options and various other derivatives.
The CME raised margin requirements - the cost to buy a futures contract - on silver four times in the past two weeks. That resulted in many speculators - generally honest traders working with leverage via margin - to reduce their exposure, thereby taking the price of silver from close to $50/ounce on Friday, April 29, to under $35/ounce by Thursday, May 5.
This really doesn't require much thought. If it costs more to buy something - in this case a silver futures contract - you either buy less of it or don't buy at all, waiting until the price is more reasonable. In the case of silver futures contract, a highly inelastic entity (You can't buy a fraction on one; you must buy a full contract.), one is either in or out. When margin requirements (cost) rise rapidly, many legitimate buyers head for the hills. This is exactly what happened all week, culminating in the final thrust downward on Thursday, May 5, as there were also fewer short contract holders which would have provided some support, having to cover as prices fell. Alas, the shorts were also out of the market due to exorbitant margin costs.
This makes a great deal of sense from a banker's perspective. Money flowing into either physical silver or gold is money out of circulation, and, more dangerously, into a competing currency. Precious metals compete with all fiat (paper) currencies, insofar as they are considered stores of wealth and mediums of exchange. Thus, when one buys Silver Eagles, silver bars, etc., bankers get worried because the buyer exchanged paper dollars (or Euros or Yen or Reals) for physical metal. And if the price of physical metal and the amount in circulation gets too high, the need for paper dollars is diminished.
Silver, being the "coin of gentlemen," as opposed to gold, "the coin of the realm (or, kings), is a very dangerous commodity to the banker line of thought. If more and more ordinary people - the "little guys" upon whom the banker depends - conduct transactions in silver - the utility of paper money declines, velocity decreases and all of a sudden there's a liquidity crisis.
This is exactly what the global (mostly in the USA) banking cartel feared as silver approached all-time highs, thus the need for margin hikes to kill the competing currency before it became a real threat.
The same is true for gold, to a lesser degree, as central banks hold gold as a final backstop to their paper currencies, though it is leased out, levered 100-1, and therefore, being a useful conduit for the bankers, not as volatile as silver.
As for oil, what caused Thursday's sell-off is a little less clear, but again, the CME, which owns the NYMEX, where West Texas Intermediate oil futures (the most popular and widely held) are traded, extended trading range limits from $10 to $20, exacerbating an already decisive decline.
In simple terms, the CME allowed oil to fall though the floor simply by changing the rules in the middle of the day. There's less concern in the price of oil declining, because lower oil prices are generally good for everybody outside of oil companies and Middle East sovereigns, so less attention was paid to the CMEs quick decision, but it still underscores the levels at which rules will be either broken or amended to accommodate the needs of the powers behind the money (read: the too big to fail banks, the Fed and Treasury Department).
Now to Friday's fiasco in the Bureau of labor Standards (BLS) non-farm payroll data for April (the establishment survey). While the consensus opinion had been trending toward lowered expectations, the BLS surprised everybody with the announcement of 244,000 new jobs created during the month, 268,000 in the private sector, offset by a loss of 24,000 public sector jobs - mostly municipal and state employees being furloughed.
What's intriguing about the non-farm payroll data is how the numbers are created, and the use of the word "created" is no accident, because the BLS employs such such extreme and convoluted data manipulation that pure statistics become rather murky. It's easy to say that our monthly "jobs data" is more a political process than an actual statistical survey with a margin of error in the low single digits. It's guided by a smallish sample and then amplified by what's known as the "birth/death model," a number created to reflect the number of businesses opening (birth) and closing down (death).
Does the BLS actually sample bankruptcy and new corporation filings in selected communities and states? No. Does the BLS ever adjust the number for seasonality. No. For accuracy, yes, but not in the month-to-month survey numbers.
So, from where did the 244,000 net new jobs in April come? 175,000 came from the birth/death model. And while some are contending that roughly 62,000 came from the widely-published McDonald's hiring, the Wall Street Journal begs to differ, stating that McDonald's hire date was April 19, a week after the BLS survey period.
Taking just the raw data, subtracting out the birth/death figures, the US economy consisting of existing businesses created 69,000 net new jobs - not so hot. If we can believe that a couple hundred thousand newly-minted entrepreneurs joined the business fray and 30 to 40,000 businesses went belly up in the same time frame, we could believe this figure. However, like the missing photo of a dead Osama bin Laden, there's no proof of these "births" and "deaths," only trust in the BLS, which, by the way, stretched credulity again by proclaiming the official unemployment rate to have risen, up to nine per cent (9%).
That rise correlated to the other side of the BLS coin, the household survey, which showed the number of employed persons to have fallen by 190,000 from the March reporting period to April.
Is it a gain of 244,000 jobs or a loss of 190,000? Who knows? The point is that many decisions are made based upon the BLS data, which, as shown, is more guesswork and massaging of data than trustworthy data, but one wonders if these decisions are based on reality, a perception of reality, or if the reality is being superimposed upon the American public to suit the current narrative of "recovery."
Whatever the case, it seems a shoddy way to run a country's economy, with dodgy data and questionable maneuvers by those running the exchanges.
It doesn't snow much in the USA in May, but that surely doesn't preclude a massive snow job by Wall Street and the federal government and their extensions.
Friday, March 4, 2011
Taking a Stab at the NFP Number
There's about an hour to go before the release of the BLS Non-Farm Payroll data for February, and, since listening to ex-chairman Greenspan dodder on CNBC is causing severe intellectual pain and suffering, I've decided to take a stab at what the number will be.
With government work contracting generally over the past 3-6 months, we're likely looking at a reduction in public sector jobs of somewhere between 15,000 and 30,000. That implies that to reach the number some have projected, 175-200,000, the private sector would have to had created upwards of 200,000 jobs, and that seems highly unlikely.
My best guess - and it's nothing more than a guess because I'm not taking into account the arcane and muddy BLS birth-death models and other smoothing mechanisms they employ - is that the private sector created no more than a net 160,000 new jobs, and even that might be a stretch.
Let's put the number at +135,000, below consensus estimates, but, considering how bad January was, this number could - and maybe should - be considered a vast improvement.
