Friday, February 4, 2011

Morning Update/ Market Thread 2/4 – Disinformation Edition

Good Morning,

Equity futures are roughly flat this morning following the completely trumped up Employment Report for January – disinformation at its finest. The dollar is up, oil is roughly flat, gold is down slightly, and most food commodities are down slightly. There was a very small movement in the McClellan Oscillator yesterday, expect a large directional move today or Monday.

I’ll get to the Employment Report in a second, but first let’s clear out the disinformation created by the “Fed” Chairman, Ben Bernanke, yesterday in his speech. He took complete credit for creating a higher stock market… oh yeah, no lying about that. But then he turned around and denied that his policies had anything to do with higher food prices around the globe, and certainly had no hand in creating the violence in Egypt! As they say, “Denial isn’t just a river in Egypt.”

To be clear, food inflation is massively high. Yesterday I pointed to a study showing that overall global food prices rose by 3.4% in January… that gain is in just one month! And I think it may be understated as many food commodities have increased at rates far greater than that. That gain was the seventh month in a row of gains, and if you annualize that figure it works out to a whopping 40.8% inflation rate in the price of food!

Imagine that you live in a country where it requires 40% of your earnings just to feed yourself. At that rate it won’t be long before you are literally starving. Bernanke’s malfeasance is beyond compare. He is a danger to this country and to the entire planet. But the genesis of his malfeasance, of course, lies in the Federal Reserve Act which mistakenly gave the private banks the power to create and control the money of the United States, which morphed into the control of the world’s reserve currency. The greatest crime against humanity ever.

So, with people now wising up and pinning the blame where it belongs, on the “Fed,” can their money printing continue for long? What happens if it is stopped? My take is that should it really stop, the markets would deflate showing instantly how much hot air they are made of. But they can’t stop because that would expose them for what they are. That would jeopardize their power and control which is what the ability to print money is all about.

Power and control… watch, and you will see that every action the “Fed” takes is about retaining and promoting their power. And the world will thus suffer greatly until that power is returned to the people where it rightly belongs.

The headline disinformation Employment Report numbers came in at only 36,000 Nonfarm Payroll jobs, a huge miss from the 150,000 expected, and is indeed lower than the 136,000 reported for December (and revised even lower, of course). As I mentioned on Wednesday, the phony Birth/ Death model corrections in this month would throw off those who failed to compensate.

But the miss and disastrous numbers are spun into disinformation when the media, politicians, and “Fed” get to tout the supposed 9.0% Unemployment headline, a vast one month “improvement” from December’s 9.4%. And what a trumped up sad sack of lies that 9.0% number is.

First let’s hear Econoday’s take:
Today's employment report is about as mixed as you can get. Payroll jobs are disappointingly anemic while the unemployment rate unexpectedly fell sharply. Overall payroll employment in January posted a minimal 36,000 increase, following a revised 121,000 gain in December and a 93,000 advance in November. The January boost fell short of analysts' estimate for a 140,000 gain. The November and December revisions were down net 4,000. The private sector barely did little better than overall as private nonfarm payrolls increased 50,000 in January, down from a 121,000 boost the prior month. The consensus expected a 150,000 gain.

For the latest month, private service-providing jobs rose 32,000 after a 146,000 increase in December. Good-producing jobs rebounded 18,000, following a 7,000 decrease in December. Manufacturing is showing a boost in momentum as jobs jumped 49,000 after a 14,000 gain the month before. Construction likely was damped by adverse weather, falling 32,000 in January, following a 17,000 decline the prior month. Mining edged up 1,000 in January. Government jobs fell 14,000, following an 18,000 drop in December.

Wage gains improved in the latest month. Average hourly earnings in January rose 0.4 percent, following a 0.1 percent uptick the prior month. The January figure topped the market median estimate for a 0.2 percent increase. Most likely, the rise in earnings was due to the jump in manufacturing employment-in a high wage sector. The average workweek for all workers posted at 34.2 hours, compared to analysts' forecast for 34.3 hours.

On a year-ago basis, overall payroll job growth rose to up 0.8 percent in January from up 0.7 percent in December.

