Archive - Oct 8, 2010

Probably the most contradictory chart in today's NFP report: the number of people who are not in the labor force climbed to the second higher number ever, at 84,161K, a jump of 175K from the prior month, even as the number of people who declared they want a job now, surged by 230K, from 5,972K to 6,202K in September, also the second highest ever, and the highest year to date. In other words, people really want a job, but don't really want to look for one. Good luck reconciling that. All we can tell these people: QE2 will save you all, and some advice: become TBTF.

The BLS, as part of the NFP report, has issued its preliminary estimate of the benchmark revision, which confirms that the BLS is really just BS. According to the report, for the period ended March 2010, the BLS has overestimated jobs by 366,000 (0.3%), or just over 30K jobs per month. While not as bad as the prior benchmark revision of almost one million for the period ending March 2009, this continue to be a blow to both the credibility and the data tracking capability of the US Bureau of Truth. By industry, the biggest hit was to the trade, transportation and utilities industry (-144K), Manufacturing (-114K) and Leisure and Hospitality (-91K). Luckily, losses in these critical sectors were offset by even more bankers than had been previously expected: Professional and business services ended up being revised higher by 14K.

An interesting "Goldilocks" read, in which total jobs missed expectations of -5K wildly, yet Private jobs missed much more modestly by just 11K (and beat Goldman's expectation). The unemployment rate came in at 9.6% on expectations of 9.7%. The actual number of people unemployed was 14.767 million, a small decline from August' 14.860, and since the civilian labor force continues to refuse to increase at 154.1 million, the jobless rate is obviously flat. Government workers declined by 159,000, and census took out 77,000. And of course, prior data was revised adversely for both August and July. Yet the most notable number appears to be the U-6, which jumped to 17.1% from 16.7% in August. The reason futures are struggling on this report, is that it is not so bad to guarantee QE2, and is most certainly not "good."

The Federal Reserve is doing an excellent job with its chosen policy option of communication. With just three words, the Fed has brought down rates while boosting equities, gold, oil, and most commodities. Of course the three words I’m talking about are those that I’ve highlighted a few times since the release of the last FOMC statement or “provide additional accommodation” but since that formal statement the Fed has used even more nuanced communication to herd investors toward risk. And at this point it seems more stage-managing than just bluffing for a few reasons.

When the momentum of the masses gravitates toward the truth, those that desire to suppress it have always resorted to smoke and mirrors to divert the people’s attention away from the truth and to channel their focus into avenues that waste their energies.

Payroll day, wholesale inventories, and one Fed speech….

• Asian stocks fall for first time in six days after commodities prices drop.
• China cuts Japan debt holdings most on record after seven months of buying.
• China's credit rating may be raised by Moody's, Shanghai stocks rise 3.1%.
• Germany's exports drop 0.4% in August; U.K. Sept. producer prices rise 0.3%.
• Greenspan says Fed asset purchases may not be enough to get 'money moving'.
• India said to consider allowing foreign retail buying of stocks.
• Ireland' rating cut to A+ by Fitch, outlook negative.

The doubts over QE2 are increasing. Yesterday, Dallas Fed's Fisher raised the warning flag when he said that "despite recent speculation in the press and among market pundits, we did little at that meeting to settle the debate as to whether the Committee might actually engage in further monetary accommodation, or what has become known in the parlance of Wall Street as “QE2,” a second round of quantitative easing." Today, St. Louis hawk Bullard makes an even stronger case that the run up in stocks since the August lows is unjustified, or at least, largely premature, when he told CNBC that "Federal Reserve officials could wait until December before making any decision to ease monetary policy further if they feel they need more clarity on the outlook." He added that "We did hit this soft patch in the economy but it's not so soft that it's obvious that you have to do a lot right now. It's still possible to make the case that the economy will improve naturally." Most importantly, Bullard clarified that the Fed missing its policy targets do not make a case for further easing a slam dunk, that the economy may still improve without extra help, and that has not heard of any discussion at the Fed moving in the direction of buying a broader range of securities. On the other hand, Bullard also said that it doesn't look like the Fed will be able to get inflation back close to target without more policy help, making the confusion complete.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 08/10/10

For those of you who are unfamiliar with the ritualistic intricacies of "quantitive harakiri" also known as "monetary seppuku" , which is expected of incompetent Japanese central bankers, we have prepared the following exclusive report.

This daily report is designed to help traders find opportunities to trade against this group. The premise is very simple we are looking for 66% of retail traders to be trading either long or short a currency pair, we then look for opportunities to fade (trade against) this group.

Another nail in the coffin for residential real estate. Ben Bernanke can cut interest rates all he likes, but can’t raise personal credit scores, and that is a big problem. Some one third of Americans now have credit scores under 620 and are unable to obtain loans under any circumstances. This won’t change until banks return to risk accumulation mode, which is at least five years off.