World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.
I am in the process of moving, so this will be an abbreviated update. Wednesday and possibly Thursday will be automated posts in order to create a daily comment thread.
This morning futures are significantly higher on news that a compromise has been reached that will extend the Bush era tax cuts. It will also extend the emergency unemployment benefits by an entire year, thus keeping any revolution at bay – temporarily, at least. The bottom line from my perspective is that it is yet another accelerating event in which no decision can be made to actually tackle our deficits. Quite the opposite, in fact this will hugely add to our deficits as the math of debt simply gets worse and worse as no adult is willing to tackle reality.
It is also a political ploy designed to make this an issue once again just in front of the 2012 elections – that’s why the tax cut extension was made to be 2 years in duration. The democrats would like to blame republicans, and visa versa of course. Reality is that they are both puppets of the central banks.
Naturally gold and oil are spiking to new highs – neither seeing any adults approaching, just can kicking.
There was a small movement in the McClellan Oscillator yesterday, so expect today’s move to be large. It’s likely a part of wave 5 up which is pushing bullish sentiment to extremes.
Hate to say it, but we look a lot like Zimbabwe at this point. Money printing galore, no adult decisions, rising equities, higher unemployment, all combined with record numbers of people on food stamps. While markets may go higher for awhile, you will see more and more real people unable to keep up with a false economy. Those profiting from this now will fall the hardest in the end.
Have a good week, I’ll be back up soon and will have more time to write once settled into our new place.
Equity prices are slightly lower just prior to the open this morning. The dollar is substantially higher, bonds are higher, oil is down slightly, and gold is up slightly. Just don’t forget that it is a Monday morning in December, thus we can expect low volume and the algos to kick into POMO high gear at some point after the open.
The Euro is solidly lower following comments by Merkel in Germany that they are not in favor of either increasing the size of the bailout pool, nor in introducing phony joint EU bonds:
Dec. 6 (Bloomberg) -- Germany rejected calls to increase the European Union’s 750 billion-euro ($1 trillion) aid fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis.
With EU finance ministers gathering in Brussels today for their monthly meeting, German Chancellor Angela Merkel rebuffed pleas from Belgium and central bankers to boost the emergency fund to save countries such as Portugal and Spain from falling prey to speculation.
“Right now I see no need to expand the fund,” Merkel told reporters in Berlin today. She said EU treaties bar joint bond sales, which might force up Germany’s borrowing costs, the lowest in Europe.
European political discord pushed down bonds in Spain and Portugal today, reversing gains made last week after purchases by the European Central Bank briefly eased concern about the spreading crisis. The yield on Spain’s 10-year notes climbed 14 basis points to 5.13 percent as of 1:35 p.m. in London. Portugal’s 10-year yield increased 2 basis points to 5.73 percent. The euro halted a three-session rally, dipping 1.2 percent to $1.3253.
Countries including Greece are “in denial” in saying they’ll be able to repay their full borrowing bills, Kenneth Rogoff, a Harvard University professor and former International Monetary Fund chief economist, told Bloomberg Television today. “We’d be very lucky to avoid restructuring.”
Merkel’s Role Under pressure to shield taxpayers in Europe’s largest economy, Merkel is drifting back into the role she played in the early stages of the crisis, when Germany held out against an aid package for Greece.
The political standoff may saddle the ECB with more of the crisis-management burden, said Citigroup Inc. economists including Juergen Michels and Michael Saunders in London in a Dec. 3 e-mailed note.
“Eventually the ECB will be forced to increase its contribution to the rescue packages substantially,” the economists wrote. “We expect that after another round of market tensions, the European fiscal policy makers will eventually come up with additional measures to fight the crisis.”
Of course doing the reasonable thing should earn the euro some love, but quite the opposite in this time of drug induced infusions to infinity and beyond. Of course the central banks will come up with more phony money, if they don’t the game is over for them… and of course if they do the game is also over for them, so the outcome is known, it’s only the timing and events along the way that are open to question. That’s what happens when you let the math of debt get away from you. Just as it has in most places around the globe, China included, and that’s why China is now enforcing price controls in order to keep inflation in check:
Dec. 4 (Bloomberg) -- The southwestern Chinese city of Kunming, where Wal-Mart Stores Inc. and Carrefour SA have operations, has imposed temporary price ceilings on daily necessities to counter inflation.
