Friday, November 5, 2010

Morning Update/ Market Thread 11/5

Good Morning,

Equity prices shot higher still on the Employment Situation Report for October. The dollar is up significantly, bonds are significantly weaker, oil has shot past the economy destroying level of $87 a barrel, and gold is down after setting a new all-time record high yesterday just below $1,400 per ounce. $1,400 per ounce? Gee, that doesn’t make the gold bugs who were calling several years ago for gold at $1,500 an ounce look so nutty, does it? Will I be saying the same thing about gold $5,000 an ounce in a couple of years? Hope not, but I think there is little doubt left that unless the characters are changed, we’re going there.

The Employment Report did come in better than expected for October, the headline percentage stayed the same at 9.6%, but they claim that Nonfarm Payroll increased by 151,000, larger than the 60,000 consensus. This holding steady of the rate was LARGELY DUE TO THIS: “Both the civilian labor force participation rate, at 64.5 percent, and the employment-population ratio, at 58.3 percent, edged down over the month.”

What this is saying is that despite a growing population size, the number of people considered to be participating in employment is falling. This has the effect of shrinking the size of the workforce which makes the numbers look good. If the economy were truly making jobs and expanding, the employment-population ratio would be expanding.

Marginally Attached and Discouraged workers are up significantly - 611,000 more than in October of last year! How’s that for job creation? Jobs were added in the category of healthcare, business services, and retail trade. Losses occurred in leisure/ hospitality, government, and manufacturing (gee, I thought the ISM was touting growth in manufacturing?).

Below is the entire report:

Employment Situation October

Looking at U-6, the measure most closely resembling how unemployment used to be reported, we see that on a month to month basis it fell from 16.2% to 15.9%, however, on a seasonally adjusted basis it was still 17.0%:

The Birth/ Death model added a supposed 61,000 jobs in October, up from 11,000 in September. This 50k increase is the same amount of increase for the month as occurred in 2009. If you look at what was reported for November last December, you will see that next month is likely going to be a negative correction month for this model which will make next month’s report appear weaker:

Here’s Econoday’s spin on the report:
Payroll jobs finally returned to positive territory as the impact of layoffs of temporary Census workers has dwindled and the private sector is strengthening. Payroll employment in October rebounded 151,000, following a revised 41,000 decline in September and a 1,000 decrease in August. The October gain came in higher than analysts' projection for a 60,000 increase. The August and September revisions were net up 110,000.

The October jobs report saw the last notable drop in temporary Census workers. But the government sector was not as negative as feared. Government employment fell 8,000 after decreasing 148,000 in September. Private nonfarm employment posted another gain, advancing 159,000 in October, following a revised boost of 107,000 in September. The consensus called for an 85,000 boost for private payrolls.

In the private sector, service-providing jobs advanced 154,000 after a 111,000 increase in September. Within services for October, temp help gained 35,000; health care added 24,000 jobs; and retail trade jumped 28,000. Goods-producing industries edged up 5,000 after a 4,000 dip in September. In the latest month, manufacturing was little changed, slipping 7,000; construction rose 5,000; and mining increased 8,000.

Average hourly earnings gained 0.2 percent in October after rising 0.1 percent in September. The October number matched the market forecast. The average workweek for all workers edged up to 34.3 hours from 34.2 hours in October, marginally topping expectations for 34.2 hours.

On a year-ago basis, overall payroll job growth rose to up 0.6 percent in October from up 0.3 percent the month before.

Turning to the household survey, the unemployment rate was unchanged at 9.6 percent, equaling analysts' median forecast.

Today's report shows the labor sector healing more than anticipated. This is good news for the economy, though there is still a long way to go to return to pre-recession unemployment. On the release, equity futures rose modestly.