Not that anybody should be happy with this number, since the amount of stimulus by government and the Fed has been enormous and we should, at this point in the "recovery," be creating 300-350,000 net new jobs, anything above 125,000 should be almost satisfactory, or, a "D" for underachievement for the Fed.
So, that's it: +135,000. I can live with that, and, even if I'm wrong, I'll be no further off than the majority of the experts out there.
With government work contracting generally over the past 3-6 months, we're likely looking at a reduction in public sector jobs of somewhere between 15,000 and 30,000. That implies that to reach the number some have projected, 175-200,000, the private sector would have to had created upwards of 200,000 jobs, and that seems highly unlikely.
My best guess - and it's nothing more than a guess because I'm not taking into account the arcane and muddy BLS birth-death models and other smoothing mechanisms they employ - is that the private sector created no more than a net 160,000 new jobs, and even that might be a stretch.
Let's put the number at +135,000, below consensus estimates, but, considering how bad January was, this number could - and maybe should - be considered a vast improvement.
Not that anybody should be happy with this number, since the amount of stimulus by government and the Fed has been enormous and we should, at this point in the "recovery," be creating 300-350,000 net new jobs, anything above 125,000 should be almost satisfactory, or, a "D" for underachievement for the Fed.
So, that's it: +135,000. I can live with that, and, even if I'm wrong, I'll be no further off than the majority of the experts out there.
Friday, February 4, 2011
36,000 New Jobs and 9% Unemployment, Really?
There's an old adage that traders often cite which goes something like: The market can remain irrational longer than you can remain solvent.
This would be applicable today for anyone (present author included)who believes, a) the market is currently overvalued, and b) economic data should matter.
The latest Orwellian absurdity comes from the Department of Truth, otherwise known as the Bureau of Labor Statistics (BLS) which today produced the ultimate statistical aberration in saying that the number of net new non-farm jobs produced in America in the month of January was a mere 36,000, when expectations were for growth of 148,000.
Notwithstanding that number of new jobs doesn't even keep pace with new entrants into the work force (more on that later), the BLS also advised that the official unemployment rate fell from 9.4% to 9.0%.
By just about any measure, this is statistical nonsense. The only way the unemployment percentage could fall on such a low number of new jobs created would be if the labor force had suddenly declined drastically.
Let's check: no major disasters (well, besides a few big snow storms), an entire city was not wiped out by a nuclear blast and there was no mass suicide by employed people ensconced in office cubicles. However, the BLS has concluded that the US labor force declined from 153,690 to 153,186. In other words, more than 500,000 people just dropped out of the labor force in January.
On that topic, we wonder where they went and what they are doing to survive. Maybe they all were abducted by aliens, or since the weather has been so cold and snowy, decided to just leave their jobs. But, but, but, wouldn't that make the unemployment rate go up, rather than down?
Not according to the BLS. The true explanation is that these half million people were collecting unemployment insurance benefits since probably around February of 2009 and their 99 weeks have run their course, so, let's just not count them any more. Simple logic, but terribly, terribly wrong, because if we just dis-employ people, wait 99 weeks and then dismiss them from the survey numbers, we could see the unemployment rate at just 6 or 7 per cent before long, depending on how quickly the government decides that work is optional, and people can just survive on whatever scraps they pick up alongside the roads while they're on their way to... nowhere, presumably.
The BLS figures are so cockeyed as to make the authors blush, but we don't know who it is who puts these figures together each month, so we'll never know who should hold the shameful award for most obtuse statistics, which these most surely are.
Because the numbers are so incongruously incoherent, investors, or the computers running the algos in the market, must have completely overlooked them, because if the first number - 36,000 net new jobs - is true, the US economy is sinking faster than a mob informant in the East River.
But, if the second number - 9.0% unemployment - is the real deal, then corporations and small businesses are hiring at a break-neck pace and the recovery is on track and we should all be eating lobster tails for dinner every night.
(Whew! I need a drink, and maybe some pills and an IV.)
The truth of the matter is that neither number is correct, though the 36,000 figure is probably a lot closer to the truth than . They are both highly-massaged digits from an unreliable sample in a series that is hopelessly flawed in many ways. And so, the markets did what any overinflated, hyped-by-monetary-easing, derivative-driven market would: they ignored them and went higher, mostly (the NYSE finished fractionally lower).
Dow 12,092.15, +29.89 (0.25%)
NASDAQ 2,769.30, +15.42 (0.56%)
S&P 500 1,310.87, +3.77 (0.29%)
NYSE Composite 8,288.50, -0.55 (0.01%)
Losers finished ahead of gainers, narrowly, 3327-3150. On the NASDAQ, there were 167 new highs, 25 new lows. On the NYSE, new highs beat new lows, 221-12.
NASDAQ Volume 1,966,407,750
NYSE Volume 4,477,823,500
In the commodity space, crude took a dive of $1.51, to $89.03, on rumors that Egyptian president Hosni Mubarek would step down, which makes little sense, except if the price was already $1.50 too high to begin. Gold lost $4.00, to $1,349.00, while silver gained 33 cents, to $29.06. We may be witnessing another dislocation of correlation in the precious metals as the gold-silver ratio regresses to the traditional norm of 16:1, though that figure is still a long way off in the distance.
Taking the BLS numbers into perspective, we are reminded of the quotation, "There are lies, damned lies, and statistics," popularised in the United States by Mark Twain (among others), who attributed it to the British Prime Minister Benjamin Disraeli (1804–1881). The two are probably enjoying a good laugh and twirl in their respective graves over the follies of fiat currency tied to nothing but the "good faith and credit of the government, of which there is little of the former and too much of the latter.
The world is not coming to an end, though the world as we know it, is. Metrics and measurements change according to political whim, and we can be relatively assured that most of the statistics and rounding-offs coming from the public sector (and many from the private sector, like bank profits) are fatally flawed and not to be believed.
With this in mind, one should not fret much over the immediate future, for it will look much like the immediate past. Forget economics for the weekend, enjoy the Super Bowl and begin making plans for a radically-different future come Monday.
This would be applicable today for anyone (present author included)who believes, a) the market is currently overvalued, and b) economic data should matter.