Kunming’s government asked five retailers -- three non- Chinese, one Chinese and one based in Hong Kong -- to report any price adjustments and give reasons for the changes two days in advance of making any alterations, the National Development and Reform Commission’s local branch said on its website yesterday.
Besides the five companies, other food, cooking-oil and beverage producers are requested to apply for government approval 10 working days before making price changes, the statement said.
The city government also imposed temporary price ceilings on daily necessities in major parts of the city starting from yesterday to the end of February, according to the statement. Prices of grain, cooking oil, meat, eggs, milk and noodles are to be kept at levels before Nov. 17, the statement said.
The city limited retail prices of vegetables, depending on type, to 40 percent to 100 percent higher than wholesale prices, the statement said.
“The city’s consumer prices in the first 10 months rose 4.4 percent, the highest among China’s 36 large- and medium-size cities,” the Kunming government said in the statement, adding that the new regulations aim at keeping prices stable and promoting a “harmonious” society amid “strengthening inflation expectations.”
China’s own policies have added to the hot money being pumped by the U.S., Europe, and Japan. They are a control government who is fighting against human nature. Price controls NEVER work, history proves that they will always ultimately fail in the long run. Having to implement them is a sign from a historical perspective that those pesky “other events” are coming.
There is no economic data here in the U.S. today, this week will be a fairly light week for data with low market volumes expected.
I hesitate to give the central banksters air time to get their propaganda out, but it is important to keep tabs on their shenanigans. Their lies put on film, they will only come back to destroy their credibility later, what little of it they have left.
Bernanke has been nothing but wrong, and wrong again. His latest lip flapping will also be proven wrong, well, at least half of it will be – the part about him probably needing to do even more QE than announced… that part is a rare glimpse of the truth:
Dec. 5 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said U.S. unemployment may take five years to fall to a normal level and that Fed purchases of Treasury securities beyond the $600 billion announced last month are possible.
“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said according to a transcript of an interview airing today on CBS Corp.’s “60 Minutes” program. The purchase of more bonds than planned is “certainly possible,” said Bernanke, 56. “It depends on the efficacy of the program” and the outlook for inflation and the economy.
Most of the following is an attempt to convince you that he's got it all under control. He wouldn't be doing this interview if he did...
Sorry, this interview simply makes me angry... PEOPLE OF AMERICA DO NOT BE CONNED! The "Fed" isn't going to go after the bad actors, THEY ARE THE BAD ACTORS! Watch their actions and look through their meaningless words!
Note the scare tactics to convince you not to revolt at the trillions he’s shoveling mainly into the banks. At some point this levitation will have to end, or our current version of the dollar will end – period. Yet another LIE again is that they are not “printing” money. Oh yes they most certainly are, and no, he certainly cannot raise interest rates anytime he wants with an economy that is completely saturated in their debt – doing so is possible with little or no debt, but not when the entire system is saturated.
The markets are completely dependent upon larger and larger doses – the math is exponential. Employment will not ever return to “normal” as long as the economy is saturated with PRIVATE banker “Fed” DEBT. The more debt they pump, the higher unemployment will go. However, the private banks currently OWN the equity markets. The following chart shows the “Feds” current holdings of U.S. Treasuries versus the S&P 500 index – this chart from ZeroHedge says it all – the market is false, it is trumped up by their money printing:
His printing is destroying confidence and is causing the money he’s printing to leave this country and go elsewhere – that is why you don’t see new production in this country, you see it elsewhere. There are consequences for all actions, you cannot wish nor print your debts away, that is complete fantasy, as phony as the central bank’s balance sheets.
Equity futures crept higher overnight until the release of November Employment data which missed expectations and thus caused the market to sell off. The immediate response is equities lower, bonds substantially higher, dollar lower, oil lower, and gold higher.
