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:

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

Quotes for a Friday Afternoon

Before getting to the important part of this posting, a quick recap of the day on Wall Street is the usual requisite, so...

Here's what happened:

Dow 10,607.85. +13.02 (0.12%)
NASDAQ 2,315.61, +12.36 (0.54%)
S&P 500 1,125.59, +0.93 (0.08%)
NYSE Composite 7,154.64, -14.84 (0.21%)
NASDAQ Volume 2,174,708,250
NYSE Volume 4,437,062,000

Not much, even for a quad-witching options day, which is supposed to be "volatile." US markets are, if anything, operating on borrowed money and borrowed time. The money's been borrowed from the Fed and the time is just a matter of when somebody with a large enough stake says, "good-bye." It's a game of chicken and nobody wants to be the last one in the room.

Note that the NYSE, the broadest measure of equities, was the only one down, and also the only index usually not quoted by the major news services.

Advancing issues beat decliners, 3321-2395, but it's mostly just churning. New highs maintained their daily edge over new lows, 413-58, another meaningless metric, due to the large, unannounced number of issues de-listed in the past six to nine months. Volume was higher than normal, but still not of any degree anyone would get excited about. Most of the additional trading was due to the aforementioned quadruple-witching in options.

There was probably more action at Belmont Park than on the floor of the NYSE, and it was certainly more fun to watch.

Oil was hammered down another 91 cents lower, to $73.66, but remains stuck in a trading range, emblematic of the global economic condition. Gold closed up $3.70, at $1,275.60, another all-time high. Silver gathered only a nickel higher, to $20.79.

Then there was word on the housing market, from a number of economists, including the widely-quoted Mark Zandi of Moody's, who's been proven wrong so many times that most people have stopped counting.

Zandi believes housing prices will drop another 5% by 2013, and then says, "After reaching bottom, prices will gain at the historic annual pace of 3 percent..." He's probably wrong on the magnitude by a measure of three or four times. Residential real estate likely has 15-20% more to decline. As to his predicted annual growth pace of 3%, it's already well-established that home prices normally rise by about one per cent, not triple that.

Somebody ought to hand Zandi a golden parachute and shove him off a skyscraper so he can stop deluding himself that he's making sense. After all, he does work for one of the rating agencies which said all that toxic, sub-prime, re-packaged, securitized mortgage garbage was AAA-rated. The guy ought to be in jail rather than on CNBC.

The upshot is that the banks have such a monster of a problem on their hands that they and the courts cannot handle it in a reasonably timely manner. The absolute implosion of the US housing market has left a crater in the economy the size of Rush Limbaugh's ego, and that's enormous. The basic paradigm for buying a house these days is to offer 30% below the asking price, and see how badly the owners - either a bank or a homeowner or a combination of both - want out of it.

Then try and get a mortgage. A million more laughs.

The glut of homes - unoccupied, unrented, in need of repair, under-water financially - is mammoth and everywhere. Count on a minimum of three and probably more like five more years of pain, price declines and associated nonsense about finding "the bottom," which will only be reached when the banks realize that it's not worth their time or expense to pursue further exposure and foreclosures and they become the party which "walks away." When the banks no longer want the properties, no longer feel there's any gain in bleeding consumers dry with fees and interest, and the property taxes, maintenance and insurance exceed what they can hope to recover on unsold inventory, there will be a bottom, and it's going to be one heck of a lot lower and a heck of a lot further out than most people anticipate.

Too many houses at prices too many people can't afford. Simple math.

Following are the promised quotes. Have a lovely weekend.

"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, (Attributed)
3rd president of US (1743 - 1826)

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"Permit me to issue and control the money of a nation, and I care not who makes its laws."

-- Mayer Amschel Rothschild

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"Income tax is nothing but wage slavery. If you have payroll deductions, you are a slave. Only way to fix it is for everyone to quit, or, as in Europe, the whole nation goes on strike. It won't happen here. Americans are too stupid and too frightened by their own government. I am not. I could care less. Let them come and take my house and my belongings. I will start over, stronger. I love this country, but I hate the people who run it."

-- Ed.