Archive - 2011

While today's unemployment number came at a low 9.4%, well below expectations, the one and only reason for this is that the labor force in America has plunged to a fresh 25 year low. Assuming a reversion to the mean in the long-term
average participation rate back to 66%, means that the civilian labor force, which in December came at 153,690, a drop of 260,000 from November,
is in reality 157.6 million, a
delta of 3.91 million currently unaccounted for. Maybe someone can ask Bernanke during his imminent presentation before Congress what happened to the
unemployed population, which would have been 18.4 million if this labor force
delta was incorporated, resulting in an unemployment rate of 11.7%.

More thoughts on the great inflation debate...

Immediate market reaction is not pretty as everyone's completely ridiculous expectation that Barclays' "95% confidence interval" of a 480,000 print ends up being that much hot air.

Summary:

• Change in Private Payrolls (Dec) M/M 113K vs. Exp. 178K (Prev. 50K, Rev. to 79K)
• Change in Manufacturing Payrolls (Dec) M/M 10K vs. Exp. 5K (Prev. -13K, Rev. to -8K)
• US Average Hourly Earnings (Dec) Y/Y 1.8% vs. Exp. 1.8% (Prev. 1.6%)
• US Average Weekly Hours (Dec) M/M 34.3 vs. Exp. 34.3 (Prev. 34.3)
• Labor force participation plunges to multi year low: 64.3%
• 24 thousand added from Birth-Death

From the report:

Goldman's most recently inducted partner David Kostin, who no doubt promised to make his superiors proud for promoting him, just did so this morning. The chartist has just told all clients to sell everything that Goldman is offering as Goldman has just revised its year end S&P target fo 1,500 on expectations of what we believe translates to a priced to absolute perfection, Goldilocks centrally planned economy, where Bernanke finally succeeds where he and his predecessors have failed every single time before. As an aside, and as empirically proven, those who take the other side of the Goldman sell-side trade (i.e., the same side as the Goldman prop trade, as after all it is Goldman which is selling whatever clients are buying) end up making money the majority of the time in the long-run. Keep that in mind as the S&P fails to hit the revised S&P target in 358 days.

Quite a bevy of news overnight, but the entire world is looking for just one big, and very much seasonally adjusted, catalyst.

Payroll day to start, followed by Chairman Bernanke’s first congressional testimony of the year and some fresh data on consumer credit later in the day….And of course, POMO

Behold your Wall Street marionettes at work: instead of focusing on what is actually important for the survival of the middle class, what has a chance of actually reducing the now $14+ trillion in debt, and has a chance of actually passing, the Congressional pissing match is back, and while guaranteed to have absolutely no impact, will result in a lot of sound and fury signifying not only nothing, but just what a posse of jokers represent this country's wealthiest social strata, if nobody else. Because who cares that, as Ron Paul made all too clear, America is now beyond bankrupt: let's spend a few weeks debating a moot point, all the while Rome burns, the violins on the Titanic deck hit a crescendo, Wall Street accrues another record bonus year, and the politicos collect indulgences from their Fed subsidiary masters.

Following in the footsteps of the recent fireworks of the Chinese SHIBOR market courtesy of the evaporation of virtually all interbank liquidity, we now get more indications that all is fine... no inverted... no fine in China. Per Bloomberg, Chinese corporate spreads have now inverted to a level not seen since pre-Lehman days: "The average yield on yuan corporate debt maturing after 2025 was 4.67 percent in December, compared with 4.97 percent for three to five-year bonds, according to Bank of America Merrill Lynch’s China credit indexes. The last time the gap was wider was on Aug. 13, 2008, when the spread reached 31 basis points, or 0.31 percentage point." And while corporate bond issuance in China, especially on the longer end, is still very scarce (and a reason why China still does not have a representative CDS market, something that JPM will fix promptly), this should be an indication that either things are very good or starting to get rather bad, as more are "rushing" to the safety of near-term fixed income on concerns of what may happen to the long end in the next few months.

The US Congress is welcoming 112 new members this week. Congratulations, if you’re on of them. Now get this through your thick, newbie head. No one likes you. No one thinks you’re smart. Chances are you got the only reason you got this gig is because your predecessor couldn’t follow simple instructions. So stop thinking of yourself as a champion of __________ or the protector of _________. You’re hired help, nothing more, nothing less.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 07/01/11

One look at the M2 chart below shows that the reliquification of the market by the Fed is proceeding according to plan: having increased for 23 of the past 25 weeks, the M2 has hit another all time high in the final week of 2010 at $8,848 billion, a $14 billion weekly increase, and a $316 billion annual increase (we will present the M2 constituents change next week). But that is not all: more important to those who believe that the Fed merely creates one and zeroes that never do anything practical, and most certainly do not add to inflation, will be delighted to learn that in addition to the $14 billion increase in M2 liquidity, reserve balances added another $26 billion in liquidity, as the absolute number declined from $1027 billion to $1001, or a gross addition of $40 billion in the week. Of course, adding a few leverage factors, and the last week of 2010 saw a gross liquidity addition of well over $100 billion or so. And there are some who wonder why stocks surged to close the year....

Looking back at the carnage created by the bursting of the credit bubble, it’s natural to scratch your head and ask “How did we ever let that happen?”. Behavioral economics exists to answer questions like this. Last week Chris sat down with Dan Ariely, gallivanting behavioral-economics-researcher-extraordinaire, who is breathing new life into this previously obscure field of study. The resulting interview is full of fresh, non-intuitive insights and shines light on how the human brain is often hard-wired for irrational action when it comes to money.

Answer key now included...(no cheating)

Team Wall Street has a deep bench ...

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.