The Bernank has already gone too far and there is no turning back. There will be QE to infinity until the point where the system collapses on itself, which is probably not too far off once the next round of official QE is started. What form this may take is anyone’s guess but as I mentioned in a recent email, the whole rate cap idea makes the most sense since it will allow infinite QE to occur without having to announce subsequent iterations. The simple fact that they tried to pretend QE would end and then tried to raid commodities to create the justification for it later on demonstrates to me how much trouble we really are in. If The Bernank had merely gone ahead and continued the program he had a CHANCE of perpetuating Disneyland for a little longer at least. Instead, he is praying that the economy can stand on its own, which of course it can’t and so then when he launches into QE3 after the economy weakens and proves QE1 and QE2 did nothing to create a self-sustaining recovery the entire mindset and understanding going into the next money printing party will be entirely different from a psychological standpoint. QE3 will not lead to confidence or anything even similar to the last rounds. Rather it will be used to basically “keep the lights on.” More than anything it will serve as that proverbial “bell” that will ring and in the minds of the savviest and wealthiest people on the planet to get the hell out of the system while they can. This is inevitable. It is already happening. The stampede is yet to come. But come it will. It is time for everyone to take additional steps whatever that may mean for you personally. I know I am. Don’t get gorged.
Yesterday I laid out why the U.S. will inevitably experience The Great Reset. What comes after that systemic devolution/crisis is unknown, but we can speculate on the shape of things to come. Though we cannot know the outcome, we can certainbly discern the outlines of the crisis itself. These destabilizing conditions will force a crisis at some point and will be resolved one way or another. The resolution of these brewing instabilities could be orderly or disorderly. In an orderly scenario, a new Constitutional Convention is convened, and a leadership backed by an enlightened public hammers out a consensus to limit the political and financial dominance of Financial Power Elites and corporate cartels. The new consensus reorients the Central State to its original purpose of limiting predation of the citizenry by Elites and criminals, defending the nation and imposing the rule of law as defined by the Constitution. The Savior State would be dismantled in an orderly process. In a disorderly resolution, the Status Quo and the public both refuse to deal with reality and instead cling to the Titanic, demanding magical solutions that will keep the doomed ship from sinking. There is no such magic, of course, and so the ship will go down, and disorder will reign. It might take the shape of a financial crisis such as a devaluation or hyperinflation, or it might take a political crisis such as a "Quiet Coup" by Elites or an outbreak of resistance to the heavy-handed Central State.
Zero Hedge has been warnings about the scourge of High Frequency Trading long before most in the general public had even heard about the concept. Over the past 2 years, and culminating with the Flash Crash it became all too clear that HFT is nothing but a parasitic phenomenon which churns volume in stocks providing the best liquidity rebates, while pretending to be adding liquidity. Recently the best we can do is to provide glaring examples of HFT algos gone wrong in hopes that some regulator somewhere will finally take the long overdue step to establish a minimum bid/ask time delay and thus put virtually the entire HFT frontrunning math Ph.D. crew out of business. The latest development in the ongoing saga against these parasites comes from none other than the Bank of England's Andrew Haldane who prepared a speech to the International Economic Association Sixteenth World Congress in Beijing China, titled "The race to zero" which essentially recaps the hundreds if not thousands of posts we have written on the matter of risks posed by High Frequency Trading, and blasts the concept, as well as the toothless captured regulators who continue to exist in their zombie, porn-addicted state, and refuse to move one finger to finally end this next Flash Crash-in-waiting.
US Needs To Generate 254,000 Jobs A Month For 65 Months To Get To Pre-Depression Employment By End Of Obama Second TermSubmitted by Tyler Durden on 07/08/2011 - 11:23
Every time we update the projection chart of how many jobs have to be created by the end of Obama's now improbable second term, the number goes up. First it was 245,500 in April, then 250,000 in June, now it is 254,000: it seems to increase by 5,000 each month. As a reminder this chart looks for the breakeven number that has be attained to restore (not surpass) the jobs that the US economy had back in December 2007 as the Depression started, when accounting for the natural increase of 90,000 people/month in the labor force. Needless to say, there is no way in hell the US economy can create a quarter million jobs per month from now for the next 65 months, as long as the president continues to pander to Wall Street's "wealth creation" via asset returns instead of directing capital into actual economically viable projects that focus on wealth creation through labor.
