Friday, June 3, 2011

Only On Wall Street Is A Bad Jobs Report a Good Thing!

They're probably looking at this as a guarantee of QE3!

And Here Comes Polly!

Wall Street is buying! This is unbelievable!

Market Reaction to NFP Shock


Crude Oil

Unemployment Rises to 9.1%, Money Mayhem Following Massive NFP Disappointment

from Zero Hedge:
Massive collapse in the American employment situation: May NFP at 54K, down from 244K, and not only below consensus of 165K, but below the lowest economist prediction of 65K. Private payrolls increased just 83K on expectations of 170K. Manufacturing payroll dropped 5K on expectations of a 10K rise.  The unemployment rate was 9.1%, although U-6 declined from 15.9% t 15.8%. The absolute number of unemployed increased fom 13.747 million to 13.914 million. For the third month in a row the Labor Force Participation rate remained flat at 64.2%.

and as if that isn't bad enough, also from ZH:
Take away the Birth/Death adjustment of 206,000 and the Real NFP is: -150,000. This is the biggest monthly B/D adjustment in over a year. And if as all the pundit claimed last month, demanding the McDonalds addition of 62,000 janitorial, part-time jobs be added to the May number, the economy really lost over 200,000 in May.

The household survey must have been atrocious!

Thursday, June 2, 2011

She's Ba-aaack! Pollyanna Recovers Just One Day After Rout!

Pollyanna Revisited

Retail Sales, Factory Orders Sink Market After Brief Rally Attempt

Dow off 80 on sagging retail sales, weak factory orders.

Sell-Off Resumes

This is a true surprise! Is the Pollyanna petering?

Fed Not to Begin QE3 for Now

by John Hilsenrath at WSJ:

Federal Reserve officials are in no hurry to respond to recent indications U.S. economic growth has hit another soft patch, despite chatter in financial markets that the Fed might start a new program of U.S. Treasury-bond purchases to boost growth.
The central bank has already purchased more than $2 trillion of mortgage and Treasury bonds. The purchases are meant to hold interest rates down by reducing the supply of securities in private hands and to drive investors into areas such as stocks to encourage businesses and consumers.

Fed Chairman Ben Bernanke signaled in April that the hurdle to more "quantitative easing," as it is known, is very high and Fed officials have done nothing to indicate that Mr. Bernanke's guidance has changed as economic data has worsened in recent weeks.
In an April news conference, Mr. Bernanke said the tradeoffs that would come with additional purchases were becoming unappealing. "It's not clear we can get substantial improvements in [employment] without some additional inflation risk," he said.
Fed officials have largely held to that line. In comments last week, St. Louis Fed president James Bullard said the Fed was entering a period in which Fed policy will be on pause—meaning it won't be trying to push interest rates either higher or lower. Charles Evans, president of the Chicago Fed and a strong advocate of past programs, said earlier last month that what the Fed had done already was "sufficient."
In comments Wednesday, Cleveland Fed president Sandra Pianalto said the Fed's current stance was appropriate and added the recovery was likely to continue, even though growth "may be frustratingly slow at times."
Mr. Bernanke has argued that past bond purchases haveworked, but it has have taken a political toll on the Fed. Critics in Congress and overseas say the Fed is fueling inflation globally.
"They don't want to do QE3," said Vincent Reinhart, an economist who formerly ran the Fed's influential division of monetary affairs. QE3 is what many traders have dubbed the possibility of a third round of Fed securities purchases.The last round of quantitative easing, which will amount to $600 billion of bond purchases, is set to conclude at the end of June.
A boost from Congress, through additional deficit spending, looks equally unlikely. Republicans have crafted an agenda based on spending cuts and would likely be reluctant to embrace new efforts to stimulate growth through fiscal policy. New tax cuts would also face a tough reception, given Washington's currentfocus on reducing the long-run deficit.
The Obama administration wants more infrastructure spending in the near term, but administration officials, stung by the divisive legacy of the 2009 stimulus bill, don't call it stimulus.
Infrastructure spending, in addition to education and research and development programs already proposed by Mr. Obama, are "policies that have the potential to impact job creation now but also have the ability to increase our competitiveness," said Brian Deese, deputy director of the National Economic Council.
The current mindset could change if the economy deteriorates. Mr. Bernanke has indicated that the outlook for inflation will play a key role in his decisions about monetary policy. Rising inflation could force the Fed to raise interest rates. A declining rate of inflation could force it to consider startinga new easing program.
The Fed initiated its last program of quantitative easing in 2010 amid worries that the U.S. was slipping toward deflation, or falling consumer prices. The behavior of bond markets doesn't indicate that deflation is a serious worry right now. Prices of Treasury Inflation Protected Securities, also known as TIPS, indicate that investors expect 2.8% inflation in five years, substantially more than was the case last August when the Fed started talking about a new round of quantitative easing. Back then, expected inflation was on a downward trajectory, from 2.8% to less than 2.2% in a couple of months.
Measured inflation is also higher than it was last year. When the Fed initiated the program in November, consumer prices were up 1.1% from a year earlier, well below the Fed's 2% goal. In April they were up 3.1% from a year earlier.
"We don't think it's likely at all, but things could change," Michael Pond, a bond strategist at Barclays Capital, said of the chances of another round of easing. "If growth slows well below its trend and on top of that you have inflation and inflation expectations coming down, it is certainly possible. At this point it is not on the table."