The headline numbers came in at 9.8% which is up from 9.6% over the past three months, while the payroll number came in at 39,000, down from 151,000 and a severe miss from expectations of 168,000. I was pointing out earlier that November was likely to be a miss due to the lack of fictional additions from their phony “Birth/Death” model.
Below is the entire November Employment Report, note the announcements regarding upcoming changes to the way this report will be calculated.:
Highlights Today's employment report stands out-unfortunately as a stray from the other good news this week. Payroll growth for November was unexpectedly soft and the unemployment rate rose. Payroll employment in November increased a soft 39,000, following a revised 172,000 boost in October and a 24,000 dip in September. The latest figure fell short of the median forecast for a 168,000 advance. The September and October revisions were net up 38,000. Private sector payrolls increase 50,000 in November, following a 160,000 boost the month before.
Weakness in the latest month was in goods-producing and government sector jobs. Good-producing employment declined 15,000, following a 3,000 rise in October. In the latest month, manufacturing fell 13,000; construction slipped 5,000; and mining rose 4,000.
Private service-providing gained 65,000 after a 157,000 increase in October. Within private services for November, professional & business services gained 53,000; health care rose 23,000 jobs; and leisure & hospitality increased 11,000. On the downside, retail trade fell 28,000.
Average hourly earnings were flat in November after rising 0.3 percent the prior month. The latest figure came in below the consensus projection for a 0.2 percent increase. The average workweek for all workers was unchanged at 34.3 hours, equaling expectations for 34.3 hours.
Turning to the household survey, the unemployment rate bumped up to 9.8 percent from 9.6 percent in October, topping analysts' forecast for 9.7 percent.
The latest employment situation clearly is disappointing. However, it very much is a curiosity as it is a stark contrast with the recent string of good economic news. At a minimum, there are two theories. First, businesses are still reluctant to hire despite improved demand. Second, the ADP report earlier this week showed strength in hiring by small businesses. This sector is a weak point in the government statistics for payrolls and could improve with revisions. In fact, the BLS is starting to update its establishment birth/death factors on a quarterly basis for January 2011 data for release in February.
On the news, equity futures declined notably.
From my perspective, it was last month’s report, just in front of the elections, that was the outlier. Note that we have had two full years of huge job losses in the private sector and now we are shifting to huge job losses in the public sector as huge and mounting deficits begin to strike all levels of government. Also note how once again the ADP report just flat out set expectations in the wrong direction.
The headline rates are artificially lowered by failing to recognize those who most certainly could and would work, but who are outside of their parameters. When we look at the table showing the “Alternate” Series, we can see that U-6, the measurement most closely resembling calculations of the past, seasonally unadjusted rate jumped from 15.9% to 16.3%, while the seasonally adjusted rate remained steady at 17%.
And sure enough, when we look at the Birth/Death model adjustments they were negative for the month, but not as severely as they were last year. If this correction would have been as large as last year’s, then the payroll number would have been even worse:
Next month should be a mild addition of jobs via this model, and thus we can probably expect a report that doesn’t miss as badly as this one did. When you remove the L from the BLS data, you will find that the job situation has not improved, and that there are millions who are able to work full time but are not.
Note once again that Shadow Stat’s SGS data points to 22%+ unemployment:
Factory Orders and Non-Manufacturing ISM is released at 10 Eastern this morning and will be reported inside of the daily thread.
SPX 1200 indeed acted as support yesterday. With $8 billion+ POMOs every single day in December, and now with Europe also artificially buying up bonds all over the place, the markets are enjoying a phony money lift. That lift is bleeding over to oil and is fluffing up momo bubble stocks that are overvalued to extreme levels.
From a wave perspective, we are clearly inside of wave 5 up.
Wave 5’s can either extend or truncate. If it is equal in length to wave 1, then it may reach the 1300ish level. If it equals the length of wave 3, which is unlikely, then it could reach as high as 1362ish. The McClellan Oscillator turned positive again, and many indicators have turned to buy signals. However, the divergences are huge and across all time frames up to monthly. Short term indicators are also divergent again.