The latest Orwellian absurdity comes from the Department of Truth, otherwise known as the Bureau of Labor Statistics (BLS) which today produced the ultimate statistical aberration in saying that the number of net new non-farm jobs produced in America in the month of January was a mere 36,000, when expectations were for growth of 148,000.
Notwithstanding that number of new jobs doesn't even keep pace with new entrants into the work force (more on that later), the BLS also advised that the official unemployment rate fell from 9.4% to 9.0%.
By just about any measure, this is statistical nonsense. The only way the unemployment percentage could fall on such a low number of new jobs created would be if the labor force had suddenly declined drastically.
Let's check: no major disasters (well, besides a few big snow storms), an entire city was not wiped out by a nuclear blast and there was no mass suicide by employed people ensconced in office cubicles. However, the BLS has concluded that the US labor force declined from 153,690 to 153,186. In other words, more than 500,000 people just dropped out of the labor force in January.
On that topic, we wonder where they went and what they are doing to survive. Maybe they all were abducted by aliens, or since the weather has been so cold and snowy, decided to just leave their jobs. But, but, but, wouldn't that make the unemployment rate go up, rather than down?
Not according to the BLS. The true explanation is that these half million people were collecting unemployment insurance benefits since probably around February of 2009 and their 99 weeks have run their course, so, let's just not count them any more. Simple logic, but terribly, terribly wrong, because if we just dis-employ people, wait 99 weeks and then dismiss them from the survey numbers, we could see the unemployment rate at just 6 or 7 per cent before long, depending on how quickly the government decides that work is optional, and people can just survive on whatever scraps they pick up alongside the roads while they're on their way to... nowhere, presumably.
The BLS figures are so cockeyed as to make the authors blush, but we don't know who it is who puts these figures together each month, so we'll never know who should hold the shameful award for most obtuse statistics, which these most surely are.
Because the numbers are so incongruously incoherent, investors, or the computers running the algos in the market, must have completely overlooked them, because if the first number - 36,000 net new jobs - is true, the US economy is sinking faster than a mob informant in the East River.
But, if the second number - 9.0% unemployment - is the real deal, then corporations and small businesses are hiring at a break-neck pace and the recovery is on track and we should all be eating lobster tails for dinner every night.
(Whew! I need a drink, and maybe some pills and an IV.)
The truth of the matter is that neither number is correct, though the 36,000 figure is probably a lot closer to the truth than . They are both highly-massaged digits from an unreliable sample in a series that is hopelessly flawed in many ways. And so, the markets did what any overinflated, hyped-by-monetary-easing, derivative-driven market would: they ignored them and went higher, mostly (the NYSE finished fractionally lower).
Dow 12,092.15, +29.89 (0.25%)
NASDAQ 2,769.30, +15.42 (0.56%)
S&P 500 1,310.87, +3.77 (0.29%)
NYSE Composite 8,288.50, -0.55 (0.01%)
Losers finished ahead of gainers, narrowly, 3327-3150. On the NASDAQ, there were 167 new highs, 25 new lows. On the NYSE, new highs beat new lows, 221-12.
NASDAQ Volume 1,966,407,750
NYSE Volume 4,477,823,500
In the commodity space, crude took a dive of $1.51, to $89.03, on rumors that Egyptian president Hosni Mubarek would step down, which makes little sense, except if the price was already $1.50 too high to begin. Gold lost $4.00, to $1,349.00, while silver gained 33 cents, to $29.06. We may be witnessing another dislocation of correlation in the precious metals as the gold-silver ratio regresses to the traditional norm of 16:1, though that figure is still a long way off in the distance.
Taking the BLS numbers into perspective, we are reminded of the quotation, "There are lies, damned lies, and statistics," popularised in the United States by Mark Twain (among others), who attributed it to the British Prime Minister Benjamin Disraeli (1804–1881). The two are probably enjoying a good laugh and twirl in their respective graves over the follies of fiat currency tied to nothing but the "good faith and credit of the government, of which there is little of the former and too much of the latter.
The world is not coming to an end, though the world as we know it, is. Metrics and measurements change according to political whim, and we can be relatively assured that most of the statistics and rounding-offs coming from the public sector (and many from the private sector, like bank profits) are fatally flawed and not to be believed.
With this in mind, one should not fret much over the immediate future, for it will look much like the immediate past. Forget economics for the weekend, enjoy the Super Bowl and begin making plans for a radically-different future come Monday.
Friday, December 3, 2010
Major Payroll Miss Slows Rally
Truly, the headline should have been worse, but the efforts of our beloved Federal Reserve, relentlessly supplying free cash flow to the entire banking and finance system through QE2, turned what, in ordinary times, should have been a major drop in the indices into a small gain. Obviously, these are not ordinary times, as the Fed's policies and government inabilities have completely distorted equity and bond markets, though, bonds, admittedly, are a little less affected.
The culprit in this case was a woeful reading from the BLS on November non-farm payrolls. Expected to come in at 150,000 new jobs, the miss was massive, registering at only a gain of 39,000 for the month. The unemployment rate was also hiked to 9.8%. A miss of this magnitude should have caused a major sell-off of something along the lines of 200 points on the Dow, but the smiley-face, feel-good "recovery" posture foisted upon an unsuspecting public by the charlatans who call themselves the "financial media" on CNBC and elsewhere, in perfect Orwellian doublespeak, turned this negative into a positive, suggesting that the lack of jobs in America is a good sign that the Bush tax cuts, QE2 and unemployment insurance will be extended.
Suddenly, like magic, the fact that there's only one job for every five applicants in America - during the height of the holiday season, no less - is a very good thing indeed! On the other side of the coin, since most everything emanating from our nation's capitol and Wall Street are complete fabrications and half-truths, at best, perhaps the doltish politicians running the circus thought a little depression might be good for what ails us.
Washington is so completely corrupt and bankrupt it's appalling, even to below-average fifth graders, who are likely to be able to see right through the politics of fraud. Nothing matters to these people except stock prices and elections. Half of the Southern states are starved for funds, as are most of the Northeastern ones along with California, but that's not anything that concerns them. They'll mindlessly dawdle over minutia like 3% tax cuts instead of actually handling matters of national importance. Thank goodness for Wikileaks and the internet, for displaying the true level of corruption and ineptitude that has brought the country to its knees.