Initial Claims Modestly Disappoints

And of course, stocks rise on the news!

Wednesday, June 1, 2011

What a Downer! Dow Drops 279 Points!

I Spoke Too Soon

I spoke too soon.

Dreadful Day

With less than 45 minutes remaining, we have just matched the lowest levels of the day.

June Swoon

After ignoring reality for months, Wall Street is finally waking up to the verity that the economic picture is not sunshine and roses. Dow is down 233 points, hitting new lows within the last 2-3 minutes. It must be difficult for Wall Street traders to acknowledge that in just a few more weeks, the Fed is going to remove another punch bowl, and they will be on their own precisely at a time when the economic picture is rapidly degenerating.

Killing Crude

Economic and stock market weakness are sending crude oil for the pits too! If the economy falters, so will the demand for crude oil.

"We're on the verge of a great, great depression" --Peter Yastrow, market strategist for Yastrow Origer

from CNBC:

Wall Street is having a hard time figuring out what to do now that the U.S. economy appears to be sputtering and yields are so low, Peter Yastrow, market strategist for Yastrow Origer, told CNBC.

"What we’ve got right now is almost near panic going on with money managers and people who are responsible for money," he said. "They can not find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.
"We need to find real yield and real returns on these assets. You see bad data, you see Treasurys rally, you see all bonds and all fixed-income rally and then the people who are betting against the U.S. economy start getting bearish on stocks. That’s a huge mistake."
"Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything," Yastrow said. "We’re on the verge of a great, great depression. The [Federal Reserve] knows it. 
"We have many, many homeowners that are totally underwater here and cannot get out from under. The technology frontier is limited right now. We definitely have an innovation slowdown and the economy’s gonna suffer."
However, he said he wouldn’t sell stocks.
"Any bears out there better be careful because the dividend yields on these stocks look awesome relative to all the other investment vehicles out there," Yastrow said. "So bears are going to have to find a new way to express their discontent with the U.S. economy."

Dow Loses 190 Points

Tough day for the Pollyanna Party! If Friday's jobs report is down by a comparable amount, it could be a bloodbath. Calls for more quantitative easing will multiply!

Investors Run for the Cover of Gold

And It Just Gets Worse

Stocks are now down 160 points, wiping out not only yesterday's gains, but most of the gains for the entire week! Look at the slope of that decline!

Australia GDP Slips Too!

from the BBC:

/Australia's/ economy contracted by 1.2% in the first three months of the year, compared with the previous quarter, the latest government figures showed.

The government said flooding and cyclones in resource rich states of Queensland and Western Australia had a significant impact on growth.

Australia's economy is heavily reliant on its resources sector.

May Economic Data Universally Bad

Wall Street may finally be sitting up to take notice! We've now all but wiped out yesterday's stock market rally, and it's only one hour into the trading day! But we mustn't dismiss Wall Street's ability to shrug off reality for its own delusional benefit! By tomorrow, the Pollyanna Party will continue, unless Friday's BLS jobs report also shows a slump and slowing. This is particularly bad timing just as the Fed begins winding down its latest quantitative easing dream. 
U.S. ISM, just as in UK and China, as indicated in this headline from the Wall Street Journal, has also slowed appreciably. Ignore that, Wall Street!  I give them 24 hours to do just that! 

from WSJ:
The U.S. manufacturing sector slowed sharply in May, according to data released Wednesday by the Institute for Supply Management...
The ISM's manufacturing purchasing managers' index fell to 53.5 in May from 60.4 in April. Readings above 50 indicate expanding activity.
Economists surveyed by Dow Jones Newswires had expected the May PMI to slip to only 57.0.

from Marketwatch:
A Chicago-area manufacturing gauge dropped by the largest amount in nearly two-and-half years in May, in a further sign that the rise in oil prices and the Japanese earthquake have affected activity.
The Chicago PMI fell to a reading of 56.6% in May, the lowest reading since Nov. 2009, from 67.6% in April.

