Archive - Jul 8, 2011

A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge

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...

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.

More lunacy.

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."

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.

Now you have it, now you don't. The gift that keeps on giving, courtesy of momo monkeys, just put a smile on the faces of all those who put the compression trade on last night.

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.

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.

Watch for those FRBNY liquidity swaps to spring in action momentarily as Dexia was, is and will be the bank that sets off the dominoes in Europe's core. "Moody's Investors Service has downgraded to A3 from A1 the long-term senior debt and deposit ratings of Dexia Group's three main operating entities: Dexia Bank Belgium (DBB), Dexia Credit Local (DCL) and Dexia Banque Internationale a Luxembourg (DBIL). This was driven by the lowering of these entities' Bank Financial Strength Ratings (BFSRs) to D, which corresponds to Ba2 on Moody's long-term scale, from C-/ Baa2 previously. The outlook on the BFSRs is negative.Dexia continues to suffer from the consequences of the financial imbalances mentioned above, inherited from the pre-crisis period. The rating agency recognises the group has made material improvements since the peak of the crisis