When wave 5 peaks, people who view the count as bullish will see the next decline as a large wave 4, while those working bearish counts will view the A,B,C over to complete wave B, and then will call for a very large wave C decline. I believe that wave C is still coming, however remain open to the possibility that a torrent of money fleeing from worthless debt instruments forces everything else higher. The end result will be the same regardless, nothing will change until we eliminate our debt saturated condition, and that will require changing WHO controls the production of money.
Equity futures are below break even this morning. The dollar is higher, euro lower, bonds are slightly lower as are both oil and gold.
The Monster Employment Index dropped from 136 to 134 in November. Again, not a terribly important measurement, but it is used to set expectations for tomorrow’s BLS release.
Weekly jobless claims jumped from last week’s trumped up 407,000 to 436,000. Consensus was expecting 425,000 – here’s Econospin:
Highlights Jobless claims failed to extend their push lower in the latest data. Initial claims came in at a higher-than-expected 436,000 in the November 27 week vs a revised 410,000 in the prior week. Yet next to the 410,000, the latest total is the best of the recovery. The improvement is reflected in the four-week average which is down a convincing 5,750 to 431,000 for its best level of the recovery.
Continuing claims also ended their run of improvement, rising 53,000 in data for the November 20 week. Yet the four-week average did improve, down 29,000 to 4.289 million for its best level of the recovery. The unemployment rate for insured workers held unchanged for a third week at 3.4 percent. Those on extended benefits and those filing for emergency claims both increased.
The latest data in this series are a bit disappointing yet fall far short of reversing prior improvement. Four-week averages in this report point to gains for tomorrow's monthly employment data. Markets are showing no significant initial reaction to the results.
Actually the markets sank following this release. If you remember from last week, the actual number of claimants jumped by more than 50k yet was adjusted lower. This week the number was pushed higher by nearly the same number – I’m assuming that’s due to the holiday week, but the DOL does not state so.
Pending Home Sales data is released at 10 Eastern.
Yesterday’s 250 DOW point romp came on yet another giant gap higher, thus denying any retail investor a chance to enter. Again, this market has been taken over so thoroughly that there are very few retail investors left – or should be. Note that the rumor of the U.S. bailing out Europe came in the afternoon well after the romp had already occurred. What’s that tell you about insider knowledge? And then the rumor was denied, or was it? The last rendition I heard is that the “Fed” was going to “lend” $300 billion to the IMF (not a legal entity) so that they in turn could enslave Europe – on OUR nickel. I did hear that Congress would have to approve such funds, but don’t bet your life on it. And all I can say is that should it occur, it won’t be a bailout of the people of Europe, it will be yet another bank bailout for which they will be simultaneously enslaving us as well! THIS NONSENSE HAS TO BE STOPPED.
The media is making WikiLeak’s Assange out to be a criminal, they are doing a full court press. I note that this morning CNN has a headline that says WikiLeak’s release of bank data “Won’t wreck banks.” Just so that you’re not scared, right? But note that’s the worry, otherwise they wouldn’t be making a headline out of it! And thus they turn a whistleblower who’s not even the actual whistleblower into a criminal! The truth is that he is protecting the actual whistleblower by hiding his identity. Why does he have to hide their identity? Because whistleblowers who provide meaningful data in this society get whacked or attacked! It is our Administration and bankers who belong on the most wanted list, certainly NOT Assange. To all Americans who think you are being patriotic by bashing Assange, you are in fact on the opposite side with your "thinking" and need to really contemplate the brainwashing that’s transpiring.
And finally under pressure the “Fed” released data on the more than $9 Trillion it lent out and backstopped during this still evolving financial crisis. You knew they wouldn’t release it all, and indeed we’re now learning they didn’t:
Dec. 2 (Bloomberg) -- The Federal Reserve withheld details on individual securities pledged as collateral by recipients of $885 billion in central bank loans, denying taxpayers a measure of the risks they faced from its emergency aid.
The central bank yesterday released data on 21,000 transactions from $3.3 trillion in emergency lending to stem the financial crisis. July’s Dodd-Frank law required the Fed to disclose the names of borrowers, the size and interest rates of loans, and “information identifying the types and amounts of collateral pledged or assets transferred.”
For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.
“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.”
Fed spokeswoman Susan Stawick in Washington declined to comment.
Public Disclosure The public disclosure of the lending data should have been prevented because it could spur runs on the banks listed, said Darrell Duffie, a finance professor at Stanford University.
“That’s a very destructive process,” he said. Still, with the data released, “if you’re justified in getting the information, then you’re justified to get enough information to judge the risk the Fed took,” he said.
It is “specifically impossible” to know how much risk taxpayers were taking by looking at pools of collateral grouped by asset class and rating, said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” published in May by Oxford University Press.
“I need to know the individual composition because a $2 billion pool can be one asset of $2 billion, which would be very risky, or 2,000 assets of $1 million each, and that’s not risky at all,” Raynes said. “The spirit of Dodd-Frank was not respected, and they used the vagueness in the wording of the law to weasel out of fulfilling their duty to the American people.”
What bullshit! How long are the people going to stand for this? You go to the airport and you let them grope you? You apply for a loan and they will demand to see every last aspect of your personal finances, yet when they STEAL money from you, you are not allowed to see jack. That’s because the “FED” is an illegal enterprise who never should have been given the power to create money – its WAY past time to take that power back and to imprison those who would get in the way of that occurring.
And now we’re learning that the central banks are going to have their first European Union joint bond offering! Again, this is probably not legal, but here’s the article:
EFSF BONDS: EUROPE’S BAILOUT fund will issue € 5 billion-€ 8 billion of bonds next month, in what will be the first ever debt offering by the euro zone as a single entity.
The European Financial Stability Facility (EFSF) will use the triple-A rated debt to help fund its part of the € 85 billion Irish rescue.
Klaus Regling, the head of the facility, said in Singapore yesterday most investors would come from Europe, but there had been strong interest from Asia and the Middle East, where the offering would be a “new way to diversify for investors who are looking for high-quality triple-A assets”.
The bond is likely to be priced at a higher interest rate than similarly rated debt from Germany and France. The news came as prospects of the European Central Bank increasing its purchases of bonds led to market interest rates falling for the so-called peripheral euro zone countries such as Spain, Italy and Ireland.
RIIIIGGGHHT! Give me a BREAK! Triple-A rated? What a joke! “Testing demand,” again, what a joke! We know where the “demand” will come from… it will come from the same asshat bankers who simply make up the money from nothing and again indebt the people who will have to slave their lives away to pay it! What a con, the greatest con in the history of the planet by far.
SPX 1200 will now act as support and it appears that we have a wave 5 underway. This wave will be based on nothing but phony money, while real people with what little money they have left continue to withdraw their money from the markets, now into our 31st week of continuous mutual fund outflows. Wave 5’s are notoriously difficult to play – sometimes they truncate, sometimes they extend. They are the distribution wave, the wave that causes people to capitulate just in time for the real reversal to finally come. Front running, as I’ve repeatedly said, is a fool’s game – as is this entire market at this juncture in history.
Another day, another HUGE gap, this time it’s up. Everyday now begins with a gap, a sign of a sick and broken market which is a reflection of a sick and broken monetary system. But hey, Santa must be coming to town and it’s time to rally even if Santa is sky high living on crack. The dollar is down, the euro is up, bonds are down significantly (rates higher), oil is zooming again ($85+), gold is higher, and most food grains are higher too.
The market is pushing on SPX 1200 again, if it breaks and we run higher, it could signify the beginning of wave 5 up. The RUT is already challenging its recent high.