Sorry, very little change in this report and a still shrinking Employment Population Ratio is not good. If this chart was still near its highs, the employment situation would look as miserable as it really is:

Reality? Here’s our economy in a nutshell. Below are two graphs… the first one shows the raw number of total workers who manufacture any kind of real goods in this country (now including McDonald's hamburgers), while the second chart shows total government workers! Note that despite a doubling in the size of our population, we still employ the same number of people actually making things as we did in the year 1942:

And just to show how strong employment really isn’t, John Williams charts the horrific and depression level numbers at

Okay, so we’re not fooled for a second into believing that the economy is actually producing meaningful employment. We’re not fooled for a second into believing that printing money will bring prosperity either. What it will bring is higher numbers… higher imports, higher exports, higher oil costs, higher food costs, higher everything AS MEASURED IN DOLLARS, EXCEPT… your wages.

If you want the audio version of my QE2 discussion yesterday, here’s David Stockman – Former Reagan Budget Director - who gets it, and explains it without pulling any punches:

Oh, you don’t say? And evidently the Chinese are getting it as well:
Nov 4 (Reuters) - Unbridled printing of dollars is the biggest risk to the global economy, an adviser to the Chinese central bank said in comments published on Thursday, a day after the Federal Reserve unveiled a new round of monetary easing.

China must set up a firewall via currency policy and capital controls to cushion itself from external shocks, Xia Bin said in a commentary piece in the Financial News, a Chinese-language newspaper managed by the central bank.

"As long as the world exercises no restraint in issuing global currencies such as the dollar -- and this is not easy -- then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament," he said.

As an academic adviser on the central bank's monetary policy committee, Xia does not have decision-making power but does provide input to the policy-making process.

"We must keep a clear mind. We must not lead the world in financial regulation, nor simply follow the deeds of mature economies. We must think 'what is good for us'," he said.

The destruction of our monetary system is not academic, nor is it up to debate! Math is math. Exponential growth simply is, you cannot argue it away, nor can it be wished away. Making it go away requires action. The action required is changing the WHO controls the quantity of money, and that means taking the power back from the banks who actually OWN the “Fed.”

As far as other items in the news, it all seems quite bizarre to me. The President and his entourage traveling the globe in a manner that is further bankrupting our nation while the minions deny the scary cost figures, yet fail to account for the cost. Escorted by ANY navy ships is simply bizarre, and what exactly is the purpose of these trips? And why are there so many power players out of the country at the same time – that time being immediately after the election? And if you really want to be blown away to the point of wondering if they are trying to incite riots (!), take a read of this:

The Federal Reserve Is Holding A Conference On Jekyll Island To Celebrate 100 Years Of Dominating America: “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve”

LOL, I thought that was a sick and twisted JOKE until I followed this link and found out that it’s for real!

A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve - November 5-6, 2010

Talk about audacity, there it is. The criminals return to the scene of the crime to gloat about their thievery and to plan their further domination of the people of the world. All the while their puppets are out traveling the globe.

Now, that may sound to people who don’t understand the situation as raging against the machine, but I’m telling you that this is very likely to have repercussions for the future of our kids and grandkids. Our government should be at Jekyll Island making ARRESTS, not fleeing from the sinking ship!

Okay, now let’s talk markets. The SPX closed one point above the April high. This follows the DOW and Transports in doing so. Note that the 61.8% retrace of the entire decline is at 1227 on the SPX:

Since we made a new high, it means that the prior Elliott Wave count was incorrect, that we had not begun wave C down. Therefore we are either still in the larger wave B up, or we are in wave 3 up of a bull market. From a fundamental perspective, there is simply no way I’m buying the bull market scenario, it is bullish only from a Zimbabwe like perspective. And the market is EXTREMELY dangerous here, way over-extended, the most gaps below us in history, 569 EXTREME new highs yesterday, and historic sized divergences. One huge divergence is found in the Advance-Decline line which yesterday was significantly lower than it was at earlier recent peaks. This means that breadth is contracting, another sign of major tops.

I’M STILL NOT BUYING THE BULL, and note that major trend changes often occur on what is perceived by the masses as good news – Queue Obama’s speech… in 5, 4, 3…

Steve Miller – The Joker: