Archive - Dec 3, 2010

Last week's advance durable goods report, which everyone promptly forgot about because it showed, gasp, bad data, just got even worse. Today, the final revision of the durable goods number was released, showing an even greater drop in durable goods orders. To wit: instead of a -3.3% decline, the final number in durable goods ended up being -3.4%: "New orders for manufactured durable goods in October, down two of the last three months, decreased $6.9 billion or 3.4 percent to $195.7 billion, revised from the previously published 3.3 percent decrease. This followed a 4.9 percent September increase." And as expected the artificial inventory led "bounce" refuses to relent: "Inventories of manufactured durable goods in October, up ten consecutive months, increased $1.5 billion or 0.5 percent to $316.9 billion, revised from the previously published 0.4 percent increase. This followed a 0.7 percent September increase." In other words: fake recovery, based on increasingly more fake numbers, relying on hoarding of unsellable products (just as GM has been doing lately).

ISM Servies prings at 55.0 compared to expectations of 54.8, now that all difusion indices trade like S&P earnings esmates. Key indices come in as follows as farce of a market goes green.

Today we will highlight the stocks “Gurus” have either recently been adding to their portfolios as new holdings or companies that they have recently increased their position in the last quarter and rate them using the Economic Margin Valuation model. In the coming weeks we will be taking the pros picks and give them letter grades (A,B,C,D,F) based on how we look at the company (based on value score).

Have you ever heard of Section 747? No, it’s not where the government is hiding the aliens. And it’s not the secret area where The Bernank prints all the money. Section 747 is a small paragraph buried deep in the 3000 page monstrosity known as the Dodd-Frank Act. And Section 747 is causing a lot of folks in the HFT world to be very concerned.

It was only two days ago that Goldman upgraded its own bonus pool by saying the economy is now going nowhere but up, up, up. That lasted for 72 hours. Below is Hatzius' (first of many) mea culpa for finaly selling out: "A clearly disappointing report all around, with payrolls up much less than expected and the unemployment rate up. Although hours worked rose only 0.1% in November, this rough proxy for real GDP less productivity changes is tracking at roughly a 2½% annual rate. Flat wages coupled with the small increase in payrolls suggests very little wage and salary growth in November." We give the Goldman "strategist" 3 months before he starts beating the QE 3-666 drums again.

When we last ran this number, the economy needed to create 232,400 jobs per month to get to the same unemployment rate as last seen in December 2007, just before the depression started, courtesy of today's massive disappointment we can now increase the creation requirement to 235,120. As a reminder this is the number of jobs per month that need to be created between December 2010 and November 2016, or the end of Obama's now improbable second term, for jobs to recover their losses when taking into account the natural growth of the labor force of 90,000 people per month. Also, when ignoring the demographic shift, or just accounting for the absolute number in jobs without accounting for the labor force growth which is so wrong only the BLS looks at that number, the breakeven has been pushed back from June 2013 to July 2013. Economic collapse you can finally believe in. And now, with the BLS' good graces, the government can promptly pass the jobless benefits extension, which is what this whole doctored data charade is all about.

...Gold. The backtested model of shorting gold ahead of NFP has just broken. Margins calls coming in. JPM/Blythe Masters scrambles to prevent an all out rout as the $1,400+ stops are triggered.

Private payrolls +50K on expectations of +160K! Manufacturing payrolls plunge 13K on expectations of +5K. Previous revised down to -7K. As Zero Hedge expected the ADP was totally and completely off. And so the myth of the recovery can suck it.

The Guardian, which earlier was conducting a live chat with Julian Assange from an undisclosed location, has generated such massive traffic that the entire Guardian website was down at last check. We expect the Guardian will find some (Swedish) replacement servers, at which point we suggest readers join in the chat which can be accessed at the following link. This is likely the last live interview with Assange before he is arrested any minute now.

Jean Claude Trichet has finally learned the Bernank's lesson #1 on Central Bankering: when all else fails, buy it all. The FT reports that according to traders the ECB was on Thursday buying Portuguese and Irish bonds in €100m tranches – four times bigger than previously, which in turn sharply brought down the cost of borrowing for Lisbon and Dublin and sparked a euro rally. Just like in the US, this means that virtually no assets reflect their true value, as the ECB is now monetizing debt, without even having formally announced it is doing so, either in a sterilized or unsterilized fashion. This means that next week's update of the ECB SNP programme will demonstrate a surge in bond buying. This is especially the case when factoring in that Trichet is currently out in the market waving every Portuguese Bond in. It is a sad day that the only way the ECB, just like the Fed, can create an upward move in an asset class only by forcing a short squeeze.

Payroll day…and also nonmanfucturing ISM and factory orders. Today's 6th of the week POMO will buy $6-8 billion of bonds due 2013-2014. Lastly, and unrelated, Julian Assange is likely to be arrested any minute.

• China calls for tighter monetary policy in 2011 as Beijing fights inflation.
• Euro steady at $1.3209 in morning European trading.
• Oil floats near $88 a barrel in Asia as economic indicators encourage hopes for stronger demand.
• Retail sales in eurozone rose 0.5% in October.
• Spain to approve measures to calm markets over bailout; may raise tobacco tax.
• Trichet pressures governments to fix the debt crisis as he buys them time to ax budget deficits.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 03/12/10

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