Dow 11,382.09, +19.68 (0.17%)
NASDAQ 2,591.46, +12.11 (0.47%)
S&P 500 1,224.71, +3.18 (0.26%)
NYSE Composite 7,751.58, +39.33 (0.51%)
Amazingly, advancing issues outnumbered decliners by a substantial margin, 4029-2364. New highs again beat back new lows, 497-39, entirely similar to the past two days. Yes, siree! The same stocks, being endlessly pumped to infinity. The best news is that volume was down, meaning Goldman Sachs probably turned off one of its Cray XE6's for the weekend.
NASDAQ Volume 1,836,885,000
NYSE Volume 4,307,858,000
Oil futures reached a 2010 high, up $1.19, to $89.19. Precious metals and grains were also sharply higher. Gold ramped up $16.90, to $1,406.20; silver gained 70 cents, to $29.27. The silver and gold bugs would like to applaud Fed Chairman Bernanke for making them rich beyond their wildest dreams. The best part is that his failed policies will continue for many more months and be copied by our counterparts in the Eurozone, meaning the prices today will look like chickenfeed in a few years.
Of course, along with the precious metals go other commodities, like food and oil, so while the hoarders of gold and silver will be wealthy, they'll eventually have to hock that shiny stuff for gasoline, a loaf of bread and cans of tuna. At least they'll be able to get around and eat. The remainder of the immobilized masses will be starving to death.
We are deserving of all this, however, for electing spineless politicians and allowing the corruption and wantonness to go unchecked for so long. In another time, the wall of congress would be ringing with gunfire and bankers hung from the nearest lampposts, but the American public has been dumbed-down, satiated and nourished with the fruits of food stamps disguised as debit cards.
There will be no revolution, no wide public outcry. We will suffer quietly until the best of us all are gone and our children reduced to slaves. Bread and circuses is what we want and exactly what we will get.
Ponder these words, lest you fall into the trap of the status quo:
The culprit in this case was a woeful reading from the BLS on November non-farm payrolls. Expected to come in at 150,000 new jobs, the miss was massive, registering at only a gain of 39,000 for the month. The unemployment rate was also hiked to 9.8%. A miss of this magnitude should have caused a major sell-off of something along the lines of 200 points on the Dow, but the smiley-face, feel-good "recovery" posture foisted upon an unsuspecting public by the charlatans who call themselves the "financial media" on CNBC and elsewhere, in perfect Orwellian doublespeak, turned this negative into a positive, suggesting that the lack of jobs in America is a good sign that the Bush tax cuts, QE2 and unemployment insurance will be extended.
Suddenly, like magic, the fact that there's only one job for every five applicants in America - during the height of the holiday season, no less - is a very good thing indeed! On the other side of the coin, since most everything emanating from our nation's capitol and Wall Street are complete fabrications and half-truths, at best, perhaps the doltish politicians running the circus thought a little depression might be good for what ails us.
Washington is so completely corrupt and bankrupt it's appalling, even to below-average fifth graders, who are likely to be able to see right through the politics of fraud. Nothing matters to these people except stock prices and elections. Half of the Southern states are starved for funds, as are most of the Northeastern ones along with California, but that's not anything that concerns them. They'll mindlessly dawdle over minutia like 3% tax cuts instead of actually handling matters of national importance. Thank goodness for Wikileaks and the internet, for displaying the true level of corruption and ineptitude that has brought the country to its knees.
Dow 11,382.09, +19.68 (0.17%)
NASDAQ 2,591.46, +12.11 (0.47%)
S&P 500 1,224.71, +3.18 (0.26%)
NYSE Composite 7,751.58, +39.33 (0.51%)
Amazingly, advancing issues outnumbered decliners by a substantial margin, 4029-2364. New highs again beat back new lows, 497-39, entirely similar to the past two days. Yes, siree! The same stocks, being endlessly pumped to infinity. The best news is that volume was down, meaning Goldman Sachs probably turned off one of its Cray XE6's for the weekend.
NASDAQ Volume 1,836,885,000
NYSE Volume 4,307,858,000
Oil futures reached a 2010 high, up $1.19, to $89.19. Precious metals and grains were also sharply higher. Gold ramped up $16.90, to $1,406.20; silver gained 70 cents, to $29.27. The silver and gold bugs would like to applaud Fed Chairman Bernanke for making them rich beyond their wildest dreams. The best part is that his failed policies will continue for many more months and be copied by our counterparts in the Eurozone, meaning the prices today will look like chickenfeed in a few years.
Of course, along with the precious metals go other commodities, like food and oil, so while the hoarders of gold and silver will be wealthy, they'll eventually have to hock that shiny stuff for gasoline, a loaf of bread and cans of tuna. At least they'll be able to get around and eat. The remainder of the immobilized masses will be starving to death.
We are deserving of all this, however, for electing spineless politicians and allowing the corruption and wantonness to go unchecked for so long. In another time, the wall of congress would be ringing with gunfire and bankers hung from the nearest lampposts, but the American public has been dumbed-down, satiated and nourished with the fruits of food stamps disguised as debit cards.
There will be no revolution, no wide public outcry. We will suffer quietly until the best of us all are gone and our children reduced to slaves. Bread and circuses is what we want and exactly what we will get.
Ponder these words, lest you fall into the trap of the status quo:
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.-- Thomas Jefferson
Thursday, October 21, 2010
An Up and Down Thursday with Lady Gaga and the Fed
Now that the US stock markets are inexorably intertwined with Fed POMOs and repurchases, and, in turn, to movements in the US dollar, investors are more likely to see moves such as today's rather than stocks moving on fundamentals, news, or economic data.
In the absence of a POMO today, the whizzing HFT computers got the markets off to a bang-up start, only to be headed off by the Federal Reserve's #1.5 billion reverse repo, which actually takes liquidity out of the market. Thus, with less free money on hand, stocks slumped midday, though managed to stage a final hour rally to close positive, again. The major indices registered marginal gains, except for the NYSE Composite, the broadest measure.