Update: the president is now 30 minutes late. Either the guy on the 18th is taking his sweet time or the teleprompter has been hacked.
The much expected TV appearance, which made waves earlier today with everyone expecting Obama to proudly announce a +200K NFP number is about to start. Watch it live here as the scapegoating begins in 5...4...3...
The Only Chart You Need To See From Today's Wholesale Inventories: GM Channel Stuffing Goes Auto Industry-WideSubmitted by Tyler Durden on 07/08/2011 - 10:24
Today we got another confirmation that the only "growth" in the economy comes courtesy of inventory stocking for that eventual day when the economy picks up and inventory can be sold at an actual profit, after wholesale inventories printed at 1.8% on expectations of 0.6%, up from 1.1% previously. We get it: economic growth now comes at the assumption that there will be economic growth in the future, thank you I in the GDP calculation. But the only chart that matters, and in keeping with our observations of pervasive channel stuffing at GM, is the following: the inventory to sales ratio for the car industry, which just surged to 1.62, or a level not seen since the summer of 2009. This is a 16.55% rise in the ratio or the biggest ever relative jump in the auto inventory/sales ratio in history. Translated: nobody is buying already built cars. But yes, keep blaming the collapse in auto "production" on Japan.
Joe LaVorgna, who yesterday raised his NFP estimate from 100,000 to 175,000 was off only by a factor of 972% (and who can forget his 300,000 NFP forecast from last month two days before the final number ended up being a revised 25,000). Here is his, uh, "explanation."
Goldman On The Catastrophic NFP Number: "Basically No Positive Offsets To The Poor Headline Results"Submitted by Tyler Durden on 07/08/2011 - 09:45
Ladies and gents: presenting Jan Hatzius.
Well that didn't take long. Just over two months after Einhorn's Greenlight bought a stake in Yahoo, he has now dumped the full amount. From his just issued letter to clients: "The Partnership bought Yahoo! (YHOO) earlier this year based on a sum of the parts analysis, which included putting substantial value on its Chinese assets. Shortly after the purchase, the value of the Chinese assets came into doubt as the CEO of the Chinese unit hived-off a valuable subsidiary into a corporation that he personally controls. From there, the finger pointing started in every direction. This wasn't what we signed up for. We exited with a modest loss." Well, the whole was less than the sum of the parts in this case. Oops. For this another modest gains and losses, but mostly losses explaining why the fund is down 5% YTD, read the full letter below.
More Records: Average Duration Of Unemployment; People Not In Labor Force Who Want A Job Now Both At All Time HighSubmitted by Tyler Durden on 07/08/2011 - 09:07
Two more self-explanatory charts: the number of people not in the labor force who want a job now surged to a fresh all time high 7,124 or up by a whopping 303K, while the average duration of unemployment also is at a new record of 39.9 weeks.
This chart needs no commentary. At 64.1%, the Labor Force Paritipcation rate just dropped to a fresh 25 year low: the civilian labor force declined by 272K from 153,693 to 153,421.
Stunner: NFP Up Just 18K, Unemployment Rate 9.2%, Household Survey Down 445,000, Birth Death +131,000Submitted by Tyler Durden on 07/08/2011 - 08:30
Absolute disaster. Total jobs per the establishment survey: +18K on expectations of 105K, Private Jobs + 57K on expectations of 132K. Last month total was revised from 54K to 25K. Combined April and May revision down 44K. The household survey was down by 445K from 139,779 to 139,334. Birth death adjustment + 131K. Complete humiliation for Wall Street's economists, the lowest prediction of whom came Bob Brusca at +60K. From the NFP: "Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down." It is time for Joe LaVorgna to retire, with his 175K forecast, or off by a factor of 972%.
With just minutes away from the all important NFP number, which is now being whispered at coming 145K and higher (this number is changing, higher, by the minute), compared to consensus of 105K, risk just snapped up, with WTI leading the parade, and now trading under a dollar away from the $100 psychological barrier. If NFP comes at the ludicrous 200K+, look for WTI to close around $101 and the whole energy price inflation charade, and speculator scapegoating to start all over again.