Archive - Sep 3, 2010

The August jobs report provided a ray of hope, but much more needs to be done to repair the devastation caused by the financial crisis.

Moderate inflation is good. This has been held as self-evident truth in modern monetary policy. But this will quickly become antisocial as the entire west goes through a structural change in demographics caused by babyboomer retirement. BoJ seems to have realized this early and well; they have managed their social transition with remarkably success, despite much sneering from western economists (I argued here that the Japanese lost decades is in fact a great achievement that US will only wish to match in 10 years). ECB seems to have realized this judging from their proclaimed resolve for austerity as opposed to unlimited simulus. The big question is: when will Fed and US government realize this?

This week's CFTC Commitment of Traders report, with some very interesting observations on speculative positions in the Treasury curve.

Your one stop shop for the week's summary of bullish and bearish events and news.

Since the beginning of the recession/depression there have been over 7.6 million total job losses (not just private jobs, which is all that the government is suddenly focusing on. What next: emphasizing the dramatic surge in janitors and trash collectors?). So which occupations are the biggest winners and losers over the past 33 months? Curiously, the split in job losses is spread about evenly between manufacturing and service jobs, with the top 2 biggest absolute losers are construction and manufacturing occupations. Things are not better in services either, as the bulk of professional segments have lost hundreds of thousands, with two exceptions: healthcare and education. Of course, the one sector that has never seen cumulative job losses in the recession is the government - for state and federal employees the recession has not only ended, but it never started.

Alan Greenspan, the Chairman of the Federal Reserve from 1987 to 2006, was more directly responsible for the current Global Depression than even his worst critics realize. Here is the explanation why. —Gonzalo Lira.

SocGen has a useful tracker of Consensus vs Actual economic data, or a +/- Surprise indicator, which is presented below as updated for everything through today's NFP, excluding the disappointing Service ISM. While it is unclear how the firm's assigns a surprise relevance rating to any given economic data point, if the firm finds the Mfg ISM worthy of a +2, then it should finds today's Service ISM at about -3, which unfortunately would not help out the firm's pretty squiggly regression line, and would certainly eliminate the upward slope.

Through it's policies encouraging the offshoring of jobs, mergers, decreasing of economic activity to fight inflation, and allowing wealth to be concentrated in fewer and fewer hands, the government has channeled water away from U.S. jobs, creating the worsening unemployment drought ...

Because sometimes the simplicity of truth hurts the most.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 03/09/10

Going into today I considered that there were two possible scenarios for equities in terms of EW count. The first according to which we were in wave 2 consolidating after the initial impulse down to 1,106 before eventually going lower, and the second in which we would have been in wave 3 already, in which case we should have topped around 1,094/1,098 and reversed lower aggressively. I think the first scenario is the one we are currently experiencing. I have only one ounce of doubt left and that is that AUDJPY has rejected quite hard today's highs approaching the key resistance triangle. - Nic Lenoir

Citi's Robert Buckland is out with the must read report of the weekend, especially for all the optimists who believe that despite the ongoing depression (and as many have demonstrated, all the talk about a double dip is moot, as America has never left the depression, or as Rosie calls it a period of prolonged economic subpar activity: the latest NFP number merely reinforces the theme of economic deterioration), and despite the 17 weeks in retail equity outflows (which would be a contrarian signal if there was hope that retail would ever feel safe enough to return in stocks. After nearly 5 months of no change in trend, the debate can be put to rest, if at least for 2010) there is still hope. There very well may not be - Citi has just pronounced the "Equity Cult" dead: "It has taken 10 years, and two 50% bear markets, to reverse this cult. European and Japanese equities are already trading on dividend yields above government bond yields. US equities are almost there as well. An immediate reincarnation of the equity cult seems unlikely. Global corporates, especially the mega-caps,  rushed to exploit cheap financing as the equity cult inflated. They have been slow to redeem equity now that the cult has deflated. Equity oversupply remains a drag on share prices." And as more and more companies and investors shift to a de-equitization theme, the trendline in allocation for the US pension assets will soon revert to that seen when the "Equity Cult" began, or roughly 20% of all assets, with bonds taking on an ever greater precedence of asset allocation (incidentally the UK is already back to the equity/debt relative investment levels of the early 1960s). What does this mean for capital flows? "A reduction in equity holdings back to pre-1959 levels (around 20% of total assets) would indicate considerable selling pressure to come. For US private sector pension funds alone, that would imply a further $1900bn reduction in equity weightings. The evidence suggests that there could still be considerable institutional selling to come."

Ever get the feeling that the Bureau of Truth is not being completely truthful? Feel like the ADP is to the NFP like the ISM to the regional Fed Surveys, and as the surging Mfg ISM employment diffusion index is to the plunging Service ISM employment diffusion index (i.e., both can not possibly be correct)? You are not alone. David Rosenberg summarizes which recent data releases are so blatantly incomprehensible, one wonder when the government will announce an AXA Rosenberg-like computer glitch and say all its data for the past 12 months has been compromised. Either that, or we await the introduction of the Birth/Death adjustment to every single data series released in America imminently.

Another perspective on the NFP numbers.

BN  10:03 *GOLDMAN SACHS SAID TO PLAN TO CLOSE PROPRIETARY TRADING UNIT
BN  10:03 *GOLDMAN PRINCIPAL STRATEGIES TRADERS IN NY MAY JOIN OTHER FIRM
BN  10:03 *GOLDMAN PRINCIPAL STRATEGIES HEAD SZE MAY START A HEDGE FUND

So as long as you do one flow trade a year, you are considered a flow trader? Brilliant.