Stocks simply cannot go down. That much is clear. How high the HFT computers and the Fed, via their Primary Dealers (PMs) will take it is the big unknown. Eventually, while Americans move from 99 weeks of unemployment benefits into the underworld of welfare recipients and food stamps, the stock market - permanently unhinged from reality and the US economy - may challenge the all-time highs. We expect REAL unemployment to be registering at about 25% (it's already 22% and rising), though the Bureau of Labor Statistics (BLS) will have it pegged at something around 9.7%, as they discard discouraged workers and anybody who was on a payroll for more than one hour in a given week.
In that regard, the weekly new unemployment claims were "down" to 452,000 this week, from last week's 475,000, which was revised from the reported 462,000. Not to worry, this week's figures will be revised upward next week, so they can show "improvement" again. The BLS has upwardly revised the number every week save one for the past six months. No, really, it's true!
US investors and their computers which run them also overlooked the extreme austerity measures undertaken by the British parliament and the ongoing strikes in France which have pretty much shut the country down.
Conditions in France are so bad that Lady Gaga cancelled all her upcoming appearances. Now, that's shocking and maybe will awaken the MTV generation that all is not well with the world.
Not making headlines today, but surely taking the heat from traders, was Bank of America (BAC), which hit another 52-week low, closing down 39 cents at 11.36. The widely =-circulating rumor is that BofA is being used as a fall guy for much of the toxic mortgage paper that investors wish to shed and be compensated for. Bank of America, with headquarters in Charlotte, NC, is not part of the Wall Street cartel, thus, it may be under preparation to be jettisoned from the land of publicly-traded companies.
For many mortgage and bank account holders, this could not happen to a better (worse) bank.
Dow 11,146.57, +38.60 (0.35%)
NASDAQ 2,459.67, +2.28 (0.09%)
S&P 500 1,180.26, +2.09 (0.18%)
NYSE Composite 7,515.67, -8.14 (0.11%)
despite the valiant efforts in the final hour, declining issues beat advancers, 3591-2799. New highs beat new lows, 522-74. Volume remained mostly moribund.
NASDAQ Volume 2,145,050,000
NYSE Volume 5,269,549,000
Commodities got smacked down again, with oil losing $1.98, to $80.56 on the first day of the December contract, a particularly bearish sentiment being expressed. Gold dropped another $18.60, to $1,325.60, while silver fell 73 cents, to $23.14, a tempting price, though one's enthusiasm for the precious metals must be tempered at this point. Commodities may be reacting more to the conditions in France, the rest of Europe and in England, as a global depression may be taking fuller shape and would negatively impact all asset classes, and primarily, commodities, as demand would be severely crimped for all production on every level.
Considering the damage done in the main by the corrupt, illicit actions of US financial institutions over the past two decades, global depression 2.0 seems the most likely outcome, something predicted here at least two years ago. Check our archives from 2006 and 2007 if you need any proof.
The banksters who roam Wall Street as free men (and maybe a few rogue women) have delivered to the world the ultimate crap sandwich, complete with a rotten apple in a fetid, torn paper bag. With US politicians more intent on re-election than actually handling problems, nothing gets done and nothing will, if the media pundits have their way.
Predicting a Republican "Tea Party" triumph, taking control of the House and maybe the Senate, the most likely outcome - with a Democrat in the White House - would be gridlock, with an assortment of charges, counter-charges, investigations and accusations being thrown by both parties at each other. This may be the most desirous of conditions for the American public, who might, after a while, simply give up on government policy and demand the wholesale dissolution of the federal government.
In the event of widespread public rage, after the rioting, ranting and raving, the states may then be able to stand up individually and reject federal controls which have destroyed the union. There will be periods of fear and bloodshed, but, in the end, removing the shackles of government may be the best and possibly, only solution.
One would hope that it would not come to such extremes, but the vast pantheon of history is replete with uprisings, revolts and revolutions. It's all part of what keeps the world spinning and a necessary needed cure to tyranny and control.
In the absence of a POMO today, the whizzing HFT computers got the markets off to a bang-up start, only to be headed off by the Federal Reserve's #1.5 billion reverse repo, which actually takes liquidity out of the market. Thus, with less free money on hand, stocks slumped midday, though managed to stage a final hour rally to close positive, again. The major indices registered marginal gains, except for the NYSE Composite, the broadest measure.
Stocks simply cannot go down. That much is clear. How high the HFT computers and the Fed, via their Primary Dealers (PMs) will take it is the big unknown. Eventually, while Americans move from 99 weeks of unemployment benefits into the underworld of welfare recipients and food stamps, the stock market - permanently unhinged from reality and the US economy - may challenge the all-time highs. We expect REAL unemployment to be registering at about 25% (it's already 22% and rising), though the Bureau of Labor Statistics (BLS) will have it pegged at something around 9.7%, as they discard discouraged workers and anybody who was on a payroll for more than one hour in a given week.
In that regard, the weekly new unemployment claims were "down" to 452,000 this week, from last week's 475,000, which was revised from the reported 462,000. Not to worry, this week's figures will be revised upward next week, so they can show "improvement" again. The BLS has upwardly revised the number every week save one for the past six months. No, really, it's true!
US investors and their computers which run them also overlooked the extreme austerity measures undertaken by the British parliament and the ongoing strikes in France which have pretty much shut the country down.
Conditions in France are so bad that Lady Gaga cancelled all her upcoming appearances. Now, that's shocking and maybe will awaken the MTV generation that all is not well with the world.
Not making headlines today, but surely taking the heat from traders, was Bank of America (BAC), which hit another 52-week low, closing down 39 cents at 11.36. The widely =-circulating rumor is that BofA is being used as a fall guy for much of the toxic mortgage paper that investors wish to shed and be compensated for. Bank of America, with headquarters in Charlotte, NC, is not part of the Wall Street cartel, thus, it may be under preparation to be jettisoned from the land of publicly-traded companies.
For many mortgage and bank account holders, this could not happen to a better (worse) bank.
Dow 11,146.57, +38.60 (0.35%)
NASDAQ 2,459.67, +2.28 (0.09%)
S&P 500 1,180.26, +2.09 (0.18%)
NYSE Composite 7,515.67, -8.14 (0.11%)
despite the valiant efforts in the final hour, declining issues beat advancers, 3591-2799. New highs beat new lows, 522-74. Volume remained mostly moribund.