Treasuries Skyrocket on the Bad Jobs News

ADP Plunges, Stocks Follow

"Today’s ADP National Employment Report suggests that employment growth slowed sharply in May. Employment in the nonfarm private-business sector rose 38,000 from April to May on a seasonally adjusted basis.  A deceleration in employment, while disappointing, is not entirely surprising. In the first quarter, GDP grew at only a 1.8% rate and only about 2¼% over the last four quarters. This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment."

Not Just Us!

Manufacturing globally has dropped recently. Will Wall Street stop its Pollyanna Party long enough to notice?

Tuesday, May 31, 2011

On the Cusp of Hyperinflation

Food Stamp Usage Increases By 20 Million to New Record in Four Years

It has nearly doubled during that time. 44.2 million people and counting!

Stocks Begin to React

Terrible Triple Trifecta!

And now, consumer confidence plunges also. May consumer confidence completed the terrible trifecta of bad news, coming at 60.8 on expectations of 65.4, and down from 66.6.

PMI Collapses, Stocks Follow

Ouch! Another "more than expected" event. It fell from 67.6 to 56.6. Stocks are now showing some weakness from overnight surge that began in Europe.

from Zero Hedge:

The May Chicago PMI is out and contrary to the herd of clueless Wall Street idiots, better known in polite circles as economists, it came at 56.6 on expectations of 62.0, a collapse drop from the 67.6 before. This is the worst monthly drop since the economy imploded back in October 2008, and the second largest two month drop since 1980! A quick look at the New Orders index indicates it was the lowest since September 2009. But the good news: the economy is still in expansion... for about 1 more month.  The release says it all: "NEW ORDERS and PRODUCTION posted their largest declines in several years...but remained positive" and "INVENTORIES accelerated buildup" - thank god for artificial economic expansion. And from the respondents: "Fuel cost are going to have a major impact on business activity in a negative way that will slow recovery to a crawl." Uh, what recovery? Just you wait until QE3 is announced in 3 months. And elsewhere, the May consumer confidence completed the trifecta of bad news, coming at 60.8 on expectations of 65.4, and down from 66.6.

Case Shiller Plumbs New Recession Lows, and Stocks Rise

"This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.

Another Greece Bailout and Stocks Scramble Higher

Dow up about 100 this morning.

Monday, May 30, 2011

Taxes on Traders Almost Certain to Go Up

Traders Accounting just sent me this! There are at least FOUR new taxes in this. This will encourage capital flight to overseas. Bad news for the U.S. economy!

from Traders Accounting:

With lawmakers putting an increasing emphasis on the federal budget deficit, Bloomberg reports it is likely those day trading for a living could see a number of tax increase in 2013.
Unless Congress acts, the federal tax cuts extended last year are set to expire at the end of 2012. Once they expire, day traders will see taxes on incomes, capital gains and dividends all rise moving into 2013.
Compounding the issue, those in higher income brackets are also set to deal with higher unearned income taxes in 2013 to pay for the government's health insurance plans.
"The deficit is an issue," Bill Fleming, managing director at New York-based accounting and advisory firm PricewaterhouseCoopers, told the news source. He added many people "have already decided in their minds that something is going to happen and they're going to pay higher taxes."
Bloomberg says the White House has proposed to allow taxes on capital gains and dividends to jump from 15 to 20 percent. In addition, the tax rate for couples earning more than $250,000 or individuals earning more than $200,000 would jump from 35 percent to 39.6 percent.
Last year, a commission set up to brainstorm ways to reduce the deficit proposed dropping the overall income tax rate, but including capital gains taxes and dividends and standard income.
With these ongoing shifts and changes, traders may have trouble keeping up with their tax needs. Experts say some may be better off delegating that work in order to focus more on the heart of the business.

Sunday, May 29, 2011

GDP Fraud

John Mauldin quoted this in his newsletter:

Gaming the GDP Numbers
I know I should quit, but this one quick note, as this just really annoys me. I get the methodology and rationalization of how GDP is calculated, but it does have the appearance of being “gamed.” This from my friends at Consumer Metrics. Link to the full report after.
“The importance of the price deflater used by the BEA cannot be overstated. In calculating the "real" GDP the BEA continued to use an overall 1.9% annualized inflation rate, which is substantially lower than the inflation rates being reported by any of the BEA's sister agencies. The mathematical implications of the deflater are simple: a lower deflater creates a higher ‘real’ GDP reading. If April's CPI-U (as reported by the Bureau of Labor Statistics) of 3.2% year-over-year inflation is used as the deflater, the reported 1.84% annualized growth rate shrinks to a 0.56% annualized rate, and the ‘real final sales of domestic products’ is actually contracting at a 0.63% rate. If instead of the year-over-year CPI-U we were to use the annualized CPI-U from just the first quarter (5.7%), the ‘real’ GDP would be shrinking at a 1.82% annualized rate, and the ‘real final sales of domestic products’ would be contracting at a recession-like 3.01%.” (