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.
Friday, February 4, 2011
Thursday, February 3, 2011
The Long Wait
Waiting for anything can be distressing, anxiety-causing, even depressing.
Today we heard Ben Bernanke at the National Press Club explain that increases in commodity prices were not due to his easy money policies, though increases in stock prices were.
Were it true, the principles of economics could be stood on their heads and spit nickels all day long.
The wait for the end of the manipulation, the final, desperate push into insolvency of the nation and the currency, is not for the weak-willed nor for the non-believer.
Egypt is but one manifestation of Bernanke's policies. Higher cereal prices, beef prices, pork, chicken, you name it, are all the result of easy money created daily at the Federal Reserve.
Rather than drone on, as I have for many posts over many months, my sentiments are similar to those of Mike Krieger. And I'll leave it there.
Dow 12,062.26, +20.29 (0.17%)
NASDAQ 2,753.88, +4.32 (0.16%)
S&P 500 1,307.10, +3.07 (0.24%)
NYSE Composite 8,289.05, +16.48 (0.20%)
There were a few more advancing issues than decliners: 3371-3016. On the NASDAQ, 138 new highs, 24 new lows. There were 192 new highs and 7 new lows on the NYSE. Volume was level.
NASDAQ Volume 1,947,644,875
NYSE Volume 4,874,717,000
NYMEX crude moderated, down 32 cents, to $90.54. Gold gained $20.10, to $1,353.00. Silver was up 44 cents, to $28.73. Apparently, somebody sees something in the precious metals.
Tomorrow's non-farm payroll report is supposed to provide some clarity on jobs in the US. Most likely, it will not. Were there any real news we could trust, we might be able to make an informed decision.
Today we heard Ben Bernanke at the National Press Club explain that increases in commodity prices were not due to his easy money policies, though increases in stock prices were.
Were it true, the principles of economics could be stood on their heads and spit nickels all day long.
The wait for the end of the manipulation, the final, desperate push into insolvency of the nation and the currency, is not for the weak-willed nor for the non-believer.
Egypt is but one manifestation of Bernanke's policies. Higher cereal prices, beef prices, pork, chicken, you name it, are all the result of easy money created daily at the Federal Reserve.
Rather than drone on, as I have for many posts over many months, my sentiments are similar to those of Mike Krieger. And I'll leave it there.
Dow 12,062.26, +20.29 (0.17%)
NASDAQ 2,753.88, +4.32 (0.16%)
S&P 500 1,307.10, +3.07 (0.24%)
NYSE Composite 8,289.05, +16.48 (0.20%)
There were a few more advancing issues than decliners: 3371-3016. On the NASDAQ, 138 new highs, 24 new lows. There were 192 new highs and 7 new lows on the NYSE. Volume was level.
NASDAQ Volume 1,947,644,875
NYSE Volume 4,874,717,000
NYMEX crude moderated, down 32 cents, to $90.54. Gold gained $20.10, to $1,353.00. Silver was up 44 cents, to $28.73. Apparently, somebody sees something in the precious metals.
Tomorrow's non-farm payroll report is supposed to provide some clarity on jobs in the US. Most likely, it will not. Were there any real news we could trust, we might be able to make an informed decision.
Wednesday, February 2, 2011
Flat City
Maybe Tuesday's ramp-up was a little too much, or investors are actually a little concerned about events unfolding in Egypt, but whatever the case or cause, markets didn't do anything other than flatline on Wednesday.
The Dow traded in a 45-point range, while the S&P and NASDAQ were bound by 10 and 5-point ranges, respectively, proving that three's nothing like pushing already overvalued stocks even higher to stall out trading completely.
ADP released its monthly employment report, which suggested private payrolls grew by 187,000 in January, and revised December's report down 50,000, to 247,000. The revision means that the initial report was off by a factor of 16%, making it about as reliable an indicator as anything coming out of the Bureau of Labor Statistics (BLS), which, by the way, is the "official" measure of everything employment-related in the USA.
Market reaction to the number was a big yawn and the rest of the session more resembled churning of butter or grape-stomping rather than orderly markets. The day was a mash, and a dull one, at that.
Dow 12,041.97, +1.81 (0.02%)
NASDAQ 2,750.16, -1.03 (0.04%)
S&P 500 1,304.03, -3.56 (0.27%)
NYSE Composite 8,272.57, -17.52 (0.21%)
Losing issues took control over gainers on the day, 3569-2893. The NASDAQ recorded 158 new highs and 15 new lows, while the NYSE had 255 new highs and 6 new lows. This indicator has been stuck at roughly these levels for the past two months with no signal that they are going to change any time soon, thanks largely to the Fed's easy money policies of ZIRP and QE2. Volume was back at the usual moribund levels.