NASDAQ Volume 2,145,050,000
NYSE Volume 5,269,549,000
Commodities got smacked down again, with oil losing $1.98, to $80.56 on the first day of the December contract, a particularly bearish sentiment being expressed. Gold dropped another $18.60, to $1,325.60, while silver fell 73 cents, to $23.14, a tempting price, though one's enthusiasm for the precious metals must be tempered at this point. Commodities may be reacting more to the conditions in France, the rest of Europe and in England, as a global depression may be taking fuller shape and would negatively impact all asset classes, and primarily, commodities, as demand would be severely crimped for all production on every level.
Considering the damage done in the main by the corrupt, illicit actions of US financial institutions over the past two decades, global depression 2.0 seems the most likely outcome, something predicted here at least two years ago. Check our archives from 2006 and 2007 if you need any proof.
The banksters who roam Wall Street as free men (and maybe a few rogue women) have delivered to the world the ultimate crap sandwich, complete with a rotten apple in a fetid, torn paper bag. With US politicians more intent on re-election than actually handling problems, nothing gets done and nothing will, if the media pundits have their way.
Predicting a Republican "Tea Party" triumph, taking control of the House and maybe the Senate, the most likely outcome - with a Democrat in the White House - would be gridlock, with an assortment of charges, counter-charges, investigations and accusations being thrown by both parties at each other. This may be the most desirous of conditions for the American public, who might, after a while, simply give up on government policy and demand the wholesale dissolution of the federal government.
In the event of widespread public rage, after the rioting, ranting and raving, the states may then be able to stand up individually and reject federal controls which have destroyed the union. There will be periods of fear and bloodshed, but, in the end, removing the shackles of government may be the best and possibly, only solution.
One would hope that it would not come to such extremes, but the vast pantheon of history is replete with uprisings, revolts and revolutions. It's all part of what keeps the world spinning and a necessary needed cure to tyranny and control.
Friday, October 8, 2010
No Jobs, Free Homes, Cheap Money and High-Flying Stocks
The financial sector of the US economy delivered one of the more entertaining sessions of the past few months on Friday, first, trying to weight the relative benefits of a nation without jobs against the potential for more than a trillion dollars flowing into the currency via the Federal Reserve's Quantitative Easing, Part II, otherwise known as QE2.
At 8:30 am Eastern time, the Bureau of Labor Statistics released its survey of non-farm payrolls for the month of September. Wall Street and investors worldwide have shown a keen interest in this number all week, and the news that the US had shed another 95,000 jobs in the month was something of a surprise to many.
Watching the Dow Jones futures as the number was announced, the immediate, knee-jerk reaction was a drop of 88 points, though that was followed by a lightning-quick ramp up. Within minutes, the investor class had come to the perverse recognition that a poor showing in employment meant almost certainty for further QE by the Federal Reserve. In other words, much more free money would be headed to Wall Street and the corrupt banking system to keep stocks flying high.
The perversity of what was easily recognizable as bad news actually having an antecedent knock-on caused the market to open in positive territory and quickly surpass the 11,000 mark on the DJIA. Joining into the fray were most commodities, after some initial fits and starts, which also ramped up on the idea of a debased US dollar and limitless liquidity being supplied by the Fed.
With stocks cruising along, even word that Bank of America was halting all foreclosure activities in all 50 states - upping their previous call for a halt in just the 23 judicial foreclosure states - had virtually no effect on the celebratory mood. Sad as it may seem, investors somehow believe that outright inflationary policy against a backdrop of people with no jobs living in homes they cannot afford is somehow a great and marvelous thing.
Folks, I can't make this stuff up. We live in a country that's just about as upside-down as one can get.
Dow 11,006.48, +57.90 (0.53%)
NASDAQ 2,401.91, +18.24 (0.77%)
S&P 500 1,165.15, +7.09 (0.61%)
NYSE Composite 7,478.42, +53.41 (0.72%)
NASDAQ Volume 2,014,985,125
NYSE Volume 4,060,130,250
Advancing issues buried decliners, 4199-1500. New highs maintained their huge edge over new lows, stunningly, 471-33. Volume was anemic, being supplied by quants, Goldman Sachs, high frequency trading computers and the odd hedge fund here and there. Nobody seems to be concerned that the market is demonstrating absolutely the thinnest trading in our lifetimes.
In the commodity space, crude oil priced 99 cents higher, at $82.66 by the close. Gold resumed its ascent to the stratosphere, up $10.30, to $1,345.30. Silver tagged along with a gain of 52 cents, to $23.10.
Monday's a holiday, so the day's events will have plenty of time in which to sink in at cocktail parties and weekend outings. Somebody has to be able to make sense of it all, though that person isn't yet telling anyone.
At 8:30 am Eastern time, the Bureau of Labor Statistics released its survey of non-farm payrolls for the month of September. Wall Street and investors worldwide have shown a keen interest in this number all week, and the news that the US had shed another 95,000 jobs in the month was something of a surprise to many.
Watching the Dow Jones futures as the number was announced, the immediate, knee-jerk reaction was a drop of 88 points, though that was followed by a lightning-quick ramp up. Within minutes, the investor class had come to the perverse recognition that a poor showing in employment meant almost certainty for further QE by the Federal Reserve. In other words, much more free money would be headed to Wall Street and the corrupt banking system to keep stocks flying high.
The perversity of what was easily recognizable as bad news actually having an antecedent knock-on caused the market to open in positive territory and quickly surpass the 11,000 mark on the DJIA. Joining into the fray were most commodities, after some initial fits and starts, which also ramped up on the idea of a debased US dollar and limitless liquidity being supplied by the Fed.
With stocks cruising along, even word that Bank of America was halting all foreclosure activities in all 50 states - upping their previous call for a halt in just the 23 judicial foreclosure states - had virtually no effect on the celebratory mood. Sad as it may seem, investors somehow believe that outright inflationary policy against a backdrop of people with no jobs living in homes they cannot afford is somehow a great and marvelous thing.
Folks, I can't make this stuff up. We live in a country that's just about as upside-down as one can get.