Turning to the household survey, the unemployment rate fell to 9.0 percent from December's unexpectedly low 9.4 percent. The market median estimate was for 9.5 percent. The drop was largely due to a drop in the labor force but household employment rose moderately.

Today's report is baffling, given it contrasts so much with recent surveys showing gains in employment. Severe winter weather may have played a role in delaying hiring. The boost in manufacturing employment is encouraging and likely portends a general strengthening in demand for labor.

Baffling indeed. Trumped up is the sad reality, I believe NONE OF IT. That includes the supposed .4% Average hourly earnings increase in just one month, yesterday’s Labor Costs report put the lie to that, clearly showing that labor costs are falling.

Here’s the entire report, the usual suspects are to blame for the trumped up numbers once again:
Employment January 2011

Right off the bat, the following paragraph tells you why the rate fell to 9.0% - it is due to 300,000+ more people who are no longer counted as unemployed:
In January, 2.8 million persons were marginally attached to the labor force, up from 2.5 million a year earlier. (These data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Would you like fries with that?
Yeah, let’s take a look at table A-16:

Note on that table that the numbers are given in thousands. That means that the number of people Not in the Workforce jumped in the past year by 2.3 million!! That’s exactly how you trump up the numbers to make them look better than they are. And they put the lie to the notion that any jobs whatsoever have been created, they are in fact being lost at an astonishing rate. This manipulation of the data all by itself hides 191,000 workers per month who are not counted in the headline U-3 number.

When we take a look at the “Alternate” Table, we find that all the seasonally adjusted number declined, while all the not seasonally adjusted numbers rose sharply. Non seasonally adjusted U-3 spiked from 9.1% all the way to 9.8%!! That’s +.7% in a month that reported a .4% decrease. Sick.

Unadjusted U-6 jumped to 17.3% from 16.6%.

Now let’s look at the sick and twisted Birth/ Death model. As expected there was a large negative correction for January, but not as large as last years’ correction:

Next month this number should turn into a small positive number, and thus we can look for their reported Nonfarm Payrolls number to improve over January. This distortion is not based in reality at all. When the economy is destroying jobs, as it is doing now, small businesses are closing, not being created. By inducing this error, it only gives the people a path through which number games can be played. In my judgment, the less playing with numbers they do not know, the better.

Of course generating real employment data is as easy as compiling a data base from all the states, as each state collects payroll taxes. Thus the actual numbers can be easily known, but that is not what the “Employment Report” is about. No, they choose to use data collection methods straight from the 1950s, a telephone survey.

If you don’t like the data, then you simply obscure the data, and then when it gets to looking really bad for the team, then you outright manipulate it.

What is being hidden? The fact that our society is saturated with debt and that once saturation occurs there is a direct correlation between attempts to create more debt and higher unemployment! Let me say that again, “stimulation” by injecting debt works when the money is sovereign and not all credit money. But once the money system becomes debt – right now 100% of our dollars are credit dollars, 0% are sovereign - then forcing more debt into the system leads to fewer employees and lower REAL economic activity!

Our economic data is now nearly 100% false fluff, as are our “markets.”

“Growth” is only occurring in dollar terms. Said another way, the only thing that is growing is our production of money and thus the price of the things we need. When you grow the supply of money without the corresponding economic activity, then the excess money seeks out places to go. Now it’s found its way into food, energy, and into the “markets.”

POMO and Quantitative Easing is nothing but a disinformation trail to hide the money creation and WHO it is that profits from it. These are “rob Peter to pay Paul” schemes. By creating artificial demand to buy up bonds, the “Fed” is simply buying down interest rates, thus masking over the amount of money actually spent on interest. I contend that the true amount spent on interest expense EXCEEDS our entire nation’s Federal income.

But watch the bond market as the long bond has broken down out of a wave 4 bearish flag – wave 5 down is underway now:

And if you want to see an example of a HISTORIC divergence, take a look at the plunging Baltic Dry Index compared to the S&P 500:

Now that is a shocking divergence! It is the result of money printing and using those dollars to not only buy up bonds, but by doing so it frees up hot money to seek more leveraged paper returns. This creates a gigantic disconnect between the REAL WORLD and the PAPER WORLD. The paper world is accounting fraud, mark-to-fantasy, Alice in Wonderland. While in the real world people starve and revolution turns violent.