NASDAQ Volume 2,011,206,000
NYSE Volume 4,553,074,500
Commodities took the day off, especially crude futures, which registered a smallish gain of 9 cents, to $90.86. The precious metals continued to be depressed, with gold down $8.20, to $1,332.10 and silver off 23 cents, to $28.29.
Thursday will bring initial unemployment claims at 8:30 am and Friday will be the big number, the BLS' non-farm payroll report. Of course, none of these indicators really matter much with the Super Bowl on Sunday. As mentioned in previous posts, there won't be any real movement in markets (other than straight up) until after the big game.
Inflation remains a hot topic, with the official government CPI proclaiming it to be hovering in the 1 1/2-2% area, when everyone in the real world knows it's really 5-8% or higher, especially concerning food and fuel.
One area not experiencing inflation are payrolls, which haven't budged much in the last 10 years for most middle class jobs. How long the government can keep the Ponzi scheme of rising prices and stagnant wages going before the USA turns into either Ireland, Greece or Egypt is an open question, though considering the general stupidity and apathetic nature of the American public, it could carry on for some time, measured more in years than months.
But then again, nobody in the "official" world saw the Sub-prime or banking collapse coming, so the next Black Swan could be right around the corner, say, in Pakistan.
Leaders in Washington have been particularly silent of late, focused more on in-fighting than any meaningful, needed reforms, and that condition is unlikely to change. After all the next big congressional and presidential elections are only 21 months away. It's actually quite astounding that nobody from the Republican camp has declared themselves a candidate.
Maybe they're all scared of Sarah Palin, or something worse. But, is there anything worse than the former Alaska governor? Well, there is Michele Bachmann, the woman who keeps John Boehner in tears.
The Dow traded in a 45-point range, while the S&P and NASDAQ were bound by 10 and 5-point ranges, respectively, proving that three's nothing like pushing already overvalued stocks even higher to stall out trading completely.
ADP released its monthly employment report, which suggested private payrolls grew by 187,000 in January, and revised December's report down 50,000, to 247,000. The revision means that the initial report was off by a factor of 16%, making it about as reliable an indicator as anything coming out of the Bureau of Labor Statistics (BLS), which, by the way, is the "official" measure of everything employment-related in the USA.
Market reaction to the number was a big yawn and the rest of the session more resembled churning of butter or grape-stomping rather than orderly markets. The day was a mash, and a dull one, at that.
Dow 12,041.97, +1.81 (0.02%)
NASDAQ 2,750.16, -1.03 (0.04%)
S&P 500 1,304.03, -3.56 (0.27%)
NYSE Composite 8,272.57, -17.52 (0.21%)
Losing issues took control over gainers on the day, 3569-2893. The NASDAQ recorded 158 new highs and 15 new lows, while the NYSE had 255 new highs and 6 new lows. This indicator has been stuck at roughly these levels for the past two months with no signal that they are going to change any time soon, thanks largely to the Fed's easy money policies of ZIRP and QE2. Volume was back at the usual moribund levels.
NASDAQ Volume 2,011,206,000
NYSE Volume 4,553,074,500
Commodities took the day off, especially crude futures, which registered a smallish gain of 9 cents, to $90.86. The precious metals continued to be depressed, with gold down $8.20, to $1,332.10 and silver off 23 cents, to $28.29.
Thursday will bring initial unemployment claims at 8:30 am and Friday will be the big number, the BLS' non-farm payroll report. Of course, none of these indicators really matter much with the Super Bowl on Sunday. As mentioned in previous posts, there won't be any real movement in markets (other than straight up) until after the big game.
Inflation remains a hot topic, with the official government CPI proclaiming it to be hovering in the 1 1/2-2% area, when everyone in the real world knows it's really 5-8% or higher, especially concerning food and fuel.
One area not experiencing inflation are payrolls, which haven't budged much in the last 10 years for most middle class jobs. How long the government can keep the Ponzi scheme of rising prices and stagnant wages going before the USA turns into either Ireland, Greece or Egypt is an open question, though considering the general stupidity and apathetic nature of the American public, it could carry on for some time, measured more in years than months.
But then again, nobody in the "official" world saw the Sub-prime or banking collapse coming, so the next Black Swan could be right around the corner, say, in Pakistan.
Leaders in Washington have been particularly silent of late, focused more on in-fighting than any meaningful, needed reforms, and that condition is unlikely to change. After all the next big congressional and presidential elections are only 21 months away. It's actually quite astounding that nobody from the Republican camp has declared themselves a candidate.
Maybe they're all scared of Sarah Palin, or something worse. But, is there anything worse than the former Alaska governor? Well, there is Michele Bachmann, the woman who keeps John Boehner in tears.
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