Dow 11,006.48, +57.90 (0.53%)
NASDAQ 2,401.91, +18.24 (0.77%)
S&P 500 1,165.15, +7.09 (0.61%)
NYSE Composite 7,478.42, +53.41 (0.72%)
NASDAQ Volume 2,014,985,125
NYSE Volume 4,060,130,250
Advancing issues buried decliners, 4199-1500. New highs maintained their huge edge over new lows, stunningly, 471-33. Volume was anemic, being supplied by quants, Goldman Sachs, high frequency trading computers and the odd hedge fund here and there. Nobody seems to be concerned that the market is demonstrating absolutely the thinnest trading in our lifetimes.
In the commodity space, crude oil priced 99 cents higher, at $82.66 by the close. Gold resumed its ascent to the stratosphere, up $10.30, to $1,345.30. Silver tagged along with a gain of 52 cents, to $23.10.
Monday's a holiday, so the day's events will have plenty of time in which to sink in at cocktail parties and weekend outings. Somebody has to be able to make sense of it all, though that person isn't yet telling anyone.
Friday, September 3, 2010
August Jobs -54,000; Stocks Soar. Can Anything Be Trusted?
Total Nonfarm Birth/Death Adjustment +115
Why is that the most important number in this month's Non-farm Payroll Report issued by the Bureau of Labor Statistics (BLS)?
It's because the Birth/Death adjustmentis employed by the BLS to estimate the number of business openings (births) and the number of business failures (deaths) and is imputed into their formulas to come up with their monthly estimate of total US employment, better known as the monthly Non-Farm Payroll report.
Accordingly, when the BLS believes that there are more businesses opening than closing, the number is positive, boosting the overall employment picture, and the opposite when more businesses are failing.
From the charts provided by the BLS themselves, the birth/death model is accounting for a rapidly-expanding number of new businesses in the US (predominantly small businesses) as compared to businesses closing their doors. Should we be inclined to believe this fantasy, we would think the US economy, specifically small business, is booming and hiring new workers, though we know this is not even remotely the case.
We can make some comparisons and use other data to demystify the claims of the BLS. Specifically, we can look at the number of businesses filing for bankruptcy in 2010, and magically, we find a WSJ report that gives us a glowing headline - in support of the BLS birth-death model - though the devil, as usual, lies in the details.
The article states that while Chapter 11 reorganizations were down 17% in the first half of 2010 as compared to 2009, but Chapter 7 filings remained flat. So, what does this really tell us? Since Chapter 11 keeps a business's doors open, while probably reducing to some extent either wages or workers or both, that's positive, since fewer businesses are jumping through the Chapter 11 hoops and thus laying off fewer workers. But, when it comes to Chapter 7, which is liquidation, and was flat as compared to 2009, we should evidence no upside benefit to the birth-death model.
Now, let's check on new business startups, which is the "birth" part of the equation.
Here's an article which postulates that the average new business is hiring fewer employees now than in the past, which makes sense, as regulations and required filings have increased the small business burden while technology has allowed workers to be more productive. Add in the quest for outsourcing and you get the perfect scenario for new businesses not putting on as many employees as they used to, so when the BLS imputes the data for business births, they should consider that any new business will likely add fewer jobs than previously encountered.
On the positive side, the Ewing Marion Kaufmann Foundation reports that 2009 was a banner year for entrepreneurship, making the claim that, on average, 558,000 new businesses were started EACH MONTH in the year.
That is a monumental claim, postulating that 6,669,000 new businesses were formed in he year. Were that number even close to being true, the gains from new businesses should have almost completely eclipsed the losses from 2007-2008.
In contrast to the claims made by Kaufmann, which uses BLS data for baseline methodology, the WSJ posits that the number of new businesses fell by 24% in 2009, and 2008, though reportedly strong, was no banner year.
Outplacement firm Challenger, Gray and Christmas find that new business creation has fallen precipitously in the first half of 2010:
The Challenger study puts the figure at 3.7% of surveyed job-seekers, the lowest two-quarter average on record. The firm began collecting data in 1986.
The World Bank chimes in with a study of their own, stating:
Going back to the BLS birth/death charts, we note that in 2009, when business births were supposedly on the upswing, the BLS shows the model producing sizable gains in March, April and May, but then becoming pretty static for the remainder of the year. In 2010, the model number falls off a cliff in January, at -427,000, but then rebounds and posts gains in each proceeding month, eliminating and overshadowing the January losses.
In conclusion, there are simply too many numbers being thrown around in opposing directions for all of them to be right or to draw any conclusion except that the BLS birth/death model is structurally inconsistent, at times in opposition to competing data and more than likely employed to massage or move the overall non-farm payroll data month to month in whatever direction is politically palatable at the given moment.
Simply put, the birth/death model, on top of or imputed into raw estimates and seasonal adjustments, shrouds the entire non-farm payroll data in layers of stealthy and obscure adjustments.
Finally, here's a 2009 story from Bloomberg that screams, U.S. Job Losses May Be Even Larger, Model Breaks Down. That is about as close as one can come to saying that the government figures are useless and probably should not be trusted without actually saying it.
With the joyous news that August non-farm payrolls decreased by only 54,000 - beating expectations - stocks were off to the races, gapping once more at the open to lock in as many short sellers as possible. The markets maintained their positive bias throughout the remainder of the session, finishing close to their highs.
Investors looked past a terrible ISM Services index reading of 51.5 in August after showing 54.3 in July. Not surprisingly, bank stocks were among the leaders.
Dow 10,447.93, +127.83 (1.24%)
NASDAQ 2,233.75, +33.74 (1.53%)
S&P 500 1,104.51, +14.41 (1.32%)
NYSE Composite 7,055.03, +88.78 (1.27%)
Advancers clobbered declining issues, 4934-1488. New highs overwhelmed new lows, 415-49. Volume was non-existent, yet another signal that the rally is made on nothing but desire to trade, and is probably being directed by a small number of insiders.
NASDAQ Volume 1,512,487,250
NYSE Volume 4,127,134,500
Of the commodities we track, silver was the only winner, cementing a lengthy rally with a 28 cent gain, closing at 19.92. Gold slipped $2.30, to $1,249.20, while crude oil fell 42 cents, to $74.60.
