Archive - Mar 2011

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 04/03/11

Pretty much  precisely what we noted earlier today: "A couple of behind-the-scene facts: from October to February, an epic
700k people have left the work force. If you actually adjust for the
fact that the labour force participation rate has plunged this cycle to a
27-year low the unemployment would be sitting at 12% today. Moreover
the employment-to-population ratio — the so-called “employment rate” —
stagnated in February at 58.4% and is actually lower now than it was
last fall when “double dip” was the flavour du jour."

The CME Group Inc. increased margins its New York Mercantile Exchange crude oil and petroleum products futures, effective after the close of trading today. The margin for Nymex crude oil will rise to $6,750 per contract from $6,075, while heating oil margins increase to $6,413 from $5,063 and gasoline to $6,750 from $5,400, the exchange said in a notice late yesterday. The attempts to prevent an out of control melt up in the one product everyone is terrified of, crude, are back on the table. Just like last week, when the ICE started and the CME followed suit, look for today's CME action to be promptly immitated by the ICE on Brent.

While Hilary Clinton was talking about Libya again, her prepared remarks have now ended, and SkyNews is back to covering Libya. Some of the better realtime commentary out there.

This farce is so much better than Two and A Half Men. #winning

The Apple RDF (reality distortion field) is running at full tilt, and the pop tech media serves as an outsourced marketing arm for the firm. Actual reporting of the news, not to mention any real analysis, is simply non-existent. I debunk the following Apple.myths - Supply chain lockup = unassailable pricing, customers prefer iPads over everything else, & iPads perform better. Best of all, I actually take it to the streets to let real people decide the truth once and for all. Oh yeah, & here comes that margin compression countdown in 4 quarters, 3, 2, 1!!!

Two very troubling financial developments out of the Middle East...

How many scientists does it take to screw in a light bulb? Too many....

Saudi Arabia stirring. Time for another paradrop of billions in linen to appease the increasingly restless natives. Oh wait, no mas dinero? Oops.

In a not so surprising turn of events, adverse Libyan newsflow has picked up just as expected, with Reuters reporting that the Oil facility at Zueitina, south of Benghazi, is now damaged and oil wells are now on fire, and that a Libyan rebel convoy is now headed to Ras Lanuf according to Al Jazeera even as fighting in Tripoli picks up, although as we noted previously don't expect any coverage as all the journalists there are now rounded up "for their safety from Al Qaeda" and the terrorist organizations crazy pills. The result: WTI now passing $103, wiping out more tens of billions from the US GDP, further destroying corporate margins, and otherwise adding fuel to today's vapormeltup. Gold and silver follow suit.

The front end of the curve rallied on the news, but still reflects a sizable chance (~28%) of a rate hike by year end. The job gains look to be on track, sustainable, and reflective of a population makeup where the assumptions of 150K-200K gains for a “steady state” of unemployment might no longer ring true (as a wise client pointed out to us recently). We would like to see further gains in the participation rate, which is about 200bp lower than the pre-crisis era, before we officially think that QE2 will be the end of the process. For now, the possibility of a QE2 extension or QE3 introduction post June appears to be lowered. The Fed will want that participation rate up too – as you cannot engender wage price inflation without it in all likelihood. And we will eventually need wage price inflation to match the commodity price inflation we have already engineered. For now, the Fed appears to finally be winning (however slightly) the game of chicken it is playing with the twin inflations.

The NFP was a snoozer. Today it is time to put the debate about Wells Fargo's Pick-A-Pay portfolio out to pasture. Please vote in the poll.

At what point can one call the chart below parabolic? What can we say but BTFD, if you see one.

Wonder why the unemployment rate is at an artificially low 8.9%? Three simple words: Labor Force Participation. At 64.2%, it was unchanged from last month, and continues to be at a 25 year low. Should the LFP return to its 25 trendline average of 66.1%, the unemployment rate would be 11.6%. And indicatively, the Birth/Death adjustment was +112,000.

Total NFP increases in February: +192,000, slightly below expectations of 196,000, and below the Goldman target of 200,000. January revised from 36K to 63K. Private Payrolls increased by 222K on expectations of 200K from 68K, manufacturing jobs increased by 33K from 25K, down from a 53K revised in February. From the report: "Nonfarm payroll employment increased by 192,000 in February, and the unemployment rate was little changed at 8.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and business services, health care, and transportation and warehousing." Average hourly earnings unchanged, and average weekly hours declined to 34.2 from 34.3.