The still worthless MBA Purchase Applications Index supposedly moved 1.1% higher in the past week, however, refinancings fell hard, down 21.6% (in one week?) to bring the overall index down 16.5%. Here’s Econoday:
Highlights Prospective home buyers are applying for mortgages, at least they have been for the last couple of weeks. The purchase application index rose 1.1 percent in the November 26 week, adding to and confirming the prior week's double-digit gain and making a new post-stimulus high. Low home prices and low mortgage rates are stimulating demand.
Yet rates aren't as low as they were, rising six basis points in the week to an average 4.56 percent for 30-year loans. The 30-year rate was below 4.30 percent only three weeks ago. The rise has been cutting into refinancing applications which fell 21.6 percent in the week for the third decline in a row. Watch for anecdotal comments on the housing sector in this afternoon's Beige Book.
Nothing but contradictory drivel – the MBA won’t show us absolute figures, their goal is marketing, not economic reporting.
The Challenger Job Cut Report which tracks announced mass layoffs rose sharply in November, up 28.2%, rising from 37,986 to 48,711 – ho, ho, ho, Merry…
But not to worry, the bulls are getting behind another worthless report, this one from ADP whose estimate of job growth more than doubled from last month’s 43,000 (revised all the way to 82,000), coming in at 93,000 supposed new private jobs for November. Of course despite their track record for never aligning with the BLS, they do set expectations among the non-thinking crowd. Keep in mind that Friday’s Employment Report is going to be negatively affected by seasonal corrections to their Birth/Death model, as November is one of only two months that the BLS subtracts jobs out with this ridiculous adjustment. If nothing else, they seem to be consistent with their months when looking at one year to the next. Bottom line – do not expect a strongly positive report due to this adjustment which will likely be negative:
Nonfarm Productivity and Labor costs were released this morning, the headline number rose from 1.9% to 2.3%, but that is a miss on expectations of a 2.4% productivity rise - here’s Econopray:
Highlights Companies are still squeezing out as much output as possible from the current workforce instead of adding to payrolls as productivity for the third quarter got a boost. Nonfarm business productivity for the third quarter was revised up to a 2.3 percent gain from the initial estimate of 1.9 percent. Analysts had forecast a 2.4 percent increase in productivity. Growth in unit labor costs for the third quarter was unrevised compared to the original estimate of an annualized 0.1 percent decline. The market median forecast called for an incremental upward revision to no change. Productivity is up from a minus 1.8 figure for the second quarter while unit labor costs improved from a 4.9 percent spike the prior period.
Productivity is up largely due to a 3.7 percent rebound in nonfarm business output after a 1.6 percent rise in the second quarter. Also, hours worked eased to a 1.4 percent increase from 3.5 percent in the second quarter. Compensation rose an annualized 2.2 percent after a 2.9 percent boost the quarter before.
Year-on-year, productivity was up 2.5 percent in the third quarter-down from 3.7 percent in the second quarter. Year-ago unit labor costs moved up to an annualized minus 1.1 percent from minus 1.9 percent in the second quarter.
It's the best of both worlds for profits-productivity is up and costs nudged down. But for the unemployed, the trend means slow hiring. There was little market reaction on the news.
First note that this report does not square with the ADP jobs added report… this report indicates a decrease in work hours which means fewer workers not more. This report is just another deeply flawed report – it too is influenced by the value of a dollar, as goods sold can rise in price and if true inflation is not adjusted (it’s not) then this figure becomes meaningless. Actually it becomes more of a gauge showing the DIFFERENCE between reported inflation and REAL (real) inflation… if you follow that. In other words, if sales measured in dollars increase, but I don’t actually sell more items, then productivity is artificially raised and didn’t really happen. Am I right? What’s gold doing?
The Manufacturing ISM and Construction Spending are released at 10 Eastern – these will be reported in the daily thread.
Yesterday the VIX closed above the upper Bollinger band thus setting up a market buy signal:
Today it is obviously going to close back inside the range, thus we have a buy signal on today’s close. It could be announcing wave 5 up which would coincide with a positive time of year. December typically is low volume, and with a POMO every single day, I’m sure we can look forward to $100 a barrel oil by Christmas and Netflix at $500 a share. Ho, ho, ho…
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