It was quite a remarkable week for stocks. The Dow, which closed at 9985 just last Thursday, has managed a gain of 462 points in the last six sessions. There is likely more upside, though it may be limited in size and duration, as resistance begins around 10,600 on the Dow and 1125-35 on the S7P 500.
Enjoy the Labor Day holiday by not laboring. Get out and have some fun. Life is too short not to.
Why is that the most important number in this month's Non-farm Payroll Report issued by the Bureau of Labor Statistics (BLS)?
It's because the Birth/Death adjustmentis employed by the BLS to estimate the number of business openings (births) and the number of business failures (deaths) and is imputed into their formulas to come up with their monthly estimate of total US employment, better known as the monthly Non-Farm Payroll report.
Accordingly, when the BLS believes that there are more businesses opening than closing, the number is positive, boosting the overall employment picture, and the opposite when more businesses are failing.
From the charts provided by the BLS themselves, the birth/death model is accounting for a rapidly-expanding number of new businesses in the US (predominantly small businesses) as compared to businesses closing their doors. Should we be inclined to believe this fantasy, we would think the US economy, specifically small business, is booming and hiring new workers, though we know this is not even remotely the case.
We can make some comparisons and use other data to demystify the claims of the BLS. Specifically, we can look at the number of businesses filing for bankruptcy in 2010, and magically, we find a WSJ report that gives us a glowing headline - in support of the BLS birth-death model - though the devil, as usual, lies in the details.
The article states that while Chapter 11 reorganizations were down 17% in the first half of 2010 as compared to 2009, but Chapter 7 filings remained flat. So, what does this really tell us? Since Chapter 11 keeps a business's doors open, while probably reducing to some extent either wages or workers or both, that's positive, since fewer businesses are jumping through the Chapter 11 hoops and thus laying off fewer workers. But, when it comes to Chapter 7, which is liquidation, and was flat as compared to 2009, we should evidence no upside benefit to the birth-death model.
Now, let's check on new business startups, which is the "birth" part of the equation.
Here's an article which postulates that the average new business is hiring fewer employees now than in the past, which makes sense, as regulations and required filings have increased the small business burden while technology has allowed workers to be more productive. Add in the quest for outsourcing and you get the perfect scenario for new businesses not putting on as many employees as they used to, so when the BLS imputes the data for business births, they should consider that any new business will likely add fewer jobs than previously encountered.
On the positive side, the Ewing Marion Kaufmann Foundation reports that 2009 was a banner year for entrepreneurship, making the claim that, on average, 558,000 new businesses were started EACH MONTH in the year.
That is a monumental claim, postulating that 6,669,000 new businesses were formed in he year. Were that number even close to being true, the gains from new businesses should have almost completely eclipsed the losses from 2007-2008.
In contrast to the claims made by Kaufmann, which uses BLS data for baseline methodology, the WSJ posits that the number of new businesses fell by 24% in 2009, and 2008, though reportedly strong, was no banner year.
Outplacement firm Challenger, Gray and Christmas find that new business creation has fallen precipitously in the first half of 2010:
CHICAGO, July 19, 2010 – A new survey shows that start- up activity plummeted in the first half of 2010 as would-be entrepreneurs were either scooped up by employers or scared off by fragile economic conditions, a tight lending market and uncertainty over the sustainability of the recovery.
The Challenger study puts the figure at 3.7% of surveyed job-seekers, the lowest two-quarter average on record. The firm began collecting data in 1986.
The World Bank chimes in with a study of their own, stating:
We find that firm births contribute substantially to gross and net job creation. New firms tend to be small and thus the finding of a systematic inverse relationship between firm size and net growth rates is entirely attributable to most new firms being classified in small size classes.
Going back to the BLS birth/death charts, we note that in 2009, when business births were supposedly on the upswing, the BLS shows the model producing sizable gains in March, April and May, but then becoming pretty static for the remainder of the year. In 2010, the model number falls off a cliff in January, at -427,000, but then rebounds and posts gains in each proceeding month, eliminating and overshadowing the January losses.
In conclusion, there are simply too many numbers being thrown around in opposing directions for all of them to be right or to draw any conclusion except that the BLS birth/death model is structurally inconsistent, at times in opposition to competing data and more than likely employed to massage or move the overall non-farm payroll data month to month in whatever direction is politically palatable at the given moment.
Simply put, the birth/death model, on top of or imputed into raw estimates and seasonal adjustments, shrouds the entire non-farm payroll data in layers of stealthy and obscure adjustments.
Finally, here's a 2009 story from Bloomberg that screams, U.S. Job Losses May Be Even Larger, Model Breaks Down. That is about as close as one can come to saying that the government figures are useless and probably should not be trusted without actually saying it.
With the joyous news that August non-farm payrolls decreased by only 54,000 - beating expectations - stocks were off to the races, gapping once more at the open to lock in as many short sellers as possible. The markets maintained their positive bias throughout the remainder of the session, finishing close to their highs.
Investors looked past a terrible ISM Services index reading of 51.5 in August after showing 54.3 in July. Not surprisingly, bank stocks were among the leaders.
Dow 10,447.93, +127.83 (1.24%)
NASDAQ 2,233.75, +33.74 (1.53%)
S&P 500 1,104.51, +14.41 (1.32%)
NYSE Composite 7,055.03, +88.78 (1.27%)
Advancers clobbered declining issues, 4934-1488. New highs overwhelmed new lows, 415-49. Volume was non-existent, yet another signal that the rally is made on nothing but desire to trade, and is probably being directed by a small number of insiders.
NASDAQ Volume 1,512,487,250
NYSE Volume 4,127,134,500
Of the commodities we track, silver was the only winner, cementing a lengthy rally with a 28 cent gain, closing at 19.92. Gold slipped $2.30, to $1,249.20, while crude oil fell 42 cents, to $74.60.
It was quite a remarkable week for stocks. The Dow, which closed at 9985 just last Thursday, has managed a gain of 462 points in the last six sessions. There is likely more upside, though it may be limited in size and duration, as resistance begins around 10,600 on the Dow and 1125-35 on the S7P 500.
Enjoy the Labor Day holiday by not laboring. Get out and have some fun. Life is too short not to.
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